Commonwealth And Europe A NEW LOOK AT THE NEW EUROPE

Press, Volume XCIX, Issue 29233, 17 June 1960, Page 12

Commonwealth And Europe A NEW LOOK AT THE NEW EUROPE

(The first of a series o» articles based on the forthcoming book, "The Commonwealth and Europe,” written ana published by the ‘Econondar intelligence Unit, London)

For the Commonwealth, the European market is of vital importance. The major European industrial powers—Britain, the Six, Scandinavia, Austria, and Switzerland —absorb about twofifths of exports from, the overseas Commonwealth and provide over a third of its imports. While it is peculiarly dependent on the United Kingdom not only in trade but in matters of finance and investment, it looks to Continental Europe as one of the most, if not the most, promising of its export markets. But the conditions governing trade between the Commonwealth and Europe are changing. Their relations with each other and with the rest of the world are a matter of great concern to the Commonwealth, all the more so now that Europe is itself dividing into two camps.

possible ways in which the Commonwealth connexion might be preserved with a Britain which had joined the E.E.C. Nor is ft true that Commonwealth Pref or. ence is any longer a factor of predominant importance in Britain’s trade as a whole. Certain particular commodities, iotably overseas Commonwealth ...anutactures, are affected very definitely; but less than half the total United Kingdom-Commonw—ifti trade secures any preference at all, and even that which dots enjoy preference benefits much lea than it did. say. 20 years ago. Commonwealth Preference k f w the Commonnwealth’s trade with Britain taken as a whole, a factor of declining importance; and there is not much doubt that the decline will continue. Room for Compromise This being so, a crucial issue arises immediately: what form could British association with the E.E.C. take? A free trade area which would confer on Britain the benefits of free trade with the E.E.C. without any of the responsibilities of membership of the Community has now been ruled- out conclusively by the Six themselves. Similarly, there seems to be little chance at present that Britain will go so far as to merge its tariff entirely with that of the E.E.C.

The fact that the two camps have come to be known as “the Six” (France, Germany, Italy, Holland, Belgium and Luxembourg) and “the Seven” (Britain, Sweden, Norway, Denmark, Austria, Switzerland and Portugal) should not be allowed to hide the fact that the Six constitute by far the bigger economic unit both in population and in productive capacity. Nor should the similarity of their adopted titles be allowed to obscure the differences between them. The European Economic Community of the Six aims not only at free trade between its members but also at a common external tariff against imports from non-mem-ber countries. The European Free Trade Area of the Seven has no plans to form any such common external tariff and, unlike the E.E.C., is not to allow free movement of capital and labour among its members. The E.F.T.A. is, in fact, a much less tightly-knit organisation altogether. Cost of a Divided Europe It would now seem that Britain (deterred by fears that joining the E.E.C. would mean abandoning complete political independence, Commonwealth Preference, and a policy of subsidised agriculture) does not intend to try to join the E.E.C. From the overseas Commonwealth's point of view, therefore, two vital alternative questions arise. First, exactly how much does the Commonwealth stand to lose because Britain has not associated herself with the E.E.C., and what will bd the effect on tie overseas Commonwealth of the alignment of Europe into two groups? Second, what consequences would follow for the Commonwealth if Britain did eventually form some kind of association with the EEC.? The first question raises many complex issues. All the same, it seems probable that the severity of the adverse effects upon the Commonwealth of a continuing division of Europe has often been exaggerated. There will, at course, be hard cases. The E.E.C.*s common agricultural policy will give rigorous protection to European farmers against competing imports. Where the Six are physically capable of meeting their own requirements of temperate foodstuffs they will do so, as, for instance, in soft wheat and dairy products. The Commonwealth’s small sales of these products to the E.E.C. will diminish to vanishing point Where, on the other hand, demand is rising rapidly, agricultural protectionism will not prevent an increase in imports of, for example, meat; and Commonwealth exports to the Six may rise dramatically. Again, the tariff preferences given by the E.E.C. to their associated and overseas territories in Africa could make it more difficult for Commonwealth producers to compete. Exports of cocoa and other tropical products may be diverted from the Six to other markets where, in conditions of world over-supply, they might be more difficult to sell. But the majority of Commonwealth exports to the Six consist of raw materials on which the E.E.C„ like the United Kingdom and other European countries, will levy no duties. And even where goods are liable to duties, the “harm” done to Commonwealth trade will often take the form of a lower rate of expansion rather than an actual reduction in sales. Even here, however, it is important not to Ignore the probability that demand for many Commonwealth products will grow more rapidly because economic expansion in the Six is more rapid than it would have been had its members remained separate entities.

But it must be emphasised that there is no economic reason why one of a number of compromises between these two positions should not be adopted. Trading arrangements could certainly be varied according to the product or commodity concerned. Separate markets might be retained in some cases; in others Britain might accept the E-E.C.’s external tariff so long as duty-free exceptions for some Commonwealth products were allowed. There can be no doubt that, economically, a large range of compromises is possible. More than that, it is fairly certain that on economic grounds alone some such comprises might well be acceptable to all countries Concerned It is important that such compromises should be studied by the various European governments, and particularly the British. And the importance of their being studied lies not only in the the chance of positive advance being made but also in the opportunity of clarifying the position even if there is no advance. For after years of disagreement veiled on both sides by economic arguments the division of Europe can now be seen clearly for what it is—a political division. This fact must be made plain. For only when this is done will it be clear that the onus of responsibility for a decision whether .or not to “join” Europe rests squarely on Britain’s shoulders.

®< E.F.T.A. The E.F.TJL is a matter of much less concern, for its members wiU retain their separate tariffs from the rest of wo * rld * though allowing free entry to each other’s manufaclures.

a y a « re not alterin « the conditions of trade in foodstuffs; and where other goods are concerned there is very little competition between the Commonwealth and producers in the E.F.T.A. It is true that Canada’s forest industries are likely to meet with stiffer competition in the United Kingdom from Scandinavia, since such preferences as Canada now receives will be extended to Sweden and Norway. But most Commonwealth exports to the United Kingdom will be wholly unaffected, much less hurt, by the creation of the E.F.T.A. It is, unfortunately, equally true that the Commonwealth also stands to gain very little from British participation in the E.F.T.A., since this is unlikely to gite much of a boost to economic growth in the United Kingdom. If Britain joined a wider European association, growth migh* well be stimulated and so the Commonwealth would gain.

Association With the Six? The- benefits, then, which the Commonwealth as a whole will enjoy as a result of the creation of the E.F.T.A., will not compensate it for the absence of any association with the Six. This brings us to our second question: what consequences would follow for the overseas Commonwealth if Britain did eventually form some kind of association with the Six?

When the question of British association with the E.E.C. first arose one of the chief reasons given by the British Government for its refusal to form any close association with it was that this would involve the abandonment of Commonwealth Preference. It is by no means certain that this is true. Jhere are a number of