Canberra, 30 July 1962
Secret
Washington Talks of 23–25 July 1962
Dr Westerman:
I thought I should, even in a very sketchy way, put you in the picture; and get any observations that you may feel it necessary to make before I go back. Very briefly, the state of play (against which the approach to the Americans was made) is roughly this.
The UK put to the Six what it call-d a ‘comparable outlets formula’ designed to deal with the post–transitional period and being really a draft protocol which would give certain assurances about what would happen after 1970. As part of this protocol, there would be a series of commodity annexes. So you had the protocol which said that, after 1970 the policies of the Community will be such that the quantities of goods imported from the Commonwealth will not be less than they would have been had the UK not joined the Common Market. In brief—in providing for such things as world commodity arrangements, where those seem to be suitable, and also providing for certain criteria which could be used, and then, as part of that, you have set up a special annex saying what would be the post-transitional arrangements on meat, on butter and other commodities.
When the UK asked what we thought of this our reply right at the outset was that it wasn’t a very wise tactic because you could easily get into a tremendously involved argument about ‘comparable outlets’, the whole concept being one which was likely to raise difficulties. You could end up in the position of having argued like hell about the suitcase that you were going to have before you knew what you were going to put in the suitcase. In other words, the annexes were the important things—what was going to happen about meat and butter and so on, in the post-transitional stage was the important thing, not the device that it is going to be packed into and by which it is going to be attached to the Rome Treaty, and to their protocol of accession.
And that’s about what did happen. She put in this ‘comparable outlets’ formula and she put in a whole series of papers in respect of the Common Agricultural Policy items—meats and dairy products and so forth, certain raw materials, metals and processed agricultural products and the like. Each of those papers went in and not one of them in fact has really been discussed by the Six or looks like being discussed by the Six with the UK. What has been discussed at great length is this ‘comparable outlets formula’. Now in the battle of the ‘comparable outlets formula’ the British then felt it was better to put in a potted version of their original ‘comparable outlets’ paper including a potted version of the commodity annexes which they were going to attach to it. And they called this, with a very strong Anglo-Saxon accent, the ‘vue d’ensemble’ which was supposed to be getting very close to European thinking. The French with beautiful Gallic humour, replied, always referring to ‘le general picture’.
And so you have had the battle of the ‘vue d’ensemble’ and ‘le general picture’ going on for some time. One aspect of the ‘vue d’ensemble’ or the ‘picture general’—or whatever it was—was the solution to the problem of post–1970 which could or couldn’t be found in world agreements. And so you had a lot of discussion about world agreements with neither party having the vaguest idea what a world agreement was. Some (the British) thought of it in the old Havana sense—all producers and all consumers all round the world, a conception of a world agreement which couldn’t be better calculated not to produce a world agreement than any other idea I can think of. Others thought of it as a world agreement involving, in the GATT sense, the principal suppliers, the principal interested parties. A world agreement in this sense, on wheat, might mean the US, Argentine, Canada and ourselves plus the enlarged community. That would be a world solution in the GATT sense as far as wheat is concerned. And even smaller numbers as far as beef and veal is concerned. So there was never any real discussion to the point of defining even what they were after in terms of world agreements. And the battle went along the way of trying to lay down the criteria which the Six would promise to look at in working towards a world agreement, thereby providing some kind of assurance that it would end up the kind of world agreement which paid attention to production prices, to prices to exporters, to providing for access and so forth that we would like to see.
[ matter omitted ]
In my view the Six’s regulations on meat, on beef and veal, for instance, when they are gazetted, are likely to be proposals with which we could live and from which we could expect to get reasonable maintenance of our trade, if the UK were prepared to do what it is within her power to do in respect of fixing the sluice gate at a certain level in undertaking an obligation to lower internal prices and, if volumes decreased in varying quality margins when these are operating to distort the trade and so on.
I am getting a little technical—some of you may not grasp the importance of that—but the point I am making is that a great deal of the element of doubt on where we are going in the CAP is an element of doubt about what the UK policy would be. There is no doubt in our minds that the UK will continue to try and screw the third country suppliers as long and as hard as she can, and the depressing and ratchet effect of the variable levy, which is a frightening form of protections when all is said and done—a protection that every time that one fellow offers something a pound cheaper, everyone gets their duty put up one pound. It’s not protection, it’s prohibition. We have been guilty in one or two cases of a sliding scale duty, but never has the sliding scale duty meant that if a man offered something for a pound cheaper, his duty went up . It might have gone up substantially, but not £!—that is prohibition.
We are in the situation where, by the time September comes, I would think that the best that the UK will have to offer the Prime Ministers will be a general paper, being something of a Declaration of Intent to which the Six and they have subscribed, and which will indicate that the enlarged Community will pay some regard to the Commonwealth’s interests and they will review and consult—after all their teeth have been kicked in, if they have been kicked in. Such a Declaration would say the Community will work towards world agreements on certain designated commodities, list the countries mainly concerned in those commodities, and otherwise provide for a decalaging out of the preference which we enjoy on the Common Agricultural Policy items. There seems to be a change in form of the protection but a decalaging out of that.
So far as the CET items are concerned, the best it would seem that UK would be putting to Prime Ministers, in my opinion, would be a decalage on the processed agricultural items, and a reduced duty quota on the metals. That is to say, instead of /12/– a ton on lead, then a quantity of x thousand tons might be admitted at ਲ਼ a ton and that quantity itself be reviewed from year to year and therefore have a security of tenure no greater than the changing supply/demand position inside the enlarged Community would give it. That’s the kind of picture.
Now, taking that a step forward, the PM when he was across took the view that it would be a very bad thing—something which we should try and avoid—if the UK were to be pushed into the situation of making a choice between sacrificing her obligations to the Commonwealth and going in, or not going in, in order to maintain her obligations to the Commonwealth—therefore, our efforts should be directed not so much at preserving the sacred virginity of the preference system so much as getting, or seeing if we could get, what might be the best in terms of substance of the trading arrangement in the post-transitional period. He put this to the Americans very effectively. Let me just backtrack on the American situation a little bit.
You will recall that the Americans have over the last year or two been very unhelpful to us, not only in their bilateral talks on policy and discussions with members of the Six, in discouraging them to maintain any of the advantages or anything equivalent to the advantages which the Commonwealth enjoyed in the UK but they even came out publicly in talking about it—for instance, Mr Kennedy, in saying that granting the Commonwealth their wish would mean a loss to American trade of some millions of dollars in Europe—and really campaigning. And so you had Mr McEwen going across there trying to put our case persuasively and directly and strongly, and you have them not responding to his arguments but maintaining their opposition …. I went across and very unhappily found that they just didn’t have a clue. They hadn’t done any homework and they were just speaking from their glandular dislike of preferences. In the meantime Mr McEwen had been continuing to make some fairly strong comments on the US attitude particularly mentioning that they stood to pick up from any preferences we lost in the UK considerable gain for their own trade where they were major competitors. The PM then landed there and pursued the line of ‘let’s not talk about preferences—we both get a little bit heated perhaps when we talk about these things. Let’s talk about the substance of what, in our mutual interest, we can do to prevent the UK being faced with this dilemma of doing one thing or the other, and at the same time to give us reasonable prospect of not too serious damage resulting from her joining the European Common Market’. Is that near enough, Jack?
Mr Bunting:
I think that puts it accurately.
Dr Westerman:
The net result of that was that the Americans, having been convinced, I suppose, at the official level when I was over there that they did not know their facts, and then having had the PM put this to the Kennedys and the Balls and the Rusks and Harrimans and so forth so forcefully that these people said to their officials ‘well, you think about it and just see if you can’t get to work and talk to Australian officials and, irrespective of preferences, find out what can be done to minimise the losses and damage that they are going to have and that we’re going to have too if the UK market becomes part of this giant regulated market which it threatens to become. Now let’s not in the process talk about preferences.’ The implications of what the PM was saying and this was a very calculated judgment on his part, and not on his part only, but on the part of Ministers back here, certainly Mr McEwen has been widely awake to this—was that if, given satisfactory enough access, terms of sale and arrangements in respect of meat, or butter or wheat, the preference issue fades into insignificance, indeed the preference itself might fade into insignificance, without any loss to us, then what we are after is to find the quantity that we can expect to sell, the terms under which we can expect to sell, and the terms and conditions of trade generally.
Now I think I have brought you up to date at a gallop with the understanding with which the PM left Ministers there. It was an understanding which apparently—and you Jack will be interested to hear this—you yourself thought had made quite a mark and you let me know that the PM thought he had been fairly successful. Now I think he was much more successful than either you or he thought then. Coming as a perfect sort of straight man if you like—Mr McEwen had been doing the direct and hearty and rough stuff which got them a little bit sore and got them a little bit unhappy, partly because they were guilty—and then the PM coming along and saying ‘let’s get down and talk turkey in a friendly fashion but let’s get some action’. And so when I got over there people like the Schaetzels, the Blumenthals, the Murphys1 and people like that were telling me. that there was a hell of a lot of ‘be kind to Australia week’ around after the PM left and in the instructions that were put down to officials to get working. As you know, I deliberately delayed going over, giving them ample time so they could do their homework, and could have reached the stage where they had had something.
Now I am coming to the point—and what I have put round is a very imperfect kind of a document.2 It was written up from rough notes made and the people who made the notes haven’t had time to write out their records and so forth yet. This document was written coming out on the plane and I therefore apologise in advance for both the errors of omission and commission and the very brief form it is in. Nevertheless it was the easiest way I could think of giving you, on record, the kind of results of the American talks.
What the Americans said, in effect, was this—‘OK. We now have taken on board that you were quite right when you said that we are going to pick up some gains out of this, and yet on the one hand we are now both agreed, and you understand, that we think it would be catastrophic if the UK didn’t go in. The Prime Minister has talked to our people and they have given him assurance [sic] that we also think it would be very very serious if the Commonwealth were hurt too badly in the process. Now this is a proposition of where we can help ourselves, [sic] and help you, and this is the way we propose to do it.’
They proposed, briefly, that we should toss in the scale; that might influence an improvement in our position in Europe, what might be called the emotive power of our mulishness,—our being difficult—and then they should toss in the coin in the GATT tariff compensation sense. For instance, they said that they had made some soundings around the Community and they felt that by offering the Europeans concessions in the American tariffs alone they could not get the reductions of the order that they would be seeking. But if they could offer more or less unlimited payment and say at the same time ‘if you do this you won’t have placed on your back the nigger of Australia being difficult in September’, there was a power or an appeal in that total combination that wasn’t there just in the situation of the US offering the Europeans some tariff concessions.
Mr Bunting:
Was that based on investigations or is that just a judgement of their own?
Dr Westerman:
They said that it was both. They said that they had made some enquiries. I challenged them on how unreal this seemed to be—for instance, I said ‘take the proposal on canned fruit, which I will come to in detail—you argued like hell with the Italians and you got them to agree in the GATT XXIV arguments to a reduction from 27% to 25%. What makes you think you can get 15%—even if 15% were satisfactory’. They said ‘Well, as we would understand it, there was a limit to the extent the Italians want to be difficult, and we could toss as many concessions on tractors or typewriters or what might be at them, and they wouldn’t come along on that, but they wouldn’t want to feel that they had kept the UK out by pushing too hard that way. At the same time, at 15% their industry should be able to have plenty of scope for expansion, given the total position inside the enlarged Common Market and, therefore, it wouldn’t be a case of real damage to their industry—it would be a brake on the expansion of their industry which we (the Americans) regard as very important and which we think in the long run you Australians will regard as important too.’
I just snatched at canned fruit to explain (and this is not my idea, this is their idea) that our mulishness—a mulishness which they were prepared to accept—was reasonable; in other words we had to get solutions. Otherwise we would have to say quite forthrightly that our interests were not adequately safeguarded. But they didn’t want us to have to say that. At the same time they felt they could do a little bit of a lobby which might provide a basis satisfactory to them and to us. So, briefly speaking, they said in respect of lead, zinc, aluminium and leather, we think, given these two circumstances that we can get the duty reduced to zero. We are not sure, of course, but we are prepared to give that a go, with us paying and you accepting that as a satisfactory outcome if it does come out that way and not being difficult and not rocking the boat. How will they pay? The way they said they would pay would be firstly with the unrequited debts which the enlarged Community would owe them, (I will explain that in a moment); and in addition, reductions in their own tariff—reductions which they couldn’t, in fact, speak out loud about now because the legislation is not through. (It has started in the Senate having gone very easily through the House.)
[ matter omitted ]
And so l left it on this basis with them. It wasn’t enough, from our point of view, to know that they would not oppose certain things. They would have to go the stage further and actively work a campaign with the UK and also with the Six—with whom they had a better ally than we have to get acceptance of these things—initially, to get acceptance by the Six that the UK could apply these principles to us. l would explain that that is the difficult thing to get. At the same time they would want from us an understanding that if it turned out that we lost our preferences by degression but that they could assure us that they were going to get the kind of propositions on the metals and on the other things and support for the CAP items that we would not be mulish to the point of rocking the boat in September on that.
Now let me just go on one stage further. Of course that doesn’t mean that we go along to the United States and say ‘OK we agree to give away the preference on canned fruits’. Don’t think we will be giving away the preference on canned fruits. We would be saying what we’ve always said, that we would look at the package. We’ve said two things. We have said that no one commodity is expendable, and we won’t give a commodity away. But, being realists, what comes up in September will be a package of things and we look at the package, and we will agree that it may be that if Ministers were to accept the desirability of going along in this particular way that you are suggesting, it may be that I could then say to you on Wednesday: ‘Well if it did tum out that we were to have lost our post-transitional preference on canned fruits and these other things and to have a degression in the transitional period, and yet there were these other things that you were talking about that were obviously reasonably achievable—although some of them couldn’t be tied off by September at all—but it was felt that they were reasonably achievable and had some assurances from the people who would have it in their hands to make them achievable that they would come out that way, then I might be saying to you in Washington, well, under those circumstances you could feel reasonably certain that we would not say or take any action in September that would bring about what you would not like to see come about, i.e. the UK faced with that dilemma and us having to be mulish.
Now I have been over this in great detail, of course, with Jim Moroney,3 who came back at a lot of personal inconvenience from the Agricultural Council over in WA—we went over it down in Melbourne. Time being of the essence and things moving as they are moving, I’ve got to get back to Washington by Wednesday. I have been over it at length with the Minister and he with the Prime Minister and the fact is, the view that they have, is that this is a line that we should take on the basis that there is nothing to lose out of it if we play it this way, and there may be the substance, in the end, to gain out of it. Moreover, it will be a pretty lonely world if we haven’t any entente with the Americans, and, with Britain in the Six, the curtains are up for our trade. There is possibly no other way of doing it and this seems to be as profitable a line of approach as we could work out.
[ matter omitted ]
The Bury affair and Australia’s capitulation
Within two days of Sandys’ clear abrogation of the imperial preference system (Document 194), a minor political storm broke out in Australia over the Common Market issue. On the evening of 25 July, the Minister Assisting the Treasurer, Leslie Bury, delivered a speech to the Australian Institute of Management in Sydney which blatantly repudiated McEwen’S stand on the Common Market. Without mentioning any names, Bury argued that the likely impact on the Australian economy had been ‘greatly exaggerated’, and said that the cries of alarm which had been raised over the preceding months seemed to him ‘very far fetched’. Far from presenting any kind of economic disaster, Bury claimed, Britain’s entry would mean very little to Australia in the short term and could bring great benefits in the long run. Although Britain’s application had come ‘as a severe emotional shock to the older generation’, he did not believe that the ‘overwhelming majority of Australians will notice any change or be materially affected’. Certain rural industries might well have to adjust any plans for future expansion but these, he argued, were only a minor element in the total economic scene. For the business community at large to be worried about the effects on their future prospects would be ‘absurd’. Rather, Australia should acknowledge the higher imperative of British entry as part of the political reorganisation of the Western world, and recognise that ‘any material fears we may have are relatively trivial’.1
Bury’s speech hit the headlines in the major capitals the following morning.2 In order to ensure the widest possible impact, he repeated his views in almost identical terms in Melbourne the following day. There could be no mistake that Bury’s speech was calculated to undermine well-established government policy, and consequently it provoked a loud response from the Deputy Prime Minister (Document 198). Although Bury was subsequently sacked (Document 199), it seems clear that his intervention was timed to signal a distinct change in the Australian position on the implications of British entry into the EEC, ushering in a period of resignation about the inevitability of profound changes in Australia’s ties to Britain.
By the time of the Commonwealth Prime Ministers ‘Conference in September 1962, the Australian Government had recognised the futility of fighting to preserve the traditional basis of Anglo-Australian economic relations, and was looking for politically credible ways of soft-pedalling Australia’s grievances. The experience of Britain’s EEC membership negotiations had brought about a sharp revision in the underlying assumptions about Australia’s overseas trade ties. Even the eventual rejection of Macmillan’s membership bid in January 1963 by General de Gaulle provided no opportunity to revive ideas about the intrinsic mutual self-interest between the two countries. The British had shown their hand in Brussels, and the prevailing view in Australia was that they had been ‘prepared to sell out the Commonwealth’ in order to get into Europe (Document 215).
1 J. Robert Schaetzel, Special Assistant to Under Secretary of State George Ball; W. Michael Blumethall, Trade Advisor, US State Department; Robert Daniel Murphy, Under Secretary of State for Political Affairs, 1959, and subsequently adviser to Presidents Kennedy, Johnson and Nixon.
2 Document 196.
3 James Vincent (Jim) Moroney, Secretary, Department of Primary Industry.
1 The full text of Bury’s speech appeared in the Sydney Morning Herald on 28 July 1962.
2 See, for example, the Sydney Morning Herald, 26 July 1962; the Age, 26 July 1962.
[NAA: Al838, 727/4/1/4 PART 1]