When we debated this matter earlier in July, I spoke at considerable length because I thought it right then to set out fully the Government's views on a variety of matters. I then spoke about the economic case for entry, about the Community budget, the effect on the cost of living, the balance of payments, capital movements, direct investment, personal capital movements and portfolio investments, as well as the future of sterling and several other matters. Since the debate in July there has been one development of major importance and that is the international monetary crisis. Indeed, there have been times during the past two months when even the question of the United Kingdom joining the Community seemed to be dwarfed by that crisis. The immediate cause of that crisis was the action taken by the United States to correct its balance of payments deficit.
Perhaps on another occasion I shall have an opportunity of saying more about it, but it is useful for the moment to consider the prospects of an enlargement of the Community in the perspective of that crisis. I know from my talks with the Finance Ministers of the Six that they, like ourselves, accept that we have a common duty to work for a common solution. Successive United States administrations have always spoken out firmly and clearly in favour of European unity.
During the week I spent in Washington last month I met nobody concerned with the Administration there who took a contrary view. The reason is not far to seek, because for the United States this is the road to shared responsibility and shared strength. But in the tense atmosphere of recent times, with the problem of imbalance in the United States economy and the strains imposed on the monetary system, fears have been expressed in some quarters that enlargement of the Community might now hurt American interests and indeed the interests of world trade as a whole.
Therefore, one must ask what is the true state of affairs. The fact is that the Community is far from being the closed autarkic protectionist grouping that some people pretend. That is a mere caricature of the Common Market. Like ourselves, the members of the Common Market are critically dependent for their prosperity on the level of world trade. Indeed, they are dependent on world trade to a vastly greater extent than is the United States of America. Therefore, one of their main vested interests is in the free exchange of goods.
The E.E.C. is the world's largest importer and the world's largest exporter. Enlargement of this Community by the accession of ourselves and three other countries, all of them in their turn committed to free trade, is bound to reinforce the liberal trading character of Europe. The Community's external tariff is lower than the present United Kingdom tariff or that of the United States. Our membership will therefore result in a lowering of tariff barriers against American goods in our market. These are facts which, to listen to some speeches, sometimes seem to be forgotten.
Between the time of the formation of the Common Market and last year, American exports to the Common Market have almost tripled and the Common Market's share of American total exports to all countries has risen from 16 to over 19 per cent. We in the United Kingdom know that it is essential in the interests of all, certainly of ourselves, to safeguard and enlarge the freedom of trade. With our fellow members, that will be a prime aim of our policy.
There is one matter on which I should like to repeat the assurances that I have given previously, and that is the matter of sterling. At the annual meeting of the I.M.F. last month, I put forward certain proposals for the long-term reform of the international monetary system. As I said a few minutes ago, this is not the occasion to go into details, but I believe that the principle behind those proposals is widely accepted. As the House knows, it involved the replacement of the present reserve currencies, the dollar and sterling, by a neutral reserve asset. Referring back to what I said to the House in July when we last debated the application to join the Communities, it will be apparent that one consequence of the scheme which I put to the I.M.F. would be to fulfil our objective of a gradual and orderly phasing out of sterling in its rôle as a reserve currency.
As I have pointed out previously, everyone whose business is concerned with these matters knows that sterling's relative importance as a reserve currency has declined very considerably since the war. In 1950, official sterling balances were 16 per cent. of world reserves. By 1970, they were 7 per cent. To put the matter in another way, as a proportion of world trade sterling liabilities were 17 per cent. in 1949 and 4 per cent. in 1969.
The assurances that I have given remain as I gave them. They are set out in the OFFICIAL REPORT, and I do not think that I need go over them again today.
I do not propose merely to repeat the considerations which I put before the House at length in July. They are on the record, and they remain valid. But there are a number of points which must be made.
The right hon. Member for Leeds, East (Mr. Healey) and some other right hon. and hon. Members have argued that our economy is not strong enough to meet the costs of entry. No doubt that is a judgment, and no doubt it is based on the words of the then Prime Minister, who told the House in May, 1967, that he had been talking of
… the robust strength of Britain's balance of payments and of sterling".
This is not a problem."—[OFFICIAL REPORT, 8th May, 1967; Vol. 746, c. 1077.]
That was in May, 1967. It is worth recalling that, when the right hon. Gentleman's Government applied to join in July of that same year, we had a balance of payments deficit of £300 million a year, the National Plan was abandoned, sterling was weak and—I do not know whether the right hon. Member for Leeds, East considers this a sign of strength—we were only a few months away from devaluation.
I say in all seriousness to the House that I do not think that many objective observers would suggest that we were better placed to join in 1967 than we are today.