(c) crown copyright
Catalogue Reference:CAB/129/89
Image Reference:0018
SECRET THIS D O C U M E N T IS T H E P R O P E R T Y OF H E R BRITANNIC M A J E S T V S
Printed
for
the Cabinet.
October
GOVERNMENT
1957
C. (57) 2 1 8
4th
October,
Copy N o .
1957
CABINET EUROPEAN
FREE TRADE AREA A N D THE ORGANISATION
EUROPEAN ECONOMIC CO-OPERATION
FOR
N O T E BY THE PAYMASTER-GENERAL
T h e a t t a c h e d m e m o r a n d u m b y officials is d e s i g n e d t o serve as a g e n e r a l
n e g o t i a t i n g brief
Ministers
for t h e U n i t e d
of m e m b e r
K i n g d o m representatives
c o u n t r i e s of t h e O r g a n i s a t i o n f o r
at the meeting
European
of
Economic
C o - o p e r a t i o n w h i c h is t o b e h e l d i n P a r i s f r o m 16th t o 19th O c t o b e r t o discuss
the E u r o p e a n F r e e T r a d e A r e a project.
2.
I c o m m e n t o n t h e n o t e in m y m e m o r a n d u m C . (57) 222.
R. M.
Office
of the Paymaster-General,
3rd
52334 October,
1957.
S.W.1,
EUROPEAN FREE TRADE AREA: MEETING OF ORGANISATION FOR
EUROPEAN ECONOMIC CO-OPERATION
MINISTERS-GENERAL
STEERING BRIEF
MEMORANDUM BY OFFICIALS
T h e C h a n c e l l o r of t h e E x c h e q u e r h a s p r o p o s e d t o h i s M i n i s t e r i a l c o l l e a g u e s
o n t h e C o u n c i l of the O r g a n i s a t i o n for E u r o p e a n E c o n o m i c C o - o p e r a t i o n
( O . E . E . C . ) t h a t t h e y s h o u l d m e e t in i n f o r m a l session i n t h e m i d d l e of O c t o b e r for
approximately three days.
Objective
2. O u r object a t t h e m e e t i n g m u s t b e t o g e t t h e n e g o t i a t i o n s s t a r t e d w i t h o u t
f u r t h e r l o s s of t i m e a n d t o g e t s u c h m a c h i n e r y e s t a b l i s h e d as w i l l give u s a
r e a s o n a b l e h o p e t h a t t h e y will b e successful.
3 . I t will n o t b e p o s s i b l e i n s u c h a g a t h e r i n g t o r e s o l v e t h e m a j o r p r o b l e m s ;
n e i t h e r is it n e c e s s a r y t o s e e k this. B u t i t will b e n e c e s s a r y t h a t all s e r i o u s
p a r t i c i p a n t s feel satisfied as a r e s u l t of t h e m e e t i n g t h a t t h e r e is a r e a s o n a b l e
c h a n c e of c o u n t r i e s c o m i n g t o g e t h e r o n t h e i r m a j o r , as distinct f r o m t h e i r m a r g i n a l ,
r e q u i r e m e n t s t o a n e x t e n t w h i c h will m a k e successful n e g o t i a t i o n s p o s s i b l e .
The Agenda
4 . M i n i s t e r s will h a v e for c o n s i d e r a t i o n t h e r e p o r t b y t h e C h a n c e l l o r of
t h e E x c h e q u e r , a t t a c h e d a t A n n e x A , a n d t h e r e p o r t s of t h e C h a i r m a n of t h e t h r e e
W o r k i n g P a r t i e s . P a r a g r a p h s 2 a n d 3 of t h e C h a n c e l l o r ^ r e p o r t i n effect c r e a t e
t h e a g e n d a f o r t h e first p a r t of t h e m e e t i n g ; t h e y list t h e p r o b l e m s as t h e y h a v e
a p p e a r e d in t h e d i s c u s s i o n s s o f a r : —
A.—(i) S c o p e of t h e F r e e T r a d e A r e a C o n v e n t i o n ,
(ii) O r i g i n a n d c o n t e n t q u a l i f i c a t i o n of g o o d s ,
(iii)—(1) I n s t i t u t i o n s of t h e F r e e T r a d e A r e a .
(2) R e l a t i o n b e t w e e n t h e o b l i g a t i o n s of t h e m e m b e r s of t h e F r e e
T r a d e A r e a a n d of t h e Six P o w e r s .
(3) A r r a n g e m e n t s for t h e close w o r k i n g t o g e t h e r of t h e I n s t i t u t i o n s
of t h e F r e e T r a d e A r e a a n d t h e E u r o p e a n E c o n o m i c
Community.
B.—Foodstuffs.
C.—(i) P r o b l e m s of t h e " p e r i p h e r a l s . "
(ii) A d d i t i o n a l c a p i t a l r e q u i r e m e n t s .
5. S e p a r a t e briefs o n e a c h of t h e s e i t e m s h a v e b e e n p r e p a r e d . T h a t o n
foodstuffs is b e i n g s u b m i t t e d s e p a r a t e l y t o t h e C a b i n e t . T h e o t h e r s a r e a v a i l a b l e
f o r u s e b y M i n i s t e r s , b u t a s u m m a r y of t h e m is a t t a c h e d at A n n e x B . I t will b e
d e s i r a b l e for all t h e m a i n p a r t i c i p a n t s t o i n d i c a t e t h e i r views o n t h e s e q u e s t i o n s ;
i n d e e d , it is o n this e x c h a n g e of views t h a t all p a r t i c i p a n t s will b e a b l e t o j u d g e
w h e t h e r it is w o r t h w h i l e g o i n g f o r w a r d . W e h a v e n o t t h o u g h t t h a t it w o u l d b e
h e l p f u l t o list h e r e i n d e t a i l t h e p r e c i s e p o i n t s o n all t h e s e s u b j e c t s w h i c h will b e
of c o n c e r n t o u s a n d t o o t h e r c o u n t r i e s . B u t i n g e n e r a l it c a n b e s a i d t h a t t h e
U n i t e d K i n g d o m will b e c o n c e r n e d i n p a r t i c u l a r w i t h t h e n a t u r e of t h e c o m m e n t s
of t h e Six o n t h e p o i n t s r a i s e d i n S e c t i o n A . O n t h e s e q u e s t i o n s s o m e m e m b e r s
m a y t a k e u p rigid p o s i t i o n s w h i c h w e w o u l d b e u n a b l e t o a c c e p t , i n w h i c h case
a p o s i t i o n of d e a d l o c k w o u l d b e r e a c h e d . B u t p r o v i d e d n o inflexible p o s i t i o n s
w e r e t a k e n a n d t h e r e w a s a r e a s o n a b l e p r o s p e c t of f u r t h e r d i s c u s s i o n r e s o l v i n g
t h e differences, n e g o t i a t i o n s c o u l d p r o c e e d ^ T h e Six a n d o t h e r c o u n t r i e s ,
p a r t i c u l a r l y D e n m a r k , will b e c o n c e r n e d w i t h \he n a t u r e of t h e U n i t e d K i n g d o m ' s
c o m m e n t s o n S e c t i o n B (foodstuffs).
52334 B
T h e O u t c o m e of the N e g o t i a t i o n s
6. T h e v a r i o u s briefs o n p a r t i c u l a r t o p i c s i n d i c a t e t h a t , to m e e t b o t h t h e
U n i t e d K i n g d o m r e q u i r e m e n t s a n d t h e p r e o c c u p a t i o n s of o t h e r c o u n t r i e s , t h e
final o u t c o m e of t h e n e g o t i a t i o n s , if t h e y a r e successful, will b e a " p a c k a g e " d e a l .
T h e possible e l e m e n t s of s u c h a d e a l c o u l d b e : —
(a) A F r e e T r a d e A r e a C o n v e n t i o n p r o v i d i n g for t h e r e m o v a l of tariffs a n d
q u o t a s o n i n d u s t r i a l g o o d s a n d t h e n e c e s s a r y rules of c o m p e t i t i o n , & c ,
intimately connected therewith.
(b) Special a r r a n g e m e n t s for c o a l a n d steel, w h e t h e r w i t h i n o r o u t s i d e t h e
Convention, to be decided later.
(c) S o m e t h i n g o n a g r i c u l t u r e , p r o b a b l y a " E u r o p e a n A g r e e m e n t f o r
Agriculture."
id) D r a f t decisions of v a r y i n g c o n t e n t a b o u t s o m e of t h e m a t t e r s d e a l t w i t h
in the T r e a t y of R o m e w h i c h d o n o t directly c o n c e r n t h e l i m i t e d F r e e
T r a d e A r e a C o n v e n t i o n or t h e A g r e e m e n t f o r A g r i c u l t u r e
(e.g.,
invisibles, l a b o u r , & c ) .
7. Precisely w h e r e t h e line b e t w e e n (a) a n d (d) s h o u l d b e d r a w n will be a
m a t t e r for d e t a i l e d n e g o t i a t i o n .
8. I n c o n s i d e r i n g t h e f u t u r e p r o c e d u r e a n d t h e n e g o t i a t i n g m a c h i n e r y it is
n e c e s s a r y t o h a v e this g e n e r a l s t r u c t u r e i n m i n d .
F u t u r e Procedure
9. A t t h e b e s t t h e r e s u l t of this d i s c u s s i o n a t t h e M i n i s t e r i a l m e e t i n g i n
O c t o b e r will reveal v e r y w i d e d i v e r g e n c e s of o p i n i o n o n t h e s e q u e s t i o n s b u t , a t
t h e s a m e t i m e , will give a r e a s o n a b l e p r o s p e c t t h a t t h e n e g o t i a t i o n s c a n b e
successful. I n this e v e n t t h e m e e t i n g c a n p r o c e e d t o e s t a b l i s h f u t u r e m a c h i n e r y , .
O u r objective h e r e will b e t h e e s t a b l i s h m e n t of a special F r e e T r a d e A r e a
C o m m i t t e e . All m e m b e r s will b e a b l e t o sit o n this b o d y a n d it will h a v e t h e
r e s p o n s i b i l i t y for t h e w h o l e r a n g e of n e g o t i a t i o n s ; it will b e c o n c e r n e d n o t o n l y w i t h
d r a w i n g u p t h e F r e e T r a d e A r e a C o n v e n t i o n b u t also w i t h d i r e c t i n g t h e w o r k o n
a g r i c u l t u r e a n d a n y o t h e r m a t t e r s w h i c h it m a y b e p r e f e r a b l e t o deal w i t h i n t h e
existing O . E . E . C . o r g a n i s a t i o n r a t h e r t h a n i n t h e F r e e T r a d e A r e a C o n v e n t i o n , e.g.,
invisibles a n d m a n p o w e r . I t will also b e r e s p o n s i b l e for w o r k i n g o u t h o w m e m b e r s
of t h e O . E . E . C . o r g a n i s a t i o n w h o d o n o t feel a b l e t o a c c e p t t h e full o b l i g a t i o n s
c a n b e associated w i t h t h e F r e e T r a d e A r e a .
10. T h e r a n g e a n d difficulty of t h e m a t t e r s t o b e d i s c u s s e d a n d settled i n t h e
s p e c i a l F r e e T r a d e A r e a C o m m i t t e e a r e s u c h t h a t , if p o s s i b l e , t h e m e m b e r s s h o u l d
be represented by Ministers, though not necessarily by the n o r m a l Ministerial
d e l e g a t e s t o O . E . E . C . F o r s o m e c o u n t r i e s t h i s will n o t be p o s s i b l e ; for S w i t z e r l a n d
it w o u l d b e c o n s t i t u t i o n a l l y i m p r a c t i c a b l e . B u t w e s h o u l d n o t e n c o u r a g e c o u n t r i e s
w h o s e p a r t i n t h e n e g o t i a t i o n s will b e critical, s u c h as D e n m a r k , t o a p p o i n t officials
as t h e i r n o r m a l n e g o t i a t o r s .
1 1 . T h e special F r e e T r a d e A r e a C o m m i t t e e , if its c r e a t i o n is a g r e e d on, will
a p p e a r n a t u r a l l y a p i e c e of m a c h i n e r y to assist t h e C h a n c e l l o r i n the role, given
h i m a s C h a i r m a n of t h e C o u n c i l l a s t F e b r u a r y , t o c o - o r d i n a t e a n d direct all
n e g o t i a t i o n s a n d d i s c u s s i o n s arising o u t of, o r c o n n e c t e d w i t h , t h e p r e p a r a t i o n of
a F r e e T r a d e A r e a . B u t t h o u g h it m a y be d e s i r a b l e for h i m t o a t t e n d its m e e t i n g s
o c c a s i o n a l l y — a n d w h e n h e d o e s h e will as C h a i r m a n of t h e C o u n c i l n a t u r a l l y
p r e s i d e — i t will b e n e c e s s a r y t o p r o v i d e a r e g u l a r c h a i r m a n . A l t h o u g h t h e r e are
i n e v i t a b l y s o m e d i s a d v a n t a g e s in h a v i n g t h e c h a i r , since i t is n o t always easy, to
d e f e n d a difficult n a t i o n a l p o s i t i o n t h e r e , i t is d o u b t f u l w h e t h e r t h e r e will b e the
n e c e s s a r y d r i v e u n l e s s t h e U n i t e d - K i n g d o m h a s it. I t will t h e r e f o r e b e desirable,
if possible, t h a t t h e P a y m a s t e r - G e n e r a l be n o m i n a t e d c h a i r m a n .
12. T h e special C o m m i t t e e will n e e d s u b o r d i n a t e b o d i e s , w o r k i n g p a r t i e s , &c:
I t s h o u l d h a v e p o w e r to c r e a t e these, a n d t h e existing W o r k i n g P a r t i e s 2 1 , 22 a n d
2 3 , w h i c h at p r e s e n t d e p e n d o n t h e C o u n c i l , s h o u l d b e m a d e subject to t h e d i r e c t i o n
of t h e special C o m m i t t e e so t h a t all t h e t h r e a d s m a y be p u l l e d t o g e t h e r in o n e
place.
'
SECRET­
13. W e c a n n o t c o u n t o n n e g o t i a t i o n s i n a s e v e n t e e n - c o u n t r y C o m m i t t e e
b e i n g r a p i d ; i n d e e d , if it c a n n o t b e r e d u c e d a n d s o m e s m a l l e r s t e e r i n g g r o u p
d e v e l o p e d w e c a n n o t e x p e c t a successful o u t c o m e t o t h e n e g o t i a t i o n s . Ideally, w e
s h o u l d like t o o b t a i n a g r e e m e n t a t t h e O c t o b e r m e e t i n g t o t h e f o r m a l c o n s t i t u t i o n
of s u c h a g r o u p . B u t it d o e s n o t s e e m likely t h a t s u c h a g r e e m e n t c a n b e r e a c h e d
in O c t o b e r , a n d u n l e s s t h e r e is a n u n e x p e c t e d c h a n g e w e s h o u l d n o t t a k e a n y
s t e p s t o s e c u r e it d u r i n g t h e O c t o b e r m e e t i n g . W e s h o u l d l e a v e t h e special F r e e
T r a d e A r e a C o m m i t t e e to work, expecting that the n e e d for the smaller g r o u p
will t h e n b e c o m e a p p a r e n t . M o r e o v e r , t h e p o w e r s g i v e n t o t h e C h a n c e l l o r , as
C h a i r m a n of t h e C o u n c i l , last F e b r u a r y t o c o n s u l t w h o m h e t h i n k s fit will r e m a i n
u n i m p a i r e d , a n d m a y p r o v i d e t h e m e a n s of c r e a t i n g a s m a l l e r g r o u p t o deal w i t h t h e
c r u c i a l issues.
14. T h e f o r m a l r e c o g n i t i o n i n t h e n e g o t i a t i n g m a c h i n e r y t h a t all t h e q u e s t i o n s
r e f e r r e d t o in p a r a g r a p h 9 a b o v e , a n d i n p a r t i c u l a r a g r i c u l t u r e ( w h i c h will h a v e b e e n
d i s c u s s e d as o n e of t h e p r o b l e m s m e n t i o n e d in t h e C h a n c e l l o r s r e p o r t ) , will h a v e
to b e d e a l t w i t h t o g e t h e r e v e n t h o u g h t h e y f o r m p a r t of s e p a r a t e legal i n s t r u m e n t s
m a y well a p p e a r t o t h e C o n t i n e n t a l c o u n t r i e s as a significant m o v e f o r w a r d b y
t h e U n i t e d K i n g d o m . W e h o p e this will b e sufficient t o l a u n c h t h e n e g o t i a t i o n s .
T h e r e a r e d a n g e r s in this. U n l e s s t h e U n i t e d K i n g d o m h a s m a d e q u i t e clear w h a t
it c a n n o t d o i n t h e a g r i c u l t u r a l field, t h e r e is a r i s k t h a t t h e c r e a t i o n of t h i s m a c h i n e r y
m i g h t p r e c i p i t a t e s e r i o u s p o l i t i c a l difficulties w i t h i n t h e U n i t e d K i n g d o m a n d e v e n
in t h e C o m m o n w e a l t h . O n t h e o t h e r h a n d , if t h e U n i t e d K i n g d o m i n d i c a t e s o n l y
t h e t h i n g s t h a t it c a n n o t d o a n d d o e s n o t i n d i c a t e t h e g e n e r a l lines of w h a t it is
p r e p a r e d t o c o n s i d e r , t h e r e m a y n o t b e a g r e e m e n t in t h e C o u n c i l t o g o f o r w a r d
w i t h t h e n e g o t i a t i o n s . T h i s p r o b l e m is d e a l t w i t h i n d e t a i l i n t h e s e p a r a t e brief
on agriculture.
T h e Risk of D e a d l o c k
15. I t m a y b e t h a t after t h e e x c h a n g e of v i e w s o n t h e p o i n t s set o u t in t h e
C h a n c e l l o r s m e s s a g e t h e r e will n o t b e a n y r e a s o n a b l e g r o u n d o n t h e basis of t h e
v a r i o u s s t a t e m e n t s m a d e t h a t t h e n e g o t i a t i o n s c a n b e successful.
This could
h a p p e n if w e t h o u g h t t h a t t h e F r e n c h s t a t e m e n t o n t h e s o r t of F r e e T r a d e A r e a
t h e y c o u l d a c c e p t w a s s o u n r e a l a n d u n s a t i s f a c t o r y as t o give little c h a n c e of e v e r
r e a c h i n g a g r e e m e n t , o r if o t h e r c o u n t r i e s c o n s i d e r e d o u r s t a t e m e n t o n foodstuffs
t o b e a n i n a d e q u a t e b a s i s for n e g o t i a t i o n . I n t h i s e v e n t , it a p p e a r s n o w t o b e
preferable t h a t t h e meeting b e adjourned r a t h e r t h a n t h a t the procedural device
of c r e a t i n g t h e special F r e e T r a d e A r e a C o m m i t t e e b e u s e d to b r e a k t h e d e a d l o c k .
I t w o u l d n o t b e d e s i r a b l e t o set u p t h e special F r e e T r a d e A r e a C o m m i t t e e . i f i t
w a s c e r t a i n t o r u n i m m e d i a t e l y i n t o a d e a d l o c k w h i c h w e h a d failed t o b r e a k at t h e
O c t o b e r m e e t i n g . It w o u l d b e b e t t e r to a d j o u r n t h e m e e t i n g a n d b y d i p l o m a t i c
m e a n s , i n c l u d i n g s m a l l e r M i n i s t e r i a l m e e t i n g s a n d visits, t o seek t o m o v e f o r w a r d
r a t h e r t h a n t o c r e a t e a n e w C o m m i t t e e b e f o r e t h e r e is a n y p r o s p e c t t h a t it c a n d o
useful w o r k .
Recommendations
16. W e r e c o m m e n d t h a t , if t h e s t a t e m e n t s at t h e O c t o b e r m e e t i n g g i v e
r e a s o n a b l e h o p e t h a t n e g o t i a t i o n s c a n b e successful, w e s h o u l d s e e k t o r e a c h
agreement on the following p o i n t s : —
(1) T h e n e g o t i a t i o n s s h o u l d c o v e r —
(a) T h e F r e e T r a d e A r e a C o n v e n t i o n ( a n d p r o v i s i o n for c o a l a n d steel).
(b) A n A g r e e m e n t for A g r i c u l t u r e .
(c) O t h e r m a t t e r s n o t falling w i t h i n id) a n d (6) b u t w h i c h it is d e s i r a b l e
t o settle a t t h e s a m e t i m e .
(d) M e t h o d s of a s s o c i a t i o n of m e m b e r s w h o feel u n a b l e t o a c c e p t all t h e
o b l i g a t i o n s of t h e F r e e T r a d e A r e a C o n v e n t i o n .
(2) T h e c o - o r d i n a t i o n a n d d i r e c t i o n of all t h e s e m a t t e r s s h o u l d b e e n t r u s t e d
t o a special F r e e T r a d e A r e a C o m m i t t e e c o m p o s e d of M i n i s t e r s , o r
e x c e p t i o n a l l y officials, f r o m all m e m b e r c o u n t r i e s .
(3) T h e P a y m a s t e r - G e n e r a l s h o u l d be c h a i r m a n of t h e special C o m m i t t e e .
52234
(4) T h e special C o m m i t t e e s h o u l d b e a u t h o r i s e d t o set u p n e w i n t e r G o v e r n m e n t a l bodies w i t h o u t further reference to the Council, a n d
s h o u l d t a k e o v e r d i r e c t i o n of t h e existing W o r k i n g P a r t i e s 2 1 , 2 2 a n d 2 3 .
( W e s h o u l d t a k e c a r e t o e n s u r e t h a t t h e t e r m s of r e f e r e n c e u n d e r w h i c h
t h e special C o m m i t t e e is s e t u p d o n o t i n h i b i t i n a n y w a y t h e p r o s p e c t of
s e c u r i n g t h e l a t e r e s t a b l i s h m e n t of a s m a l l e r s t e e r i n g group.)
FREE TRADE
ANNEX
A
AREA
NEGOTIATIONS
REPORT TO O . E . E . C . BY THE CHANCELLOR OF THE EXCHEQUER, JULY 1 9 5 7
I t b e c a m e c l e a r s o m e t i m e a g o , f o r r e a s o n s well k n o w n t o all of u s , t h a t t h e
W o r k i n g P a r t i e s set u p i n O . E . E . C . t o h a m m e r o u t t h e p r o b l e m s of c r e a t i n g a F r e e
T r a d e A r e a w o u l d n o t b e a b l e t o m o v e as fast as s o m e of u s h a d h o p e d w h e n
M i n i s t e r s l a s t m e t i n O . E . E . C . i n F e b r u a r y . I t h e r e f o r e a s k e d t h e C h a i r m e n of
t h e t h r e e W o r k i n g P a r t i e s t o m a k e p e r s o n a l r e p o r t s t o m e o n t h e s t a t e of t h e w o r k .
I a m a r r a n g i n g f o r t h e s e r e p o r t s t o b e c i r c u l a t e d t o m e m b e r s of t h e O r g a n i s a t i o n .
I, a n d I a m s u r e all m y c o l l e a g u e s , a r e m o s t grateful for t h e w o r k w h i c h t h e s e t h r e e
g e n t l e m e n h a v e d o n e for u s b o t h in t h e i r l a b o u r s i n t h e W o r k i n g P a r t i e s a n d i n
preparing these reports.
It quite clearly emerges f r o m these documents that,
d e s p i t e t h e d e c i s i o n w e t o o k last F e b r u a r y t o e n t e r i n t o n e g o t i a t i o n s , w e h a v e n o t
yet b e e n a b l e t o t a c k l e s o m e m a j o r issues, o n w h i c h t h e discussions h a v e s h o w n
t h a t w e a r e w i d e l y d i v i d e d : t h e r e is far f r o m a c o m m u n i t y of v i e w a m o n g u s a s
t o w h a t k i n d of F r e e T r a d e A r e a w e w a n t .
2 . T h e first essential p o i n t o n w h i c h t h e r e m u s t b e g e n e r a l a g r e e m e n t is, d o
w e a c c e p t as o u r objective t h e c r e a t i o n of a F r e e T r a d e A r e a ? I h a v e b e e n m u c h
e n c o u r a g e d i n m y d i s c u s s i o n w i t h a n u m b e r of M i n i s t e r s to find t h a t t h e y d o feel
t h a t it is i n t h e b e s t i n t e r e s t of E u r o p e t h a t w e s h o u l d s u c c e e d i n o u r e n d e a v o u r t o
complement the Customs Union by a Free Trade Area to maintain wider
c o - o p e r a t i o n a n d a v o i d division. I h o p e t h a t w e shall all k e e p this essential n e e d
c o n s t a n t l y i n m i n d d u r i n g t h e n e g o t i a t i o n s : w e shall n o t b e successful unless w e d o .
3 . W h a t are the major points o n which we m u s t at least m o v e together a
little if n e g o t i a t i o n s a r e t o h a v e a n y p r o s p e c t of s u c c e s s ? T h e y a p p e a r to m e t o
be the following: —
A.—(i) I n
g e n e r a l , w h a t s h o u l d b e t h e s c o p e of t h e F r e e T r a d e A r e a
Convention?
W e a r e all a g r e e d t h a t if a F r e e T r a d e A r e a is t o
s u c c e e d t h e r e will h a v e t o b e c o n t i n u e d c o - o p e r a t i o n , a n d i n d e e d
f u r t h e r p r o g r e s s , i n m a n y fields o t h e r t h a n t h e r e m o v a l of tariffs
a n d q u o t a s . B u t w e a r e n o t clear o n h o w t o d o this. S h o u l d w e
s e e k i n t h e C o n v e n t i o n t o d e a l specifically w i t h all t h o s e m a t t e r s
r e l e v a n t t o a F r e e T r a d e A r e a w h i c h fall w i t h i n t h e T r e a t y of
R o m e ? O r , a l t e r n a t i v e l y , s h o u l d w e d e a l in t h e C o n v e n t i o n o n l y
w i t h tariffs, q u o t a s a n d o t h e r essentially r e l a t e d m a t t e r s s u c h a s
rules of fair c o m p e t i t i o n w h i l e w e p r o v i d e a t t h e s a m e t i m e f o r
continued w o r k a n d where necessary take n e w decisions for
f u r t h e r p r o g r e s s in o t h e r fields of e c o n o m i c c o - o p e r a t i o n i n
O.E.E.C.?
(ii) S o f a r as t h e m o v e m e n t of g o o d s is c o n c e r n e d , d o w e accept t h a t w h i l e
w e all k e e p o u r o w n e x t e r n a l tariff a u t o n o m y w e s h o u l d h a v e
l i b e r a l r u l e s for defining t h e origin a n d c o n t e n t qualification of
g o o d s e n t i t l e d t o m o v e freely w i t h i n t h e A r e a ?
(iii) W e a r e all a g r e e d t h a t t h e F r e e T r a d e A r e a will r e q u i r e n e w
institutions a n d procedures, including voting procedures, which
m a y differ in i m p o r t a n t r e s p e c t s f r o m t h o s e a t p r e s e n t u s e d i n
O . E . E . C . I t will b e n e c e s s a r y t o a g r e e also o n : —
(1) w h a t i n s t i t u t i o n s a n d p r o c e d u r e s , i n c l u d i n g v o t i n g p r o c e d u r e s ,
the Convention should provide for; and
(2) w h a t m e a s u r e s s h o u l d b e t a k e n t o r e l a t e t h e r e c i p r o c a l
o b l i g a t i o n s of the m e m b e r s of t h e F r e e T r a d e A r e a t o t h o s e
of t h e signatories of t h e T r e a t y of R o m e ;
(3) w h a t a r r a n g e m e n t s s h o u l d b e m a d e t o e n s u r e t h a t t h e
i n s t i t u t i o n s e s t a b l i s h e d u n d e r t h e R o m e T r e a t y a n d t h o s e of
t h e F r e e T r a d e A r e a w o r k closely a n d c o n t i n u o u s l y
together.
B . — O n foodstuffs t h e r e a r e serious q u e s t i o n s t o c o n s i d e r . H o w far a r e t h e
m e m b e r s of O . E . E . C . , i n c l u d i n g t h e s i g n a t o r i e s of t h e T r e a t y of
R o m e , willing to a g r e e n o w t o e n t e r i n t o r e c i p r o c a l a r r a n g e m e n t s
w i t h all o r a n y of t h e m e m b e r s of O . E . E . C . a b o u t t r a d e in
foodstuffs i n c l u d i n g the r e m o v a l of tariffs a n d q u o t a s , s i m i l a r t o o r
i d e n t i c a l w i t h t h o s e p r o p o s e d a n d e n v i s a g e d by t h e T r e a t y of
R o m e ? S o m e m e m b e r s h a v e m a d e it plain t h a t t h e y r e g a r d this
a s i m p o s s i b l e . A r e t h e r e o t h e r a r r a n g e m e n t s w h i c h m e m b e r s of
O.E.E.C., including the Six, w o u l d be p r e p a r e d to accept?
C.—(i) C e r t a i n m e m b e r s of O . E . E . C . h a v e i n d i c a t e d t h e i r d e s i r e to b e
a s s o c i a t e d w i t h t h e F r e e T r a d e A r e a w h i l e feeling u n a b l e t o
s u b s c r i b e t o t h e full o b l i g a t i o n s of m e m b e r s a t l e a s t a t t h e o u t s e t .
I t a p p e a r s t o m e t h a t u n t i l t h e r e is s o m e g e n e r a l a g r e e m e n t o n t h e
q u e s t i o n s i n P a r t s A a n d B a b o v e t h e s e c o u n t r i e s will n o t b e a b l e
t o s t a t e i n d e t a i l h o w far t h e y w o u l d r e q u i r e d e r o g a t i o n s f r o m t h e
o r d i n a r y r u l e s of m e m b e r s h i p , n o r shall w e b e a b l e t o see
a r r a n g e m e n t s w o r k e d out for associating with t h e F r e e T r a d e A r e a
m e m b e r s of O . E . E . C . w h o a r e n o t a b l e t o a c c e p t t h e g e n e r a l
obligations.
(ii) C e r t a i n m e m b e r s feel t h a t t h e y will n o t b e able t o j o i n o r b e a s s o c i a t e d
w i t h t h e F r e e T r a d e A r e a u n l e s s t h e y h a v e a d d i t i o n a l r e s o u r c e s of
e x t e r n a l c a p i t a l available t o t h e m t o assist in t h e i r d e v e l o p m e n t a n d
readaptation.
H o w far c a n t h i s a d d i t i o n a l c a p i t a l b e m a d e
a v a i l a b l e ? A r e n e w i n s t i t u t i o n a l a r r a n g e m e n t s n e e d e d , a n d if so
what arrangements would be appropriate?
4. I d o u b t w h e t h e r w e c a n r e a s o n a b l y ask officials t o d o m u c h f u r t h e r w o r k
i n P a r i s o n these p r o b l e m s u n t i l t h e y h a v e b e e n d i s c u s s e d at a m e e t i n g of M i n i s t e r s .
I s h o u l d t h e r e f o r e l i k e t o m a k e t h e f o l l o w i n g p r o p o s a l s for p r o c e d u r e in t h e
i m m e d i a t e future.
5. F i r s t l y , I t h i n k w e s h o u l d all of us i n o u r c a p i t a l s d u r i n g the c o m i n g w e e k s
give m o s t e a r n e s t a t t e n t i o n t o t h e s e basic p r o b l e m s a n d c o n s i d e r w h a t w e c a n d o t o
t a k e a c c o u n t of t h e d i v e r s e p o s i t i o n s of o u r p a r t n e r s .
6. S e c o n d l y , I s u g g e s t t h a t w e s h o u l d m e e t t o g e t h e r as s o o n as is p r a c t i c a b l e
t o c o n s i d e r all t h e s e p r o b l e m s . I believe t h a t , g i v e n t h e diversities of v i e w t h a t
exist n o w , w e s h o u l d r e g a r d this p r i m a r i l y as a n i n f o r m a l m e e t i n g of M i n i s t e r s .
T h i s w o u l d n o t p r e v e n t o u r m e e t i n g as a C o u n c i l if w e wish t o c o n d u c t a n y f o r m a l
b u s i n e s s . A t t h a t m e e t i n g w e s h o u l d s e e k t o t a k e s t o c k of t h e p o s i t i o n , a n d
c o n s i d e r b y w h a t m e t h o d s a n d p r o c e d u r e s the n e g o t i a t i o n s c o n c e r n i n g t h e F r e e
T r a d e A r e a s h o u l d b e c o n d u c t e d . I will v e r y s h o r t l y m a k e p r o p o s a l s o n t h e d a t e
of s u c h a m e e t i n g .
7. I t will also b e n e c e s s a r y t o c o n s i d e r t h e n e g o t i a t i o n s w h i c h will b e r e q u i r e d
t o b r i n g c o a l a n d steel w i t h i n t h e F r e e T r a d e A r e a .
8. I a m s u r e I d o n o t n e e d t o e m p h a s i s e t h e i m p o r t a n c e of t h e m a t t e r s t o
w h i c h w e set o u r h a n d last F e b r u a r y . It will b e a v e r y serious d a y f o r E u r o p e if
w e a r e n o t able t o c r e a t e a F r e e T r a d e A r e a a s a c o m p l e m e n t t o t h e E u r o p e a n
E c o n o m i c C o m m u n i t y e s t a b l i s h e d b y t h e T r e a t y of R o m e .
We have made
c o n s i d e r a b l e p r o g r e s s i n u n d e r s t a n d i n g t h e c o m p l e x i t i e s of t h e p r o b l e m s a n d t h e
a t t i t u d e s of t h e v a r i o u s m e m b e r s . B u t it is clear t h a t w e shall n o t c r e a t e a r e a l a n d
effective F r e e T r a d e A r e a a s a c o m p l e m e n t t o t h e C u s t o m s U n i o n u n l e s s w e a r e all
d e t e r m i n e d t o succeed a n d a r e all p r e p a r e d for a n i n t e n s i v e a n d c o n t i n u o u s effort.
July
1957.
SECRET
52334
B 3
;
SUMMARY
ANNEX
B
OF ADDITIONAL
BRIEFS
This n o t e summarises the proposed U n i t e d K i n g d o m position on t h e subjects
o t h e r t h a n foodstuffs, m e n t i o n e d in p a r a g r a p h s 2 a n d 3 of t h e C h a n c e l l o r ^ r e p o r t
( A n n e x A ) a n d listed i n p a r a g r a p h 4 of t h e g e n e r a l steering brief. T h e s e a r e :
S c o p e of t h e F r e e T r a d e A r e a C o n v e n t i o n .
O r i g i n a n d c o n t e n t qualification of g o o d s .
Institutions.
R e l a t i o n b e t w e e n t h e obligations of m e m b e r s of t h e F r e e T r a d e A r e a a n d
of t h e Six.
A r r a n g e m e n t s for t h e close w o r k i n g t o g e t h e r of t h e i n s t i t u t i o n s of t h e F r e e
Trade Area and the European Economic Community.
P r o b l e m of t h e " P e r i p h e r a l s . "
Additional capital requirements.
M o r e d e t a i l e d briefs o n all t h e s e subjects h a v e b e e n p r e p a r e d f o r t h e u s e of t h e
United Kingdom delegation to the October meeting.
S c o p e of the F r e e Trade Area Convention
2. O u r o r i g i n a l c o n c e p t of a n i n d u s t r i a l F r e e T r a d e A r e a w a s of a C o n v e n t i o n
t o p r o m o t e f r e e d o m of t r a d e in i n d u s t r i a l g o o d s , a n d w h i c h w o u l d d e a l w i t h tariffs
a n d q u o t a s a n d s u c h essentially r e l a t e d p o i n t s a s rules of c o m p e t i t i o n a n d
a p p r o p r i a t e i n s t i t u t i o n s , d e v i s e d w i t h i n t h e O . E . E . C . f r a m e w o r k , to h a n d l e t h e
n e c e s s a r y m a n a g e m e n t f u n c t i o n s . T h e T r e a t y of R o m e e s t a b l i s h i n g t h e E u r o p e a n
E c o n o m i c C o m m u n i t y is b a s e d o n a v e r y different c o n c e p t . T h e T r e a t y deals w i t h
t h e w h o l e r a n g e of e c o n o m i c policy a n d t h e C o m m u n i t y is r e g a r d e d p r i m a r i l y as a n
i n s t r u m e n t d e s i g n e d t o e n a b l e t h e Six t o d e v e l o p t h e i r r e s o u r c e s i n c o m m o n .
(i) I t is u n l i k e l y t h a t w e c a n n e g o t i a t e t h e i n d u s t r i a l F r e e T r a d e A r e a u n l e s s
w e a r e p r e p a r e d t o a c c e p t s o m e c o m m i t m e n t s o u t s i d e t h e field of tariffs
a n d q u o t a s a n d directly r e l a t e d m a t t e r s . S o m e O . E . E . C . m e m b e r s —
n o t o n l y t h e Six—will wish t o insist on a c c o m p a n y i n g c o m m i t m e n t s i n
o t h e r fields, e.g., f o r invisibles. A p a r t f r o m t h e v i e w s w h i c h o t h e r
c o u n t r i e s will u r g e i n n e g o t i a t i o n , f u r t h e r e x a m i n a t i o n h a s s h o w n t h a t
it will p r o b a b l y b e t o o u r a d v a n t a g e to h a v e s o m e a d d i t i o n a l o b l i g a t i o n s
in t h e fields of invisibles, e s t a b l i s h m e n t a n d services, e i t h e r in t h e
Convention or separately.
(ii) If w e a b a n d o n e d o u r original c o n c e p t a n d set o u t t o n e g o t i a t e a
C o n v e n t i o n of w i d e scope, t h e n a t u r a l m o d e l w o u l d b e t h e T r e a t y of
R o m e , a n d w e s h o u l d be e x p o s e d t o p r e s s u r e to agree t o t h e i n c l u s i o n
of subjects w h i c h w e w a n t t o e x c l u d e . F u r t h e r , w e s h o u l d b e likely
t o a l a r m o p i n i o n b o t h i n t h e U n i t e d K i n g d o m a n d in t h e
Commonwealth.
(hi) T h e b a l a n c e of a d v a n t a g e lies i n m a i n t a i n i n g t h e o r i g i n a l l i m i t e d c o n c e p t
of t h e i n d u s t r i a l F r e e T r a d e A r e a , w h i l e a t t h e s a m e t i m e b e i n g p r e p a r e d
t o a c c e p t e i t h e r o b l i g a t i o n s of s u b s t a n c e , or else c o m m i t m e n t s t o
u n d e r t a k e f u r t h e r s t u d y , o n s o m e o t h e r subjects in O . E . E . C . o u t s i d e
t h e s c o p e of t h e C o n v e n t i o n . T h i s n e e d n o t r u l e o u t t h e possibility
of i n c l u d i n g s o m e s u c h c o m m i t m e n t s i n t h e C o n v e n t i o n itself, if t h i s
p r o v e s d e s i r a b l e in t h e c o u r s e of n e g o t i a t i o n .
Origin a n d content qualification of g o o d s
3. T h e p r o b l e m of defining t h e o r i g i n of g o o d s arises b e c a u s e in a F r e e T r a d e
A r e a t h e e x t e r n a l tariffs of m e m b e r c o u n t r i e s will n o r m a l l y differ, a n d t h i r d
c o u n t r i e s will t h e r e f o r e h a v e a n i n c e n t i v e t o e x p o r t t o t h e w h o l e of t h e A r e a via
t h e m e m b e r c o u n t r y w i t h t h e lowest e x t e r n a l tariff, to t h e d e t r i m e n t of m e m b e r
c o u n t r i e s w i t h h i g h e r tariffs. T h i s difficulty c a n o n l y b e o v e r c o m e b y agreeing i n
a d v a n c e t h e c i r c u m s t a n c e s in w h i c h g o o d s a r e t o b e r e g a r d e d as h a v i n g b e e n
p r o d u c e d w i t h i n t h e F r e e T r a d e A r e a f o r t h e p u r p o s e of c l a i m i n g e n t i t l e m e n t t o
duty-free entry into other A r e a countries.
4. W e a r e i n f a v o u r of r u l e s w h i c h w o u l d e x t e n d the benefits of t h e F r e e
T r a d e A r e a t o t h e b u l k of t r a d e p a s s i n g b e t w e e n M e m b e r c o u n t r i e s . S u b j e c t t o
o n e qualification, this w o u l d b e a c h i e v e d b y o u r p r o p o s a l t h a t all g o o d s s h o u l d
qualify for F r e e T r a d e A r e a tariff t r e a t m e n t if at l e a s t 50 p e r c e n t , of t h e i r v a l u e
h a s b e e n a d d e d in t h e A r e a . T h e qualification, w h i c h i n o u r view is a v i t a l o n e ,
is t h a t c e r t a i n listed b a s i c m a t e r i a l s i m p o r t e d i n s u b s t a n t i a l q u a n t i t i e s f r o m o u t s i d e
t h e A r e a , e.g., n o n - f e r r o u s m e t a l s , t i m b e r , p a p e r p u l p , p e t r o l e u m , & c , s h o u l d b e
d e e m e d t o b e of F r e e T r a d e A r e a o r i g i n w h e n c a l c u l a t i n g t h e A r e a c o n t e n t of g o o d s
m a d e from those materials.
5. T h e difficulty is t h a t s o m e c o u n t r i e s , n o t a b l y F r a n c e a n d I t a l y , at p r e s e n t
h a v e a p o l i c y of h i g h tariff p r o t e c t i o n o n b a s i c m a t e r i a l s , w h i c h t h e y a r e u n w i l l i n g
t o s u r r e n d e r . T h i s is a q u e s t i o n o n w h i c h t h e Six c o u l d n o t a g r e e b e f o r e t h e
s i g n a t u r e of t h e T r e a t y of R o m e . T h e y h a v e t h e r e f o r e p o s t p o n e d a d e c i s i o n o n
t h e s e i t e m s (List G of A n n e x I t o t h e T r e a t y of R o m e ) u n t i l after t h e T r e a t y h a s
c o m e i n t o force. If G e r m a n y a n d t h e B e n e l u x c o u n t r i e s c o n t i n u e t o o p p o s e a
p o l i c y of h i g h a n d effective tariff p r o t e c t i o n o n t h e s e b a s i c m a t e r i a l s , t h e r e is n o
p r o c e d u r e u n d e r t h e T r e a t y t o e n s u r e t h a t a g r e e m e n t is r e a c h e d b e t w e e n t h e Six,
i n w h i c h c a s e t h e existing tariffs o n t h e s e m a t e r i a l s will c o n t i n u e t o be a p p l i e d .
6. If t h e Six e v e n t u a l l y a g r e e d o n a h i g h level of tariff p r o t e c t i o n f o r b a s i c
m a t e r i a l s , it w o u l d in p r a c t i c e b e i m p o s s i b l e for t h e m t o allow g o o d s m a d e in t h e
F r e e T r a d e A r e a f r o m m a t e r i a l s p r o d u c e d o u t s i d e t h e A r e a (e.g., z i n c s h e e t s m a d e
i n t h e U n i t e d K i n g d o m f r o m A u s t r a l i a n zinc) t o qualify for free e n t r y i n t o t h e
Customs Union.
7. I t is r e c o m m e n d e d t h a t t h e line t o b e t a k e n b y t h e U n i t e d K i n g d o m o n
t h e s e q u e s t i o n s s h o u l d b e as f o l l o w s : —
(i) W e c a n n o t a g r e e t o p r o p o s a l s — e . g . , l i m i t e d h a r m o n i s a t i o n of tariffs—
w h i c h w o u l d m a k e it n e c e s s a r y f o r us t o t r e a t t h e C o m m o n w e a l t h less
favourably t h a n Europe.
(ii) W e see serious o b j e c t i o n s t o a d m i n i s t r a t i v e p r o c e d u r e s — e . g . , a t a x o h t h e
m a t e r i a l c o n t e n t of g o o d s i m p o r t e d i n t o t h e C u s t o m s U n i o n f r o m t h e
F r e e T r a d e A r e a — w h i c h w o u l d i n effect c o n c e d e t o t h e Six t h e r i g h t
t o u n i l a t e r a l r e t e n t i o n of tariffs.
(iii) W e w a n t t o see a r e a s o n a b l y l o w p e r c e n t a g e of F r e e T r a d e A r e a c o n t e n t ,
c o m b i n e d w i t h a s a t i s f a c t o r y list of b a s i c m a t e r i a l s , a g r e e d as t h e
qualifications for F r e e T r a d e A r e a tariff t r e a t m e n t .
(iv) T h e r e d o e s n o t in p r a c t i c e a p p e a r t o b e a n y w a y i n w h i c h t o r e c o n c i l e t h e
r e t e n t i o n of h i g h tariff p r o t e c t i o n on b a s i c m a t e r i a l s i n t h e C u s t o m s
U n i o n , o r i n a n y o t h e r F r e e T r a d e A r e a c o u n t r y , w i t h t h e c r e a t i o n of
a n effective F r e e T r a d e A r e a c o v e r i n g t h e g r e a t b u l k of i n t r a - E u r o p e a n
trade in industrial goods. W e must therefore express the h o p e that
w h a t e v e r t h e Six m a y d e c i d e t o d o a b o u t t h e c o m m o n tariff o n b a s i c
m a t e r i a l s — o n w h i c h it is n o t for u s to a d v i s e t h e m — t h e y will n o t allow
t h e i r decisions (or f a i l u r e t o t a k e decisions) t o p r e j u d i c e t h e s e t t i n g u p
of a F r e e T r a d e A r e a o n t h e lines w e h a v e p r o p o s e d , i.e., o n e i n v o l v i n g
a c c e p t a n c e of c r i t e r i a of o r i g i n as i n (iii) a b o v e .
( T h e F r e n c h a n d I t a l i a n s m a y a r g u e t h a t t h e 5 0 p e r cent, r u l e will l e a d t o t h e
i m p o r t , v i a t h e l o w tariff c o u n t r i e s s u c h as D e n m a r k , of c h e a p s e m i - m a n u f a c t u r e s
(e.g., c h e m i c a l s , m a c h i n e r y c o m p o n e n t s a n d textiles) f r o m o u t s i d e t h e A r e a . O u r
v i e w o n this is t h a t w e a r e n o t p r e p a r e d t o a c c e p t in a d v a n c e g e n e r a l l y restrictive
a r r a n g e m e n t s t o cover h y p o t h e t i c a l difficulties w h i c h i n t h e e n d m a y n o t b e s e r i o u s .
B u t w e s h o u l d b e p r e p a r e d t o c o n s i d e r r e m e d i e s if a n d w h e n difficulties arose.)
Institutions
8.—(i) T h e U n i t e d K i n g d o m p r o p o s a l is f o r a F r e e T r a d e A r e a t o b e
e s t a b l i s h e d w i t h i n t h e f r a m e w o r k of O . E . E . C . , w i t h s u c h m o d i f i c a t i o n s
of existing p r o c e d u r e a n d p r a c t i c e as m a y b e n e c e s s a r y .
(ii) T h e i n s t i t u t i o n s s h o u l d b e h e a d e d b y a C o u n c i l of M i n i s t e r s .
(iii) I t will b e n e c e s s a r y t o e s t a b l i s h a b o d y of officials t o d e a l w i t h t h e d a y - t o ­
d a y m a n a g e m e n t of t h e F r e e T r a d e A r e a .
Such a b o d y could be
either: —
(a) a B o a r d of N a t i o n a l officials; o r
(b) a C o m m i s s i o n of i n t e r n a t i o n a l officials.
I n e i t h e r c a s e its m e m b e r s h i p w o u l d n e e d to b e r e s t r i c t e d t o a
s m a l l n u m b e r . O u r p r e f e r e n c e is for (a).
(iv) W h i c h e v e r t y p e of m a n a g i n g b o d y w e r e a d o p t e d , it s h o u l d n o t h a v e
r i g h t s of i n i t i a t i v e similar t o t h o s e w h i c h the E u r o p e a n C o m m i s s i o n of
t h e Six will p o s s e s s . F o r all p r a c t i c a l p u r p o s e s t h e C o u n c i l of M i n i s t e r s
of t h e E u r o p e a n E c o n o m i c C o m m u n i t y c a n t a k e n o decision b y
m a j o r i t y v o t e e x c e p t o n t h e r e c o m m e n d a t i o n of the C o m m i s s i o n .
In
the Free T r a d e A r e a we should n o t wish to accept any a r r a n g e m e n t
w h i c h l i m i t e d t h e a u t h o r i t y of t h e M i n i s t e r s of t h e m e m b e r c o u n t r i e s
t o this e x t e n t . T h e C o u n c i l of M i n i s t e r s of t h e F r e e T r a d e A r e a should,
h a v e p o w e r t o t a k e decisions e i t h e r b y u n a n i m i t y o r m a j o r i t y v o t e
a c c o r d i n g to t h e s u b j e c t m a t t e r , r e g a r d l e s s of t h e r e c o m m e n d a t i o n m a d e ,
by the managing body.
(v) U n a n i m o u s v o t i n g s h o u l d b e t h e r u l e , except w h e r e t h e C o n v e n t i o n
e x p r e s s l y p r o v i d e s o t h e r w i s e . B u t t h e r e will b e a n u m b e r of s u b j e c t s ,
w h i c h m u s t b e p r e c i s e l y defined in t h e C o n v e n t i o n , f o r w h i c h m a j o r i t y
v o t i n g will b e n e c e s s a r y if t h e F r e e T r a d e A r e a is t o w o r k satisfactorily.
E x a m p l e s of s u c h subjects a r e a p p r o v a l of p r o p o s a l s for i m p l e m e n t i n g
specific o b l i g a t i o n s , w h e r e t h e details n e e d t o b e w o r k e d out, a n d
a p p r o v a l of d e r o g a t i o n s f r o m p r e c i s e o b l i g a t i o n s ; m a j o r i t y v o t i n g
w o u l d a l s o s e e m a p p r o p r i a t e for c a s e s w h e r e c o u n t r i e s a r e a l l o w e d t o
take action without previously consulting the organisation but are
r e q u i r e d t o seek a p p r o v a l after the e v e n t . I t will b e n e c e s s a r y t o insist
o n u n a n i m i t y for a l t e r i n g t h e p r o v i s i o n s of t h e C o n v e n t i o n o r f o r
a d o p t i n g o b l i g a t i o n s n o t defined in it b u t left for s u b s e q u e n t definition.
U n a n i m i t y w o u l d also b e a p p r o p r i a t e for a p p r o v i n g a p p o i n t m e n t s t o
the managing body.
(vi) D e t a i l e d m e t h o d s of v o t i n g n e e d n o t b e discussed a t this s t a g e .
R e l a t i o n b e t w e e n the obligations of m e m b e r s of the Free T r a d e A r e a a n d of the Six
9.—(i) I n t h e s p h e r e of t r a d e i n i n d u s t r i a l g o o d s a n d m a t e r i a l s w e a r e p r e p a r e d
t o a c c e p t i n t e r n a t i o n a l o b l i g a t i o n s a n d objectives c o m p a r a b l e w i t h t h o s e
of t h e T r e a t y of R o m e . I n t h e s e fields o u r objective i d e a l l y w o u l d b e
a F r e e T r a d e A r e a C o n v e n t i o n c o n t a i n i n g a set of r u l e s b i n d i n g o n
e a c h i n d i v i d u a l s i g n a t o r y i n r e l a t i o n t o all o t h e r i n d i v i d u a l s i g n a t o r i e s ,
governing their relations with each other a n d prohibiting
all
discrimination between them.
(ii) T h o u g h w e s h o u l d get a s n e a r a s w e c a n t o a C o n v e n t i o n of this k i n d ,
it will a l m o s t c e r t a i n l y n o t b e a c c e p t a b l e t o t h e Six. I t w o u l d i m p l y
s u p e r s e d i n g t h o s e p a r t s of t h e T r e a t y of R o m e w h i c h d e a l w i t h t h e s a m e
t o p i c s as t h e F r e e T r a d e A r e a C o n v e n t i o n a n d w o u l d seriously l i m i t
t h e p o w e r s of t h e i n s t i t u t i o n s of t h e E u r o p e a n E c o n o m i c C o m m u n i t y .
(iii) A l t h o u g h , t h e r e f o r e , w e c a n n o t e x p e c t t o o b t a i n a C o n v e n t i o n w h i c h b y
its v e r y n a t u r e a v o i d s all d a n g e r of d i s c r i m i n a t i o n a g a i n s t U n i t e d
K i n g d o m t r a d e r s i n t h e field of i n d u s t r i a l g o o d s a n d m a t e r i a l s , w e
m u s t try to avoid such discrimination by two m e t h o d s : —
(a) O n t h i n g s w h i c h really m a t t e r t o u s t h e t e r m s of t h e F r e e T r a d e
A r e a C o n v e n t i o n a n d of t h e T r e a t y of R o m e m u s t b e effectively
t h e s a m e ; t h a t is t o s a y , w e m u s t either a d o p t in t h e C o n v e n t i o n
t h e p r o v i s i o n s of t h e R o m e T r e a t y , o r in a n y cases in w h i c h t h e s e
p r o v i s i o n s a r e seriously o b j e c t i o n a b l e seek t o w r i t e i n a c c e p t a b l e
p r o v i s i o n s sufficiently p r e c i s e t o o v e r r i d e t h e c o r r e s p o n d i n g
articles of t h e R o m e T r e a t y a n d t o b i n d t h e Six as signatories of
the Convention.
(b) T h e a d m i n i s t r a t i o n of t h e rules of t h e F r e e T r a d e A r e a a n d of t h e
E u r o p e a n E c o n o m i c Community, where they cover c o m m o n
g r o u n d , m u s t b e similar. I n o r d e r t o s e c u r e this object c l o s e
c o - o p e r a t i o n b e t w e e n t h e I n s t i t u t i o n s of t h e A r e a a n d of t h e
C o m m u n i t y will b e essential ( p a r a g r a p h 1 0 b e l o w ) .
(iv) T h e m o r e t h e p r o v i s i o n s of t h e F r e e T r a d e A r e a C o n v e n t i o n l i m i t t h e
f r e e d o m of its m e m b e r s , t h e m o r e t h e c e n t r e of p o w e r will m o v e t o t h e
i n s t i t u t i o n s of t h e A r e a . C o n t r a r i w i s e , t h e less t h e C o n v e n t i o n l i m i t s
t h e f r e e d o m of m e m b e r s of t h e A r e a , t h e m o r e t h e c e n t r e of p o w e r
will rest in t h e i n s t i t u t i o n s of the E u r o p e a n E c o n o m i c C o m m u n i t y ,
w h e r e w e shall h a v e n o influence.
A r r a n g e m e n t s for t h e Close W o r k i n g Together of the Institutions of the F r e e T r a d e
A r e a a n d the E u r o p e a n E c o n o m i c C o m m u n i t y
10.—(i) Council
of Ministers.—We
envisage t h a t the supreme governing b o d y
of t h e F r e e T r a d e A r e a will be t h e C o u n c i l of M i n i s t e r s . T h e T r e a t y of
R o m e delegates i m p o r t a n t powers to the E u r o p e a n C o m m i s s i o n , b u t w e
s h o u l d s e e k t o s e c u r e t h a t all m a j o r P o w e r s i n t h e F r e e T r a d e A r e a
will b e e x e r c i s e d b y t h e M i n i s t e r i a l C o u n c i l . P r o v i d e d t h e Six a r e
r e p r e s e n t e d i n d i v i d u a l l y b y t h e i r M i n i s t e r s o n t h e C o u n c i l of t h e F r e e
T r a d e A r e a , M i n i s t e r s of t h e n o n - S i x will h a v e t h e m a x i m u m
opportunity for ensuring that decisions are taken on a E u r o p e a n , a n d
n o t a " little E u r o p e " basis,
(ii) Liaison between
the Managing
Bodies.—The
F r e e T r a d e A r e a will h a v e
a m a n a g i n g b o d y d e a l i n g w i t h s u b j e c t s s i m i l a r t o s o m e of t h o s e d e a l t
w i t h b y t h e E u r o p e a n C o m m i s s i o n , t h o u g h its p o w e r s will b e m o r e
r e s t r i c t e d a n d it will c o v e r a n a r r o w e r r a n g e of t o p i c s . N o n e t h e less
t h e m a j o r q u e s t i o n s will b e d e a l t w i t h b y b o t h . It will b e d e s i r a b l e t o
e n s u r e s o m e c o m m o n m e m b e r s h i p a n d close l i a i s o n a r r a n g e m e n t s .
. (hi) Delegations.-The
r o l e of t h e n a t i o n a l d e l e g a t i o n s will b e i m p o r t a n t b o t h
i n t h e F r e e T r a d e A r e a a n d in t h e E u r o p e a n E c o n o m i c C o m m u n i t y .
T h e n o r m a l c o n t a c t s b e t w e e n d e l e g a t i o n s will facilitate t h e w o r k i n g o u t
of s i m i l a r s o l u t i o n s t o p r o b l e m s i n b o t h o r g a n i s a t i o n s p r o v i d e d t h e
d e l e g a t i o n s a r e in t h e s a m e p l a c e . T h i s is a s t r o n g r e a s o n for h a v i n g
b o t h o r g a n i s a t i o n s in t h e s a m e p l a c e . I f t h e y are it is a l m o s t c e r t a i n
t h a t t h e n a t i o n a l d e l e g a t i o n s of t h e Six t o t h e E u r o p e a n E c o n o m i c
C o m m u n i t y will b e t h e s a m e as t h e i r d e l e g a t i o n s t o t h e F r e e T r a d e A r e a .
If t h e y a r e n o t , t h e n t h e r e will b e n o b a s i s for c o n t a c t b e t w e e n , f o r
example; the U n i t e d Kingdom delegation to the Free T r a d e A r e a a n d
;
the G e r m a n delegation to the E u r o p e a n E c o n o m i c Community.
- (iv) Secretariats.-!!
t h e r e is t o b e effective c o - o p e r a t i o n b e t w e e n t h e s e c r e t a r i a t
of t h e t w o b o d i e s , t h e y m u s t b e i n o r n e a r t h e s a m e p l a c e .
This
will n o t o n l y a v o i d d u p l i c a t i o n of staff, b u t will assist t h e d e v e l o p m e n t
of c o m m o n a t t i t u d e s in b o t h b o d i e s .
r
P r o b l e m s of the " Peripherals "
11. T h e r e are some O.E.E.C. m e m b e r countries (Turkey, Greece, Iceland,
the Irish Republic, a n d — t h o u g h perhaps to a m o r e limited extent—Portugal) w h o
c a n n o t , o r t h i n k t h e y c a n n o t , a c c e p t t h e o b l i g a t i o n s of a F r e e T r a d e A r e a i n full
i m m e d i a t e l y . [ F o r c o n v e n i e n c e t h e s e c o u n t r i e s a r e c o m m o n l y d e s c r i b e d as t h e
" p e r i p h e r a l s , " b u t t h i s t e r m s h o u l d n o t b e u s e d i n p u b l i c ] I n g e n e r a l t h e less
s a i d a t t h e O c t o b e r m e e t i n g - a b o u t t h e p r o b l e m s of t h e " p e r i p h e r a l s " t h e b e t t e r .
T o t h e e x t e n t t h a t it is n e c e s s a r y to discuss t h e m , t h e f o l l o w i n g p o i n t s m i g h t b e m a d e ;
t h e f o u r t h w o u l d b e b e t t e r a v o i d e d , if p o s s i b l e : —
(i) T h e w o r k s o far u n d e r t a k e n in W o r k i n g P a r t y N o . 23 of t h e C o u n c i l
is r e v e a l i n g t h e n a t u r e of t h e difficulties w h i c h face c e r t a i n m e m b e r
c o u n t r i e s . T h o s e c o u n t r i e s w h i c h h a v e d i s c u s s e d their p o s i t i o n i n t h a t
W o r k i n g P a r t y a r e , w e u n d e r s t a n d , n o w r e v i e w i n g t h e i r j u d g m e n t of
w h a t t h e y c o u l d d o in t h e light of t h e d i s c u s s i o n s .
(ii) If t i m e is n o t t o b e w a s t e d , it is i m p o r t a n t t h a t s t u d y of this p r o b l e m
s h o u l d go o n c o n c u r r e n t l y w i t h c o n s i d e r a t i o n of t h e p o s s i b l e r u l e s a n d
s c o p e of t h e F r e e T r a d e A r e a so t h a t m e a n s of m e e t i n g t h e difficulties
of c o u n t r i e s u n a b l e to a c c e p t t h e full o b l i g a t i o n s of a F r e e T r a d e A r e a
can be considered against an established factual b a c k g r o u n d when b r o a d
ideas o n t h e b a s i c r u l e s of a F r e e T r a d e A r e a a r e sufficiently a d v a n c e d .
(hi) It is g e n e r a l l y a s s u m e d , a n d w e d o n o t dissent f r o m t h i s v i e w , t h a t s o m e
special a r r a n g e m e n t s will b e n e e d e d t o allow t h e a s s o c i a t i o n of c e r t a i n
c o u n t r i e s w i t h t h e F r e e T r a d e A r e a . W e c a n n o t n o w suggest e i t h e r
w h a t they should be, or what institutional arrangements would be
a p p r o p r i a t e . T h e facts m u s t first b e e s t a b l i s h e d .
(iv) It h a s a l r e a d y b e e n s u g g e s t e d t h a t s o m e c o u n t r i e s m i g h t b e r e q u i r e d to
c o m p l y w i t h a s l o w e r t i m e - t a b l e i n d i s m a n t l i n g t h e i r tariffs a n d q u o t a s
t h a n o t h e r s . W e c a n n o t n o w e x p r e s s a view o n t h a t . U n t i l t h e b r o a d
lines of t h e b a s i c o b l i g a t i o n s of t h e F r e e T r a d e A r e a a r e k n o w n w e
cannot m a k e any progress on these questions.
Additional Capital R e q u i r e m e n t s
12. A f t e r t h e O . E . E . C . C o u n c i l m e e t i n g i n F e b r u a r y t h e C h a n c e l l o r , i n setting
t h e t a s k s for W o r k i n g P a r t i e s 2 1 , 22 a n d 2 3 , a d d e d t h a t special a r r a n g e m e n t s m i g h t
b e n e c e s s a r y f o r t h e c o n s i d e r a t i o n of o t h e r i m p o r t a n t q u e s t i o n s such as t h e
e s t a b l i s h m e n t of a D e v e l o p m e n t ( I n v e s t m e n t ) B a n k for t h e F r e e T r a d e A r e a . H e
would m a k e proposals later.
(i) It is i m p o r t a n t t h a t at t h e O c t o b e r m e e t i n g t h e U n i t e d K i n g d o m s h o u l d
n o t i n d i c a t e a n t a g o n i s m t o t h e w h o l e idea of s u c h a b a n k ( a l t h o u g h
i n fact w e d o dislike it). T o d o so m i g h t p r e j u d i c e t h e c h a n c e s of
getting negotiations started. Without, therefore, saying anything which
i m p l i e s a c c e p t a n c e of t h e i d e a , w e s h o u l d t a k e t h e l i n e t h a t a t this s t a g e
w e a r e a b l e t o m a k e n o firm j u d g m e n t . T h e p r o b l e m n e e d s m u c h
further e x a m i n a t i o n before any such judgment can b e m a d e .
(ii) A s s u g g e s t e d b y t h e C h a i r m a n of W o r k i n g P a r t y N o . 2 3 , it will be
n e c e s s a r y for u n d e r d e v e l o p e d c o u n t r i e s t o e x p l a i n j u s t w h a t a d d i t i o n a l
finance t h e y n e e d , a n d w h y , a n d for t h e s e e x p l a n a t i o n s t o b e e x a m i n e d
carefully.
(iii) It will b e d e s i r a b l e t o e x a m i n e t h e a d e q u a c y of e x i s t i n g i n s t i t u t i o n s for
m o b i l i s i n g a n d c h a n n e l l i n g d e v e l o p m e n t capital a n d t h e q u e s t i o n w h e t h e r
t h e i n s t i t u t i o n of t h e F r e e T r a d e A r e a calls for a n y m o d i f i c a t i o n of o r
a d d i t i o n t o t h e m . T h e U n i t e d K i n g d o m is v e r y r e a d y t o c o n s i d e r
w i t h o t h e r m e m b e r s of O . E . E . C . h o w best this c o u l d b e d o n e .
(A
p r o p o s a l that such an examination might be conducted by the M a n a g i n g
B o a r d of t h e E u r o p e a n P a y m e n t s U n i o n , o r b y a special b o d y o n w h i c h
t h a t B o a r d was represented, h a s already been canvassed informally
b y Sir H . E l l i s - R e e s w i t h t h e S e c r e t a r i a t a n d t h e C h a i r m a n of W o r k i n g
P a r t y N o . 2 3 . B o t h o p p o s e d t h e i n s t i t u t i o n of a n y s u c h e x a m i n a t i o n
until t h e s t u d i e s of W o r k i n g P a r t y N o . 23 w e r e f u r t h e r a d v a n c e d . )