Commercial policy - 18 September 1956

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Commercial policy - 18 September 1956

A.L.B. 

a)  Colonial angle.  [Serious doubts about politics.]  Wd. not have serious affect on trade of Colonies – wh. enjoy no preference (e.g. rubber, copper) on main items.  They fear ceilings on exports more than competn. fr. Europe.  But this sitn. won't remain.  W'in a generation several Colonies will become interested in preference for manufd. goods – as they develop industries.  Genl. view in Party tht. existg. restrictn. wh. wd. limit concession to 10% shd. be removed.
  Essential tht. all f'stuffs be excluded.  That wd. help to meet present anxieties of Colonies.
 Are dependant territies. to be included w'in Eur. Customs Union?  If so, shall we be able to give same advantages to Colonies qua raw materials.
 If we compensate Doms, we shd. give it also to Colonies : Malaya W. Indies are interested in commodities under c) & d).
 Even so, diffies. qua Colonies are not so great tht. I shdn't institute confl. enquiries.  Have asked a large no. of Colonies for views.  They shd. be taken into a/c.  The rest of Colonies shd. be consulted also before any announcemt. made.
 If Eur. dependencies come into C. Union, our Col. shd. have option to enter free-trade area.
 b)  Politically – serious doubts.  Shall have to find i) some compensatg advantage for Canada ii) some agricultural concession to Doms. generally.
 V. diff. to take this line w'out disrupting Commonwealth.
 GATT. has tied us down to courses wh. have precluded closer ties with Doms.  If this fails, shd. we not loosen GATT obligns.?


K. 

Assent to this course.  For – if we don't
  i)  Face formidable bloc in Europe.
  ii) Gt. diffy. in m'taining Imp. Preference.
 But  a) Plan G. repd. – as contn. of existg. policies : paras 50. 51. 54. of rept.
  b) Para. 75. of rept.  Measures for closer co-opn. in Europe shd. be matched by efforts for closer co-opn. with our other partners.
 But 11 major points of unpopularity – Objectionable to U.S : may have to force France in : diffies. over Social Services (harmonisn. with France) : Commonwealth – Canada, Austr. will be opposed.  Asian Doms. will seek re-negotn. of trade agreemts.  In U.K. unyielding oppn. fr. T.U.C. and dissatisfn. of cotton, chemical & car industries.  Pol. objns. : Tory Imperialists – dislike of controls – supporters of agriculture – risk to full emplt.
 We need to know how these diffies. cd. be minimised.
 Timing.  Suggd. mtg. of Comm. offls. next month.  Do we allow it to
 x|  arise naturally from O.E.E.C. w. party Dec. : or do we take
  initiative earlier.
 Agree with H.M. & R. tht., if we go for this, we must seem to have confidce. in it.  But easier if we can present it as natural developmt of past policies.


H. 

On x/ unlikely to get Dom. re-actions before Oct.


P.T. 

Agree with ALB this plan has no adverse on Col. trade as at now.  Indeed to extent tht. Eur. is prosperous market it wd. help Colonies.
 True tht. some Col. may become more industrialised.  But tht. wd. be diff. for us, quite apart fr. Plan G. – we cdn't afford to accommodate much more imports by cheap Col. labour.  But clear they wd. undercut competn. in European as well as U.K. markets.
 Ques. wtr Col. come in, on free trade area, is for considn. on merits.
 Genl. dangers are here already.  Austr. started this - & not for GATT reasons.  Basic reason : they have pushed 2ndary. indies. & we have expanded our agric & the old pattern doesn't suit them any longer.  N.Z. will soon realise same is true of them.
 "Opinion" in U.S. – not ascertainable : but offl. U.S. policy has always bn. in favour of this sort of approach.
 France will have to be pushed into this.
 Canada – trade is balanced now wholly in her favour : she can't expect more than she gets now.
 T.U.C. – internatl. aspect will have an appeal.
 Our own agriculture – we can't expand it further.
 Greater dirigisme – will turn on merits : this Plan won't make it any more necessary – perhaps less so.  Separate ques.
 Time-table.  No commitment at this stage.  Talk first with Doms.  Not wedded to mtg. of Dom. offls.  Interests of separate Doms. are different – series of bi-lateral talks mght be better.


R.A.B. 

Objective of authors was to take initiative.  They are concerned about U.K. economy.  Their remedy : take a plunge wh. involves most drastic consequences.  Is this wise, at this moment.  B/P. diffies. & imports – will they be improved by this?  Will it increase "confidence".
 Trend of the Plan – to increase imports & increase severity of internal measures.  Latter is necessary on any view.  Is former wise?
 Will Messina go as quick as is feared?  If not, can't we play it slower?
 Pol. diffies. with Party & T.U.C. will be v. great.  Is this the moment to encounter them.
 Despite these doubts, I agree we shd. discuss with Doms.  [It] will in any event be discussed in O.E.E.C.


H.M. 

Not [ ].  But genl. issue of Messina will.
 But don't ask Cab. to decide now, in advance of knowg Dom. views and wtr Messina 'risk' is really imminent.


B.H. 

What are need of time-table?


P.T. 

We shall soon have chance of shaping Eur. policy on lines acceptable to us.  If we allow Eur. to shape their plan first it may be more diff. for us to come in.
 But no precise time-table for decns. is needed.


H.M. 

OEEC. w. party will study means of assocn. betwn C. Unions & others.  In early stages they will be considerg. wtr it is possible – not desirable.  Quite a complicated issue.  Will take whole of Oct.  Prob. no need for us to take a line there until Nov.  But w. party is due to report in Dec. (on wtr Customs Union and Free Trade Area can be run together).
L.P. Clear we must discuss.  But likely tht., once raised, we can't go
 y|  back quite to where we stood before.


P.M.

 i) Views of J.S.  Effect on Comm. connection – Empire unity etc., Damaging results on Tory Party in U.K. as well as Comm. links.
 ii) Agree with y/.  By this approach we shall have created a new situation.  What is risk of leakage?
 iii) Awkward dilemma:  agree with K. tht. no sign of any alternative. No real chance of developg. on lines of closer commercial link with Doms – cf. attitude of Austr.  Southern Doms & Canada are bound to draw closer to U.S. – Asians are unreliable.  Tho' this Plan is hard for U.K., alternative may be "going it alone" wh. wd. be even harder.
 iv) Fr. suggn. of closer union.  We ought to consider what steps we cd. take – e.g. defence & economic – to draw us closer to them irrespective of rest of Europe.  We shd. be a formidable partnership.  Mght have some bearing on wider ques. *Cttee. of officials & Ministers.
 v) If it's true we can't stay still, then an imaginative initiative wd. have an appeal to younger element in Tory Party.  Somethg. on lines of Plan G., linked with iv), mght do.  What of a Comm. Union which included France, Benelux & Scandinavia but dropped Asians?


L.P. 

Diff. to keep up with evolutions in world.  But is world being ranged into 2 groups – 1 headed by U.S. & other by R.  In mil. matters this is modified or reflected by N.A.T.O.  Shd. we not look for same grouping in economic matters too?
 Doubt wtr Europe is the right unit.


P.T. 

Agree : choice is betwn. dependence on U.S. or framing of some other trade area large enough to be viable.  U.S. have urged on us the latter.


R.A.B. 

But sterling is a world currency.  How do we guard that, in combination with a regional trade grouping?


P.M. 

Wd. France join sterling area?


D.S. 

West/East grouping is inevitable.  But is this inconsistent with it?  It doesn't involve our w'drawg. support for U.S. and the West.
 Not inconceivable tht. some Eur. countries mght. enter Commonwealth.  Scandinavians – Greece – Turkey.
 Better for us to be leaders of Europe than to try to stand alone.


D.E. 

Effect on sterling & full emplt.
 Formerly, held tht. econ. policy shd. serve one end – e.g. £.  Now it is full emplt. – and £ has suffered crises as result.  But we don't m'tain full emplt. generally by tariffs : but by managing infl./defln.  We don't now want tariffs for indies. wh. compete in world markets.  We cd. use them for indies. wh. don't export.
 Sterling is now v. vulnerable because of emphasis on f. emplt.  This (not future of their secondary indies.) is main anxiety of Doms and Colonies.  Their bankers shd. see tht. we wdn't adopt Plan G. unless prepd. to put £ before full emplt. as primary objective.  And unless we are so prepd., we can't m'tain st. area.  And if that breaks can we hold Comm. unity?
 Tho' we can still present this w'out avoidg. charge that it is designed to create unemploymt.


H.M. 

Events of last 6 wks.
 We must win our objective over Suez – or get out.  Assume therefore for this purpose that we shall.
 Believe we are at a turning-point in our history.  We are losing Comm. old style.  We may be able to create another.  Basis of modern industrial market must be big enough to carry its overheads.  Home market alone, in U.K., is not now enough.  We now need a v. high vol. of exports in order to feed ourselves.  Old theory of Imp. Pref. assumed manufacture in U.K. & primary prodn. in Doms – now outmoded.
 Recognise diffies. and risks.
 We must consider this.  All I can ask now is authy. to discuss with Doms.  Can't be a surprise to them that we shd., for it's already a subject for speculation etc., in Press.
 Suppose that, instead of one H. Kong hitting one Lancs, we had several – free entry cdn't stand.
 "Do somethg. for Canada" (H).  They are much stronger than us.  All we cd. do is to ensure that our market is strong enough to absorb their products.
 Means of presentn. to Doms.  A plan to strengthen £ : to strengthen market for their primary products : to strengthen power of old world to provide capital for the new.

Taken from C.M. 66(56) - Meeting held on 18 September 1956.