In preparation for your talks with Mr. Spaak,¹ you may be interested in the latest information available to us on the progress of the Commission set up by the Messina Conference to study various aspects of European economic integration.² Mr. Spaak has, as you know, been spending a good deal of his time and energy this summer with these Commissions of technical experts and has been Chairman of the Steering Committee to which they report.

The Foreign Ministers of the Six Messina Countries (of the European Coal and Steel Community) met in The Hague on September 6 to consider Mr. Spaak's first report on the work of the Commissions. Our Embassies in The Hague and Brussels have reported that Mr. Spaak requested and received confirmation that the other Foreign Ministers concerned stood by the decision in principle which they had taken at Messina "to find means to establish a United Europe by developing common institutions, by the gradual merger of national economies, by the creation of a common market and by the progressive harmonization of their social policies.³ He has evidently had difficulty with some of the Commissions of experts, particularly the Commissions studying transportation and a common market, because all of the experts did not accept without question the political decision taken at Messina that these objectives were attainable and desirable. He was, however, able to report that the work of the Commissions to date had confirmed his opinion that the most helpful direction for future progress was towards the development of a common market. In other words, Mr. Spaak has now come around whole heartedly to subscribe to the approach of his Netherlands colleague, Mr. Beyen, who has for some time believed that the "sector" approach to European integration (such as has been tried for coal and steel) could not be progressively extended to other major fields - or at any rate that integration by sectors was no substitute for establishing a common market.

The only important qualification raised by any of the Ministers was apparently by M. Pinay. Since the Geneva Conference on the Peaceful Uses of Atomic Energy,⁴ the Messina proposal to integrate the atomic research and development of the Six has been losing ground since there is now a good chance that an International Atomic Energy Agency under the United Nations will be established and regional European cooperation might well be organized under its aegis. Since the development of European atomic energy research for industrial power was one of the main French motivations in furthering European economic integration, M. Pinay now seems less inclined than he was on his return from the Four Power Conference in Geneva to push such schemes as a common European market. At The Hague, he spoke of the need for harmonising economic and social standards and of proceeding by "stages" towards the establishment of a common market, but apparently did not dissent when Mr. Spaak suggested that the aim of the Ministers should be to create a common market over a period of six or seven years.

Although the United Kingdom Government had participated in the expert Commissions and in the Steering Committee, they were either unwilling or unable to be represented at the Ministerial meeting in The Hague. They have served notice that although they might participate in a "freer trade area", they would not be a party to a European common market customs union. They have also declined to participate in any West European atomic energy agency and have continued to oppose all supranationalist trends.

The hour of decision for the Messina Powers has been put off. The Commissions are not now expected to submit their final report until October 31, and the final report of the Steering Committee will be circulated to Foreign Ministers about one month later. This means that no decisions by Governments will be taken before December; and if the Ministers decide to proceed with the establishment of a common market, treaty negotiations would not start until next spring - preferably, Mr. Spaak thinks, before the French elections.

A good deal will, of course, depend on the development of United States, United Kingdom, French and German commercial policies in the meantime. If there is to be back-sliding on both sides of the Atlantic and if the convertibility of the major European currencies is not achieved as soon as we have been hoping, the movement already under way towards the establishment of a common market (in the sense of a customs union) for the Messina countries may be given more impetus and might take a more restrictive and protectionist trend, to our obvious disadvantage.

Although we do not yet have enough information on which to base any long term judgement or policy, I think, it is probably fair to say that the European Coal and Steel Community experiment has not increased restrictions and barriers between the Community and the outside world. It has certainly facilitated trade within the Community. On balance, therefore, we may say provisionally that it has probably not had a bad effect on our economic interests. In terms of its political importance, I think we could reasonably say that it had served to strengthen our Western European allies.

Whether we would be able to say the same about any of the prospective developments which are being examined by the Messina Commissions, I do not know. I can see nothing against atomic energy cooperation on a Western European basis which could be fitted into broader international cooperation under the United Nations. But we would hope that any progress towards the development of a common market would meet the requirements of GATT, which provides in Article 24 for waivers for regional arrangements which do not add to existing discriminations and restrictions and would, therefore, be least prejudicial to Canadian economic interests. Fortunately, the Messina Commissions have shown no interest in agricultural integration.

It would, I think, be valuable for us to know more about how Mr. Spaak's mind is running on these questions. No one is more committed than he to the development of the Atlantic Pact and an Atlantic Community. You will recall Mr. Spaak's article in the April edition of Foreign Affairs advocating a degree of political integration among the Atlantic countries comparable to that already achieved in the military sphere.⁵ He concluded that an Atlantic Council was required for the formulation of a common foreign policy on all matters affecting the Community. No doubt he would also like to give more practical significance to Article 2, particularly now that there is a lessening of tension and a consequent slackening in the cohesiveness of NATO as a military organization.

Mr. Spaak may have heard of your proposed initiative in suggesting that there should be a general discussion, at the Ministerial Meeting of the NATO Council in December, on Article 2 and its implications. We have submitted to you separately draft letters to Mr. Howe and Mr. Harris sending them copies of a draft Departmental memorandum which carries the approval in principle of the officials of the other Departments concerned.⁶ Copies of these papers are attached in case you wish to take them to Brussels with you. The memorandum is less specific than we ourselves would have wished from the political point of view, but the December Council would, in our view, provide a useful opportunity for a NATO discussion of the international economic and commercial policies of member States; this would at least be a beginning - already long delayed.

Indeed, since Geneva, there is, I think, a real danger that, with a less immediate sense of military danger, the need for close cooperation among countries of the free world in economic and political, as well as military matters, will seem less urgent. Yet the dangers of economic friction undermining the unity which has been created are in fact likely to become more real. In the new circumstances, serious strains may appear, if the economic policies of NATO countries are not more effectively harmonized. The maintenance of our collective security requires the reduction of economic and commercial frictions within NATO. Fresh initiatives designed to maintain the present momentum towards a world-wide system of trade and payments would seem to be required on both sides of the Atlantic.

From the economic point of view there are perhaps as strong arguments against the formation of discriminatory regional economic arrangements on an Atlantic basis as there are against tendencies towards uneconomic integration in Western Europe. Mr. Spaak no doubt recognizes the validity of our general reservation towards regionalism and would agree that Western European economic or political integration should not be pursued at the expense of NATO. The rather tenuous beginnings of an Atlantic Community would suffer if the development of Western European economic integration were to conflict with the principles of GATT. If, however, a common Western European market or other measures of integration can be achieved within the latitude permitted by GATT, then there need be no conflict of interests. Indeed we would naturally welcome any such strengthening of our Western European partners.

At the same time, if Western European economic or political integration were to go forward without a corresponding strengthening in Atlantic cooperation, "third force" tendencies in Europe (which see NATO merely as a temporary military stop-gap) might be encouraged to the detriment of the future of the Atlantic Community. This is not so much an argument for less European integration as for closer Atlantic cooperation in the political and economic fields. Hence our desire to discuss economic problems in NATO where such questions could be critically examined from the point of view of their impact among all members of the Community.

Mr. Spaak's enthusiasm for European economic integration may be based on the assumption that the United States Administration will not be able to make progress towards multilateralism sufficiently rapidly to maintain the momentum of European liberalization. Admittedly we share some of the doubts and face many of the same difficulties as the Western Europeans in this regard. But despite the clear signs of danger ahead, it is still our hope that United States policy and practice will permit and perhaps even encourage other countries to move forward on a multilateral basis.

Above all, with the post-Geneva slackening in military pressures, combined with the rising economic pressures for protection due to keener trade competition in all countries of the Atlantic area, the paramount need is to maintain and increase the unity of the Atlantic Community at a time when it is in danger of erosion.

During the summer, while reviewing our policy towards Article 2, we have been giving some thought to the problems which the various Western European movements towards political and economic integration pose for the Atlantic Community as a whole. As a first step, we prepared a review of current developments.? This is attached. Although no attempt is made in this paper to define the Canadian attitude towards these movements, you may find the memorandum useful for reference purposes before your talk with Mr. Spaak. The primary purpose of the memorandum is, however, to brief our European Missions and encourage them to report and comment more fully on this interesting topic. For although the United States can afford to adopt an uncritically encouraging attitude towards virtually all movements promoting Western European unity, Canada's trade position does, I think, require that we should take a more circumspect look at what is happening, not only from the political but also from the economic point of view.

J. L[ÉGER]