Canberra, 22 February 1967
Secret
Mr Holt welcomed Mr Bowden and expressed appreciation of his undertaking the long journey to Australia for his visit. His action in doing so confirmed the close understanding which existed between the two countries.
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European Economic Community
The COMMONWEALTH SECRETARY said that Britain had taken no decision to negotiate for entry. The Cabinet had, however, decided unanimously to undertake a series of probes in the capitals of the Six to discover whether the climate was right to start negotiations. The British Government had of course very much in mind the need for adequate safeguards for British agriculture, for the Commonwealth and for their EFTA partners. The probing so far had not been encouraging. General de Gaulle had pointed out that the Six were homogeneous but Britain was of a different nature. He had said that negotiations would be difficult but perhaps not impossible. In his view, if Britain joined it would become a different community. He had also suggested either something new and different or associate membership for Britain, but this would not be acceptable. The question was whether the five other members of the Community could put sufficient pressure on France. He did not think that this was true of West Germany.
If the Cabinet eventually decided to negotiate, there would have to be full consultation with the Commonwealth before these negotiations started. There was still considerable opposition to Britain’s entry in both the main political parties, and it would be a difficult political decision.
He had said that some special arrangement would be necessary for New Zealand. Australia’s case was different, but he accepted that one seventh of her exports would be affected and would need protection, and this would have to form the subject of their consultations if it was decided to negotiate for entry.
Mr McEWEN doubted whether Britain was close enough to entry for there to be profitable discussions at present. Australia’s position was still as it was in 1962. A transitional period would not meet their needs. Even if Australia was large enough to stand the knock in financial terms she could not do so in human terms. She could not stand by and see half her sugar growers, butter producers and fruit farmers ruined.
Mr McMAHON said that Australia was concerned at the effect on her sterling balances of $800 million if Britain entered EEC, since it was being said that it would then be necessary for sterling to cease being a reserve currency. The COMMONWEALTH SECRETARY said it had been made clear to General de Gaulle that sterling could have to remain as a reserve currency if we entered the Community. This might be a breaking point for us.
Mr McEWEN said that the British Government would obviously like to enter the Community, and he recognised that it was a burdensome obligation for them to have to meet Commonwealth interests. He thought that world commodity arrangements provided an alternative to which the British Government had not yet paid sufficiently vigorous attention. Australia was engaged in discussions on cereals and dairy and meat agreements. He thought that possibly the British Government were holding back as a result of their experience over sugar, but their record over sugar was such as to entitle them to speak firmly to the United States and Japan. Japan was buying sugar at low world prices and then taxing it heavily.
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[UKNA: FCO 24/5]