North Atlantic Free Trade Area

Part of the debate – in the House of Commons at 12:00 am on 26th July 1968.

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Photo of Mr Terence Boston Mr Terence Boston , Faversham 12:00 am, 26th July 1968

From this side of the House, Mr. Speaker, I should like to join in the thanks expressed to you for your work during the Session.

Like the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) I greatly appreciate the chance to debate this subject. The right hon. Gentleman has performed a service by introducing the first debate in the House devoted to this subject. I join the right hon. Gentleman in the tributes to the others who have been active in this sphere, particularly my right hon. Friend the Member for Battersea, North (Mr. Jay) and my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris), the right hon. Member for Thirsk and Mal-ton (Mr. Turton) and the right hon. and learned Member for Hertfordshire, South-West (Sir D. Walker-Smith).

I am not yet, I confess, among the out and out supporters of the proposal itself, but I seek, like the right hon. Member for Stafford and Stone, to make out a prima facie case for a thorough and searching inquiry into its feasibility. This is important because negotiations on Britain's entry in the Common Market are at a standstill and also because there appears to be no early chance of their success. This has been given added point by the overwhelming Gaulliste victory in the French elections and by the appointment of M. Couve de Murville as the French Prime Minister. This suggests that Gaulliste views could well prevail even after the General's departure from office. So we should be failing in our duty if we did not now set about the job of exploring the alternatives anew.

I feel that Britain and her partners are in a sense again at the crossroads. There is evidence of a history of missed opportunities in the international sphere. We cannot afford to go on missing opportunities in future and then, when it is too late, try to retrace our steps—because that, to some extent, is the history of our attempts to get into Europe already.

First, what are the alternatives? I shall make only a brief passing reference to all but one of these. I start, as the right hon. Gentleman did, from the basic assumption that we want freer trade. The first alternative is another Kennedy Round of negotiations in the G.A.T.T., and most people would not feel that there is a strong likelihood of much success with that in the early future.

The second is concentration on Commonwealth trade. This is a doubtful starter, at least on its own, not because of lack of sentiment but because there is little support in the Commonwealth for trade policies akin to the Ottawa Agreements of 1932. Third, associate membership of the E.E.C. There is little enthusiasm for this, especially with no guarantee of full membership later and because Britain would have no say in the policy decisions of the Council of Ministers. Fourth, we could continue as we are, and that is a serious if uninspiring alternative. Fifth, there is the technological community, but that is not an exclusive alternative and one hopes that progress will be made with it anyway.

Finally, there is the proposal we are discussing and because this is the first debate on it I want to go into one or two further details. It has already been receiving considerable study in this country and elsewhere and I want to quote one or two things from some detailed preliminary work done for the Committee of the Atlantic Trade Study in an excellent booklet called, "The Free Trade Area Option—Opportunity for Britain". What is involved? The basic proposal is for a treaty of free trade and economic co-operation between, initially, Great Britain, her E.F.T.A. partners, the United States and Canada. This would be for an open-ended agreement allowing any industrial nation or regional trade group to join which was willing to adhere to the system. This would be developed, therefore, by systematic negotiations rather than by the creation of a supranational authority.

The other basic principle is that gradually, phasing it perhaps over 10 to 15 years, we would bring to an end internal tariffs and other discriminatory restrictions on the movement of industrial products, capital goods, raw materials, investment capital and so on. But it would not include, at this stage at least, agricultural products and it would not require members to adopt a common external tariff.

I come at once to the attractions as I see them for Britain. First, there would be no common external tariff. Each member nation would be free to continue its special preferences with non-members. The area would not be a customs union nor an economic community. For example, there would be no difficulty in our making special arrangements for, say, New Zealand.

Secondly, there would be special facilities for developing countries initially, as they would find it disadvantageous to join at the start. The idea is that the developed nations would extend free access to their markets without expecting full reciprocity until industrial progress in the developing countries made it possible for them to reduce their own trade barriers. Third, there would be no surrender of national sovereignty, as under the E.E.C., so this would have its obvious of Common Market membership, attractions for those who fear this aspect

Fourth, agricultural products would not be included. This is again an advantage compared with the E.E.C. to some minds, as the E.E.C. would involve higher food prices and a rise in the cost of living, at least initially. The idea is that the Atlantic free trade area would be restricted, at least in the first place, to largely industrial commodities and basic materials.

Fifth, an arrangement of this kind need not include movement of labour—another problem on which some people have misgivings about the E.E.C. Finally, the hope is that other nations would join in at the start or later, particularly Australia and New Zealand, and it would also be possible for the E.E.C. itself to join. There are obviously other considerations as well but I think that these are the main ones.

I want to turn now to the effects on Britain and the substantial benefits for our balance of trade. Here again, I draw on the study I have referred to, particularly for figures showing what would happen to our trade balance with the United States and Canada as the first examples. The direct effect of an Atlantic free trade area on member countries would be clearly trade creation from removing tariffs over a period. It is clear that Britain's balance of trade in manufactures would improve substantially, provided, of course, our export prices could be held down. But that is vital whatever we do or whatever group we enter.

Compared with 1965, under the A.F.T.A. system, the United Kingdom would be able to export 243 million dollars-worth more of manufactured goods to the United States but in return would increase imports in manufactures by only 186 million dollars. So our trade balance would improve by a significant 30 per cent. I shall not go into the main products. In trade with Canada, again compared with 1965, our exports would go up by 49 million U.S. dollars— slightly more than a 10 per cent. increase.

That is under the heading of trade creation but there are also substantial benefits to be derived from trade diversion, in which, for instance, we would win trade away from the E.E.C. and other countries. If we compare Britain's entry into an Atlantic free trade area with her entry into the E.E.C, and take into account both the trade created and the trade diverted, we find that the net increase in Britain's trade would be in the Atlantic area some 665 million dollars and in the E.E.C. 221 million dollars.

There is a further important point. These calculations were published last November, so they do not take devaluation into account. Devaluation would have resulted in further benefits, of course. All this is without going into further benefits that would follow from membership of an Atlantic free trade area—through, for example, an attack on non-tariff barriers, such as quantitative restrictions, state trading, Government buying, arbitrary customs classifications and so on—Scotch whisky would benefit —and through other aspects such as the so-called dynamic effects of an association, which mean economies of scale and effects on rates of growth and so on.

On the other side, it is said by some that an arrangement of this kind would mean domination by the United States. But the whole point of the arrangement is that, like E.F.T.A., it would not involve surrendering sovereignty and there is no evidence, as my right hon. Friend the Member for Battersea, North has pointed out, that Switzerland or Sweden, say, have been dominated by Britain inside E.F.T.A. Moreover, if there were the slightest sign of U.S. investment in Britain reaching dangerous proportions, it would not be incompatible with the free trade concept to control this flow. By far the bigger danger is American isolationism, and a failure to show some enthusiasm for developing links with the United States would encourage those in America who actually want her to become more isolationist and more protectionist.

Moreover, there are signs that Eastern European countries would be much more inclined to see an Atlantic free trade area developing than to see Britain in the E.E.C. This is of interest to those of us who want closer links not only with Western Europe but with Eastern Europe as well and, significantly, Czechoslovakia is among those countries which show some interest in this as an idea.

There are those who say that the United States would have to show its interest in an Atlantic free trade area before it would be worth our while to initiate moves. But the Joint Economic Committee of Congress has started reviewing this concept and Mr. William Roth, the American chief Kennedy Round negotiator, was appointed by President Johnson last year to head a committtee on future policy. He said last February that the American Government were studying an Atlantic Free Trade Area plan.

Of course no one need suppose that joining any group would solve our difficulties overnight, and certainly the United State is not going to drop everything to help Britain over her problems, because she has plenty of her own. But, as I have learnt from an extensive five-week tour of the United States recently, there is not only enormous good will among its people generally but is tremendous scope for developing our trade with the United States.

Much of what I have said could be argued about, no doubt, but if there is scope for argument that is all the more proof that there is scope for thorough exploration. I hope that the Government will decide on a full study and will start soundings with the United States and other nations and that we could have a Green Paper initially.

In our debate on the Common Market last year, I spoke in favour of Britain's entry, but I also said that we could not afford to go through the upheaval of applying every five years. What would be unforgivable now, would be for us not at least to satisfy ourselves about the options now open by examining them thoroughly, and this is what I hope the House and the Government will do.