NAA: Al838, 727/4 PART 7

Canberra, 6 July 1961

Secret

Discussions with Mr Sandys

This is intended as [a] 'prompt' list of questions upon which you might draw in discussions.

The idea of the paper is approved by other Depts: but I have yet to get their comment on the validity of the 'economic' question towards the end. This I shall do.

Political Implications

The UK case is that there will be political and economic benefit from entry.

Presumably our purpose in the discussion is to preserve Australia's limited bargaining strength; and to satisfy ourselves that UK economy will benefit to our advantage as compared with the status quo.

Set out below are some questions we might ask Mr Sandys.

General

Has the UK already decided that entry into the Community is its best policy? If not, what would make it change its mind? (This is a counter to the question 'what are the essential Australian economic interests which Australia thinks the UK should try to protect in a negotiation'). If it has made an overall assessment leading to this decision, what precisely are the main features of that assessment?

If the UK finds that no significant derogations from the Rome Treaty can be negotiated would it nevertheless intend to enter the Community?

Prospects for United Kingdom Political Influence

The Community

De Gaulle and Adenauer are old men. What kind of France and Germany will follow them? Is it to be assumed that the present movement towards European unity will survive their deaths? If so, at what pace will it continue? How much of its progress hitherto is due to temporary factors–e.g. post-war reconstruction?

Why must the UK take its decision now about joining the Community? Is it necessarily true that the terms for joining will become progressively unfavourable–given, for example, de Gaulle's strong personal nationalism and his distrust of the Anglo-Saxon powers?

How much do the Europeans wish to see the UK in Europe? In particular, does de Gaulle want to see this? Do not France (and Germany) see the UK as a potential rival for leadership in Europe rather than a co-operative partner? Why should they (and especially the French) be prepared to pay any price for UK entry?

The Position of the UK

If the UK entered the Community, what precise political advantages would it expect to gain?

How would Australia benefit from these?

Why should the UK better maintain its world influence within the Community than outside it? Would its status be merely that of one of a number of equal partners, rather than that of an independent world power? In these circumstances, and given European suspicions of UK good faith, would the UK be able to achieve a position of leadership in competition with a prosperous Germany and a vigorous France? Would the UK in Europe not be under immediate pressure to prove itself a 'good European' and to conform to the outlook and strategic priorities of its partners? Will not the UK be obliged eventually to harmonise its foreign policies with those of its partners, and compromise its freedom to exercise an independent influence?

Does UK recognise that France, Italy and Germany each has its own views on areas of the world that it is important to defend, to trade with, to develop, and to conciliate politically? Much is made of the present 'division' of Europe. What makes UK confident they can lead an undivided Europe their way? Will Europe lead the UK their way, with damage to UK-in-the Commonwealth, and the UK-US accord?

Would not the very integration of the UK's economy with that of its European partners force it to adopt common positions with them against the rest of the world–which would include Australia and New Zealand? [...]

Could the UK as a partner in Europe maintain its present special position with respect to the US? If that position were surrendered and the UK became one of a European group, could it maintain the role of a bridge between Europe and America (as in Indo-China, Laos, summitry negotiations, America and the China question)?

Specific Questions Affecting Australia

What would be the effect for Australia of UK entry into Europe, in terms of UK policies and freedom of action in the area beyond Suez?

For example, would not the UK tend to adopt the European attitude that the threat of China is a matter for the US? Would it not tend to disengage from South East Asia and the Pacific? How might its commitment to SEATO and its attitude on a problem like Laos be affected? How far would it be able to maintain its forces in the Far East and its ability to use them independently (e.g., Indonesia, Borneo, the Singapore base)?

Would it not be obliged to commit more UK forces to the defence of Europe? Could present Australian-UK defence planning arrangements continue indefinitely on their present basis? Would there not be pressures on the UK to pool its present independent nuclear deterrent with its European partners?

Would not the present intimacy of consultation with Australia become impaired by the UK's loyalty to its Treaty partners? Would not Australia find itself excluded from information and a share in the making of decisions vital to its interests in the same way as it is now excluded from proceedings in NATO? How could we be given a share of the making of the important strategic and political decisions affecting our interests?

To illustrate the real possibilities–is Australia going to have to pool our information, and discuss our anxieties, with the Americans and to consult with them about the motives and intentions of the Six and the UK? This is foreign to the idea and practice of the present old Commonwealth relationship. It is no use pretending it may not happen.

Compensation

The United Kingdom has been looking at its position in the world ten years hence.

What relations (in all relevant matters) does the United Kingdom want to see with Australia ten years hence? We can supply the answer to the reverse question.

The Commonwealth

Does the United Kingdom realise the effect on the future of the Commonwealth psychologically as well as materially, especially for new members, who approach the association as a matter of convenience?

What would the UK attitude be to a situation in which, from necessity rather than choice, members of the Commonwealth sought new preferential associations and treaties, whether with foreign powers in Europe, with the US, or with other groups?–or they perforce remained isolated.

In short, what is the United Kingdom's view of the future Commonwealth, after its inspired beginnings in imperial statesmanship?

The future of Commonwealth institutional arrangements:

Commonwealth economic co-operation laid down at Montreal would become largely irrelevant?¹ The Commonwealth Economic Consultative Council? Finance Ministers' meetings? Political effect of unrecompensed trade losses suffered by particular Commonwealth countries?

Can the United Kingdom sustain its view of the Commonwealth as a multi-racial association with Nigeria and Ghana strongly resisting the idea of a United Kingdom link with France and Germany? With India demanding material compensation for trade losses?

If Australia, New Zealand, Canada made perhaps eventually an association with the Community, or with other foreign groupings, (a potential cleavage of the Commonwealth between black and white?) [sic]

How would the UK propose to mitigate the damage done to the Commonwealth association by trade losses inflicted on Commonwealth countries and by moving Britain into a foreign 'community'? Has it in mind specific initiatives (substance not words) to demonstrate that its Commonwealth loyalties are not impaired?

Economic Prospects

The assumption that there would be political benefits if the UK entered the Community greatly depends on the proposition that its economy would greatly benefit.

The examination of this proposition is primarily a matter for other Departments. But the following questions may help towards a critical examination of it.

Is the UK assuming absolute decline or unacceptably slow growth if she stays out?

What are the United Kingdom's present and prospective economic problems and does the EEC offer a uniquely effective set of solutions? Japan has gone through a period of great economic growth and looks towards a period of even more spectacular growth in the next ten years: can any parallel be drawn between United Kingdom and Japanese prospects, both outside the EEC, in the next ten years? If as is sometimes alleged, the United Kingdom wishes, by joining EEC, to subject British industry to greater competition, can this not be achieved by less drastic means?

If the United Kingdom joins the EEC, would this not cause the United Kingdom economy serious economic disruption, extending over many years–if in fact the EEC is able to negotiate the difficult period of transition still remaining? Although some industries (such as electronics) may benefit, will not some industries (such as the motor industry)–which may be the greatest employers of labour–suffer grave losses? Would the United Kingdom be able, during this period of disruption, to maintain its economic position in the non-EEC world in an important part of which it would have lost its privileged position? Would it be able to make real progress in EEC itself? Are the disruptions likely to be experienced by the United Kingdom, with its trade now oriented very largely to the Commonwealth, likely to be much greater than the disruptions so far experienced by the existing members of the EEC?

Is the adoption of the Common Agricultural Policy likely to increase the costs of United Kingdom industry? If so, and given the change that this would mean in the United Kingdom's competitive position vis-a-vis its EEC partners, would the present social welfare costs in the United Kingdom become an intolerable burden for United Kingdom industry to bear? It is likely that, while the cost background for all EEC countries is being evened out, the United Kingdom would be at a serious competitive disadvantage compared with its EEC partners and that this period might extend over many years?

Will the present EEC have the unmitigated success which now seems to be supposed? Is there virtue in 'bigness' of a market itself? (The United States which is comparable in size with the EEC plus the United Kingdom has been one of the slow-growth economies in recent years.) Are there any economies of production which can be obtained in the enlarged market which are not already possible in the component markets? When the present boom is over and trade within the EEC begins to approach complete freedom, will the EEC countries be over-capitalised?

Is it not likely that the Common Agricultural Policy will involve high support prices, especially for food probably higher than French prices, perhaps as high as German prices? Will there not tend to be equalisation of social welfare, wages, etc, at the highest rather than the lowest level of the individual economies? Will not this high-cost structure make it more difficult for EEC countries to compete in export markets?

How does the United Kingdom view its performances in the Australian market in recent years?

What is the United Kingdom assessment of the potential of Canada, Australia and New Zealand which have a population of 30 million and approach, in purchasing power, the equivalent of 60 million of the European Economic Community? Does the United Kingdom believe that its prospects in these Commonwealth markets, where it has a preferred position, will be less than in EEC markets, where it will be exposed to stiff competition from countries with efficient industries? How would the United Kingdom hope to regain its position and its privileges in Commonwealth countries if the expectation of gains from entry into Europe proves to be unfounded?

Would the United Kingdom agree that its present capacity to take advantage of the growing Australian market depends on its ability to compete with other countries–including France and Germany? If, despite her preferences, United Kingdom industry has been unable to compete with European exports in the Australian market, is it likely to be able to compete with European industry either in the United Kingdom itself or in the Six when the trade barriers are removed? Could it, having lost Commonwealth preferences, become a declining market on the fringe of Europe and without any essential or dynamic role to play in the growth of Europe?

1 The Commonwealth Trade and Economic Conference, held in Montreal in September 1958, was largely the initiative of the Canadian Government of John Diefenbaker, which had recently been elected on a platform of restoring Canada's ties with Britain and the Commonwealth (in the wake of the St Laurent Government's breach with Britain during the Suez crisis). The objectives of the conference were never clearly laid out, and the outcome achieved only moderate advances. The Montreal Conference never assumed the importance, in the Britain and Europe context, that is implied in this reference.