Brussels, 11 June 1970
Restricted
European Economic Communities
The commencement of the negotiations for the enlargement of the Communities being imminent, it may be useful to set out some of the considerations as seen from Brussels which we may need to keep in mind in assessing Australia’s position in relation to the Communities in the short-term and in the long-term. These notes take account of contributions and comments from my colleagues although our views are not identical on all points.
The Short-term
2. In the short-term the principal questions are:
(a) Can Australia, at this juncture, expect its views to be taken into account, either by the Commission or—which is more important—by the Governments of the Six, or to be heard as a third party at any stage during the course of the questions?
(b) Can Australia reasonably expect Britain to mention or to argue any case which Australia may wish to make in the course of the negotiations?
(c) In the light of the determination by the Council of Ministers on 11–12th May of its common position on ‘Commonwealth problems’, should Australia assume that there will be no consideration of the trade interests of old Commonwealth countries other than New Zealand’s butter except in the context of possible world arrangements on commodities?
(d) Would the effectiveness of any case that Australia may put forward on specific matters be limited—at the maximum—to the transitional period applicable to the entry of Great Britain?
3. In view of the stage of the preparations by the Communities and by Britain—the former having this week completed by preparation of their common broad negotiating position—Britain and the Six seem unlikely to be very receptive to an Australian approach. However, it is a fact that the common negotiating position of the Six has, so far, been determined only in fairly general terms and that it will not be crystallized in more specific terms until after the British request for admission has been heard and the detailed negotiations proceed.
4. Possibly—we have no knowledge on the point—Britain might still be prepared to listen to limited Australian proposals which related to the phasing in time of the application of import levies and customs duties but it would seem unlikely, on the basis of all their public statements, that the British, given their apparent determination to enter the Communities, would be receptive to Australian arguments on other more fundamental or continuing problems.
5. Despite one or two hints that the views of third parties might be considered during the negotiations it seems most unlikely that the Communities would be prepared to open up the negotiations to the hearing of third parties, primarily because it would open the way for requests by a very considerable number of countries, Commonwealth and otherwise, which have traditional trade links with Britain or with other applicants, or which consider that they have substantial trade interests at stake.
6. On the other hand, it is clear from all we have been able to do in stating Australia’s interests that people in Brussels do not appreciate that in some particular commodity areas Australia will have problems. To some the situation seems like: ‘no representations, no problems’. Therefore, it would seem that any general statement of our concerns and any other positive proposals from Australia should be conveyed either to some or all of the Governments of the Six, to the Commission, and to Britain. In our view, Australian representations would need to be made fairly widely. To have any real chance of being effective representations to such an entity as the Communities need to be applied simultaneously to a number of the numerous points of power or influence in the Communities. The complex inter-relationships between these various points of power on the different matters under consideration are such that representations at just a few of the points of power would risk that in the event we had addressed ourselves to the wrong people or not all of the right people. The points of greatest power are the Governments of the Member States, and more particularly the six Foreign Ministers, although other Ministers are important. The Commission, although it will have a subordinate role in the negotiations, will have sufficient influence that it should not be ignored.
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8. How receptive would the Six be to Australian representations? Here we must distinguish representations for short-term relief during the transitional period and those designed to secure longer term benefits or to affect a longer term relationship with the Communities. On the latter, we may assume that none of the six members of the Community would be receptive unless our representations were seen as more than arguments to help Australia and were supported by other third countries. It would not be easy to get the Six very interested in world trade problems while they have the enlargement negotiations on their hands. And yet it may be too late to press such problems later.
9. In the shorter term certain members may be more receptive than others. For example, Germany, despite its problems with its agricultural lobby, could be more receptive than France. Germany will provide the President of the Council for the second half of 1970. France, in our view, is in the European Communities primarily for the purpose of using them to support French interests and would be less prepared than any other member to make any concessions which might have the effect of changing, or otherwise disrupting, the present arrangements, and particularly those for agriculture. There is no certainty in any case that the French really want Britain to enter the Communities—this is a nice point for debate—and they may still be prepared to be intransigent on matters of cardinal importance for the British in the expectation that the British will not be prepared, or, indeed, able, to pay the price. Germany, on the other hand, clearly wants Britain to become a member, as do the Benelux countries and Italy, and would be more likely to support consideration for Australia and others which might ease the way for the British to accept the conditions of entry.
10. It should be noted, however, that Italy, despite the fact that it will from 2nd July hold the Presidency of the Commission, carries less weight generally in the Communities than its formal position and population suggest, due largely to the instability of its domestic politics, and, secondly, to a comparative lack of forceful leaders. Individually, all three Benelux countries would be reasonably helpful, but Belgium, in particular would be unlikely to give much support on such an extraneous issue—extraneous to Belgian issues—as Australian access to the British market, in the face of French opposition. Nor is the Commission and its senior staff likely to be particularly helpful since they tend—as we gauge the situation—to take the view that the overall pattern of Australian trade is such as should permit Australia to adapt itself to the new situation following British entry at a cost which should not be unacceptable. Some Commissioners or senior officials will talk of liberal policies but in the crunch they must defend the interests of the Communities.
11. We conclude, therefore, bearing also in mind British Government statements, the British White Paper, the Commission’s Opinion and the conclusions of the Council of 11th and 12th May, that it is most improbable that any special consideration will be given to Commonwealth problems other than those specifically referred to in that material. Australia might, however, if it chooses its ground carefully, obtain some concessions during the transitional period, if these coincided with interests amongst the Six to facilitate British entry and coincided also with British interests.
12. There have been some indications that Britain may seek a delay of 12 months after her entry before the commencement of the reduction or [sic] internal customs duties between the Six and Britain and the phasing in of the common external tariff and the import levies. But any benefits to us may not amount to much being so short lived except that more time would be afforded to see what kind of ‘world solutions’ could be contrived.
13. We are also aware that there is in the Commission a body of opinion, the importance of which we cannot gauge, which feels that it would be advantageous for the Communities to make some concessions during the transition period to cushion, as far as possible, the cost of entry to Britain. There is also some scepticism—perhaps a good deal of scepticism—within the Commission about the current improvements in the British balance of payments situation, in particular because of the current rate of wage increases in the United Kingdom which, in their view, give cause for considerable concern and which, in particular, could lead to further balance of payments problems for Britain beyond those which will be incurred through agricultural imports if Britain were to enter the Communities. It is felt that it may be advantageous to lessen the agricultural costs to the balance of payments during the early part of the transitional period, and to allow the main costs to be incurred towards the end of that period. This could be balanced (in the process of relaxing trade barriers between Britain and particular states) by allowing industrial tariffs between Britain and the Six to fall considerably in the early part of the transitional period. The effect of higher agricultural prices on wages and costs in the British economy would be of a much greater magnitude than that of a decrease in industrial tariffs between Britain and the Six. There could be some advantage for Australia in encouraging this viewpoint in the Commission since it could result in the British market for agricultural produce being still open to Australian exporters in a large measure until the later part of the transitional period.
The long-term
14. From the angle of timing, it has been speculated that Britain, if she enters the Common Market, would do so at the beginning of 1973. This allows for about 12 months for ratifications by all Governments of an agreement for her entry. The transitional period would be, say, 5 years, meaning that Britain would be a full member by 1978.
15. In the long-term Australia’s interests vis-á-vis the Communities can probably best be preserved by making every endeavour in association with the United States, Canada, New Zealand and, possibly, Japan and South Africa, to discourage the enlarged Communities from becoming inward-looking, particularly in the field of agricultural protectionism. One method of doing this would be by seeking to exercise persuasive influence on Great Britain and possibly on the Netherlands and Germany in the hope that this would in turn have its influence in the Communities. Another course would be to continue pressures in GATT for the maintenance of the principles and purposes of GATT and for the progressive elimination of barriers to world trade. A third forum for influence—and perhaps not the least rewarding—might well be OECD, assuming membership is sought and obtained.
16. The whole question of Australia’s interests in relation to the Communities needs to be looked at against the background of the potential development of the Communities over the next several decades. It is quite possible that the enlarged Communities will not remain at ten but will, in the next decade or two, increase to 16 or 17 members or closely associated countries. They might include some of the following: Greece, Turkey, Switzerland, Sweden, Spain, Portugal, Finland and Austria, as well as the present applicants. With a total population of 350 million people rising to 400 million by 1980 and with a general high standard of living and a high growth rate, such an economic grouping could certainly rival if not surpass the United States economically and be of much greater importance in international trade.
17. Judging by the progress which the Communities have made in the last decade, it is reasonable to assume that the economic growth rate will continue in a similar manner in the ensuing decade. The increasing size of the internal market may even make an increased growth rate possible, and with benefits to its less developed members.
18. Moreover, the Communities, notwithstanding that they have made no firm decisions about the means of doing so, are moving towards co-ordinated economic and monetary policies which would eventually result in fixed rates of exchange, common budgetary and fiscal policies, etc, and perhaps a common currency. A blueprint of development for economic and monetary union by stages is expected to be agreed upon before the end of 1970, and applicants will almost certainly be asked to accept in principle this blueprint during the entry negotiations. The aim, which will no doubt prove unduly optimistic, is for complete economic and monetary union by 1980. The future role of sterling in these circumstances cannot at present be foreseen, but there seems every reason to suppose that the role of sterling as a reserve currency will change. The development towards economic and monetary union will undoubtedly go on alongside similar progress in the technological, social, fiscal, transport, company legislation and other fields.
19. Whether these developments are slow or fast, they will all be aimed at an increasing integration of the economic and commercial activities of the member states—and of the daily lives of their people—and will inevitably require an increasingly close political co-ordination and probably the implementation of many common political decisions at least on issues internal to the Communities, but probably increasingly so in foreign relations also.
20. It is impossible to forecast the eventual form of the institutional developments of the Communities. However, there are certain clear pointers towards increasing political integration in addition to those already mentioned. The summit meeting at The Hague foreshadowed progress towards political integration.1 France remains a reluctant supporter of this aspect of the communiqué. Nevertheless France has come a long way since de Gaulle lost power. It may be that the Gaullist policies will recede over the years and with them the strength of the opposition to political integration. France may nevertheless remain for some time the most nationalistic of the Six and the strongest opponent of integration. Britain also appears to be a likely supporter of France in opposing any rapid move towards integration. However, Britain has strongly supported the provision in the Treaty of Rome, for a directly elected parliament, possibly realising that the European Parliament’s powers are not likely to increase rapidly but nevertheless accepting as a basis for the future of the Communities the need for greater democratization. One of the implications of greater democratization might well be either the need to give the parliament greater powers or, alternatively or perhaps in addition, to make the Commission more democratic and less bureaucratic. Nevertheless the process of development towards political integration is likely to move only very slowly; but some would take a different view. The Foreign Ministers, working through the Davignon Committee, are obviously far from agreement about the nature of the political integration envisaged at The Hague, and, for the foreseeable future at least, the most that appears likely to be achieved in this field is some degree of voluntary co-ordination in foreign policy.
21. The significance of the increasing integration of the Communities, commercially, economically, monetarily and ultimately socially and politically, is likely to be that its influence as a world entity will grow substantially over the years. While this is happening the probabilities point to a reduction of the power and influence of the United States, having in mind its major internal problems and internal unease at the burdens of world responsibilities.
22. One of the corollaries of increasing integration of the Communities in a wide range of fields of activity is that in the long run budgetary expenditure on defence and defence industries are likely to become matters of Community interest. With the probable reduction of United States forces in Europe, Western Europe will, of course, need to spend more on defence and to spend it more efficiently, and for this purpose to bring about a closer integration of its weapons production. While it is difficult to foresee the disappearance ofNATO, it is likely that the Western European membership of NATO will become itself more closely integrated.
23. Transport is another field which may in due course affect Australian interests. The Communities are still at an early stage in the process towards establishing a common transport policy and discussions so far have covered only road, rail and inland waterways. However, recently the Commission has not only been encouraging closer co-ordination in these sectors but has also proposed an extension of the scope of the Communities’ policy to include shipping and civil aviation. This might affect shipping companies serving areas of the world external to the Communities, as well as the operations of the Communities’ internal airlines, including amongst other things Qantas arrangements with BOAC. The Ten may also come to speak as one in IATA, and may wish to negotiate all access and frequency agreements for the international airlines as a single ‘pool’.
24. Another probable result of an enlargement of the Communities to 10, and even more so a further enlargement to 16 or 17, would be an eventual capability, due to the increased market and the increased availability of funds for research, for the Communities to take their place alongside the United States in the field of highly technological production with a resultant tendency to move away from the mass production of the less technical products where these can be more easily or cheaply produced in countries outside the Communities with more direct access to raw materials or cheaper labour.
25. Many inferences could be drawn from the above trends. For example:
(i) Australia will need to maintain closest liaison with the enlarged Communities and seek in its relations to establish good will and co-operation. It will not be able to afford to alienate the Communities and may become increasingly dependent on the Communities.
(ii) If the Communities’ trend is towards the more highly technological production, there may be scope for Australia with its considerable resources of raw materials to step up considerably its industrial production of the less technically advanced industrial products.
(iii) On the assumption that the enlarged Communities will have an ever-increasing standard of living, as well as a probable increase of population, the Communities may well become a market of much greater importance than the United States.
- 1 The Hague Summit was a meeting of the Six in December 1969 where they agreed to reopen negotiations for new membership.
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