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COMMONWEALTH ECONOMIC CONSULTATIVE COUNCIL MEETINGS OF OFFICIALS

Following is a memorandum summarizing the discussion of the main items on the agenda of CECC officials meeting. This memorandum was prepared by Mr. Plumptre for Mr. Bryce for use in connection with Prime Ministers Conference; it will serve as our report of the discussion on these agenda items. We shall be reporting about the discussion of GATT items in a separate telegram.

A meeting of Commonwealth Economic Consultative Council at the official level, took place from April 26 to April 28. Many of the officials concerned, having met at somewhat similar meetings and in other ways over the years, know each other well, so that discussion is always frank and friendly. This meeting, however, was particularly useful and interesting. There were several subjects of special topical interest on the agenda, and Sir Frank Lee, the newly-appointed Permanent Head of UK Treasury, is an exceptionally good chairman.
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European Trade Relations

This subject attracted a full day's discussion, much of it technical relating to rather detailed plans of the "inner Six" (France, Germany, Italy, Netherlands, Belgium and Luxembourg) and the "outer Seven" (UK, Scandinavia, Switzerland, Austria and Portugal) and the frustrated attempts of the latter, led by UK, to achieve agreement on a Europe-wide FTA.

UK officials led off with an historical review. This evoked a variety of statements from other countries, many of them marked by a tendency to be more or less critical of UK policy, at least in some of its aspects. Their attitude flowed from the fact that, whether or not repeat not other Commonwealth countries had stood to gain or lose from the original UK proposal for a Europe-wide FTA (excluding agriculture), none of them saw much promise, for UK, in the grouping of the "outer Seven" and none of them expected that, in the foreseeable future, the Seven could persuade the Six to agree to form such an area.

Several Commonwealth countries seemed to have moved a considerable way towards the position which had been put forward by Mr. Churchill last September, at the last meeting of Commonwealth ministers: that UK might, in this new world of convertibility of currencies, give her primary attention to getting tariffs and trade barriers [down on?] a general, world wide basis, through GATT, rather than paying so much attention to getting free entry into the markets of the Six which, after all, absorb less than one-fifth of her exports.³⁶UK reply to this, we would judge, is more political than economic, and relates to the position and influence of UK in Europe and throughout the world. Further, it should be added that the European market is nowadays expanding more rapidly than that of USA. In this discussion Canadian delegate indicated that the support given in 1956 and later in 1957 to UK initiative for a Europe-wide FTA (excluding agriculture) could not repeat not automatically be projected into the future, or indeed into the present. There was now no repeat no immediate likelihood of the Europe-wide FTA gaining acceptance, and the conditions of world trade and balance of economic strength between Europe and North America had greatly changed since 1957. New movements, new groupings, would have to be considered and assessed at the time they were likely to be made.

Officials of several countries brought forcibly to the attention of the meeting the fact that, by gradually giving free-entry to the products of other members of the Seven, UK would be gradually eliminating very important Commonwealth preferences. Some Commonwealth countries still have commercial treaties with UK under which tariff preferences are "bound;" UK has obtained release from the relevant sections of these treaties. In 1947 Canada and UK agreed that preferential margins should no repeat no longer be "bound" between them (although a large number of preferential rates of duty were and still are bound). While margins are no repeat no longer bound, there is consultation between the two countries before important margins are reduced. After consulting, before departure, with Mr. Fleming, I made a brief statement confirming that these consultations would continue but warning that, if extensive erosion of preferences in UK market took place, this could not repeat not but affect the ability of Canadian government to maintain preferences in Canada.

Commonwealth officials from countries other than Canada and UK were disposed to be critical of the plan to reconstitute the OEEC (Organization for European Economic Cooperation) and to include Canada and USA in its membership. The leader of Australian delegation, typically forthright, said "it will do more harm that good." He and others argued that the new economic organization, in which they are denied membership, will inevitably shift power and influence away from GATT and other international bodies in which they are represented. Moreover, an organization consisting exclusively of the rich, powerful, white countries is unlikely to be beloved by the poorer, weaker, brown-yellow-or-black countries; and such an organization is open to all sorts of mischievous misrepresentation.

This sort of criticism came as no repeat no surprise to representatives of the two Commonwealth countries to be members of the new organization; – UK and Canada. We did our best, without a great measure of success, to calm the fears and eradicate the misunderstandings of the others. The fact of the matter is, of course, that nobody would have thought of calling an entirely new organization into being along the exact lines and with the exact membership of the proposed organization. But the problem is different: it is to take an existing organization, which is too widely beloved by too many powerful members to be allowed to die, and to transform it somehow from a regional, discriminatory body that has cared primarily for the interests of European countries through the difficulties of the 1950s, into a useful, constructive body designed to turn outwards, rather than inwards, the burgeoning economic strength of Europe in the 1960s. It is not repeat not surprising that, at this juncture, the outside countries can only see the rather ugly and ungainly old phoenix that has gone into the flames and have little confidence that the bird that flies out will be markedly different. And it will indeed be an uphill task for those countries wishing to achieve this transformation to see that it is brought about.
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³⁶ Voir/See Volume 26, document 124.