Australian High Commission, Ottawa, 3 August 1962
241. Secret
Australian Attitude to Negotiations Between Britain and the EEC
1. The Trend of Developments in the Negotiations
As we see the course of the negotiations it seems likely in the absence of new developments and new attitudes, that the terms and conditions which the United Kingdom will have been able to get agreed with the Six by the Prime Ministers’ Conference in September will not be such as to enable her to conclude, or the Australian Government to agree, that our trade interests deriving from our trade agreement and history of trade relations would be adequately safeguarded.
While in no way minimizing the strength of the British endeavour to obtain agreed safeguards for our trade, we believed a realistic assessment of the current position in the negotiations suggests the following likely outcome.
(A) In Regard to the So-called Transitional Period
The Six seem to be insisting (in the case of CAP items) that the existing form of preferences be changed and then eliminated over a transitional period.
Imports to be regulated under the CAP by the levy system would be accorded, in lieu of existing preferences a degressive part of the already degressive ‘lump sum’ which will be applied to give an intra-Community preference.
No protection seems to be in prospect for outside suppliers against the likely disruptive and depressive effect of levies and related techniques.
For the CET items the picture is not yet clear.
Already, however, the Six and the UK have reached a tentative agreement on the phasing out of Commonwealth preferences on ‘hard’ manufactured goods.
It would be very optimistic at this stage to suggest that the prospect for our exports of metals and processed agricultural products could be regarded as being any brighter than those for our manufactured goods or CAP items.
(B) In Regard to What Has Been Termed the ‘Post-transitional Period’
It would seem that the Six will be rejecting arrangements the UK has proposed to maintain our present competitive position vis-a-vis third countries.
Also they are resisting giving meaningful assurances that, in the event of imports of the principal temperate foodstuffs suffering a substantial decline (in either the transitional or single market stage) as the result of the operation of the CAP, the Community will take appropriate measures to remedy the decline.
It seems quite clear that in trade items covered both by the CET and CAP, the terms of any possible agreement which Britain might be able to negotiate are unlikely to offer Australia assurances for the maintenance of our existing competitive position with third countries.
Such terms would expose a large part of our existing trade with the United Kingdom to the virtual certainty of serious damage resulting from the Community policies of practically unlimited protection.
This is implicit in the type of regulations already issued as part of the CAP.
These provide, for example, for variable levies, threshold and sluice gate prices, deposit and licensing systems, intervention buying and a level of internal prices in most cases far above those required or obtained by a reasonable cross section of the most efficient external suppliers.
The Six have proposed that definitive solution of the post-transitional problems of the Commonwealth and third countries in respect of a number of important bulk agricultural items be found in what they term world-wide agreements!
The precise meaning of this term or how suitable or practicable such agreements might be for individual commodity problems are questions which do not seem to have been seriously considered between the United Kingdom and the Six.
Indeed, the term ‘world-wide agreements’ seems to have come to be regarded as a kind of universal panacea to all commodity ills ahead of any real diagnosis of those ills or considered judgment as to their suitability for this kind of treatment.
In the light of the foregoing it would seem that unless some assurances not yet in prospect emerged, Australia would be placed in the unhappy position at the September conference of Prime Minsters where it was quite clear that, by any reasonable standards of judgment, our trade interests were going to suffer seriously if the UK joined the EEC. On the terms offering— that there was every reasonable probability that over a large section of our trade with the UK damage would occur in respect of both the quantity we could look forward to selling and the price—that the adoption by the UK of the restrictive measures of the Community would even in some cases encourage surpluses which could threaten existing markets elsewhere—and that the array of protective devices which our goods would face would not only impair the trade position we have achieved because of our preferential position under the UK/Australia trade agreement, but would seem likely to run counter to the basic objectives of GATT.
2. The Australian Attitude
As indicated in earlier discussions at both the political and official levels, Australia would wish to do anything it could to avoid the United Kingdom being faced with the dilemma of having to choose between her Commonwealth obligations (as she sees them) and entry to the Common Market.
Our real concern is not the maintenance of the preferential system as such.
Our concern is to ensure that, should Britain join the Common Market, the terms of her joining are such that our trade does not suffer greater damage than we can reasonably be expected to bear—and greater, indeed, than that suffered by non-Commonwealth third countries.
As I have already said, the course of the negotiations to date gives no grounds for confidence that the terms the six are offering the United Kingdom would do other than to cause injury to a large sector of our present trade with her.
Whether or not this assessment will finally prove to be true will probably be known within the coming week.
The Brussels negotiations are already in the decisive phase.
It can be expected that deadlock will be reached very shortly unless the Six are prepared to modify their position on several crucial points.
We have been considering what Australia can do in the event of the negotiations becoming deadlocked—but only in that event—to assist in avoiding what seems, in prospect, to be a grave dilemma for the United Kingdom.
We do not wish to see her placed at the forthcoming Commonwealth Prime Ministers’ Conference in a position of having to choose between entering the Community on terms which offered the Commonwealth less concrete assurances than they could find acceptable or deciding not to enter the Community because of her commitments to the Commonwealth. Nor do we wish ourselves to be placed in this dilemma at the September conference.
In the event that a deadlock is reached in Brussels we would wish, and indeed are anxious, to work with other interested Commonwealth and third countries in the coming weeks in an effort to find practical ways of achieving safeguards for sufficient areas of our trade to permit us to reach the conclusion that terms of entry for the United Kingdom can be achieved which, overall, would give our trade interests the kind of protection we think to be reasonable—or at least tolerable—in all the circumstances.
Australia has never taken the position that it expects that out of the revolutionary changes involved in the UK joining the Common Market Australian interests must emerge unscathed.
Nor has Australia ever approached Britain’s negotiations on the basis that some of its trade was ‘expendable’ and some not.
Australia has always said that, in looking at the nature of the safeguards Britain might be able to negotiate with the Six, her attitude would be conditioned by the total implications for our trade prospects presented by the ‘package’ which proved negotiable at the end of the day.
In these circumstances we are anxious to consider what minimum improvement in the current prospects there would need to be to provide a ‘package’ which we could accept in September as reasonably protecting our interests.
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The question, shorn of all incidentals, would seem to be as follows:–
‘If the USA, using her bargaining coin (both unrequited debts in the Article XXIV(6) sense, 1 and new coin should her trade legislation become law) could, by September, or by such other time as may not be too late to break any deadlock, achieve a sufficient assurance of the Community’s willingness to go along with the tariff reductions referred to in regard to the CET above; if USA would actively support us as necessary with the UK and the Six to enable us to obtain from the UK the assurances in respect of CAP items referred to above; and if the USA would actively support us as necessary with the ‘declaration of intent’ to give us some assurance of the terms of our access in the post-transitional period, then , so far as Australia is concerned the question is
- – Would the phasing out of preferences in the transitional period and their elimination in the post-transitional period, and
- – Would the United Kingdom’s changing over from an unrestricted market to a market regulated by the policies of the Community so seriously affect our trade that
- – We would have no alternative but to say that our important interests were not safeguarded, and
- – We would be unable to avoid the UK being faced with the dilemma of choosing whether to renege on her obligations to us (as she sees them) or refrain from joining the Common Market?
After consultation with Ministers I can give you what I believe would be the Australian reaction to this question.
In the unhappy event that the UK is unable to achieve in her negotiations the kind of arrangements to protect our interests, she is seeking I believe that, as a last resort, a package containing the kind of hypothetical arrangements and assurances I have outlined above while it would impose considerable hardship on us, could have enough attractions, taken as a whole, to enable us to accept it as safeguarding our interests to a reasonable degree.
In some respects it would leave us in no worse position than before, in some respects it may improve our position (e.g. in respect of prices for some commodities), in others it would be immeasurably worse.
Taking the pluses and minuses as a whole and if we can be assured that reasonable measures we might have to take internally to afford protection to certain industries which proved unable to compete because of loss of preference would not be opposed by the USA, I believe (and I am certain enough of Ministers view to say this) that such a package would be tolerable.
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1 That is, of the GATT.
[NAA: A 1838, 727/4/2 PART 3]