BRITAIN AND THE EEC

Created: 3/14/1967

OCR scan of the original document, errors are possible

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OF INTELLIGENCE

Intelligence Memorandum

BRITAIN AND THE EEC

APPROVED FOR RELEASE DATE:0

7 No.

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attitude, Wilson has argued that his commitment to the Rome Treaty and tho community'h organization would be as firm as that of any of the present The shift has also brought closer to the surface the basic differences between France and the Five over tbe community's future, and has heightened the possibility of another crisis when and if Londonormal approach.

In this context, Britain's attitudes on other broad, politicalthe nuclear non-proliferation treaty, offset costs of British troops ln West Germany, and London's current eagerness toreaty of friendship with Hoscow--have permitted tbe skeptics further to question theof Britain's "European mindedness." The debate on these issues, however, has had tho result of increasing the awareness on both sides of the chan-nol of the wider implications of Britain's effort to Join the EEC.

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It is widely considered that London approachod the accession negotiations ln i alse sense of optimism. For their part, the British continue to emphasize their need to "safeguard theirreflecting their problems on the domestic and Commonwealth fronts. London has. however,certainly taken to heart the advice of the Five to restrict its bid to essentials and to keep up the momentum. One Dutch official has ventured the opinion that Wilson has been deliberately himsolforner" so that events would make it appear that he has no alternative toaccession to the EEC.

Among the specific problems Wilson raised in his talks with the Six was the potentiallyeffect EEC membership might have on Britain's regional development policy. This policy isto encourage industrialization in the north while slowing down the increasing concentration of industry in southeast England and elsewhere. The Italians pointed out that It lnasic community objective to eliminate imbalances"ovor-extended" and backward areas--anwhich has had no adverse effects on Italy's own endeavors in behalf of its underdeveloped south. The Dutch likewise indicated that the UK's regional policies would present no dlfficutly.

Wilson also voiced concern that the EEC countries mighthannel for diverting Britishprevented by UKother highly industrialized countries, in particular the US. The Dutch considered this concern to be unwarranted since the escape clauses alreadyIn the EEC treaty could be applied if tho need to check such outflows arose London was also given the impression that some type of specialwould be possible for the problems from tho UK's Commonwealth ties, particularly giving New Zealand's agricultural exports continued access to the British market Thereap. between the community emphasiseriod and the British desire for somuthing permanent.

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Agriculture and Sterling

6. Agriculture and starling are likely to be much nore serious technical Issues ln any newnegotiations, but all sides appear to believe that thoy are not insuperable obstacles in themselves. The Belgian minister for European affairs has stated that "the fate of the pound cannot constitute aprerequisite to these negotiations." While admitting that agriculture Iserious problem, the minister added that "we remain convinced that this is purely a technical problem which can bo solved if the political will exists. This political will is the only real condition for opening

7. In commenting on the implications forof adopting the EEC's agricultural policy, the British leaders heavily stressed both the increase in Britain's domestic food prices and the largethan that now made by any prosentUK would have to make to the EEC's farm fund. The British are evidently genuinelyabout this, but there may have been anof exaggeration in their presentations for bargaining purposes. British farmers, notsee advantages for themselveswitch to tho high-price community system. Moreover, key UK officials appear to recognize tho merit of theparticularly by Commissioner Hanaholt and tnwonce inside the community, the British would participate in the review of CAP prices and financing arrangements which must take place before

8. The complex problems posed by the delicate state of Britain's economy and the UK'sfinancial role may prove more troublesome than the agricultural ones. Wilson went to great lengths to demonstrate thai Britain's balance ofand its trading position are Improving and that the Six would not be taking on the burdenick economy. The British recognize, however, that an ability to sustain economic growth without thealance of payments deficit isif Britain's economy is to survive tho"plunge" into the community. On the part of tbe Six there la fear that some future UK balance of payments crisis would inevitably call into play

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the treaty's mutual-help provisions and Involve too* in more massive and costly support than they have rendered in the past.

UK has yot to show that it canevon moderato growth without Inducing acrisis and nttcndant speculation Because of the UK's large externalliabilities and woak reservo position,especially vulnerableoss ofcommunity presently fears that, if ato occur after the UK hadember,taken to bolster the UK loans, deflation, or devaluation ofentail hoavy costs to the other Furthermore, It fears that suchlend to disrupt the balance of advantagesevolved in tho advancing coaimunity system elimination of internal tariffs, theof the common agricultural pricing andschemes, and harmonization of economic policies.

Six, especially the French, appearthat the international role oftrading currencyomponent ofmonetary reserves, entails specialfor the community. In addition to concernadequacy and liquidity of the UK's reserve the Six suspect that pressure onfrom the sterling area (forof payments deficits of sterling areahave costly ropercussions on their own In the light of this, Wilson tookto explain tho workings of the sterlingto discount anxiety on its account. Although

no specific solutions were proposed to the problem of the sterling balances during the round of talks, Britain maintained that it is willing to discuss various possibilities. In the talks in The Hague, the British also gave explicit assurances that thoy would not consider it an EEC responsibility to bail tho UK outrisis brought on by sterling's international role, as opposed to one traceablourely British-incurred payments deficit. They also stated that ln the event of difficultiesfrom the world-wide use of sterling, thewould be one for International cooperative rather than for the EEC alone. Whether or

not such distinctions can ln fact be made, however, seems doubtful and the monetary questions coulderious stumbling block in negotiations. The French in particular soem likely at some stage to stress these issues.

d the Treaty

an effort to remove any doubtsBritain's commitment to the treaty'sand institutions, Wilson repeatedlyBritain accepted the importance of the role

of the EEC Commission and was willing to go as far as tho Six themselves in respecting majority voting ln the Council. Wilson indicated his recognition that in an expanded community, majority voting would be essential. He even predicted that whon the EEC has ten to twelve members the voting pattern wouldluid one, shifting from issue to issue. In speaking with the Dutch, Wilson also emphasized that British interests would require an expanded role for the European Parliament, to ensure that thewhich the UK would be providing an important"well spent."

their well-know distastevoting and the EEC's assumption ofpowers, the French are nowattention to the unique structure and of the EEC, which they say would bethe addition of now members. ajorthe Five's traditional suspicion ofindeed been the UK's presumed wish tothe supranational character of theother words, to make common cause with France

Gaullist reform" of the community system. Paris* disingenuous employment of this argument against the UK underscores its basic Interest in maintaining its dominant voice among the Six. The French may in fact realizeargerwouldthe intereststrengthening of the very institutions andwhich De Gaulle has found barely tolerable.

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The French and the Five

13. Although the dubious logic of this French argument nay not impress tho Five, they naytend to be sympathetic to the implication that admitting the UK might in some way rock th* boat. The French nay more or less explicity pursuo this line at the summit meeting ol the Six to bo held in Rome ln April, {The prospect of this meeting could influence the British to make an earlyhere arc meanwhile, Indications that the Frencharo already proving more cooperative ln the community in order to facilitate decisions of to the Five. In the final analysis, however, the merits of theoretical French argument will have to be weighed by the Five against an estimate of how their interests would be affected if UK entry were again indefinitely postponed. ritishwould compel them to focus on what those interests really are.

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How much support the Five will find it politically possible to commitritishwill depond in largethey have said from thethe nature of the bid. If it is short and to tho point, they would feel far more inclined to support it because of their own commitment to the Rome Treat;

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Tha "Outsldo" Issues

15. In Paris, Wilson rejected Dethat the UK "associate" withor take part in "soncthlng new andhe had Id mind in the latter suggestionunexplained, although he aay possiblyto entrap Wilson Into endorsing aho could later say was at odds with thesystem. De Gaulle might conceivablyto tho "new and differont" notion laterknowing that tho Five would be aghastprospect of having to relinquish thethe "something new." Perhaps even moroa commitment to the community as such,also being challenged to prove itson issues about which tho are by no moans ln agreement. the nonprollforation treaty (NPT),troops in Germany, and closer tiesand Moscow. In the present atmospherehave tended to bocome touchstones for test-

public approach to theseissues thus far has been to deny thatbe linked to Britain's bid for EECwishes to avoid overloading the docket and

to get answers on issues specifically goraane to the EEC. Moreover, Wilson is seeking to preventopposition from uniting by keeping those issue* separate.

is aware, however, that aof the negotiations with Bonn over thecoats of the British troops in Wosthave an unfortunate effect on German support

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for London's cause in the EEC. Wilsono admitted the relevance of the NPT issue by telling the Dutch that the prospects for EURATOM--whose r_ futureajor source of concern among com- "i. ci im munity members in relation to thehe ulu given new impetus with British membership.

The Domestic Front

18. Wilson's own domestic opposition, from the "anti-marketeers" In the Labor Party, Is troublesome, but there la virtually no prospect that It can prevent him from bidding for entry into the EEC, if he Is determlnod to do so. Wilson can count on the support of the Conservative and Liberal parties in any parliamentary clash on the issue, and not even his bitterest Labor Party critics seem willing to contemplate the chaos which would follow an attempt to remove him from thethis or probably any othor issue. resentment at what they consider Wilson's high-handed disregard of party opinion may Increase Labor backbenchers' willingness openly to oppose the leadership on other issues. If Wilsonid for entry will fail, however, he might retreat from such an unobtainable goal rather than exacerbate his problems with the Laborite Any attempt to pacify this opposition by playing down the political implications of British entry into the community would undercut Wilson's position with the Five, on whose support hisdepends.

19. In any case, Wilson's current drive to makeember of the EEC reflects tho trend of opinion in Britain. The dissenters who remain offer no renl alternatives, but they

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constitute obstacles to the concentration ofWilson will require to succeed. Among those are the advocates of an Atlantic freo tradea notion which has been given some playprincipally because of its endorsementroup of US Senatorsublic letter to tho Times of London. The US Embassy there reported that as8 February it had been universally rejected by the press. Government officials, the leader of theHeath, and tho director of theConfereration of British Industry have all told the US officials that basic UK interests would not bo servedpecial trade link with the US. It soems likely that informod opinion will contlnuo to consider tho Idea unroalistlc.

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