London, 8 July 1970
Confidential
After welcoming Mr McEwen and his party Mr Barber recalled the formal opening of our negotiations on 30 June. There would be a further ministerial meeting between Britain and the Communities on 21 July. We were not proposing at this meeting to put forward either our negotiating objectives or any opening bids; rather, we had it in mind that the meeting should set up working parties to establish the facts of the problems to be faced in negotiation. There was no question of putting forward any particular case or position at this meeting.
2. In answer to a question from Mr McEwen , Mr Barber said that the Six had decided that they would have one spokesman in the negotiation, the Chairman of the Council of Ministers, though no doubt we should be talking individually with the Foreign Ministers of the Six and with the Commission. He added that the Conference would have its own Secretariat, staffed from the Council of Ministers Secretariat and independent of the Commission; and that we had been invited to provide two members for it. Sir C. 0 ‘Neill said that it appeared that the set-up would be very similar to that of the 1961/63 negotiations. We did not expect to be dealing much with the Commission alone, but the Commission would always be represented at negotiating sessions, and at working party level it might provide the sole Community representation.
3. Mr Barber said that he hoped that by the end of 1972 we should know whether the negotiations were likely to be successful or not. It was possible we should know before this. We did not know whether negotiations this time would be successful, but there were certainly signs of goodwill on all sides. In answer to a question he said that though our interests and those of the other applicants did not coincide over the whole field, there were no important differences of approach to the negotiations between us.
4. Mr McEwen recalled the historical importance of the United Kingdom market to Australia. Some Australian industries had been created to supply this market. It was impossible therefore to consider in broad terms the effects on Australia of British entry into the Communities. A number of industries and communities would be seriously affected. Moreover the Australians were worried that if they were excluded from the UK market and Community policies on the disposal of surpluses remained as they were at the moment Australia would face serious problems in residual markets. 80% of Australian dairy produce, 60% of their canned fruit, 40% of their dried fruit and 32% of their sugar went to the UK at the moment. There was no alternative market of any size for butter; both canned and dried fruit were produced by communities which were largely dependent upon them; while something like two-fifths of the population of tropical Australia were dependent upon sugar. He said he mentioned these points largely for the record, but the germs of a very real and quite widespread problem existed. It was true that in recent years Australia had succeeded in diversifying her trade. The United States now took Australian meat and sugar and Japan took Australian sugar and wool. But alternative outlets for dairy produce and fruit were very limited. The dairy farmer had not been helped by diversification. Nor had the fruit farmer to any significant degree.
5. Mr McEwen mentioned the problem of Papua and New Guinea, held by Australia in trust for the United Nations. It was impossible to contemplate political freedom for Papua New Guinea without genuine economic viability. These territories depended on exports of copra, coconut oil and other tropical produce.
6. Mr McEwen said that the Six were responsible for 29%. of the world trade and an enlarged Community would be responsible for 40% (if one included trade within the enlarged Community as well as trade between the Community and third countries). A group of this magnitude could have an enormous effect on world trade, and if it pursued a restrictive policy it could cause major problems for other suppliers. It was the strong belief of the Australian Government that the terms of British entry should accord with the principles of the GATT and that the trading opportunities of other countries should not be diminished. He thought that the same principles should be applied to trade in agricultural goods though it was admittedly much more difficult to work out in GATT terms the exact extent of any diminution of any opportunities for agricultural trade. He thought therefore that the question should be approached by the UK with understanding and goodwill: He added that he thought ‘a pretty solid amount of fierce negotiations’ would be needed to provide continuing opportunities for third country agriculture under the Community’s Common Agricultural Policy. Not only was there virtual prohibition of agricultural imports when it suited the Community, but the extent to which exports were subsidised was a matter for general concern. The Community intervention price for butter was the equivalent of 72 Australian cents per pound. In Hong Kong France was landing butter at the equivalent of 28 Australian cents per pound. If a gigantic bloc traded in this way then he could only regard it as a gigantic monster.
7. Mr McEwen said that the world appeared to be becoming increasingly divided into restrictive trading blocs—COMECON,1 the European Communities, and in practice, though not in form, the United States and Canada with Latin America. Australia, New Zealand and Japan were the only developed countries who were not members of a trading bloc, nor was it apparent which bloc they could become members of. He asked Mr Barber to bear this general situation in mind in his approach to the Community.
8. Mr McEwen said that Australia would wish to see as long a transitional phase as could be contrived. Even ten years would not see the disappearance of the problems that would be created. But at least Australia might be partially protected for a period.
9. He repeated that Australia could not tolerate ‘predatory subsidised dumping’ by the Community. He admitted that in Australia’s view we should not succeed in our present attempt to enter the Community if there were any suspicion on the side of the Community that, after entry, we might wish to ‘wave a wand’ and change the CAP. The Australian Government did not oppose our entry, but its manner should not violate the principles of GATT. Australia would support, with other third countries, a top-level GATT review to preserve the principles of GATT.
10. Mr Barber said that HMG accepted that British entry into the Community would create socio-economic problems for Australia and hence no doubt political problems. We realised that in particular dairy produce and sugar posed serious difficulties. An important decision which still remained to be taken was where to pitch our opening bid in the course of our negotiations. He quite agreed that the approach of the enlarged Communities to international trade was of great importance. Nobody could guarantee exactly what would happen after our entry but our voice would certainly be used in support of any attempts to make the Community as outward-looking as was reasonable. Many Community countries were interested in our membership for this reason. He hoped that Mr McEwen would accept our assurances that we would take a liberal line within the Community; it was difficult to say this publicly, but our objective would be to try to ensure liberal trading policies as far as was possible.
11. Mr McEwen had asked for the longest transitional period that was possible; we would certainly be trying to achieve the longest transitional period which we thought was reasonable. But did Mr McEwen think it likely that the Six would be prepared to permit anything more for Australia than might be agreed as a general transitional period?
12. Mr McEwen said that the Australians had been told in Paris that they had the highest standard of living in the world so there was no point in asking the French to help. He did not think the Six would have much sympathy for any request for a long transitional period; but the Australians certainly expected Britain to put up a strong fight for the longest transition possible given the particular trading relations between Australia and the UK. They could not ask us to do more than that.
13. Mr Barber said that we would certainly ask for the longest transitional period we thought possible. Mr McEwen repeated that even a ten-year transitional period would not solve Australia’s problems. He referred to the possibility that world commodity arrangements couid moderate Australia’s dependence on the UK market and provide an answer to some of the problems of entry. But his experience with the Six in this respect was disappointing: they talked in a very forthcoming fashion but their practical approach in the International Sugar Agreement and the International Wheat Agreement was a very different one.
14. In answer to a question Sir C. O’Neill said that we hoped it would be possible for dependent Commonwealth territories (and for many independent Commonwealth countries) to become associated with the enlarged Communities, but this would be by virtue of their relationship with the United Kingdom. Since Papua and New Guinea had a trust relationship with Australia and not with ourselves it was difficult to see how they could become associated. Some of the commodities they exported would face no tariff in the enlarged Community, and no problem should arise. We hoped that the market for coconut oil, where there was a CET, would continue to expand.
15. Mr Barber said that as regards the position of the enlarged Community in relation to world trade it might well be that many of the facts of the present situation would change once we became members. There was for example a reasonable prospect that the surplus in some commodities could disappear. He said that many aspects of the way in which the Communities conducted their affairs were not attractive to us but we obviously could not say this at the outset nor could we proclaim that we wished to change the way the Communities ran their affairs. But he reminded Mr McEwen that the Communities had not pursued any policy which was contrary to the interests of any one of its members.
16. Mr McEwen said that he wanted to leave with us three thoughts:
(a) The need for as long a transitional period as possible.
(b) The desirability of support for world commodity arrangements as a means of minimising problems.
(c) That the enlarged Community should not become a new monster, dumping agricultural products recklessly on world markets. Perhaps the only way of controlling Community surpluses would be for these surpluses (by virtue of world commodity arrangements) to be incapable of being disposed of on non-commercial terms.
1 Council for Mutual Economic Assistance–the Eastern Bloc’s response to the formation of the OEEC.
[UKNA: FCO 30/802]