26 JANUARY 1962, Page 30

The 'Market' and the Outside World


ON the whole the bankers in their annual pontificals have taken a sober, realistic view of the Common Market. It is not to be seen as a commercial paradise, said Mr. Duncan Stirling, of the Westminster, but if we stay out, said Sir Oliver Franks, of Lloyds, our efforts to find an adequate mar- ket for our industrial exports will become progressively harder and we may be reduced to barter. He might have quoted Mr. Anthony Barber, the Economic Secretary of the Treasury, who told the Institute of Bankers last November, very bluntly, that there would be no automatic benefit to Britain. 'After all,' he added, 'there are impoverished areas even in the United States and the world is littered with places which have failed to make the competitive grade.' Britain might have become another dump if the Ottawa protective system of preferential tariffs had been continued much longer.

But, while welcoming 'the removal of this protective wadding,' Sir Oliver Franks was right to sound a warning. European nations, tradi tionally protectionist, are now moving rapid13 towards free trade in manufactures, but, as yet. in manufactures only. When we join the Com- mon Market this will mean initially—subject to such exceptions as may be agreed to in nego- tiation—that substantial tariffs will be imposed in Britain on foods and raw materials which have hitherto entered free. It is therefore essential, said Sir Oliver, that the common external tariff on primary products should start as low, and be reduced as rapidly, as possible. It is, indeed! It would be monstrous if all the affluent indus- trial nations of the world, trading freely with one another, as Mr. Kennedy desires, in their respective manufactures, became richer and richer while the indigent underdeveloped nations, selling their foodstuffs and primary products under more disadvantageous terms, became poorer and poorer. But it could happen! Already the fall in commodity prices, accen- tuated by the new manufacturing techniques of the industrial countries (using more substitute materials, etc.), has made the primary producers almost as badly off in terms of trade as in the great depression of the Thirties. And when desperately they try to diversify and develop new industries of their own they find their manu- factures up against the external tariff of the European Common Market.

It was reassuring to hear Sir Oliver say that there are men prominent in the Common Market who see the frightful danger of this course. At the Bari conference he attended last September, which was held to formulate policies on the re- lationship between the EEC and the developing nations, there were those, he said, who thought that the primary concern of the Six should be with the newly independent peoples in what had been French Africa or territory under Italian trusteeship, but there were others—and these were more numerous—who insisted that the Six had a regional perspective on the whole world

and that all the developing people in the several continents should be brought within the policy of the EEC. And these idealists went on, he added, to express the hope that if Britain joined the Common Market, the enlargement of European interests in the world outside, which would naturally follow, 'would tend in time to still wider membership, even across the Atlantic, so that in the end the EEC might be found to be the basis for the structure of the whole free world.'

This Utopia is what Mr. Kennedy and Mr. Macmillan are praying for, without doubt, for it would be the salvation of the free world. But praying is not enough. Britain must take up this point in her negotiations with the Six, insist on its recognition as the long-term objective and not be content with short-term measures de- signed merely to soften the blow coming to the primary producers. As Sir Oliver so rightly points out, while a generous flow of monetary aid is indispensable if the underdeveloped nations are to be advanced, trade is ultimately more important than aid, and trade must be two-way. In this we in Great Britain have already set a good example. We are currently giving £180 million a year in monetary aid to the less- developed countries, we are allowing their pri- mary products to enter duty free and we are providing a growing market for their manufac- tures. For example, our imports of cotton yarns and piece goods from India and Pakistan more than doubled between 1954 and 1960. In 1960 our imports of manufactures of all kinds from those two countries amodnted to L50 million— nearly 30 per cent. of the total trade we did

with them. It is to be hoped that we can get the Six to accept a similar policy as their final objective. The same liberal trading which they are applying to manufactures should be applied in due course to food and raw materials.

The new agricultural agreement which the Six have arrived at after hectic negotiation does not rule out this possibility. Over a period of eight years a single agricultural market is to be created—protected not by tariffs, quotas and subsidies, but by a system of supported prices maintained by levies on imports from the out- side world. (I do not see why our Farmers' Union or Mr. R. A. Butler should be so upset by this proposal. The 'support' prices could be fixed in annual reviews if our farmers insist on it.) Escape clauses have been agreed which allow governments to block imports from member governments if they are large enough to damage home production. Everything depends on the level of the 'support' prices. If they are so high as to encourage inefficient farmers in Europe to increase their output, the outside world producers will, of course, suffer. Mr. Heath will, I hope, ask for Great Britain to be excused for a time from the levy in respect of imports of special foodstuffs from the Common- wealth which have been the economic mainstay of the producers. The New Zealand farming in- dustry, for example, would be ruined if it could not send us the mutton and lamb which con- sumers in this country alone have been accus- tomed to eat at the annual rate of over 26 lb. per head of the population. If there is any reluctance in the EEC to make a special case of such imports we should seriously consider offering New Zealand political union (on the lines of Northern Ireland), as I suggested on August 25 last year. We must take care in join- ing the Common Market that we do not sacrifice the primary producers outside.