London, 7 September 1962
Common Market Negotiations
Welcoming the Australian Ministers, MR MACMILLAN said that he hoped they could review generally the position that had so far emerged in the Brussels negotiations and discuss frankly the situation as seen by Australian and British Ministers.
Temperate Agricultural Products
MR HEATH summarised the position reached on temperate agricultural products. He said that in his opening statement to the Six he had asked for comparable outlets for the Commonwealth and had not defined this further until after the Six had agreed on their common agricultural policy. We had then said that what we wanted was access for Commonwealth producers up to traditional quantities without hindrance and as far as possible on the same conditions as they now enjoyed. We had asked for this access to be to the Community as a whole, partly because of the advantages this might give to Commonwealth producers and partly to show that we were already thinking in Community terms. There had been a long debate but the Six had maintained their opposition to any quantitative solution. When the common agricultural policy had been under negotiation the Germans had wished to retain quantitative arrangements. The French had opposed them, fearing that such arrangements would enable importing countries to obtain advantages for their industrial exports, and their view had prevailed. They were not willing to have this question reopened and it was clear that this was a breaking point as far as they and probably others of the Six were concerned.
The Six had put forward alternative proposals based on price policies and world-wide agreements and we had tried to build on this approach which, in some respects, offered a more realistic and comprehensive solution for the Commonwealth. We had tried to make the arrangements on price policy as specific as possible and had had some success. The Six had agreed to state their intention of pursuing a policy which would offer reasonable opportunities in its markets for exporters, with a special reference to Commonwealth suppliers. They had, however, stressed in the negotiations that they could not agree to any wording which suggested that the balance would be weighted against domestic Community producers in favour of outside producers. We had succeeded in getting their agreement to a confrontation of price policies in the context of world-wide agreement which would enable strong pressure to be brought to bear on them to maintain reasonable policies.
We had established that the Community would not use quantitative restrictions to control access, except as a general Community measure to deal with state-trading countries and, as a last resort, in cases of serious market disruption. The Six had accepted that, where the Commonwealth at present enjoy a preference in Britain, they should benefit from the intra-Community preference although the rate of its application had been left for further discussion. This preference could not be extended to commodities such as wheat where the Commonwealth have no preference at present in the British market. We faced a dilemma here since we wished the intra-Community preference to be as low as possible for the sake of non-preferential Commonwealth exports, and reasonably high for the sake of the benefit the Commonwealth would get on their preferential exports. The agreement that the Community would fix the intra-Community preference in such a way as not to cause a sudden and considerable alteration in trade patterns seemed the best solution. We had also obtained agreement to a safeguard clause if, contrary to this intention, trade patterns in the British market were affected to a considerable extent. This safeguard would apply to all products whether they at present enjoyed preferential tariff in Britain or not.
There was no question but that the Six were in earnest in their expressed intentions of working for world-wide agreements although some shared our doubts whether these agreements were negotiable for some commodities. Here again, we had tried to make the arrangements as specific as possible and had been encouraged in this by the views expressed by the Prime Minister of Australia. We had agreed on the date for an international conference, its purpose, the products which might be covered and the main items for the agenda. We had tried to conclude a statement about the principles to be followed but the Six had resisted this on the grounds that it would be impossible either to commit the conference in advance or to settle at this stage what the enlarged Community, which might by then comprise ten members, would wish to put forward. It was clearly stated, however, that the purpose of the conference would be to seek to work out arrangements which would ensure an agreed balance between the interests of consumers and producers. The Six had in mind a general conference to be followed by more limited conferences if agreement could not be reached in the larger forum.
Summing up the position, MR HEATH said that in the first place, there was the assurance that the enlarged Community would take an early initiative to secure international agreements covering the key commodities. If, in the case of any commodity, this initiative failed, then the Community would be ready to conclude agreements with the same purposes on a more limited basis–and, in particular, with Commonwealth countries. Secondly, the enlarged Community would pursue a price policy which would offer reasonable opportunities for exports of temperate foodstuffs. In addition, the Community would be prepared to consult about these policies, either within the framework of international agreements or of more limited agreements. They had also undertaken to do their utmost to contribute to the harmonious development of world trade, with a special reference to the Commonwealth. They had given us assurances that quantitative restrictions would not be used except in exceptional circumstances; and that the intra-Community preference would not be operated in a way which caused damage to Commonwealth interests. The Community felt that in accepting such arrangements they had gone a very long way and, indeed, a good deal further than individual countries had ever done before. It was doubtful whether we should be able to get them to be very much more specific. Problems still to be discussed in this field were the rate of application of the intra-Community preference to Commonwealth products and the arrangements for individual commodities.
MR McEWEN said that the explicit assurances that Australia had hoped for had not materialised from the negotiations; one was in fact being asked to assume that the actual behaviour of the enlarged Community would match up to the intentions now expressed. Unfortunately Australia had often been disappointed by the results of declarations about modifying protectionist policies. Whether a price policy was reasonable from the Australian point of view would depend on whether it provided access on profitable terms. He would like to see the Community apply the same principles to outside producers as to Community producers; terms which allowed a fair margin of profit but did not over-stimulate production. The establishment of some minimum, or sluicegate, price seemed to be essential if there was to be a fair relationship between the internal Community price and the price paid to outside producers.
The GATT enabled the level of protection on industrial products to be negotiated. The levies on agricultural products were analogous to tariffs and the Australians would like to see them negotiated in GATT in the same way as tariffs. He realised that the acceptance of predetermined prices for imported agricultural products was a hard decision for the United Kingdom to have taken and that it represented a dramatic change in policy, but it might nevertheless suit the United Kingdom to be able to take part in negotiating the level of protection in a way which would ensure reciprocity. He was not seeking an immediate decision on this point but asking that it should be considered as a device that could be used in determining the attitude of the Community to outside producers. In some cases it might afford a better device than the contemplated commodity agreements. The GATT offered a forum where all members could express their views in the general debate but where the actual negotiations took place between those principally concerned. There was an obvious danger that a world-wide conference attempting to reach agreement on commodities would degenerate into a mass meeting at which views could be expressed but no decision taken. It might even be advisable to get away from the expression ‘world-wide agreements’, although he recognised that this term had been valuable in the negotiations so far. ‘Commodity agreements’ might now be a better term.
If these questions could be brought into GATT there would be the added advantage that the Americans would be enabled to play their part at an early stage. He thought that such a move could be presented as an evolution of the arrangements that had emerged from the Brussels negotiations. Perhaps, for some commodities, temporary decisions could be taken with a commitment to review the results in the GATT.
The great point for the Australians was that they wanted some definite assurances on the policy to be followed by the Community. They realised that the United Kingdom could not at this stage declare what the policy of the Community would be, but it would be useful to have expressions of United Kingdom intentions in general form for public use and also to be given a more explicit statement in confidence.
MR HEATH said that the Conference text on temperate agricultural products envisaged that the international conference would be limited to the principal exporting and importing countries of the products in question. As regards the level of prices for cereals, he thought all in the Community except the Germans were reconciled to what might be described as reasonably low prices. This would involve reductions in the German, Belgian and Italian prices with consequential reductions in home production. This would involve a movement of workers from the land to industry in those countries but it was thought that they could be absorbed. On the other hand, French and British production might be stimulated. Up to 1966 the price policy of the Community would be decided by unanimous vote and after that by a qualified majority vote. The Six were aware of the increasing surpluses in world production and they wished to ensure stability and reasonable returns through commodity agreements. He recognised the attraction of having the levies bound in the same way as tariffs as a means of preventing prices getting out of hand. It would, however, be an extremely difficult idea to put over and he would expect the Six to argue that the levy was only the mechanism to carry out a price policy aimed at achieving a balance between the interests of domestic producers and outside exporters, and that to bind the levy would defeat its purpose.
MR MACMILLAN said that it must be apparent to members of the Community that they would have to follow the path already trodden by the United Kingdom in moving from agricultural to industrial production. Too high prices for agricultural products would delay this and he thought the Community as a whole would support fairly moderate prices.
MR MENZIES said that if the price level were to be determined entirely inside the Community, outside producers would not only feel that they were being unfairly prevented from stating their case but would probably suffer. If there were to be an opportunity for outside producers to discuss price policy with the Community, this would be a great advantage. In this event it would seem a good idea to make use of the effective machinery which already existed in the GATT. In any event, the determination of whether a policy was ‘reasonable’ was completely subjective unless both sides could have an effective voice in its formulation. MR MENZIE said that if the price level were to be determined entirely inside the Community outside producers would not only feel that they were being unfairly prevented from stating their case but would probably suffer. If there were to be an opportunity for outside producers to discuss price policy with the Community, this would be a great advantage. In this event it would seem a good idea to make use of the effective machinery which already existed in the GATT. In any event, the determination of whether a policy was ‘reasonable’ was completely subjective unless both sides could have an effective voice in its formulation. in a fairly high level. Whether the level would be decided in relation to other undertakings, for example in GATT, would also be important in determining its acceptability.
MR HEATH said that the rise in standards of living in the Community, which should increase demands for agricultural products, had also to be taken into account. Although its effect could not be definitely determined it was likely to have a helpful influence on both the level of prices and the demand for imports.
MR MACMILLAN said that it seemed that it might be advisable for the enlarged Community to aim at keeping prices at about the present general level—i.e. to harmonise prices at approximately the average level. This seemed likely to change the pattern of production inside the Community to some extent without adding greatly to its total.
[ matter omitted ]
[NAA: A3917 VOLUME 8]