NAA: A4940, C3368 PART 1

Canberra, 26 June 1961

Secret

The Political Implications for Australia of United Kingdom Entry into the
European Economic Community

Introduction

Prospects for United Kingdom Participation

The two major obstacles to the United Kingdom participation in the European Economic Community have been the lack of a positive desire on Britain's part for membership, and the unwillingness of the Six (and France in particular) to agree to any form of association likely to weaken the Common Market itself or its ultimate objective of political integration. Recently it has become clear that the United Kingdom Government's ideas have become firmer, and there is every prospect that it will shortly announce that an attempt will be made to negotiate an early accommodation with the Six.

2. Over and above its economic aims, the Treaty serves the political objective of the progressive integration of France, Germany, Italy, the Netherlands, Belgium and Luxembourg [...] It seems clear that if the United Kingdom joins the Community it cannot escape the trend towards progressive European integration; and, following on the failure of the Free Trade Area scheme, the United Kingdom itself has now accepted that a solution of its problems with Europe would be unsatisfactory 'unless it involved political as well as economic ties between this country and the major European countries'. (Mr Heath, 14th March 1961). It remains to be seen how the question will be presented to the United Kingdom Parliament, but we may expect that in discussion with Australia and other Commonwealth countries the United Kingdom will use all the arguments it can employ to persuade us of the political necessity of its entry.

3. How, and how rapidly, the process of European unification may develop is difficult to foresee. At present, General de Gaulle is the leading advocate of closer political integration among the Six, but along lines which run counter to those of the founders of the EEC (who envisaged an ultimate union entailing real surrenders of sovereignty), and to other Europeans of similar views. De Gaulle is a strong nationalist and believes that the creation of a Common Market has its logical corollary in a confederation (rather than the union of states) the members of which would preserve their separate national identities. There would be regular meetings of the Heads of Governments and the Defence, Economic, Agricultural, and Foreign Ministers for the co-ordination of national policies.

4. The Rome Treaty provides for a transitional period of twelve years. If the United Kingdom joins the Community, the movement towards economic unity would be slowed, if only because the task of harmonising seven economies would be more exacting. But within Europe the pace of economic integration is already significant, and this will exert a continuing influence in the political sphere. Much will depend on the successors to de Gaulle and Adenauer. But assuming that the process now begun maintains its momentum, it is possible that within two or three decades such a degree of integration will have been reached as to entail real surrenders of sovereignty and real obligations upon members to harmonise their policies towards the rest of the world.

The United States Attitude

5. It emerged from Macmillan's discussions in Washington with President Kennedy that the United States favours United Kingdom participation in the EEC on political grounds. It also appears that, although recognising that United Kingdom obligations to its EFTA partners and to the Commonwealth will have to be taken into account, the United States has made its support conditional on there being no weakening of the political structure of the EEC as a result of the United Kingdom's entry.

6. There are important political reasons for this American attitude. First, the United States sees in the Rome Treaty a path towards the union of the principal European powers as a strong and prosperous barrier against Communism, and therefore does not want the structure of the Community weakened. Moreover, the United States is looking to Europe to take an increasing share of the immense financial burdens of the competition in arms and aid with the Communist world.

7. Second (though we have less explicit evidence of this) the United States may well wish to see preserved the broad Atlantic community on the basis of which the Second World War was fought and on which, with the addition of the Federal German Republic, Western unity has since been constructed through NATO, OEEC and so on. The Six, as a powerful continental group dominated by France and Germany, possess great resources and are potentially a super-power, like the United States, USSR and China. The future orientation of this power can only be a matter of speculation: its dynamic economic growth means that it is unlikely to become Communist (despite large Communist parties in certain member countries), but it will be continental in outlook, and may adopt policies independent of the United States (a fortiori of the United Kingdom) and possibly unpalatable to both. Though we have not been told this specifically, the American view may well be that the West, faced with the great and growing strength of the Communist world, cannot afford such a division; and that the best way of preventing it may be for the United Kingdom to enter Europe, where it could do much to keep the Community outward-looking and its policies acceptable to the United States.

8. There is also the desire of the United States, explicitly stated, to avoid any deep-seated division of Europe on the basis of the present EEC and EFTA groups.

Implications for Australia

9. United Kingdom membership of the Community would not entail specific commitments in the fields of foreign affairs and defence. But in the longer-term it could have far-reaching effects, and a broad survey of the prospects over the whole field of Australia's relationships with Britain–inevitably entailing much that is speculative–is required. Such a survey is attempted in the present paper.

10. Essentially, our concern would be that by its entry into a European community which within twenty years could become so unified as to compel, at the very least, harmonious extra-European policies on the part of its members, such freedom of action as the United Kingdom now enjoys as a world power and employs as leader of the Commonwealth could be further reduced; and, in particular, that it might lose both the interest in maintaining, and the ability to maintain, an effective strategic role in the world beyond Suez, where Australia's defence interests lie. In addition, its entry into Europe could disturb in greater or less degree the whole complex of relationships, including the Commonwealth, on which Australia's traditional outlook and policies rest, and compel us to make important adjustments in consequence.

11. But those matters cannot be assessed realistically without considering what the position might be if the United Kingdom did not join the Community. We need to consider, against these two alternatives, what the future holds for the United Kingdom's own world position, for the Commonwealth, and for Australia's own position and relationship with the United Kingdom.

Present Realities And The Position If The United Kingdom
Did Not Enter The Community

(i) The United Kingdom World Position

12. The very decision with which the United Kingdom is now confronted is evidence of the decline in its independent power. Although since the Second World War the United Kingdom has, by determination and skilful diplomacy, been able to maintain much world influence, it clearly no longer possesses the basic resources which alone could sustain its former position. Relative to its position before the War and to that of other countries, its world economic and trading position has weakened. Since the War, there has been a progressive withdrawal of United Kingdom influence from the Mediterranean, and of United Kingdom power from Palestine, India, Pakistan, Ceylon, Malaya, Cyprus, and now from Africa; its bases in Egypt and Ceylon have been relinquished. Strategically–despite the possession of some nuclear striking force of its own–the United Kingdom is essentially dependent on the United States and on its various alliances, especially the NATO alliance. Its power in conventional arms has diminished; the White Paper on Defence of February 1961 provides for a total strength in the armed services in April 1962 of 444,000 (as against 525,600 in April 1960).

13. The world confronting the United Kingdom now comprises more than one hundred countries. Although few possess substantial economic or military strength, independent power of decision is now exercised in every continent by sovereign countries whose strength lies in their power to deny co-operation (bases, over-flying rights, commercial privileges, protection of investment). Britain, in competition with the Soviet Bloc (and often with indigenous nationalism) is in no position to secure political advantages solely by its own financial or military strength, and it can no longer rely upon either to protect commercial interests. It is dependent on the co-operation of the United States in situations requiring the use of armed force.

14. Thus the restoration of former British influence is no longer feasible and the prospect is one of the continuing decline of the United Kingdom as a world power. Commonwealth relations in many ways already reflect this decline. The United Kingdom has not been able to gain the support of lndia and of other Afro-sian members upon major security issues and has sometimes found itself obliged to modify policies against its judgment. Britain is not able to present, towards the United States or continental Europe or Russia or China, a united Commonwealth on some of the major world issues present or foreseeable.

15. The United Kingdom is involved in a system of decision-making, on most really important issues, by more or less collective means–whether in NATO, in the quadripartite planning group in Berlin, or in bilateral discussion with the United States. (But this is true of all countries including the United States. Most countries now belong to groups, sometimes to several overlapping groups, which limit their freedom of policy–for the United Kingdom, entry into the EEC would be an additional but not a unique commitment of this kind. And although if the United Kingdom entered the Community, it would become subject to the influence of its partners, it would itself hope to acquire some leadership within the group.)

16. What is the prospect if the United Kingdom does not join the Community? Unless something unexpected happens, it is one of a further decline in United Kingdom political and economic strength, relative to that of other major powers and the continental group. (There is room for argument here, given the uncertainty of the rate at which the EEC countries may develop and of the extent to which their present rapid progress may be the result of temporary factors, in particular, their post-war recovery. Also, it is not the purpose of this paper to comment on the prospects for absolute expansion in the United Kingdom economy outside the Six, or the prospects of Australian trade in that circumstance.) The United States would increasingly deal with the Six, as the major European power. This is not to say that the United Kingdom would fail to retain some special influence with the United States, derived in part from American respect for its national character and for its long experience and diplomatic skill. But in the end its influence with the United States as an ally would be eroded as its basic national capacity is reduced, just as its influence upon potential enemies has already diminished.

(ii) The Commonwealth

17. The Commonwealth is no longer the close group the members of which in 1939 declared war on Germany almost simultaneously. lt now comprises countries pursuing diverse and sometimes conflicting policies, some being members of one regional alliance, some of another, some of none; and there is every sign that the foreseeable additions to membership will accelerate this loss of common political aims. The association has more value to some than to others. For all there are some concrete advantages, both economic (trade and aid) and political (seats on United Nations bodies, Prime Ministers' Conferences). Were it not for the Commonwealth, Ghana would enjoy less international influence than it does, while Burma has less chance of election to the United Nations Security Council than if she were a Commonwealth member.

18. But in future the association will be based less on common policies and more on common features of law, custom, language, institutional methods and the benefits which each member finds in the habit (and institutions) of exchanging information and consultation on international policies, limited though this consultation is. There will remain, among old Commonwealth countries, special ties of sentiment and kinship, and allegiance to a common sovereign. But even here the ties of 'Old Commonwealth' countries with the United Kingdom are becoming increasingly independent of the existence of the changing entity called the Commonwealth. The 'Old Commonwealth' is a practical reality in that the degree of mutual concern of members with each other's interests, reflected in candour in discussion of attitudes or intentions, is greater than exists in the full Commonwealth. Despite the development by individual members of special ties with non-Commonwealth countries, in particular the United States, the 'Old Commonwealth' is still a political and economic unit of some strength. But there are limits to its potentialities set by such matters as population and the very limited capacity of each member to contribute to its own military defence.

19. Ties between individual Commonwealth members other than the United Kingdom are a matter both of common links with Britain–stemming from the past–and of a feeling of present similarity of interest (or desire to preserve an opportunity to promote this similarity) and of readiness to give some mutual help in some fields. If these ties are to survive and flourish, the second element will tend to outweigh the first. For the 'Old Commonwealth' countries, the new countries offer a bridge into Asia and Africa; and the future of the association as a whole–as distinct from that of the narrower 'Old Commonwealth' group–lies in the strengthening of this bridge, so that the association becomes a multi-racial community, however loosely bound. Even in such a community, however, the central role of the United Kingdom as focus and leader will remain extremely important and indeed appears to be vital.

(iii) Australia's Position and Policies

20. Australia's vital interest will lie in the direction in which future United Kingdom Governments exercise Britain's influence in the European Community as well as outside it.

Hitherto, Australia's relationship with the United Kingdom has been based on a tacit assumption of mutual assistance, like that extended in the two World Wars, as well as on much practical co-operation. But the post-war period has revealed the practical limitations upon this mutual assistance. We have ourselves restricted the geographical area of our defence obligations to South East Asia and the Pacific. While there has been no such contractual limitation on the part of the United Kingdom–indeed, the joining of SEATO suggested the contrary–the progressive limitations which its capacities have placed on the United Kingdom's ability to fulfil obligations in our geographical area have become plain.

22. We have every reason to seek to maintain a United Kingdom interest in this area, and to ensure that this is reflected in policies and commitments which serve our own interests. But the present trend ofUnited Kingdom capabilities and policies is in many ways already unfavourable to us. United Kingdom territorial rights have been and will continue to be reduced: for example in Singapore. It has been moving to dispose of its remaining territorial responsibilities–for example, those in Singapore and Borneo, and in East Africa. United Kingdom military power is diminishing: it is known that some Army reductions in the Far East will be made in 1961 and that further reductions may be necessary during the period 1962/65. The degree of United Kingdom concern over the damage which could be inflicted by the Indonesian forces, even at their present strength, is significant. The cautious attitude of the United Kingdom towards SEATO, and its concern about threats to its economic interests in Indonesia are reflections of a dwindling assertiveness in diplomacy in this area. Its capacity to offer economic aid in this part of the world is limited. Diplomatically the United Kingdom now exerts less influence than previously upon such countries as Korea, Japan, Indonesia, Formosa and Thailand.

23. We have ourselves recognised that United Kingdom power no longer provides an answer to our security problems. There is no longer any valid concept of lmperial defence. The United Kingdom is beginning to advance the conception that other Commonwealth countries should assume from it defence and other burdens in various parts of the world; we may expect this conception to take more concrete form with the passage of time. The United Kingdom's contribution to the defence of South East Asia and Australia is no longer the key to our security, for which we looked primarily to the United States by negotiating the ANZUS Treaty and, subsequently, to SEATO. Our dependence on United States strength in a global conflict is now axiomatic, with corollaries in the degree of our co-operation and standardisation with United States armed forces as compared with those of the United Kingdom. Finally, unless there is some dramatic change in the strategic balance, the United Kingdom must seek always to avoid involving itself in conflicts where its material interests do not justify the risk of nuclear bombardment of the British Isles. We must recognise that its material interests in Asia and the Pacific are limited.

24. In other respects, too, our inter-dependence with the United Kingdom has been modified. An increasing proportion of our population and amount of our development capital is non-British in origin. Our trade policy has for some years recognised the need to negotiate into wider foreign markets, but difficulties have been encountered here–in particular in North America and Western Europe–which will no doubt be referred to in the analysis of the trade aspects of the problem.

Consequences Of United Kingdom Entry Into The Eec

25. Against this background, the political consequences of United Kingdom entry into the Community may now be examined, under the same three heads as before.

(i) The World Position of the United Kingdom

26. From the moment of its entry into the Community–and despite the absence of specific political commitments under the Rome Treaty–there would be strong pressures on the United Kingdom to prove that it was a 'good European' and to dispel the suspicions of its good faith entertained in various quarters in Europe which have played some part in the reluctance of Europeans, notably the French, to admit it except on payment of the full price of membership. What this would mean in practice is difficult to evaluate; it could, for example, mean in the short run concessions to the French point of view over Algeria (if that question remains unresolved); some concessions to Franco–German rigidity over Berlin, in contrast to Mr Macmillan's view of 1958 that the Berlin situation was so dangerous as positively to require re-negotiation; acquiescence in European opposition to being involved directly in the United States dispute with China; greater reluctance to be involved in Laos or Thailand in counter-measures against the Communist threat (France has already said she will not put forces into a Laos operation). In the longer run, the pressure upon Britain to become European could mean the commitment of more United Kingdom troops to the defence of the Continent. It could mean some pooling of the development and control of the European nuclear deterrent at present independently sustained by Britain at great cost. It could mean a readiness to yield something to de Gaulle's ambitions for a triumvirate of the United States, United Kingdom and France to take collectively the basic strategic decisions. It would mean a greater reluctance to take a different stand from its European partners in international organisations; for example, on questions of armed conflict and the terms of their settlement arising in the United Nations General Assembly and Security Council.

27. In general it would mean a tendency for the United Kingdom to be drawn into the acceptance of the strategic priorities of its Continental partners, in the conduct of the present cold war by political and economical means as well as in the planning for armed hostilities, and into presenting a common European front upon these matters to the rest of the world–which would include Australia and New Zealand. In particular, it would be likely to accelerate the shedding of United Kingdom commitments east of Suez; to a greater concentration of attention upon the threat from the USSR rather than China; and to an even greater tendency than at present to regard Communist pressures in Asia as a problem for the United States rather than for the European group, and as a problem not offering such a threat to that group as to justify the risk of nuclear war.

28. There would, of course, be compensating pressures. Though the increasing concentration of United Kingdom attention upon Europe, and in particular upon maintaining its position with respect to France and Germany, could lead to the shedding of burdens elsewhere in the world, it must be noted that the acceptance of international responsibilities–and in particular the Commonwealth–is an important asset to the United Kingdom in distinguishing it from a country like Italy. Any British Government is likely to be aware of this and to want to preserve its international influence. No doubt the United Kingdom believes that she can retain her influence in the Commonwealth and use it to her advantage in Europe.

29. Moreover, might not the United Kingdom be more preoccupied with a rising France and Germany if she were outside the EEC than if she were a member? Only time could show what balance of forces would emerge. But essentially the ability of the United Kingdom to influence Europe yet to maintain a degree of independent action, and her ability to be a real link between Europe, the United States and the English-speaking countries overseas, would be directly related to her own economic strength. An independent Australian judgment as to how much entry into the Community would contribute to United Kingdom economic strength is required before the effects upon Australia can be finally assessed. This judgment is left to other Departments to offer.

(ii) The Commonwealth

30. To the extent that the Commonwealth draws its vitality from some common political and economic interests, it would be weakened by the United Kingdom's entry into Europe. To the extent that it becomes clear to individual members of the Commonwealth–more particularly newer members moved by self-interest more than sentiment–that the United Kingdom's capacity to support them has been reduced by her obligations to Europe, we can expect that they will become less responsive to the United Kingdom leadership. They will tum to foreign powers (as Australia, for that matter, has already done).

31. Economically, the United Kingdom's interest in the Commonwealth seems likely to be weakened by its entry into what would eventually become a duty-free market of 230 million. The existing structure of Commonwealth economic co-operation established at the Montreal Conference would lose much of its relevance. Eighty per cent of United Kingdom Government aid at present goes to the Commonwealth and colonial territories: allowing that the EEC as a whole would be a much greater potential source of aid, would the same pattern continue? Private United Kingdom investment in Commonwealth countries runs at the rate of about £300 million a year, of which about £100 million is invested in less-developed areas. This might diminish by being re-directed, were the United Kingdom in the Community; though here again the likely trend is difficult to judge.

32. The countries which are likely to be hardest hit economically if the United Kingdom joins the EEC are those which have traditionally placed most importance on their attachments of sentiment to the United Kingdom. How would these attachments be affected by a decision which resulted in serious hardship?

33. Commonwealth ties of language, culture and kinship among the four old Commonwealth countries would remain. Even under the most thorough political integration it is hard to see the United Kingdom or the other nations of Europe losing their national identities. The machinery of political consultation through Prime Ministers' Conferences, the CRO, and the exchange of High Commissioners would continue; Commonwealth education and telecommunications schemes and a wide network of Commonwealth arrangements need not be touched.

34. But though this machinery would not change, it is to be assumed that the increasing engagement of the United Kingdom in an association in which no other Commonwealth country shared, and in fields of common economic, social and political action in which they had no part, would have a cumulative effect.

(iii) Australia's Position and Policies

35. The process of policy-making on strategic, or lesser international issues would be particularly important to Australia. Being already excluded from direct NATO consultation and decision, we could eventually find ourselves excluded from another important policy-making group, the Community, and from knowledge of the attitudes and intentions of members. Under the rules of the organisation, the United Kingdom is precluded from informing us about NATO discussions, and the same might well become true in the Community; apart from rules, loyalty to partners would become a strong inhibiting influence. The real value of our continuing direct access to and consultation with the United Kingdom could be impaired, and would be impaired if Australian policy were consistently opposed to that of Western Europe.

Diplomatic and Defence Support

36. The European attitude towards China has already been mentioned; how would this affect our interests in a crisis over Laos or the offshore islands? What would be the effect if United States/United Kingdom/Australian consultation about means of meeting the Communist threat in South East Asia should become consultation between the United States, Australia and the Community? What would be the effect upon any prospect that may now exist of the United Kingdom's being willing to use nuclear weapons in Asia?

37. There could be consequences for us in United Kingdom membership of the Community if we should become involved in disputes with neighbours which do not involve the struggle against Communism. Conceivably, an aggressive Indonesia could threaten Australia in circumstances in which we could at present hope for United Kingdom military support. What would be the prospect of this help, or even of such diplomatic support as we might like, from the United Kingdom as a partner in Europe? Apart from this unanswered question, it is to be feared that in a situation short of a merger of sovereignty, when there would be no single Community foreign policy backed by power but various inhibitions on the freedom of action of individual Community members, aggressively-minded countries outside Europe could be tempted to adventures by the expectation that they would fail to be met by a unified response from Europe. (This might suggest that the early period of the Community could entail the most risks for countries like Australia).

38. There follow some questions upon which advice to Ministers would be a matter for other Departments.

39. What effect would there be on the present structure of Commonwealth defence and of United Kingdom/Australian defence arrangements? Could defence planning be conducted indefinitely on its present basis? Given the pressures to contribute more to European defence, could the United Kingdom military presence in South East Asia and the Far East be maintained at its present effectiveness?

Trade, Finance, Migration

40. The loss to our export trade in the United Kingdom could to some extent affect our whole relationship. What would be the effect on us of serious economic losses on the part of New Zealand? Would the sterling area survive, or might the United Kingdom eventually enter a new European currency area, and if so would this be a disadvantage to Australia? How would the flow of United Kingdom capital to Australia be affected?

41. Migration would presumably not be hindered, unless by greater United Kingdom prosperity. Nor would the web of personal and cultural connections between Australia and the United Kingdom be impaired.

Conclusion

42. The conclusions that this paper suggests are these:–

(I) United Kingdom entry into the Community would accelerate tendencies which are already established: towards the transformation of the United Kingdom into a European rather than a world power and towards a decline in its commitments beyond Suez; and towards the transformation of the Commonwealth into a looser group. Likewise, it would make plainer than before the existing and accepted fact that Australia is essentially dependent for effective physical resistance to aggressive powers in Asia, and for national survival, not on the United Kingdom but on the goodwill, self-interest and strength of the United States. But it would not initiate any of these tendencies;

(II) This acceleration could reduce the prospects for Australia of getting effective collective action against the various forms of Communist expansion, and Chinese or Indonesian aggression, in Australia's North. It could require of us earlier adjustments than if the United Kingdom remained outside Europe. But this effect is by no means axiomatic;

(III) We could be caused serious economic losses, especially in trade, which is a major national interest for Australia; these are the subject of a separate paper by the Department concerned;

(IV) The pace of European integration cannot be assessed. But even the most rapid timetable would be likely to give us ten or twenty years in which to adjust ourselves politically and strategically in the developing situation; and there should be no immediate or dramatic changes in these fields as compared with what we may expect in any case. But we might suffer an initial period of increasing isolation from United Kingdom and European support, while the Community takes shape and the United Kingdom is proving itself as a European power;

(V) Although the retraction of United Kingdom influence from beyond Suez, and its increasing concentration upon Europe seem inevitable, entry into the Community would give the United Kingdom an opportunity of a new period of growth and vigour sufficient to slow down this decline in her political influence in the Middle East and Asia;

(VI) In the aggregate, whether Australia stood to gain or lose would depend on the net effect on our trading position, and on such imponderables as how far the United Kingdom would be reinvigorated economically by the share in the European revival (at whatever rate we estimate this will continue) which it could gain by entry; whether, if it did not join Europe, the United Kingdom would have any future rather than slow economic growth and a more rapid decline in relative power; whether the kind of Europe which emerged would be isolationist or not; how far the United Kingdom could influence the extra-European policies of the Community; and how far the United Kingdom could maintain some degree of independent action on world issues and, in addition, would want to employ it in this area of the world.

(VII) How much the United Kingdom-in-Europe will contribute to arresting Communism in an Asia increasingly dominated by China will partly depend on the sort of understanding on the distribution of strategic and financial responsibilities which is reached between the United States and the European community. The United Kingdom may or may not seek to move her European partners to give a higher priority to Asia. In a sea of speculation, the prudent estimate for Australia to make is that the European Community will resist giving this area a high priority; that Australia will have a limited capacity to move European policy in this direction; and that our self-interest lies in exploiting now all the arguments of sentiment and mutual interest available to us to obtain–for what it is worth–public recognition from the United Kingdom that she will have continuing concern with the security of Australia and New Zealand. Our objective should be to try to avoid this objective being lost in a generalised acknowledgment by the United Kingdom of a sense of responsibility towards the welfare of the Commonwealth as a whole. More specific 'compensations' in the political field will be difficult to define.

1 The document was prepared by the Department of External Affairs for Menzies in his capacity as Minister for External Affairs. It was preceded by a number of internal papers which are referred to in later correspondence, but are not produced here as they overlap substantially with this submission. In contrast to McEwen, Menzies himself seems to have had little direct involvement in the formulation of this position.