UKNA: DO 159/62

UK High Commission, Canberra, 28 November 1962

Confidential

Australia: House of Representatives Debate on the Common Market

[matter omitted]

I have the honour to report that the debate on the Common Market which followed Mr Menzies' report to the House of Representatives on the Prime Ministers' Conference revealed a marked change in the Australian Government's public attitude. The gap between the views now put forward, and those for airing which, only a few months ago, Mr Bury suffered dismissal as a Minister, has been substantially narrowed. ¹

2. The main public image to suffer from this readjustment, that is if the Australians are not so generally bored with the subject as to be unmoved by the change, is that of Mr McEwen. Everyone expected Mr Menzies to pick a nice path between the need to convince his electorate that Australia was doing her best on the one hand, and his desire to maintain his reputation as a world statesman on the other. But Mr McEwen's uncompromising utterances in the past have left him with little room for a change of directions, and 'Black Jack' on this occasion was never more than pale grey.

3. Copies of Mr Menzies' speech, made on 16th October, have already been sent to London and you will not wish me to comment on it in detail. He, the Ministers who followed him, and the Leader of the Opposition, expressed their belief that Britain was determined to join the EEC, come what may. The Prime Minister explained at considerable length his belief that political associations never stand still, either progressing towards closer union or breaking up, but while expressing his fears for the future of the Commonwealth should Britain ever become part of a European Federation, he philosophised dispassionately that a changing Commonwealth might learn to live even with that situation. It was not for Australia, he emphasised, to attempt to influence Britain in principle on this issue. Turning to the economic side he justified all that Australia had done and was doing to put her case for access and fair price stability. He took comfort from the attitude of the United States in these matters and the policies which, armed with the new powers of the Trade Expansion Act, she might be expected to follow. He obviously regards it as something of a triumph for Australia that Britain has been persuaded to lend her support to the proposed negotiations of international commodity agreements.

4. Mr McEwen, whose speech, as I have said, was in a minor key, also welcomed the promised British support for a fresh and vigorous approach to world agreements. He spent some time explaining why the dedicated attitude of the Six to the Treaty of Rome made negotiating so difficult for the British. He referred, almost apologetically, to the occasions in the past when he had felt impelled to comment critically on the policies and attitudes of the United States ('keep out of our hair'), and to the more complete understanding of Australia's problems, which he thought now prevailed in that country. He could not resist a dig at Britain for the changes in her attitude towards Europe over the years, saying that, had the Australian Government endorsed the British Government's policy throughout, Australia would have been following a pretty winding path. Not for the first time, Mr McEwen showed dissatisfaction with GATT's treatment of the problems of primary producing and undeveloped countries. The great industrial Powers, he said, could not expect Australia to continue to support GATT unless she showed herself able and willing to deal realistically with these problems. He finished on the note that Australia's apprehension remains but 'we can also have our hope'. Mr Whitlam, the Deputy Leader of the Opposition, who followed the Minister and whose speech was disappointingly party-political, described Mr McEwen's effort as his calmest and first realistic assessment of the attitudes of the Six, the United States and Britain.

5. Mr Holt, the Treasurer, who left Australia for the conference saying that he was worried about the prospects for a continued inflow of capital from Britain into Australia, has apparently been completely reassured by his discussions in London and made an optimistic contribution to the debate. No British Government, he thought, bearing in mind the extent of Britain's capital investment in Australia, the size of Australia's holdings of sterling resources, the volume of her loan indebtedness, the size of the market she continues to provide for British manufacturers, and the steady absorption she continues to make of British immigrants, could afford to ignore the importance of Australia's prosperity and national growth for the economic and social well-being of Great Britain. He had been assured repeatedly that Australia should be able to have access to the London market in future, to no smaller degree than she had experienced in the past. He saw the possibility, with Britain entering the Community, of the City of London becoming an even more powerful financial centre than it is to-day. Speaking more generally, he was sufficiently optimistic to believe that the world would gain advantage from this great adventure, and he declared (with feelings on the part of his former Assistant Minister which can be left to the imagination) that the challenge that Australia must face would in the long run produce a better and stronger Australia.

6. The best performance came, not from the Government side, but from the Leader of the Opposition, Mr Calwell, who, apart from some side swipes at the Government for its 'shocking miscalculations of economic policy' which, he claimed, had caused a greater loss of production than Australia might lose in exports if Britain entered the EEC on the worst possible terms, made a really statesmanlike contribution not very different in tone from that of the Government's new line but without the latter's air of deflation. His principles, he declared, were those of a strong and self-reliant Australia; a strong free world against Communism; a new deal for commodity producers everywhere; and a strong Britain. On the last point his remarks are worth quoting. 'The case for the Commonwealth has been put to Britain. She knows we wish her well, and I tell her that, for myself, I truly hope that the decision will be one which will bring new strength and dynamism for Britain which lacks them now and which in the past has often been the one lonely barrier against the spread of doctrines quite alien to our traditions of freedom.'

7. These views undoubtedly appeal to a great majority of Australians and in expressing them Mr Calwell has done his party better service than those of its members who would prefer to harp on the alleged danger of an intensification of the cold war following British entry into Europe, and on the alleged domination of the British Government by the United States.

8. Outside Parliament, Mr McEwen has not abandoned his usual more gloomy tone. He told an audience on 23rd October that Australia faced the prospect of a 'cataclysmic' alteration in her relations with Britain. He continues to tell his listeners that over the past 10 years Britain has sold Australia ਺.1,500 million more of items under preferences than she has bought under preference without, apparently, thinking that if his implications are accepted they reflect rather adversely upon the Minister who negotiated the 1957 Trade Agreement. Dame Patricia Hornsby-Smith² during her recent visit found him aggressive, blaming Britain for everything, claiming, so she says, that we had no right to put up tariffs against Australia at any time in the future, and threatening that if we did we could expect no concessions in Australia. He expressed annoyance that Britain had bought wheat from India when she could have bought it from Australia,³ and he resented Dame Patricia's reminder that India, too, was in the Commonwealth and needed help. Incidentally, in the course of her meetings with both Country Party and Liberal Party members, Dame Patricia found widespread disbelief that Britain could compete with Germany, and a false impression about the relative levels of social security levies in Britain and in the Six, an impression which she, as an expert on the subject, did her best to correct.

9. As I have already reported, business men and others in the cities have for some time now been reconciled to the prospect of Britain's entry and not unduly worried about the consequences. Amongst primary producers also there are signs of change. While it may be true to say that many of the smaller men on the smaller family units, together with their leaders, are still looking over their shoulders 'at arrangements that have been rapidly losing their significance anyhow' (President of the Graziers' Association of New South Wales), the bigger men, and especially the economists of their organisations, in wool, meat, cereals and sugar, having passed through the valley of resignation, are saying that now is the time to prove the potentials of their industries, and one can readily detect a new optimism in the face of challenge.

10. The grounds for that optimism are not purely subjective: it is, to some extent at least, based upon expansion and development in various directions. Thus there are schemes to develop roads for the easier transport of beef cattle in Northern Queensland, to develop for closer settlement the brigalow country in Central Queensland and in the Ord River area on the borders of Western Australia and the Northern Territory. These latter two schemes are designed to increase production of beef, wheat, rice and cotton.

11. These increases in productive capacity are matched to some extent by a widening in Australian markets for their products. Perhaps the most noticeable is the great increase in the sale of meat to both the United States and Canada, and the growth of their markets in the Far East: China, for instance, is now the biggest buyer of Australian wheat whilst Japan (always a very important market) is now Australia's largest customer for wool. Similarly, companies have been formed to promote the sale of Australian dairy products in South-East Asian countries by new technical processes. Apart from increasing their markets, other industries, such as that of dried fruit, are known to be working on a scheme for stabilising world prices, which should have an effect on strengthening the position of the industry in the European market.

12. In short, the initial shock has by now been pretty well absorbed, even in those parts of the community where it lingered longest. The word 'challenge' is heard more frequently nowadays than 'disaster' and, although Australians generally might be reluctant to admit it (Mr Holt came very close to saying so in the debate), this challenge has forced them to face up to changes in the pattern of trade, already taking place but which, coming about more slowly, might insidiously have weakened Australia's commercial position. As it is, the drive for new markets has been stepped up, South-East Asia being the main, but by no means the only, target. Government assistance includes the strengthening of the trade commissioner service, increased participation in overseas trade fairs, and sponsoring more trade missions. Some six or seven of the latter will take place during the current year, compared with three in the previous year. Organised commerce and organised manufacturing industry, bitter rivals in most matters, have come together to suggest the setting up of a joint enterprise to organise overseas fairs and exhibitions, and are exploring other forms of co-operation for the promotion of exports. Mr Calwell's appeal to Australians, in the recent debate, to 'stop whining and start working' was to a large extent preaching to the converted. Certainly from this time forward we are likely to hear more about schemes for securing new trade and less recrimination about the loss of traditional outlets.

13. I am sending a copy of this despatch to the British High Commissioners in Ottawa and Wellington.

The French veto: January 1963

On 14 January 1961, with only a relatively small amount of negotiating ground left to cover, Macmillan's EEC membership application was brought to an abrupt halt by French President Charles de Gaulle. Without any formal warning and without consulting his EEC partners, de Gaulle announced in a press conference that Great Britain was 'not yet ready' to assume the obligations of full EEC membership. He warned that to introduce into the EEC 'new and massive elements, into the midst of those that have been fit together with such difficulty, would obviously be to jeopardize the whole'. He observed that the Six were 'a group of continental countries, immediate neighbours to each other, doubtless offering differences of size, but complementary in their economic structure. Moreover, the Six form through their territory a compact geographic and strategic unit. It must be added that despite, perhaps because of their great battles of the past–I am naturally speaking of France and Germany–they now find themselves inclined to support one another mutually rather than to oppose one another'. Britain's motivations for joining seemed at variance with those of the Six, and he expressed his understanding as to why 'Britain–who is not continental, who remains, because of the Commonwealth and because she is an island, committed far beyond the seas, who is tied to the United States by all kinds of special agreements–did not merge into a Community with set dimensions and strict rules'. Given the prior history of Britain's attitude to the Six, De Gaulle felt entitled to wonder at Britain's new found enthusiasm: 'Yet, apparently now', he marvelled, 'adopting a new state of mind, Britain declares she is ready to subscribe to the Rome Treaty, even though she is asking exceptional and prolonged delays and, as regards her, that basic changes be made in the Treaty's implementation. At the same time, she acknowledges that in order to arrive there, it will be necessary to surmount obstacles that the great perceptiveness and profound experience of her Prime Minister have qualified as formidable'.

Although the precise effect of his pronouncement was somewhat vague initially, it soon became clear that de Gaulle had cast a formal 'veto' over Britain's membership application. After a brief and ineffectual protest on the part of France's EEC partners, the Brussels negotiations were brought to a close on 29 January 1963.

1 Document 199.

2 Margaret Patricia Hornsby-Smith, Conservative MP for Chislehurst.

3 Note by CRO: 'Britain has purchased no wheat from India at least since the beginning of 1957'.