From the Archives: Britain's Imperative
Britain has just taken the most momentous and far-reaching step in this century. She has decided to apply for membership of the European Economic Community—the Common Market, as it is more usually called. In doing so she has ended a centuries old policy of isolation from the continent of Europe and has cast her lot in time of peace for the peaceful purposes of trade with those whom she has hitherto only supported (or opposed) in time of war or for the express purpose of preventing the military dominance of Europe by any one power.
How has this revolution in British political thinking and alignment come about? Briefly the answer is that Britain has finally come to the conclusion that she cannot earn her living and pay her way by depending solely on the Commonwealth for preferential trade arrangements. Since the Europeans decided to band together in a tight trading system of their own and an undeveloped and dependent empire became a developing and independent Commonwealth, Britain has been brought to recognise that she needs Europe more than Europe, or the Commonwealth, need her. The patterns of trade have changed so that the Commonwealth now look elsewhere than just to the United Kingdom for their imports and exports, and Britain can no longer rely on them to maintain her commerce. Britain must therefore join Europe or lose what amounts to a third of her trade.
Even so it took Britain much heart-searching to come to this conclusion. For the first ten years after the last war successive British governments refused to join with the efforts of a war-ravaged Europe to save itself by a common productive programme. They failed utterly to understand the determination of the Europeans to throw overboard the traditional prejudices of nationalism and to try anything that would help them to recover the stability and prosperity that they had lost in two world wars.
In 1945 Europe lay in ruins, begging for Britain to give it a lead. But so concerned were we with our own problems—and to be fair they were considerable—and so afraid were we of hitching onto our own ankles the ball and chain of Europe's chaos and destruction, that we turned a deaf ear to these cries. So the Europeans, with the help of American aid, went ahead with their own plans, first the pooling of coal and steel, then the plan for a European army, but still hoping we would join and lead these movements and inviting us to do so.
The first plan succeeded and the Coal and Steel Community of these same six nations—France, Germany, Italy, Belgium, Holland and Luxembourg—came into being, but with Britain steadfastly refusing to be a partner. The second, the European army plan, failed and the cynics in Britain smiled complacently. The Europeans would never federate, they said; the European army's failure showed how wise we were to keep out of these pipe-dream plans.
But within two years the movement towards European unity had regained its momentum and its confidence. The Common Market plan was born and a year later—Britain having once again refused to take part—the Six signed the Treaty of Rome and launched the economic United States of Europe. Britain woke up with a start, realising what this could mean to British industrial exports. We offered a half measure association with the Six in the form of a Free Trade Area of all Western Europe which would have given access to the Common Market for our industrial goods but would still have barred our market to anything the Europeans wanted to sell us that might be in competition with our own farmers or our Commonwealth suppliers. But the Europeans, led by the French, who saw everything in this for us and nothing for themselves would not have it. The European "bus" had left and our last minute effort to get on at half-price was brusquely rejected by the French conductor.
So, as a very poor second best, we turned to the rest of Europe—to Scandinavia, Austria, Switzerland and Portugal—and formed the European Free Trade Area, or the Outer Seven as it is called. But now, two years later, we have found as was inevitable that the swings of the Outer Seven cannot make up for what we shall lose on the roundabouts of the Common Market with its tariff walls against us. The Outer Seven gives us a market of 40 million people as compared with 170 million of the Common Market; and besides, the margins of preference we shall enjoy in our best markets among the Seven, over our German competitors for example, will be minute because our best markets are inevitably in the low tariff countries such as Sweden and Denmark. Not only has the British government come to recognise these unpalatable truths, British and American business interests are already investing heavily in the Common Market area in preference to Britain, building factories in France, Belgium and Germany so as to benefit from the free trade within the Six and, as it were, tunnel under their tariff wall; and unless we go into the Common Market this capital and investment will be lost to us.
If the arguments in favour of our joining Europe are so compelling, what has been the case against it? Until the last year or so one British government after another has excused its policies of negation in Europe by pleading that for Britain to join with Europe would betray her obligations to the Commonwealth. Leaving aside what British ministers may have thought the Commonwealth was thinking, what does it really think, and what does it stand to gain or lose by closer ties between Great Britain and Europe?
In the late forties, when I was touring parts of the Commonwealth, a distinguished Australian political leader summed up the attitude of his fellow countrymen to me in these few succinct words: "My country is best known in Great Britain for sending over a cricket team every five years and an army every twenty-five. If you fellows took a bit more interest in Europe between wars, may be we wouldn't have to send the army and could concentrate on cricket." This was in 1949 when the great debate had just started about Great Britain's role in Europe. Certainly no one that I spoke to at any stage of this 40,000 mile journey upheld the British Labour Government's rejection of the leadership of Europe on the grounds that to do otherwise would bring Great Britain into conflict with the Commonwealth. Great and profound as were the sentimental and economic attachments to the motherland that I encountered, every thinking person emphasized the importance to the Commonwealth as well as to ourselves of Great Britain combining the roles of leadership in Europe and the Commonwealth.
It is, I think, fair to say that at none of the many conferences of prime ministers or finance ministers of the Commonwealth since the last war has any serious anxiety or concern been shown at the prospect of a closer British association with Europe. On the contrary, meeting after meeting of Commonwealth ministers has emphasized in its published communiqué the importance they attach to European integration. In July 1957 the prime ministers expressed their support for the Free Trade Area plan, and John Diefenbaker of Canada, although he was at the time almost exclusively devoted to increasing Canadian trade with Great Britain, said on his return home that Canada would regard British participation in European free trade "with a benevolent eye." At a subsequent finance ministers' conference at Mont Tremblant in Quebec there was unanimous agreement that a European Free Trade Area would "contribute to agreed Commonwealth policies for expanding world trade" and "broaden the advantages to be derived from economic integration in Europe."
The broad-mindedness and foresight of the Commonwealth approach to these issues was perhaps best summed up by Australia's Prime Minister, Robert Menzies, at a press conference in July 1957. Speaking of Great Britain's position in relation to the European Common Market, he said that this was not in conflict with her Commonwealth relationship. The Common Market and Free Trade Area had many political and economic merits, such as access to cheaper raw materials, greater mobility of labour and consequently lower production costs. If the purchasing power of Europe were improved, Australia stood to gain benefits for herself. Likewise, if association with the Common Market raised British purchasing power, Australia would again reap advantages since the United Kingdom was her best market.
So much for the argument that Britain could not join Europe because of the Commonwealth. Whatever the sincerity of those who advanced it, this argument struck the Europeans as nothing but a smoke-screen for the continuation of Britain's traditional isolationism. In actual fact the first time any British post-war government really discussed these issues with their Commonwealth partners was when Mr. Harold Macmillan, as Chancellor of the Exchequer, took the Free Trade Plan to Washington in 1956. The Commonwealth were not consulted about the Schuman Plan for a Coal and Steel Pool in Europe. The French Government's invitation to Britain was turned down out of hand and the Commonwealth were told about it afterwards. The late Mr. Ernest Bevin and his colleagues then made out that the rejection was decided on Commonwealth grounds. How could it have been? And what harm could have come to the Commonwealth if Great Britain had joined the Coal and Steel Pool? It could hardly have had any possible adverse effects on Commonwealth trade, since neither coal nor steel figures among the principal exports of the Commonwealth.
Great play was made in 1949 with the argument that in accepting the invitation we would have had to underwrite the principle of a supranational authority for the coal and steel industry. Apart from the fact that Great Britain could have entered a reservation on this aspect and still been welcomed to the negotiations, it is hard to see what harm would have befallen the Commonwealth if we had accepted the supra national principle in this limited sphere. Nor is there any constitutional provision which would prevent Britain from internationalising her coal and steel industry, if she so desired, with the same carefree abandon as she nationalised both of them under one regime and denationalised one of them under its successor. Small wonder that, as M. Paul Henri Spaak once said to me, we never could tell the Europeans just what it was in their plans that would conflict with Commonwealth interests.
As with the Schuman Plan, so with the European Defence Community; the Labour Government took their own decision, informed the Commonwealth afterwards and then made them the pretext for holding aloof. Once again there were no constitutional or Commonwealth obligations which precluded our joining our forces in Europe with those of the EDC. This was something which no European could understand, especially after the French and later—in the London negotiations for the Western European Union — we ourselves had been granted a special dispensation as a colonial power to withdraw forces from Europe in the event of an emergency arising in our overseas territories. If such an escape clause could be negotiated by France as her price for the EDC and by Great Britain as hers for the eventual WEU settlement, presumably Great Britain could have got the same conditions for membership of the EDC.
Even when in 1956 the Government suddenly awoke to the dangers of exclusion from the European Common Market, they spoiled their Free Trade Area initiative by over-cautiously hemming it around with safeguards and exceptions far in excess of what was necessary to take care of Commonwealth interests—an approach hardly likely to commend itself to a European audience already suspicious enough that the British were trying to have their cake and eat it. Again the reason given—the need to maintain Imperial Preference—was based on overstatement of the real requirements of the Commonwealth in the post-war world.
The fact is—sad though it may be for those who persist in living in the world of Ottawa 1932—that Imperial Preference is no longer the valuable and effective instrument of promoting Commonwealth trade that it was in the nineteen thirties. Not more than 30% of Commonwealth exports go to the U.K. and since the Commonwealth's share of world trade has been declining in recent years, partly because the British market has been expanding more slowly than other markets, the trend towards those other markets is likely to increase and the dependence on the U.K. to diminish. In the four years since the Rome Treaty was signed, there has been a noticeable rise in trade between the Commonwealth and the Common Market countries, whereas trade with Great Britain has decreased in proportion.
Besides this, many of the preferences granted at Ottawa and operating in full up to the Second World War have been either reduced or totally eliminated by bilateral agreements, such as those between Great Britain and the U.S., and Canada and the U.S., and by multilateral negotiations within GATT (General Agreement on Tariffs and Trade). In 1937 preferences were granted on 56% of Great Britain's exports and 61% of her imports from the Commonwealth. By 1956 these figures had fallen to 40% and 45% respectively.
As to our own exports, Imperial Preference helps us a lot less than has been suggested by the worshippers of this sacred cow. Only Australia, Canada, New Zealand, and the West Indies give substantial preference margins to British exports. How this works out in actual trade is shown by the fact that since 1945 we sell to "preference markets" less than 40% of our exports of iron and steel and textiles, 33% of our motor cars and 20% of our machinery and chemicals. To quote from an Economist Intelligence Unit report of August 1958,
The system (of Imperial Preference) was highly effective during the 1930's when world trade was declining . . . but as the shape of Commonwealth economies began to change and they ceased to be complementary to the U.K., the importance of Imperial Preference dwindled. It may well be that, with a few major exceptions, such as butter among imports, cotton and rayon textiles among U.K. exports, its contribution to the development of U.K. and Commonwealth trade was to establish and protect certain trade flows and that, once established, trade would continue to follow the same pattern even if preferences were to disappear altogether.
Leaving aside the question of Imperial Preference, what might have become of those trade patterns of which the Economist report spoke, if Great Britain had conceded the European (or more accurately, French) demands for including foodstuffs and extending the common external tariff to the Free Trade Area? The area of serious competition between the Commonwealth and Europe is in fact confined to tinned meat, butter, cheese, eggs and fish. The total value of this trade with the U.K. in 1956 was £133 million, or less than 8% of total Commonwealth exports to Great Britain in that year. It can scarcely be said that Britain would be right or wise to risk exclusion of our own exports from the Common Market for fear of competition for such a small fraction of Commonwealth trade. Looking at it purely from an economic point of view, it could hardly be the wish of our cousins in this historic family of nations, any more than it could be good business for the sterling area, to jeopardize over £500 million-worth of British exports to Europe in order to hold inviolate and protected a quarter of that sum for the Commonwealth.
In the light of all these facts and figures it is difficult to avoid the conclusion that we could well afford to have been a lot bolder and more generous towards Europe in our Free Trade offer, or, better still, taken part in the original negotiations at Messina and so worked out the concessions and exceptions we needed from the inside and during the formative stage of the Common Market's growth. Had we done so, we should have avoided the difficulties which now confront us of negotiating our way into an already established trading system and of reconciling our and the Commonwealth's interests with the rules and requirements of the European club.
Can we nevertheless, by belatedly seeking Common Market membership, avoid being excluded from Europe and priced out of the European market or shall we be confined to the role of impotent spectators of a continental community growing and expanding in wealth and power at our expense, whilst we are forced to rely for bread and butter on a dwindling trade with an indifferent Commonwealth?
We cannot resurrect our original plan for a Free Trade Area. France would again cast her veto against it and there is no one in the Common Market group today with both the power and the will to prevent her. Nor for that matter are the French any too keen on expanding the Common Market and inviting British industrial competition. Still less do they want British political influence competing with French for the leadership of the European Community and disturbing their special relationship with Germany. Nor will there be great enthusiasm for this in Bonn. There are those who say that the present Franco-German entente is but the fragile product of two men, Adenauer and de Gaulle, which will wither and die when one or both of them leave the scene. But in international affairs events are usually bigger than men, even bigger than the men who create them and certainly more compelling than the influence of those who inherit them. However much Ludwig Erhard, or any other German who may follow Adenauer, might wish to strengthen ties with Great Britain, he will not be able to do so at the cost of weakening Germany's ties with France—and no one with any sense of history would wish it so. The Franco-German entente is in business as the senior group of partners in the Common Market and it will be to the advantage of neither partner, nor of the Western Allies, for this relationship to come unstuck for as long as anyone today can foresee.
There will very likely come a time when the Europeans will find that their present economic partnership is not big enough or broad enough to withstand the outside pressures that will impose themselves upon it. These pressures will come, not from our side, but from the Soviet bloc as it heaves its mighty productive capacities into the scales of the struggle of competitive co-existence. Then the 160 millions of the European Economic Community will seem puny by comparison and will need reinforcement not only by Great Britain but by the whole agglomeration of the North Atlantic community. But we cannot afford to await such a cosmic upheaval whilst doing nothing to protect ourselves meanwhile.
We must somehow find a way to make terms with Europe which will persuade France to raise her economic sights beyond the immediate horizons of "Little Europe." To do this we must not only ask to join the Common Market ourselves but at the same time offer to bring with us a trading area which will provide the French with opportunities for expansion and development sufficient to compensate for the acceptance of British industrial competition, in addition to German, in the French market. We must, in short, throw the net a lot wider than the area which our old Free Trade proposals were intended to cover.
In the long run, I am convinced that if the West, let alone Great Britain, is to withstand the competitive power of the Communist world, it must galvanize and mobilize all its productive capacities—industrial and scientific—in a manner without any precedent in history. An economic North Atlantic Treaty Organization, patterned on the principles of the European Common Market, must be applied to the whole Atlantic community, including the Americas. Nevertheless, I readily admit that such a revolutionary departure from nationalist traditions could not be imposed in a few months upon the Western world. Although the latest signs are that the governments of the Atlantic community are beginning to think and plan along these lines, a vast amount of preparation and education of public opinion must be put in before the idea of an economic NATO can command general support. As the post-war history of the federation in Europe has shown, this kind of "inter-allied" merger must grow gradually. Over-ambitious schemes inevitably collapse or are stillborn; but practical essays in unity can and do succeed and in their turn give birth to bigger and better coalitions. The Benelux Union and European Coal and Steel Community inspired the Common Market and the European Atomic Energy Pool. Now it is up to Great Britain to devise an enlargement of the Common Market to serve and save her own interests and to pave the way for an economic community embracing the whole Western world.
A plan of this kind already exists in outline. In 1952 the Council of Europe worked out a set of proposals which became known as the Strasbourg Plan. The purpose they had in mind was to harness the industrial resources of Western Europe to the raw material of its associated territories overseas and, by providing assured markets for both, to expand the trade and production of the whole. The Strasbourg Plan envisaged the creation of a system of primary and secondary preferential tariffs, a dollar pool for the area as a whole, an international central bank to co-ordinate monetary policies and investment plans, international commodity schemes fortified by long-term contracts, and a currency system based on flexible exchange rates and the automatic provision (under a revised and expanded European Payments Union) of credits for countries in temporary balance-of-payment difficulties. In short, its purpose was to forge closer links between the economies of the sterling area and the European Payments Union with the object of building an economic unit capable of standing on its own feet in face of the continental economies of the United States and the Soviet Union and restoring some kind of economic equilibrium to the free world.
Had the Strasbourg Plan been accepted by the British Government as it was, unanimously, by the parliamentary representatives of the fifteen member states of the Council of Europe, there would have been no Common Market and hence no question of Great Britain being excluded from the European Community which has since arisen. For the Strasbourg Plan was specifically designed to give the widest practicable merger of Western markets and resources; and with such a merger there would have been no need for the narrower and more restricted concept of the Six. Yet, as it turned out, the Plan was rejected out of hand by the British Government on the grounds that it would cut across existing economic policies, policies which were designed in the spirit of GATT to serve the ends of multilateralism as opposed to regionalism.
I believe the time is due, if not almost overdue, to re-examine this project. For until an economic community of all the West can be realized, the Strasbourg Plan offers the best hope of getting Great Britain inside the European market on terms which would safeguard all possible Commonwealth interests. And it can offer this hope because it would do for France and her Common Market partners what a Free Trade Area singularly failed to do—that is, to provide an expanding market for their own production outside the area of the Six, which would more than compensate them for the risks of admitting British industrial competition to their own group.
The simplest and most graphic proof of this claim is to be found in the following facts and figures. Of the twelve principal Commonwealth countries (excluding Great Britain) with a total population of nearly 600 million, nine include machinery among their main imports, eight textiles and vehicles, and three petroleum products; and in the official lists of Common Market exports, France puts textiles, vehicles and petroleum products at the top, Germany vehicles and machinery, and Italy, Belgium and the Netherlands textiles and machinery. Conversely, every Common Market country lists wool and cotton among its main imports and Germany and the Benelux countries list wheat and flour; and all of these raw materials are staple export products of the Commonwealth. Add to this fact that the Commonwealth is already looking increasingly towards the Common Market for an expansion of trade and the case for some merger of these two trading systems seems to be overwhelming. Certainly no other project yet devised can claim to combine as this one does the two essential requirements of any enlargement of the Common Market, a preferential market for British and Commonwealth goods in Europe and an expansion of French and other European trade with the primary producers of Africa, Asia and Australasia.
It may be objected that this would conflict with the obligations we have undertaken to pursue a policy of multilateralism under GATT or that this would create a dangerously powerful economic rival for the United States. It may be difficult to reconcile this with GATT, but such a grouping in a world of expanding demand should be complementary rather than competitive to the American economy. Besides, the alternative—to wait until the Common Market is being crushed by the superior weight of the Soviet economic bloc—is too dangerous for Great Britain, for Western Europe and ultimately for the whole Free World. What is more, the idea of an expanding economic community of the West, although still perhaps too revolutionary to be generally accepted, is being discussed and debated by an ever widening circle of people in the United States in the light of their sudden awakening to the Soviet challenge in science and technology. Mr. Harold Macmillan may only recently have added the word "interdependence" to the Anglo-American diplomatic vocabulary. But it has already been adopted as a motto by many on both sides of the Atlantic to whom a few years ago it would have seemed synonymous with a betrayal of national interests. Just as Britain has now awakened to the perils of economic separation from Europe, so equally areas of the United States which hitherto have slumbered behind the thick protective curtains of isolationism are becoming aware that perhaps America is not as self-sufficient as once she was thought to be. Added to this, the St. Lawrence Seaway is now bringing the sea-lanes of the Atlantic and the markets of Europe to the doorstep of the Middle West, where in the economic clubs "Free Trade" is today more a question mark than a dirty word.
Slowly, but without any doubt surely, America and Britain are beginning to rethink this whole vast and challenging problem and to discard the outworn prejudices of nationalism. It is to be hoped that Britain's application to join the Common Market will be the first essential step towards merging the Common Market and the Commonwealth and that from these broad and imaginative regroupings a growing unity of political purpose and economic action will emerge to embrace, protect and prosper the entire Free World.