London, undated [June 1971]
Meetings between British Ministers and the Australian Deputy Prime Minister (Mr Anthony) 18 June—23 June 1971
Mr Anthony has recently become Deputy Prime Minister in the Coalition Government and Leader of the County [sic] Party in Australia. The future of neither institution can be described as confident, which must in large measure account for tensions reappearing in public utterances by Australian politicians of recent weeks on the issue of Britain’s entry into Europe. Mr Anthony has said that the forthcoming talks would be held under ‘strained circumstances’. He has accused Britain of failing even to put up Australia’s case.
2. He is perfectly aware, of course, that Britain could hardly join the EEC without creating problems for certain sectors of Australian primary industry—some of questionable viability, eg dairy products; others of real efficiency, eg Queensland sugar and South Australian dried and canned fruit. He also knows that because of the strides which Australia has made in diversifying her economy (and she is to be congratulated on the vigour with which she has pursued her opportunities), the acute local problems which will arise from loss of markets in Britain for these industries will not mean economic disaster for Australia […] and that it is for this reason we gave no pledge to Australia on this occasion to negotiate for her interests beyond the affirmation that we expected to secure transitional arrangements which would allow our traditional trading partners time to adjust.
3. It is this point which Mr Anthony will pursue with vigour, however, claiming that this affirmation has been belied by our agreement to accord full Community preference to products covered by the CAP from the outset. Without qualification, this means not only the rapid exclusion from our market of items like sugar and dairy products and certain kinds of wheat from Australia but also from other third countries so that Australian exporters will find themselves competing with these newly diverted supplies on the already limited outlets in the rest of the world.
4. To concentrate on these items is to take a very narrow overall view of Australia’s general export prospects to the enlarged Community […] but in terms of votes for the Coalition they are vital. Accordingly, during his ten day visit here, his domestic political position and the tradition of tough talking by Australia will tempt Mr Anthony to make all the mileage he can with anti-Market opinion and consciously to exploit the fact that Australia is one of our very largest customers according us preferences1 and a country where we still have vast investments. At the same time he will be conscious that Australia still needs that investment: her regular deficit on current account is only remedied by her surplus on capital account. Nor would it be clever to antagonise Britain if he hopes to profit from the Community pledge to use the mechanisms of its institutes to rectify or avert disruptions in trade from traditional suppliers. For this reason, if he can gain some assurance that Australia is not simply regarded as expendable by Britain, and that when it comes to dealing with specific trade situations there is no reason to believe the enlarged Community will simply decide whether to deal with them or not behind closed doors, Mr Anthony may set out to build on the positive prospects rather than confine himself to a fall back on recrimination.
5. There are indications from Canberra that Australia still hankers after using the GATT as the forum for pressurising the Community into dealing with problems of world agricultural trade by disciplines acceptable to Australia. This, despite 25 years of experience to the contrary and, more recently, unmistakable evidence that the EEC is indifferent to attacks from the agricultural members of the Contracting Parties with the United States leading from behind. We have no particular reason to dissuade Mr Anthony from pursuing this line or from attempting to secure some expressions of understanding in the capitals of the Six to this end if he really believes this will be useful. But we should have to point out that once we have entered the Community ourselves, our role in the GATT would be as members of the Community. Besides, we could add that it has been our experience with the Community, including the present negotiations, that there are more prospects of achieving meaningful settlements (e.g. on tariff quotas) when talking about, in more limited terms, precise problems for individual areas of trade in particular markets than has so far been achieved by the kind of ‘best effort’ codes of conduct in world markets which tend to emerge from large multilateral conferences.
6. Against this background our objective should be to encourage Mr Anthony to build on the positive features of the situation and to persuade him that what we have negotiated in respect of third country interests is of real value. The main points to be made are as follows. On items subject only to tariffs we have secured agreements to an even transition of six steps over five years—a longer period than the Six wished to concede. In respect of items subject to levies, the area of greatest interest to Australia, it has always been clear that accession to the EEC meant adopting the CAP and thus applying the full Community apparatus of levies etc. from the start. We have accepted this and have not sought derogations from the CAP which would have been unnegotiable. However we have from the outset of the negotiations pointed out that the adoption by the UK of the EEC systems and price levels would entail considerable adjustments in trading patterns over some large volumes of trade and have emphasized the need to ensure that the third countries affected had an opportunity to make these adjustments in an orderly fashion which avoided undue disruption of world trade. And we made our agreement to the Community’s proposals for agricultural transition specifically conditional on arrangements to cover this point. What we secured from the Community was explicit recognition that circumstances could arise in which significant volumes of trade with third countries would be in serious difficulties or in imminent danger of being so and agreement that in such cases it would be the intention of the enlarged Community to take effective measures to avoid unnecessary disruption.
7. This understanding is not limited to any specific products or countries. Our approach was not to seek to negotiate detailed plans in advance to cover all possible contingencies—which would be impossible and moreover out of line with the general basis on which the negotiations are being conducted—but rather to seek from the Community an unequivocal declaration of principle together with effective and flexible arrangements for implementing it. The enlarged Community will have available a variety of means of taking effective action and, when action is agreed to be necessary, will choose the means most appropriate to the circumstances of the commodity, the degree of risk, the market situation etc taking account of the situation on world markets as well as marketing in the enlarged Community.
8. It seems to us that this flexible approach is a better way of dealing with the adjustment of third country trade than seeking to make detailed specific provision at this stage because so much will depend upon the detailed circumstances of the commodity at the time. It is against this background that the somewhat emotive issue of full Community preference should be viewed. The Six attached great political, almost theological, significance to our acceptance of the principle of applying this straight away but the economic significance of this decision for third countries can be greatly exaggerated. For the leviable products Community preference is only of significance if the market price falls below the threshold price. In these circumstances for products where the Community is in surplus any significant degree of levy preference will tend to exclude third country supplies. What matters therefore is not that the full preference is being applied straight away but that the Six have recognised the need to take action should the operation of the levy system during the transition period cause disruption of trade with third countries.
9. Mr Anthony’s political need will be to convince his constituents that the arrangements we have negotiated are meaningful and capable of translation into effective action. On this we should seek to reassure him using the arguments above that this is so but clearly we should refrain from giving any further specific bilateral assurances. This should in any case be unnecessary if, as we believe, we have negotiated a meaningful agreement with the Community. It would be useless to him for domestic political purposes if given privately; but if given publically could arouse suspicion in the Six, and possibly disturb the course of the final negotiations; while indicating to the Community that we had doubts about the value of the agreement we have negotiated with them and thus undermining our negotiating position in this matter once we are Members. Obviously it would be for the Australians to do something to help themselves by deciding what kind of approach they make to the Six but Mr Anthony should be able to see as well as anyone else that it is much too soon in 1971 to speculate about what kind of measures could be taken to present disruption which can only be considered in the light of market conditions at the time; nor would it be wise to try to identify which products could come up for discussion (a question on which both the Community and ourselves have carefully refrained from being precise). Indeed it will only irritate the Six to press them on either issue now but on the assumption that he has a political need to secure the measure of response from the Community on Australia’s interests some time this year, Mr Anthony might try on the Six the idea that expert evidence from traditional suppliers would be highly relevant to any analysis of such market factors and particularly by preference to the way in which the interests of those third countries might be prejudiced.
10. It would also be up to the Australians themselves to take any initiative in sounding out the Six this way and they would be most unwise at this stage to refer to our attitude in the matter. It would not only prejudice their prospects of an understanding attitude in the European capitals now (because it would arouse a suspicion that we were trying to unpick the settlement already reached); it would also hamper our ability to achieve effective remedies if and when events show that disruption is threatened.
[…]
1 Footnote in document: ‘on 80 per cent of our exports and duty free entry on over 60 per cent’.
[UKNA: FCO 24/1054]