EUROPEAN ECONOMIC UNION

HC Deb 28 March 1958 vol 585 cc711-803

11.4 a.m.

Mr. Julian Ridsdale (Harwich)

I beg to move, That this House, while recognising the reasons which have led to the formation of the European Economic Community, urges the need for a close association of that Community with other countries who are members of the Organisation for European Economic Co-operation. I have used the word "Community" rather than "Union," which appears in the Motion on the Order Paper, as I have been told that this is a more exact description of the organisation. I say at once, as one who represents a constituency which has farming and horticultural interests, that I am well aware that they must be treated separately as distinct from industry in the Free Trade Area. I am not unaware, too, of the importance of ensuring that such plans as we make towards a Free Trade Area must be co-ordinated with Common-wealth and colonial interests as well. Indeed, had it not been for the rules of procedure of the House, I would have incorporated a reference to both these interests in the terms of the Motion. I hope, however, to make my position abundantly clear in the course of my speech.

In calling attention to the urgent need for a Free Trade Area, I am extremely conscious that for this country, with its old battles of protection versus free trade, the proposed Free Trade Area represents in some degree a challenge to many people. In a changing world, however—indeed, in a revolutionary world—surely the chief question we have to face is whether we can keep pace with that change which is going on around us and adapt ourselves and our economic circumstances to the quickly-changing conditions which we continually have to face?

But are we always to look inwards? Do we want to go back to the 'thirties, in which world-wide tariff restriction policies kept industrial momentum and efficiency at such a low ebb? At a time when the new countries of Asia and Africa are thirsting for capital and development, must we see each country retreating behind its national barriers because it is frightened of the challenge that competition from the outside world might bring?

In the Blackwater River, which bounds one side of my constituency, I see merchant ships beginning to be laid up, as they were in the 'thirties, because of the recession in the United States and the fall in world-wide commodity prices and the consequent fall in freight rates; yet are not these ships a dreadful warning to those of us who were brought up in the 'thirties? One cannot help but remember the effect that world-wide restrictionist policies by creditor nations had on all of us in those days.

Because of recent events, however, I fear that there is a slight tendency for us to be guided and to think in terms of "little Englandism". Indeed, such a feeling seems to be spreading to the Continent; it seems that some of our neighbours in Europe believe that it might be possible to create a little Europe in an already divided Europe. Because of the great forces which are at work in the world today—in China, Russia, India, Africa and the Middle East—I do not believe that there is any possibility for us to be able to retreat to our island neutrality any more than some of our European neighbours can retreat to a little Europe. It would be impossible if we are to survive as a trading nation of 50 million people.

Protectionism might bring a temporary gain, but let us be absolutely clear that in the end, under such a system, it is the consumer who pays every time. His inadequate income is unable to match the high cost of living. In such a protectionist structure, it does not matter whether a worker takes 10 hours to produce what someone else can produce in six hours. What matters is that there should be no possibility of even marginal unemployment. In such systems, a policy of heavy Government spending is embarked upon. There is over-centralisation and an increased burden on public finances. Monetary instability is protected by arbitrary exchange controls, taxes are raised and there is heavy Government borrowing. As a result, we have higher taxation and the costs of production go up. In the end, the result, if such a policy of protectionism is pressed to extremes, is certain economic paralysis.

It is because I want to prevent such a situation from coming about that I urge the House to turn its eyes to the proposed Free Trade Area. It is now over eighteen months since the Federation of British Industries stated the first reaction of its members on the proposed Free Trade Area in Europe. A canvass of its members and trade associations showed a considerable majority which was either positively in favour of the Government carrying on negotiations for a Free Trade Area, or, less emphatically, not opposed to the Government doing so; in both cases with the proviso that proper safeguards were worked out.

I am sure that if a new survey of industrial opinion were taken now, the balance of opinion would not be very different, but in the interval the nature of what has been proposed has been more fully understood. Indeed, it has become clear that the economic repercussions of the Free Trade Area on British industry will not be as large as was at first believed.

I know that certain industries stand to gain quite a lot. The new industries, such as aircraft, chemicals, a section of the electrical industry and aluminium, as well as the traditional ones like wool, iron and steel and shipbuilding, all have good prospects of further expansion if the Free Trade Area is able to come about. On the other hand, there will be losses, and we must recognise that. Cotton textiles are likely to suffer, and so are manufacturers of such items as optical and photographic equipment.

The glass trade, in which I have an interest, is one which will be affected, and it is interesting to see the reaction even in that trade on the proposals being made. Instead of retreating inwards, the reaction, in many parts, has been to concentrate on new items on which a profit can be made, and one can look into the future with confidence. It does not mean that we wish the tariffs abolished completely at once, but over a period of twelve to fifteen years, and that condition will make it much easier for industries like the glass trade, which will be affected by the proposed Free Trade Area.

There are two important items to which I must draw the attention of the House. One is agriculture and the other the Commonwealth. I am glad that it is recognised that we should treat agriculture separately from industry as a whole. Nevertheless, thanks to the 1947 and 1957 Agriculture Acts, I have no doubt that our agricultural industry is in most respects today competitive with Continental agriculture. Indeed, a farmer from my own constituency won the first prize for wheat at the Toronto Fair last winter. It is good to know that we can grow the best wheat in the world in North-East Essex. Certainly, in beef as well as wheat, British farmers can compete with all corners. I am sure that that efficiency will continue to increase, with a continuation of the post-war policy that has been adopted towards agriculture.

However, I am certain that, where the Commonwealth is concerned, we must make it clear that we cannot make a choice between the Commonwealth and Europe. While we are ready to maintain and strengthen our association with Continental Europe, we cannot be expected to make a choice in favour of Europe at the expense of our Commonwealth associations, and I hope that my right hon. Friend the Paymaster-General will assure us on this point. I am sure that there is no doubt that this is fully agreed and recognised on the Continent.

Nevertheless, I am sure that it will be very misleading and dangerous if the impression is allowed to get abroad that there is some kind of price that we could pay, at our sole expense, as a condition of other countries agreeing to a Free Trade Area. This seems to overlook the fact that our position in the Commonwealth markets is the counterpart of the position which we give to other Commonwealth countries in the United Kingdom market, to say nothing of our responsibilities as bankers for the sterling area.

I hope that one day it will be possible to associate the Commonwealth with this wider market, but, as the Prime Minister said in the debate on 26th November, 1956: We would dearly have liked to find some way by which the Commonwealth countries … and Europe … might, if they wished, join together in some still wider common market"—[OFFICIAL REPORT, 26th November, 1956; Vol. 561, c. 38.] I know that public opinion is interested in this point, and that it would like this association brought about, but what can we do at present?

If we cannot attain this wider prospect, surely it is fair for us now to throw open to the industries of Continental Europe our immensely valuable market, as a perfectly fair and equal counterpart to the benefits which United Kingdom industry would hope to obtain in Continental markets. This is not trying to enter Europe without paying an entrance fee. We would be offering to Europe the closest possible economic association of which we as a country are capable, and this is not because we think that other solutions or adjustments are quite impossible, however unwelcome some may be, but because such an association is surely most consistent with our relations with our Continental friends.

However, the signing of the Rome Treaty has posed fairly and squarely the question of what will happen if Europe unites and Britain remains outside. We would lose the kind of large market in which the economies of large-scale production by modern techniques can be exploited. We would lose the advantage of bigger investment programmes, for the size of the European market is large and is steadily growing. Indeed, some of the proposed markets have great possibilities of expansion.

In 1955, the member countries of the Organisation for European Economic Co-operation took 34 per cent. of the total of world's manufactures; in 1951, they took only 30 per cent. The European market for manufactures is much larger than the North American, and while both have been growing fast since 1951, the European market has grown faster by 38 per cent. between 1955 and 1957. This is a valuable and a thriving market, with a population of 270 million, to which Britain sent a quarter of her exports of manufactures in 1955, to a value of £585 million. During the same period, Britain imported from O.E.E.C. countries manufactures worth £374 million.

It is quite evident that we would stand to lose a considerable number of advantages if we remained outside this quickly and powerfully growing market, As things stand at present, the O.E.E.C. countries do not present a stable market, since by the Treaty of Rome the Six will become a single market by progressive stages from 1st January, 1959, onwards, and other countries may become affiliated with them.

Of course, we must ask ourselves how will this affect the area as a market for us, whether this is an area in which our industrialists can afford to sell at a disadvantage in face of competition from the members of the Six, and whatever other countries are prepared to join in the common market; for unless there is also a Free Trade Area when the Common Market comes into operation, the six members and others who may join may sell manufactures to each other in one market without tariff barriers or quota barriers, whilst at the same time, there will be a common external tariff against imports from other countries of a substantial proportion. To sell across these tariffs in competition with German, Italian, Benelux and French industries when they are free from tariff handicaps would, clearly, often present formidable difficulties.

There is, however, another side to the medal, for in 1955, while Germany did 28.8 per cent. of her total trade with the Common Market countries, she did 32.4 per cent. of her total trade outside; and, in 1955, while Italy did 23.5 per cent. of her trade with the Common Market, she did 25.4 per cent. of her trade outside. Indeed, both Germany and Italy are particularly dependent on trade outside the community.

In making these comparisons, I feel bound to say that whilst the seeds of trade discrimination may be taking root, it is essential that we should take steps to prevent this and see that the Common Market should not be established as a hostile and exclusive trading system, because if this discrimination happens, undoubtedly, in the end, we shall see economic discrimination develop instead of the co-operation which we all want. I have no doubt that such a situation would offer every opportunity for Russia to use trade to play off the Common Market against the other Powers of N.A.T.O.

We shall be most interested to hear a report of the progress concerning the present negotiations for a Free Trade Area from my right hon. Friend the Paymaster-General. On all sides we hear that he has been conducting these negotiations most skilfully. I fully realise that the present negotiations have entered a difficult phase. We hear rumours. There is talk of French counter-proposals. We are told that the French want to scrap the Free Trade Area and replace it by a European Economic Union.

What is in a name? I must say that after Torrington I am very used to being called a "hyphenated hybrid," but What's in a name? That which we call a rose, By any other name would smell as sweet. But would this new name, European Economic Union, be so inappropriate for what we have in mind? It is possible that some opinion on the Continent has not appreciated what is really meant by a Free Trade Area. As far as I can deduce, the term "Free Trade Area" is a technical term which we did not invent. It is in G.A.T.T. It certainly does not mean simply scrapping tariff barriers without laying down any rules of competition or of seeing that legitimate interests are not undermined.

After all, we have an important economic relationship already with the other countries of Western Europe in O.E.E.C. Indeed, the White Paper of 1957 recognised that Co-operation in the field of economic policy is of great and continuing importance. It went on to say that In practice, an appreciable movement towards closer economic co-operation may be expected to take place among the members of the Free Trade Area over a period of years, either as a matter of deliberate policy or as a spontaneous development. What is worrying is the thought that what we and the rest of Europe have gained by O.E E.C. and E.P.U. may be jeopardised if the Common Market is not matched by a wider association. The consequences of such a situation would be heartbreaking indeed if we are to be left with a common market in its present form and with no free trade area.

Before I conclude, may I restate our position as I see it? I must say that as far as our trading interests are concerned, it is true that the largest proportion of our total trade lies in the Commonwealth and the rest of the world outside Europe. That is why I do not believe we can tie our hands completely by joining the Customs Union type of Common Market in Europe, and why I am certain that we are right instead to join a Common Market in this Free Trade Area form. Nevertheless, the fact remains that the trade between this country and the countries of the six-Power Community is very large and important in both directions. Trade between the United Kingdom and the Community countries, in 1956, represented 12.4 per cent. of our total imports and 13.5 per cent. of our total exports.

Mr. Anthony Fell (Yarmouth)

I do not understand this. Is my hon. Friend suggesting that if something should happen to the Free Trade Area this huge import —what we buy from Europe—of over £300 million would dry up?

Mr. Ridsdale

No, I am not suggesting that it would dry up. I am pointing out the great danger of trade discrimination developing if that should happen and we were not able to develop the Free Trade Area.

What matter to us at present are the foundations that have been laid for inter-European trade since the war. That is why I regard as so important the present fabric of inter-European trade which rests on the foundations built up since the war in O.E.E.C. by a multilateral trade and payments system, the very essence of which is non-discrimination. This fabric can and should be strengthened, as the six countries have taken the lead in doing, but we must try now to strengthen the fabric overall if it is really to hold Europe together. We live too closely to divide an already divided Europe. Some of our neighbours in Europe cannot become little Europeans any more than we can become little Englanders. We depend too much on one another's markets, and, indeed, we are becoming more and more dependent on each other in the defence sphere as well. Surely, with political unity must go economic unity.

Abraham Lincoln said that the United States could not endure permanently half-slave and half-free. Nor can we have a united Western Europe if the six countries of the Common Market are enjoying the freedom of each other's markets in a market of 165 million people, while the rest of us, the other 85 million, are giving them in our markets the same trading facilities as everyone else, but are obliged to trade on a second-class basis in their markets. Far-reaching adjustments would surely be inevitable if the Free Trade Area negotiations were to fail. The growth of the European Community would suffer a grievous setback. I trust that the safeguards we asked for will be understood.

In the meantime, I ask the House to remember a favourite quotation of Stamford Raffles, that great Empire builder, which seems so appropriate not only to ourselves but to our neighbours on the Continent at this critical moment in the negotiations: Pray God our greatness shall not fail Through craven fears of being great. It is in that spirit that I commend the Motion to the House.

11.30 a.m.

Mr. W. F. Deedes (Ashford)

I beg to second the Motion.

I am very glad to have an opportunity of seconding the Motion which, the House will agree, has been most compellingly moved by my hon. Friend the Member for Harwich (Mr. Ridsdale). The House will agree also that my hon. Friend has picked a good moment for it. We appear to be entering a decisive period now in the eighteen months since the project was first discussed here. How decisive, I hope my right hon. Friend the Paymaster-General may be able to tell us later in the debate.

I confess that I support the Motion as a relative stranger to European affairs. I have never before inflicted a European speech on the House. Though I regard Friday as a day of dispensation for such exercises, I support my hon. Friend principally as one who has recently convinced himself that this concept, first of all the plan of the Six and then the Free Trade Area which may accompany it, will be a huge factor in Europe's future and also, I do not hesitate to add, in the Commonwealth's future. In these matters, I regard the free world as indivisible. The European project bears upon its aggregate strength.

I can only say that we seem to be entering a decisive period, because the movement towards the European Economic Community and the Free Trade Area, particularly during recent months, has been a very difficult game to follow. I think my right hon. Friend will probably accept that, although enthusiasts may not. It has been rather like trying in a fog to watch a football match from the back of the stand—we see very little of what is going on. Occasionally, we hear the shrill of the Paymaster-General's whistle. We hear cries of "Foul" and "Free kick" from our French friends. At moments, the fog lifts and we see one little corner of the game, people playing to rules unfamiliar to us. It is very confusing. There are moments when the whole game appears to be about to cease; and then it is resumed.

Since it is confusing, I should like to express the admiration which some of us feel for the manner in which my right hon. Friend has been conducting our end of the game throughout, and the confidence which we feel in his capacity, his patience and his skill in sorting it all out.

I confess at once that my interests are largely agricultural and horticultural, and it is from this corner that I want to support my hon. Friend's Motion. It is exceedingly important that there should be no further risk of misunderstanding about agriculture's position. I am most anxious that agriculture should be in no way made to appear a handicap in the forward march to the Free Trade Area. At the first mention of the whole conception, there was a very natural anxiety in the industry and, to meet it, distinguished spokesmen on behalf of the Government stressed from the start our determination to exclude agricultural products from the prospective arrangements. That led to talk about our special position.

I am not sure that the assurances given by the Government were wholly accepted by the industry. My own experience is that perhaps they were not. However, they were too readily accepted, and have since been criticised, by those who are apt to regard agriculture as a spoiled child. This is unfortunate. We are not, in fact, proposing, and have never, I think, proposed, anything exclusive for our agriculture. I believe I am right in saying that no member of the European Economic Community and none of the prospective Free Trade Area countries is willing to expose its agriculture to the same conditions as other industries. We are not exceptional, and we have not acted exceptionally. We are not seeking privileges for our agriculture which anyone else is not seeking. It is important that that should be stressed, that this one industry should not appear to be a handicap in our negotiations.

There has been a tendency to create a rather defensive mentality among our agriculturists. They have, I think, been too readily led to believe that the possibility of a Free Trade Area constitutes a danger for all our farmers from which we must preserve them at all costs, without any corresponding opportunities or gains which at least bear examination even if they are not at once to be seized. I think that the real prospect is probably a combination of both. As in most challenges of this kind, there are no real opportunities without an element of risk. I do not wish to suggest that the second does not exist, but I believe that real opportunities for agriculture also exist. I cannot accept that there are not, subject to safeguards which I shall stress later, opportunities for British agriculture in the possibilities of the Free Trade Area not less bright than those for many of the industries whose participation is taken for granted, and not less bright than the opportunities for some of Europe's own agricultural economies.

I sometimes wonder whether agriculture in this country. particularly in this European business, is sufficiently willing to recognise and acknowledge the strength of its position. This is not a profitable exercise at about the time of the February Price Review, and there is just now much being said to the contrary; but the fact remains—I believe that it is in the interests of our agriculture to stress it—that the very large sums of money which have been pumped into the industry since the war have not led simply lined farmer's pockets and to a high level of production, but they have constituted also a long term capital investment. It is not only fat and feathers which have been produced, but a good deal of sinew too. These things are very relevant when we consider our position in agriculture in relation to the rest of Europe.

I doubt whether there is any country in Europe which has an equivalent postwar record in agriculture. I believe that there is no other country which has achieved the same results since the war, although comparisons are very difficult to make. It is simply not true to regard agriculture as a luxury which can survive only if Europe's cheaper products, which constitute about one-fifth of our total food imports, are excluded. As my hon. Friend the Member for Harwich said, in grain we can even more than hold our own. In beef, we can certainly hold our own. It is only in the great range of dairy products that many of the European prices compare favourably with our own.

Mr. John Hay (Henley)

And horticulture.

Mr. Deedes

And horticulture. In both I do not think the gap will widen. I think that, in the long-term, it may well narrow, for much of Europe's horticulture and dairy produce is being produced on a standard of life below that of our small farmers. I question whether that is likely to continue indefinitely. I think that the magnetism of industry in those European countries will make itself felt as it has done in this country, and that this may considerably affect the terms of European agricultural trade. Urban standards will affect the basic cost of Europe's agricultural production perhaps more than we now appreciate. In the long run, this applies, as little that can be said about agriculture does apply, to some horticultural produce as well, which, as is well known to the House, is far more vulnerable to European competition than agriculture itself.

I noticed that one leading farm paper, the Farmer and Stock-breeder, has recently been at pains to demonstrate the strength and efficiency of our agriculture compared with Europe's. Even with the most painstaking research, it is a difficult comparison to make. One of the Paymaster-General's difficulties must be the absence of reliable statistics by which we can make, in this or any other sphere, exact comparisons with other European countries. It is certainly difficult in agriculture. It is impossible to be accurate because, even if we can establish our basic food producing costs, we are left with innumerable methods of supporting the industry which are difficult to reconcile. This exercise to which I refer proves that we are not subsidising an expensive industry against cheaper imports. In future, we shall find that trends in Europe will help us even more.

This question is most relevant both to the Commonwealth primary producer as well as to our own farmers. If there is one factor now causing more anxiety than the prospect of a Free Trade Area to the farmers in this country, it is the surplus to which increasing efficiency without a corresponding increase in the domestic appetite may lead. That is now a shadow over all farmers, and it has proved in recent months to be a lengthening shadow. I mention it in this context with great moderation. Of course, Europe is not to be regarded as an outlet for our surplus agricultural products. It may be that all European countries will have the same surpluses. But a country which must import up to 50 per cent. of its food, and a fifth of that from Europe, is in a not unfavourable position when it comes to horse trading.

With regard to this trading level, I do not think there is the cause for despondency which some people have suggested. It may help my right hon. Friend if we give fresh emphasis to our efficiency and try to dispel the notion that we are defending an uncompetitive industry from the chilly winds of free trade arrangements, thereby possibly imperilling the Free Trade Area prospect.

There is a second element to this confidence which is an important part of the prospect. I understand that there are to be negotiations and discussions on principles and methods. I believe that this is one of the main tasks of the countries outside the Six. My right hon. Friend is on record as saying that he wants trade to be freer and fairer. We must be willing to submit our agricultural policies to detailed scrutiny, examination and even to criticism. The word, I think, is "confrontation," which I regard as one of the foggier words in this business. When we talk about "fairer," we do not mean ourselves but the other chap. It is possible that he may mean us. We have said we shall accept no interference with the obligations to our own farmers and no interference with our commitments to the Commonwealth.

It is most important that we should now get this matter a little clearer. We have developed by trial and error, not unsuccessfully, since 1947 an internal agricultural economy designed to meet our own special needs. It has [lot yet met all these needs, but it has been steadily shaped to our requirements. It would probably match no other country's needs, but it matches our own, and it has certainly gone further than many at one time believed possible. Other countries in Europe may be doing the same thing in a different way.

An indispensable contribution to the confidence that I want to see created is an assurance that there is no likelihood of these domestic arrangements, built up during the last ten years, being changed in principle or detail at the behest of other European countries. I am not arguing that some countries are fairer or less fair than others. All have separate methods of dealing with their internal agricultural structure. I am not arguing that because I have no wish to interfere with the arrangements of any other European country on those terms. If we look into the question of internal prices support in agriculture, one realises the impossibility or considerable difficulty of achieving international harmonisation. So many imponderable factors have to be considered—taxation, transport, social services, and many other factors which cannot be calculated. In the European Economic Union itself, it may be that there will be an inquisition into such methods. I hope that for our part, whatever arrangement we may enter into, we shall not attempt such a quest. It is difficult enough to reconcile in our internal farm economic system the farmer, the taxpayer and the consumer. To reconcile it to Europe's criticisms would be a difficult task indeed.

I hope that my right hon. Friend will be able to give us some clear, unqualified words on the safeguarding of our own internal methods of domestically administering our agriculture. That lies within our own control, and we ought to know where we stand. I have said this because I want to see the attitude of agriculture inspired not by fear but by hope. I believe that that is a reasonable aspiration. We have approached this matter with caution. Obviously we must proceed cautiously, but that is not the same as proceeding half-heartedly. There are many half-hearts in this matter.

All other considerations aside, there is this to be said for the kind of arrangement which I know by hon. Friend the Member for Harwich has in mind in moving the Motion. For a long time now, we in this country have declared our faith in and tried to pursue an expansionist policy. I suppose that that is the accepted and only ultimate solution if we are to carry our commitments. It is a common desire. Unfortunately, there has been a reaction, when entering heavy economic weather, to throw the levers in reverse; suddenly to restrict and restrain and to attempt to isolate or insulate ourselves against outside circumstances. It is this alternation which has checked and impeded our progress and which has raised perhaps doubts as to the future of our expansionist course.

Participation in any kind of free trade area would profoundly affect or bear upon this ambivalence. It is important to recognise this fact. If this proposal goes forward, eventually we shall not be able to insulate ourselves as we can now. Such insulation would cease to be a safeguard. It would not any longer be a quick way out of temporary economic difficulties. Without it, we should be compelled to take what I regard as the only safe and sure course, which is to eventually make ourselves competitive. It is difficult to be expansionist eleven months in the year and restrictive in the twelfth month, or to encourage all to bask in the sun for eleven months and in the twelfth month to declare that the ice man cometh. I believe that the free trade prospect is an important contribution to consistent expansion, and that if we mean it we must accept it.

In the twelve years since the war, our progress towards association with Europe has gone a lot further than most people are prepared to credit. We have done enormously more in terms, not necessarily of political office, but in terms of history, than has been done in, I would say, any preceding era. We ought not to allow ourselves to get too much discouraged by the disappointments of the enthusiasts. In social terms and in defence terms, we have gone far further than anyone seriously envisaged back in 1945. I think that course will continue and I am quite certain than in its continuance this association is the next logical step.

11.51 a.m.

Mr. Roy Jenkins (Birmingham, Stechford)

We can all agree in congratulating the hon. Member for Harwich (Mr. Ridsdale) in having chosen this Motion for today. It is a very useful time to to have a debate on the subject. Certainly, the Government themselves have shown no desire to precipitate a debate. Therefore, we are dependent upon the hon. Member and are grateful to him.

The hon. Member moved the Motion in very agreeable but, possibly, slightly unrealistic terms—terms which would, perhaps, have been more appropriate eighteen months or two years ago. Then, we were considering the general merits of the Free Trade Area proposal on the assumption, which the Government certainly held at that time, and which, to some extent, we on this side perhaps held, too, that if we put the proposal forward it would almost automatically be accepted by the countries of the Common Market, everything would sail along happily, they would say, "How very nice of you to come in in this way" and we could be certain of erecting a Free Trade Area around the core of the Common Market.

Obviously, the situation with which we are confronted at the present time is very different indeed. I hope that the Paymaster-General, in his speech to the House today, will try to give us some hard information. He has not given us very much in the last few months. Surely the position now is that the negotiations for a Free Trade Area are in an extremely critical state. The chances certainly are that we will not get a Free Trade Area to start on 1st January next year, when the Common Market starts, and the chances that we will get one at all should not, I would have thought be regarded very much higher than fifty-fifty.

Therefore, it seems to me inappropriate at this stage and not very helpful to discuss the matter in general terms of whether we would or would not like a Free Trade Area. I would certainly like one very much, as I have done all along, but we have to consider rather different aspects of the problem at present.

Although I do not want in any way to make a partisan speech, I am bound to say that some of the blame for the position in which we now find ourselves attaches to Her Majesty's Government, although not principally to the Paymaster-General himself, who took on at a rather difficult stage. I am sure that the right hon. Gentleman has conducted the negotiations with great skill. The hon. Member for Ashford (Mr. Deedes) first said that everything that his right hon. Friend the Paymaster-General had been doing had been shrouded in fog and then congratulated him warmly on what he had been doing.

This argument must have been based on faith in his right hon. Friend's character and intellect rather than on actual experience of what was going on. I am to some extent prepared to share that faith. Probably the right hon. Gentleman has conducted the negotiations, so far as we can see what is happening, with great skill, but his inheritance in this work was an extremely difficult one.

There are three points on which I would certainly attach blame to the Government. The first is the really gross mis-appraisal of the situation eighteen months ago and the belief that we had only to say in a rather condescending way that we would come into the Free Trade Area would be welcomed with loud cheers in Europe, with everybody saying how very good it was of us.

It is possible that that belief was shared to some extent on this side of the House. It is, however, the Government who have the responsibility. It is they who have the embassies in Europe. It is the Government's job to keep in touch with what feeling is in Europe. The blame for this misappraisal must, therefore, rest to a far greater extent upon the Government.

There can be no doubt whatever that there has been such a misappraisal and that if one looks back and reads, for example, the speech of the Prime Minister when he was Chancellor of the Exchequer, which he made in the last debate on this subject at the end of November, 1956, the tone was that of assuming that, if we made up our own minds, there would be no difficulty about getting a Free Trade Area, but that what we had to worry about was how many safeguards we would insist upon and not whether we could get a Free Trade Area.

Secondly, associated with this there has been the attitude to agriculture. Obviously, the problem of what would happen to British agriculture is a difficult one on which there are cross currents on both sides of the House There are certainly many people in the Labour Party who would be very doubtful about making too many concessions concerning British agriculture. But what, I am sure, was a major mistake on the part of the Government was to go on for a year or more saying that agriculture had to be excluded as a subject even for negotiation. I am sure that this was a major mistake and I cannot believe that the Paymaster-General thinks otherwise.

That, again, was in a sense founded on a misapprehension. After all, nobody in Europe wanted free trade in agriculture. To take such a line was, therefore, to attack an entirely fictitious target. Nobody in Europe wanted free trade in agriculture, but, equally, it was unrealistic for us as a great industrial exporting nation to say that we wanted an industrial Free Trade Area in which we improved the position for our exports but were not even prepared to discuss the question of agriculture, which, for many European countries, was the main aspect of our market in which they were interested. Therefore, by taking up this attitude and insisting upon it for a long time, we did ourselves a good deal of harm in the negotiations. We got them out of phase. For one thing, we allowed the extremely detailed and complicated negotiations for the Rome Treaty to go on far ahead of the parallel negotiations for the Free Trade Area. Therefore, we got into a situation in which the negotiators of the Six were exhausted and unanxious to do another set of negotiations and in which the six Governments, too, were frozen into particular attitudes.

I am sure that had it not been, first, for the misappraisal of the degree of welcome that there would be for our attitude, and secondly, for our false approach to agriculture, we would have been able to have a greater effect upon the form which the Rome Treaty would take. I do not think anybody now doubts that it is a great pity that we were not in a position to have such an influence.

There is another ground on which blame attaches in a more general sense. We have now come to a situation in which it is quite clear that to set up a Free Trade Area at all will involve a lot of hard bargaining. I believe that we are in a much worse position from the point of view of doing that bargaining because, over the past six or seven years, we have deliberately made the Commonwealth and the sterling area into a far less discriminatory trading unit than it was in 1951.

During the whole of that period, although not solely on our own initiative —I dare say some of the initiative has come from other countries in the Commonwealth, although certainly the strongest initiative has come from London—we have progressively dismantled the discriminatory aspects of the Commonwealth and we have got nothing in exchange. We have thrown away our bargaining position before we get to the table. Under the present Government, we have done in trade negotiations exactly what hon. Members opposite sometimes try to pretend we will do about the Summit Conference. We have given away our strong cards before we get there and we have got absolutely nothing in exchange. Undoubtedly, now that it has come to hard bargaining, we would be in a stronger position if the Commonwealth were a more discriminatory trading area.

The Paymaster-General (Mr. Reginald Maudling)

How would the hon. Member reconcile that with our obligations under the G.A.T.T. and the International Monetary Fund agreement?

Mr. Jenkins

It is not the case that all the changes which have been made since 1951 have been changes to fulfil our obligations under G.A.T.T. and under the International Monetary Fund agreement—by no means. We have marched towards the abandonment of quotas and the abandonment of discrimination and towards making sterling very nearly a freely convertible currency. In all these ways we have put ourselves in the position in which Europeans have less to lose from not having special arrangements with us and with the Commonwealth market.

Mr. John Biggs-Davison (Chigwell)

The hon. Gentleman would agree, would he not, that these steps to which he refers were entirely in harmony with the obligations which were assumed in various agreements by the Labour Government?

Mr. Jenkins

No. I would say there has been a very big change as a result of deliberate Government policy. One really cannot have it all ways. As I understand, the Government take credit for the measures towards greater freedom in international exchanges which they have taken. We cannot be expected to accept both that claim and the view that they were all a natural consequence of what the Labour Government did. I do not think that we can accept that.

Therefore, on these three grounds, I would blame the Government for what has happened. However, what we have to do now is not primarily to look at the past, but to look to the immediate future. Certainly, I believe that the desirability of a Free Trade Are has in no way become less than I thought it was a year or fifteen or eighteen months ago. If anything, I think it has become rather greater both on economic grounds and on political grounds.

First, the political grounds. While I have always thought that the Free Trade Area would be a considerable advantage to us from an economic point of view I have thought it even more important from the political point of view. Unless it comes about one would see a sharp, new and dangerous division in Western Europe. This point has been reinforced by the exacerbation of Anglo-French relations, which has already occurred as a result of the Free Trade Area agreement. I have no doubt at all that if things go ahead in the Common Market and we are left out then the degree of split will be even greater.

From the economic point of view, I think that the danger of our position in the European Market being less favourable than that of Germany becomes greater with every day that passes. We have seen the news this morning that German exports have passed ours, and this difference will be further accelerated if, in this very important market, we trade, vis-à-vis formerly, on less favourable conditions than those we have at present.

On this ground, I should like to put to the right hon. Gentleman the fact that if we have to look for new solutions we have to look again at the possibility of bringing the Commonwealth as a whole into the Free Trade Area—the old Strasbourg Plan. I Wonder whether it would not be worth while to reappraise that possibility. While I blame the Government quite substantially for having got us into this state, I think that any European countries which assumed that it would be wise for them to hold up negotiations until there was a change of Government here would be working on a false assumption. It is more than likely that there will be a change of Government and I think, therefore, that the attitude of the Labour Party to these problems is at least as important as, if not more important than, that of the Conservative Party.

Equally, however, I think that it would be very foolish indeed for any European country to think that in this matter the Labour Party would be softer to deal with than the Conservative Party. I think that the feeling in my party is now strongly in favour of a Free Trade Area. But if it is made impossible for us to enter into such an arrangement, the fact that we are less wedded in a doctrinaire sense to a non-discriminatory economy than is the Conservative Party means that certain counter-measures could be more available to us.

We have, I believe, now reached the stage at which we must consider what those measures might be. We could go back to a more tightly knit and more discriminatory Commonwealth sterling area. This might be easier to achieve at the present juncture of world economic affairs than would have been the case two years ago.

As I said earlier, our move towards non-discrimination in the sterling area in 1952, 1953, 1954 and 1955 was, on the whole, then welcomed by many of the countries in the Commonwealth. But the fact of falling commodity prices and the effects of the American recession will make sterling area countries a great deal more receptive to a tighter Commonwealth, to a more discriminatory market and stabilised commodity agreements than they were.

We might also be able to do something with the Scandinavian countries—an important trading partnership so far as we are concerned. I would hope certainly that we should continue plans for a Free Trade Area with the Scandinavian countries even if we cannot get a com- mon market and that we shall associate them in our Commonwealth arrangements.

Then there is the European Payments Union, which is an extremely important part of the mechanism of trade settlement in Europe. This now operates on a 75 per cent. gold basis, often a very heavy burden for this country. Were we excluded against our desire from participating in the closer trading arrangements in Europe it is very doubtful whether we could continue to carry this.

This is not the only lubricant which we provide for trading arrangements in Europe. We also provide help by means of support for the transferable sterling rate. This is undoubtedly used by many countries and particularly by Germany, enabling them to sell their pounds in Zurich to buy dollars. I do not think that we could continue such an arrangement if we were excluded from the new market.

In conclusion, I would say this. I wish the Paymaster-General well in the negotiations that he is conducting at the moment. I do not envy him his inheritance. I think that he should give the House a little more information than he has yet given it. But I hope he will be successful. I can say for myself, and I think I can for many of my hon. Friends, that our keenness for the Free Trade Area has grown greater and not less during the last eighteen months, but that that is no reason why European countries should think that a change of Government here would necessarily make advisable the holding up of negotiations in the meantime. I think that they would be well advised to settle with the right hon. Gentleman.

12.8 p.m.

Mr. John Biggs-Davison (Chigwell)

I sympathise a great deal with what the hon. Gentleman the Member for Stechford (Mr. Roy Jenkins) has said about the possibility of a more discriminatory Commonwealth and sterling area. He blamed the Government for not having fulfilled their promises to regain this country's freedom to discriminate, but I think it should be said, on the other side, that it was engagements entered into by a Socialist Government which imposed upon Britain and upon most of the free world the obligations of Bretton Woods and the obligations of the General Agreement on Tariffs and Trade which, I believe, have been so injurious to the European nations.

Mr. Douglas Jay (Battersea, North)

Is the hon. Gentleman suggesting that there is any international obligation to make transferable sterling convertible, for instance?

Mr. Biggs-Davison

The Labour Government had a go at convertibility, which did not really work.

However, I do not want to engage in a debate on the responsibility of past Governments for the present lack of freedom to discriminate in our economic relations with other countries. My hon. Friend and Essex colleague the Member for Harwich (Mr. Ridsdale) has a number of claims on my gratitude and I think that all of us feel most grateful to him for enabling us to discuss this most important subject at what is a critical moment in the history of Europe. The hon. Member for Ashford (Mr. Deedes) spoke of the negotiations so ably conducted by my right hon. Friend the Paymaster-General as "a football match in a fog" I only hope that my contribution today will not be in the nature of bitter lemons for half-time.

I share the regret of my hon. Friend the Member for Harwich that the terms of the Motion which he moved so eloquently do not include the Commonwealth. I agree with him that there can be no choice between Europe and the Commonwealth and for us the Commonwealth comes first. Yet we are Europeans, and I myself have played a very minor part in the European Movement.

I remember very well hearing you, Mr. Speaker, make a moving speech at the unveiling of a memorial, not far from the Palace of Westminster, to General Smuts. It was that great Commonwealth statesman who saw the vision of a united Europe linked with the Commonwealth through Britain and forming at least an equal counterpart to the United States and the U.S.S.R. If that counterpart existed today there might be no need for or talk of a Summit Conference. Its achievement is the great political and economic question of our time.

As competition grows more intense in a world which is overshadowed by two colossal continental systems, one totalitarian and the other highly protected, we have to look to our markets and supplies of raw materials, and very many of our raw materials come not from Europe but from beyond the oceans. The hon. Member for Stechford said that the European Economic Community is "a reality", the Rome Treaty having been signed, but I do not think that we should be overawed by that. Certainly the Ruhr, the Rhineland, Lorraine and the Saar is a formidable combination, particularly with access to French and Belgian Africa; but I wonder how far the six members of the European Economic Community are prepared to go.

These are proud nations and the logical outcome of the Rome Treaty is not only a common market but also a common currency and perhaps common government. The Germans are people who look to the East as well as to the West. The French sometimes look across the Rhine, but they also look across the Channel. There has been the policy of Laval and there has also been the Entente Cordiale. The French want German capital for Africa, but I am sure that they do not want to be separated from England.

The national traditions of the Six nations remain and they may, in the end, prove stronger than a nostalgic sentiment for the empire of Charlemagne or admiration for the eighteenth century federation of America. My hon. Friend the Member for Harwich referred to those who would divide a divided Europe still further in the name of European unity. Europe, after all, is not six countries, nor even the 15 countries of O.E.E.C. There are countries east of the Iron Curtain. It may be that there will be disengagement and that direct Soviet control may be lifted from the vassal States of Central and Eastern Europe. But this does not mean that they will embrace free trade, free enterprise and liberal institutions. A people's democracy has a totalitarian obsession with its balance of payments and if we are to win these countries for the West we must be flexible in the European economic system that we devise.

At the same time, I think that the hon. Member for Stechford underestimates Britain's bargaining position in Europe. We have a great bargaining position in the whole world because we are such a great importer. Our imports from the six countries of the European Economic Community have risen by about 25 per cent. in the last four years. I understand that in 1956 we took £290 million worth of agricultural products from the countries of O.E.E.C.; 80 per cent. of our total imports of bacon, 25 per cent. of our fruit and vegetable imports and 35 per cent. of our imported butter came from the Continent of Europe. If we were pushed we could buy more in the Commonwealth and we could grow more at home.

Neither should we exaggerate the prospects for our European as opposed to our Commonwealth trade. It is quite true that Western European trade has expanded faster than that of the United States whether we take as a base year 1938 or 1952. It is also true that in the years 1950 to 1956 the trade of the metropolitan O.E.E.C. countries rose in value by nearly 96 per cent. while the world increase was 66 per cent. But what was the starting line? It was ruin and rubble, defeat and occupation. The remarkable recovery of a ravaged Western Europe sustained by lavish American aid is a misleading indication of future prospects.

One of my difficulties in accepting the present plan for a partial Free Trade Area in Europe is that whereas foodstuffs, feeding stuffs, drink and tobacco, indeed the majority of our present imports from the overseas Commonwealth are excluded, industrial imports from our Commonwealth partners are not. There are the textiles of India, Pakistan and Hong Kong. These are not popular in Lancashire, but I have always believed that any Commonwealth preference system should be based on the right of each member of the Commonwealth to discriminate even against Commonwealth partners whilst discriminating in favour of partners against outsiders. There are also the Canadian exports of paper, chemicals, synthetic fibres and motor cars which have a preference of 11⅓ per cent.

Many of these Commonwealth countries overseas, Canada, Australia and perhaps India, are on the verge of a huge industrial expansion such as has been seen in the United States in the memory of people still living. We should be very careful to see that we get our share of that expansion.

Commonwealth countries which are industrialising will need the capital equipment which Britain is well fitted to provide. They also need our quality consumer goods. I do not believe that it is true to say that the overseas Commonwealth countries are no longer interested in Commonwealth preference or have grown lukewarm towards it. They want preference, but they want it to be a true preference. They want it to be reciprocal. Australia and New Zealand have been turning away from us because, as a result of the way in which the Ottawa Agreement and G.A.T.T. have worked, they have not had a fair deal in the United Kingdom market.

That is one of my difficulties about the present plan for a European Free Trade Area. It does not provide for the great industrial expansion that is likely to take place overseas. I believe that there is a way in which we can get over these difficulties and reconcile our place in the Commonwealth with a special European position. The germ of the idea was stated by my right hon. Friend the Prime Minister on 29th September, 1949, in a meeting at Central Hall, Westminster, when he said: A low tariff area could be created in Western Europe to which such preferential systems as are enjoyed by the Commonwealth can be partially extended. The hon. Member for Stechford referred to the Strasbourg Plan. That plan was pigeon-holed, though adopted unanimously by the Council of Europe and conveyed to the Commonwealth Governments. I suspect that the Americans did not like it. Since then Mr. Diefenbaker has set British Ministers an example in formulating a national economic policy for his country and, indeed, the Commonwealth.

I doubt whether the scheme for a Free Trade Area in its present form can achieve the trinity of power which General Smuts desired, but I am deeply anxious, as is everyone in the House, to see how we can reconcile our Commonwealth duty with our European responsibilities and opportunities. I believe that we shall not be able to solve this problem unless we are prepared to look at some of the international agreements to which we have been referring across the floor of the House, and unless we are prepared to have a go at G.A.T.T.

What does G.A.T.T. say about free trade areas and customs unions? The devil can cite Scripture. The General Agreement on Tariffs and Trade allows for the formation of a customs union or of a free trade area or the adoption of an interim agreement necessary for the formation of a customs union or a free trade area. If, therefore, the intention is to form a customs union or a free trade area G.A.T.T. allows discrimination but, at the same time, under Article 24 (4), it seeks to prevent the raising of barriers to trade between the constituent territories of the customs union or free trade area and other contracting parties.

That is why I wonder how, given G.A.T.T., given the project of partial free trade area as it has been explained to us, it will be possible for the European countries concerned to reduce their dependence upon the American economy. It has not surprised me that there should have been so little objection to the plan on the other side of the Atlantic. Many Americans see the European Economic Community, and even the European Free Trade Area, not as areas of economic independence of United States patronage but rather as an extension of the American Customs Union to other parts of the Atlantic Community.

I do not wish to detain the House any longer. I have tried to convey to my right hon. Friend the Paymaster-General some of the anxieties and doubts in my mind about the present plan for a partial Free Trade Area. I hope that he may help me with some of them. I assure him that I myself believe that it should be the object of British policy to bring about an association between the nations of the Commonwealth and the nations of Europe which can enable them to prosper and also to make peace.

12.24 p.m.

Mr. Robert Edwards (Bilston)

We are all grateful to the hon. Member for Harwich (Mr. Ridsdale), because at some time or other I am certain this House will have to discuss at great length and in close detail this country's relationship to Europe and the relationship of the Commonwealth to Europe. It is a fact that none of the nations of Western Europe can exist and expand their economy within the limitations of their own frontiers. They are being com- pelled by economic events to integrate Western Europe in order to guarantee the living standards of their people and to expand their economy.

No matter what we do about Europe, there is no doubt that the little six countries of Europe—France, Italy, Germany and the Benelux countries—will integrate that part of Europe, both economically and politically. It is probable that within a reasonable period of time we shall have in Europe a European Bank and either a gold franc or a gold mark. Unless we are closely related to this development, there could be serious economic difficulties arising for our country.

I want to approach this subject, not so much from a purely selfish attitude as it relates to our economy, but in an effort to lift the problem to a higher level. Whether we like it or not, we are living in a world dominated by two mighty blocs, the United States of America in the West and the Soviet Union in the East. These two great Powers are snarling at one another across the world, dominating our universe.

These two great areas—the rouble area and the dollar area—have created a blockage in the circulation of world wealth and world trade. It is this blockage which is responsible for the failure of all countries to take full advantage of the great developments in science and technological production which, by now, should have brought us to an era of superabundance. There should be no shortage anywhere in the world, and the physical problems of mankind, the struggle to live and to win a decent life out of men's labours, by now should have been solved.

It is my view that it is this basic change in the structure of world trade and of the distribution of world wealth which is preventing humanity from enjoying the full fruits of technical advance. It is also my view that it is urgently necessary for there to be in the world a third balancing force. There should be a great new economic market, which can bring some reason into the world to act as a bridge between the two great power blocs, not merely helping to keep the peace, but helping to break down the barrier which prevents countries trading freely one with the other with a flow of trade, capital and labour across the frontiers. We shall need, therefore, to debate this subject much more frequently than in the past.

There is widespread ignorance in this country about the great revolution which has taken place in Western Europe. It has been a revolution, and a very colourful revolution. The hon. Member for Chigwell (Mr. Biggs-Davison) briefly dealt with what happened in Europe after the end of the war, when the cities of Europe were disrupted, when their organisation was destroyed, when great cities were piles of rubble, and when people were living in deplorable conditions, hundreds of thousands of them living on less than 2,000 calories a day.

Out of that misery and disorganisation, the six little countries of Europe brought some hope to the people. That hope was for a union in Europe which could prevent the Continent from another clash of military adventures across Europe. Out of it has come one of the most important functional organisations anywhere in the world, the Coal and Steel Community of Europe.

I well remember our fears in this country about what would happen when Europe's coal, steel and iron resources were integrated. I well remember the fears in the British trade union movement. It was predicted that this integration would lead to mass unemployment, that the inefficient pits in Belgium would be closed down and the workers thrown out of employment. It was predicted that the steel industry of Italy would be the first victim of this integration and that hundreds of thousands of steelworkers in Italy would lose their jobs. It was predicted that there would be a lowering level of employment and a shattering of the living standards of the people, that wages would go down to the lowest level and that social security would be harmonised to the lowest level.

All those prophets of despair have been proved wrong by events. On the contrary, the wages of industrial workers employed in the Community have risen. Industrial workers in Italy have had their wages raised to the highest rates in Europe. Social security, pensions and all kinds of schemes for social advance have been brought, not to the lowest level of the six countries, but to the highest level. It is a fact, and it should be stated, that nowhere in the world have the workers more security of employment than have those workers employed by the Coal and Steel Community.

I do not know anywhere else in the world—and it is my business to know what is happening in the world on the trade union front—where workers have a guaranteed basic wage of fifteen months if they are redundant due to the operations of a plan of integration. That is what many thousands of Italian steel workers are enjoying today. There is a compensation fund from which a guaranteed fifteen months' basic wages are paid to workers who have been made redundant because plants have become inefficient. During those fifteen months, they are trained for new jobs and new occupations. Throughout the whole of this great Community, covering six nations, only 20,000 workers have lost their employment, whereas the critics imagined that millions would be thrown on the streets and that their jobs would disappear as though they had never existed.

These facts should be known, and known throughout the trade union movement in this country. I am certain that, unless we have some arrangement with the European Common Market, not merely shall we fail in our duty politically to support Western Europe, but we shall fail in our duty to assist in maintaining and expanding our own industries.

It is an old argument, but it must be stated again and again, that because there are no frontiers and because the Americans are able to exploit all their natural resources throughout the whole sub-continent of America, and because they are able to use automation and nuclear power—in a small way, admittedly, but they are using it—because they are able to use every new method to increase production, the United States of America have raised living standards to the highest in the world.

Even now, with a minor recession in America, the American workers still consume three times more than is consumed by people in Europe—three times more of the electrical appliances which go into homes to lighten the toil of housewives, three times more motor cars, three times more of the expensive foods, three times more television and all the things which improve the life of the common people.

It is logical that, with its population of 260 million, if Europe could only double consumption—not treble it—of all the goods which we make and make well and in plenty, then we could look forward to a glorious future of expanding production and improved living standards, not merely for ourselves, but for all the people of Europe.

It is suggested that our movement towards Europe within a Free Trade Area will limit our chance to expand Commonwealth markets and our chance to assist by capital investments the underdeveloped areas in our Colonial Territories. I cannot understand that argument. It is simple economics that one cannot assist any country if one's own country is weak and feeble economically. One can assist under-developed areas only if one's economy is strong and expanding. Those areas cannot be assisted unless we have a strong home market, both here and in Europe. The more we solve the problems of Britain in line with Europe, the more we shall increase the volume of wealth production, which will enable us to use some of our surplus wealth to raise the standards of half the world where great poverty now exists.

From every point of view, politically, economically, and, what is important to me as a trade union general secretary, socially, we have nothing to fear from courageous action in alliance with Western Europe within the Free Trade Area.

In the early days of the discussions relating to European union and integration, very great fears existed in the minds of those belonging to the British trade union movement. I am happy to say that many of those fears have been allayed, and that the Trades Union Congress is actively participating with its colleagues in Western Europe in discussions to make our entry into the Free Trade Area a practical reality and a success.

Many conditions were laid down in the Schuman Plan, setting up the Coal and Steel Community, but they have all been satisfied, and all the conditions which the British trade union movement suggests as a basis for our entry into the Free Trade Area can also be satisfied, in co-operation with the Six. Those conditions are that full employment shall be maintained throughout Western Europe; there shall be no lowering of the wages of the industrial workers participating; there shall be no lowering of social security and benefits, and no interference in the political decisions and policies of the respective Governments. In addition, in certain circumstances each country must be able to maintain and must take action to maintain its balance of payments.

If all these conditions are satisfied—and I think they are being satisfied and will continue to be, through our discussions—no evil consequences can possibly arise for this country, for the Commonwealth or the Colonial Territories or for the industrial workers, through vigorous British leadership in Europe.

I have great pleasure in supporting the Motion.

12.42 p.m.

Mr. Maurice Macmillan (Halifax)

I know that the hon. Member for Bilston (Mr. R. Edwards) will forgive me if I do not follow him in detail upon the subject that he knows so well—the part played by the trade unions in working towards the European Free Trade Area. It would be a bold man who tried to follow him on that subject.

It is always pleasant when hon. Members on this side of the House can agree with hon. Members opposite, but we can all agree with the hon. Member for Stechford (Mr. Roy Jenkins) that we are reaching a difficult and critical time in the negotiations for the Free Trade Area. I cannot agree with his deduction, however, that it is wrong to discuss this matter in general terms, or to point out in general terms the consequences of failure not only to ourselves but to Europe and to the rest of the world. In moving the Motion, my hon. Friend the Member for Harwich (Mr. Ridsdale) made quite clear the dangers of economic discrimination that might result from the failure of the Free Trade Area negotiations, and drew attention to the opportunity that such failure would give to Russia to exploit the situation. I am sure that the converse also holds true, and that the success of these negotiations and the development of the Free Trade Area can be of great importance in strengthening the hand of the free world.

Much has been done to set the various arguments and problems before industry, by way of joint conferences between unions and management and such a conference was recently held at the international level, but the hon. Member for Bilston is right in saying that there is still much to be done to inform the general public of the importance of this matter. However varied and detailed may be our discussions in the House, I feel that the attention of the general public—and, judging by some of the Questions which are put on the Order Paper, of hon. Members, also is—very much concentrated upon the two great problems of peace and prices.

Prices, like the poor, are always with us, and in our less optimistic moments we may feel that they are with us to the extent that we shall all always be poor. All I hope is that we can so act that peace, too, is always with us. Peace and prosperity are very much bound together, and the successful outcome of negotiations for the Free Trade Area is of importance since it will be a step in the direction of achieving both in the world in general.

Even in Western Europe the various attempts to achieve a unity upon a purely political level have not come to very much, although much work has been done in the direction of federal union and of forming looser ties. Even in defence there have been failures. It is noticeable that those movements towards union which have been comparatively successful have been less ambitious and more restricted; and on the economic side. Through the Free Trade Area I hope that we can extend the success already achieved in this direction to wider fields, linking it not only with the rest of Europe, but with the Commonwealth.

I should be out of order if I sought to discuss the political details of Eastern Europe, but we cannot ignore the possible effect of disarmament plans, of ideas of disengagement in Eastern Europe, and of the attainment of a measure of agreement in these directions, upon the ultimate organisation of the Free Trade Area. This is especially true in view of the assurances given by the Lord Chancellor in another place, to the effect that we are hoping to create a situation in Europe in which all countries are free to choose how they should plan their own futures.

We cannot deny the potential effect which German reunification would have upon our plans for the Free Trade Area. I hope that when my right hon. Friend the Paymaster-General considers these matters he will not lose sight of this possible distant wood in dealing with the somewhat nearer and harder trees which he is encountering in his present negotiations. I hope, too, that none of us will lose sight of our future relations with the uncommitted countries. As the hon. Member for Bilston pointed out, any measures which strengthen the United Kingdom and the free world in general—such as the Free Trade Area arrangement—can only strengthen our position in the uncommitted countries and our ability to invest both money and men in them.

My hon. Friend mentioned the possibility of an eventual link with the Commonwealth. It is a very attractive idea, which cannot lightly be dismissed. Once again, I think, it should be emphasised that the strengthening of our general economy will release more capital for investment in the Commonwealth, and eventually, I hope, a greater ability for the Commonwealth itself to invest in underdeveloped countries and, if necessary, in Europe. Moreover, we in Europe will be in a stronger position in any negotiations with regard to East-West trade if the Free Trade Area successfully comes into being.

It is surely a truism that success in defeating rising prices at home means that we must not only increase our productivity, but maintain an increase in the rate of production, which, in turn, will depend on an expanding market. I do not believe that any industry can remain static. Nor do I believe that we can achieve the necessary increase in productivity in a contracting industry. We need expansion and we need more markets, but we cannot achieve this at home alone. Here, I think, it is worth remembering that if these facts had been more widely accepted earlier perhaps the delays about which hon. Gentlemen have complained would not have taken place. Therefore, it is worth mentioning them again now.

We need at home a market which is not unduly restricted in order to establish a firm export market, and I am sure that that implies that we must accept the necessity for reducing import restrictions even on manufactured goods. We hear a great deal about fair competition. Competition must be fair, but I think it is very necessary that both sides of industry should accept the fact that competition at the international level is here to stay. There is nothing we can do except equip ourselves as best we can by increased specialisation and by taking full advantage of modern techniques to meet it.

It is, I agree, a pity that the Commonwealth can no longer provide the expanding market that we need. Whatever may be the reason for this failure, I think it has been generally accepted that if this country is to achieve her proper share of world trade we must extend into Europe. It seems to me that the threat to the present negotiations comes from a protectionist tendency in the countries that have signed the Rome Treaty, and I cannot believe that in these negotiations it will he helpful if the British Commonwealth, in turn, is to seek to adopt a more protectionist attitude. If we are to play our proper part in the Free Trade Area and to take the lead, as we can, we must accept, as the Commonwealth itself has accepted, that such an organisation is to our mutual advantage. I think, also, it is important that all should accept the need to have as little delay as possible.

I hope that the House will not think I am too fanciful if I look back about 400 years to see the consequences of delay that occurred in the first Elizabethan age. The United Kingdom was very late in coming into the field of world discovery and world voyaging. That was odd, in view of what we had already achieved at sea. I am sure that part of the reason why we did not appreciate the possibilities of an expanding world trade was our determination to keep England out of European politics, a determination in those days not to get embroiled in Franco-Spanish quarrels.

Then, as now, it was impossible. The eventual force that drove us was mercantile. It was, in fact, a merchant who wrote in a book of geographical information: There is no sea unnavigable, no land uninhabitable. He might well have added, "no market unreachable," for it was the need of markets for our increasing production that forced us into competition, and especially our production of cloth. As a Yorkshire Member, perhaps I shall be forgiven for mentioning this earlier effect of the textile industry on the problems of freer trade and also if I mention that it is not only North-East Essex that is able and willing to meet competition.

At that time, English commerce demanded expansion, and it was Spanish and Portuguese insistence on monopoly that led our free traders to become pirates and which led what was originally honest competition to develop into private war. I am not suggesting that a failure now would have a similar disastrous effect, but I think it would be a political tragedy to have one more division in an already divided Europe and a grave economic setback to have one more bloc in a world which is already too much divided into economic blocs.

I should like to consider, too, the possible effect of a Free Trade Area on our East-West trade. The present volume of trade with the East is still far below the pre-war figure. After the reconstruction period of 1948–49 it shrank very greatly, largely because of Soviet domination, right up to the time of the Korean War. Since then recovery has been very slow. The trade now is only just about half the pre-war figure. There is, therefore, room for expansion, and I think the question that concerns us is whether such expansion is easier or harder with a Free Trade Area in being.

The restrictions on East-West trade are twofold. They are economic, because the Soviet and satellite systems of economic planning and integration in the Eastern bloc demand a restrictive trade. They are political because, although Western capital and Western credit might well help satellite countries to develop foreign trade, the assurances that are so far demanded by creditors, and indeed must be demanded, are such that they cannot be accepted by the countries concerned. As an example, we can take the determination of the Soviet Union that Czechoslovakia should not join in the Marshall Plan.

We also have restrictions of a political nature on our side, which I should be out of order to go into now, but which I think my right hon Friend should consider when he is considering a wider application of European trade. Most of our imports, that is, most of the O.E.E.C. countries' imports from Eastern Europe, are of fuel and raw materials, and I think the tariffs are already such that they will not be materially affected by the Free Trade arrangements.

We also import considerable amount of foodstuffs. Out of a total of 1,120 million dollars of imports into Western Europe in 1955—the latest figures I could get—foodstuffs accounted for 215 million dollars worth. But, since 1956, the Eastern world has been a net importer of cereals, and there can be no doubt that there is a market there for Western agricultural products.

Eastern Europe is facing increased Western competition in manufactured goods, and I feel that Free Trade Area negotiations can only help us in our efforts to export these. We can quite safely say that the Free Trade Area arrangement can only strengthen the Western position in economic negotiation with the East. The Eastern countries need imports for the fulfilment of their various plans and programmes, and, considering their need for greater economic development, that demand for imports will prove to be a continuing one. As their level of exports is determined less by price or by terms of trade than by their need for imports, I am sure that such expansion can take place even with unfavourable terms of trade. I also believe very strongly that the Free Trade Area can help us in our task of helping the underdeveloped countries, and in maintaining our economic and political position in the world, in competition with Eastern Europe.

However tenuous it may be at present, an extension of free trade from Western to Eastern Europe is something that we should keep in mind. As we in the United Kingdom see it, the Free Trade Area is not only trying to achieve freer trade within the "club," so to speak, but to lead to a general easing of restrictions. The European Economic Community might easily become exclusive, as, indeed, might the Commonwealth, but perhaps we can hope that the successful establishment of the Free Trade Area will prevent such a position arising.

While joining in the general congratulations to my right hon. Friend the Paymaster General for the tenacity and patience he has shown in the negotiations, I hope that, if I may borrow the analogy used by my hon. Friend the Member for Ashford (Mr. Deedes), however hard and violent the game may become, he will, at least, be able to keep his team going towards the same goal.

1.4 p.m.

Mr. Christopher Boyd (Bristol, North-West)

I agree with very much of what has been said by the hon. Member for Halifax (Mr. M. Macmillan). Hearing him speak reminded me that half a century ago a Boyd and a Macmillan were working together as colleagues, as chaplains to the Archbishop of Canterbury of that day, at a place not very far from this House.

I was particularly fascinated by the hon. Gentleman's rather venturesome remarks on East-West relations, East-West trade, and even prospects of the political unity of East and West Europe. That, obviously, is a longer-range prospect, but it is right that the younger Members of the House should sometimes take long views on this whole question of European unity.

The achievement of that unity will, clearly, be a long process. Even the little Europe of the Six is only planned to come to fruition in twelve years, and it may very likely, in practice, take longer to achieve the gradual elimination of the exceptions and the contracting-out clauses. The wider concept which the French have of European economic co-operation may well be a still longer process, and it has already been said that we may be unable to start on the present plan on the same date as the others.

It is particularly helpful that the hon. Members for Harwich (Mr. Ridsdale) and for Ashford (Mr. Deedes) both represent agricultural constituencies, and that both emphasised the fact—I think, generally accepted today—that we need not be quite so frightened about the agricultural difficulty as we were in the earlier stages of the negotiations.

I have often thought that it should be possible to look at individual agricultural products one by one, find out which are most crucial to each Commonwealth country, and work out some kind of dovetailed agricultural plan which would meet the most important needs of the European and of the Commonwealth countries. I was glad to hear such detailed evidence given by the hon. Member for Ashford of the ability of British agriculture to face rather more competition than it has had in the past. Surely there could be no greater benefit to our agriculture than a highly prosperous industrial and trading community at its doorstep.

It is proper that each Member of the House should represent the interests of his constituents. Protectionist interests in every country have been all too vocal in the past, and very often the more constructive interests have been heard less frequently and less loudly. My constituency, in Bristol, includes the main port for the larger ships, while a large section of my constituents work on the manufacture of aircraft. The Britannias made by them are putting the name of Britain in a fresh light all round the world.

Obviously, whether it is conducted by sea or by air transport, we, in Bristol, are very much concerned with the expansion of world trade. During the next few years, the aircraft industry faces difficulties connected with the contraction of military uses for aircraft, and the result may be that the expansion of civil aviation may not be more than that industry can cope with. There is, therefore, a particular urgency at present to explore the possibilities of expanding civil aviation but, in general, we are very much concerned with world trade. Much of that trade involves British shipping plying between foreign countries, yet not necessarily coming near this country.

The hon. Member for Harwich has, of course, a special interest in trade with the Continent. In fact, the only times that I have visited his constituency have been en route for the Continent, and that no doubt applies to many other hon. Members. It is quite proper that these interests should be promoted in order to balance the negative restrictionist interests that are voiced from time to time. It is natural that we in Bristol should take a lively interest in the Commonwealth.

None of us in this House wants the Commonwealth to suffer as a result of this country drawing closer to Europe. I think it has emerged from the discussions of the whole subject that there is not necessarily a conflict here, if the arrangements are carefully worked out, but there is no doubt that the negotiations are bound to be very complicated indeed. In the present sensitive state of French opinion especially, I would feel that the important thing is to arrive at some kind of preliminary agreement, of a not-too-complicated kind, as soon as possible, leaving over as many things as can be left over for further negotiations at a later stage when the initial arrangements will have begun to work.

If we could only go in on the first 10 per cent. next January, with arrangements made at some later stages for subsequent discussion, I would have thought that that would have been a great advantage. I do not say that it is necessarily possible to do this, but it has often been said that Continental countries have been exhausted by their efforts at negotiation and I admit that this is a complicated and laborious process. Protectionist influences have by no means disappeared, in France especially, but even a small amount of progress in the application of the scheme would make it possible for those interested to quieten down, and for French sensitivity and French fears to be allayed a little, if they reflect upon what the Anglo-French entente means to them.

I should like to feel that there was some more frequent expression of the fact that we in this House are conscious of the importance of the Entente Cordiale to us. It seems to me that the negotiations, as far as I can judge from the newspapers—and many of us only know what we read in the papers, though we are hoping to hear more later today may well have reached the stage when they would be helped by Britain showing an interest in European cooperation in other fields. I feel that we have been handicapped by the dispute over the presence of British forces on the Continent and our apparent unwillingness to carry out our obligations to maintain substantial British forces there. It would be helpful if, when it is thought that we are showing hesitation, the Government could remove these apprehensions to which the withdrawal of our troops from Germany has given rise, and the fear that Britain is in doubt whether her military future is still linked with that of France and the Continent or not. If we could be a little more emphatic about these things, and about our political interests in Europe, it would be a great help.

The hon. Member for Halifax went back into history in his very interesting speech. It must have occurred to other hon. Members that this country, from the point of view of its own interests, has always resisted European unity for centuries. We have considered it a major interest of this country to keep the Continent of Europe politically divided. We have perhaps idealised that in our own minds by representing it as a struggle against great tyrannical emperors on the Continent. We have built up this idea of keeping the Continent divided so as to diminish the danger of an overwhelming power on the Continent being strong enough to be a danger and a threat to us. Many people, especially about the Continent, are bound to feel that that danger might well exist in our minds if we cannot relieve them.

Now that there is evidently growing support for the proposed United States of Europe, or some kind of federation on the Continent, which is not something which could cone overnight, but which looks as if it might come within twenty or thirty years, and if some kind of democratic federation of States on the Continent came about, growing slowly on sound economic foundations, it may well be that Britain would be afraid of it. If we stayed outside it, and then proceeded to build up the Commonwealth, together with the Scandinavian countries, into some kind of hostile bloc or rival close trading group, we might well find that our interests were endangered. Such a bloc would be rather large and strong, and would include nations which have been our rivals before in seeking the leadership in world affairs.

I certainly would have thought that, as this thing will happen anyway, and we cannot prevent it, we might as well assist it. Our interests lie in getting inside, and it is worth getting inside if we are wanted inside by the other nations. I do not think that there is any country in the little Six on the Continent which does not want Britain to join. These countries have their various reservations, but they all want us to join. Here is a remarkable opportunity for Britain to join where we are wanted, in contrast to other parts of the world where we have been accustomed to be leaders.

On the Continent of Europe, British leadership, and not merely British participation, is desired by the other nations, and we are, apparently, very reluctant to take it up. Here, I think, the quotation with which the hon. Member for Harwich concluded his speech is very relevant. Our country is in the curious position of hardly being able not to be the leader of world affairs. It is a very tricky position to be in, and it is one which we can only face by taking up the opportunities we are given here.

We have to play a leading and prominent rôle in world affairs in order to maximise our link with every corner of the globe, to improve to the utmost our trading opportunities and also our opportunities of protecting our people against the dangers of modern warfare even greater than in the past. The development of military science emphasises the danger to the United Kingdom if we do not play a large part in the organisation of world affairs, and a greater part than ever before. Therefore, it seems to me that there is every reason why we should try to get over the insularity and timidity that has been shown by our people in their approach to Europe.

I hope that I have already shown that I do not think we ought to risk either the Commonwealth or the N.A.T.O. alliance or the United Nations. Our participation in any of these groups of nations must be part of the arrangements we make with Europe. The danger there is not nearly as great as many people believe. As for the Commonwealth, we should remember that its development has been a decentralising process so far, and that it is much more likely to continue in that direction.

I believe that we are sometimes more likely to stir up suspicions among other Commonwealth countries than to improve Commonwealth relations if we place too much emphasis upon trading arrangements and economic partnership with Commonwealth countries, so that they may think, rightly or not, that we wish to reassert in some subtle economic way our old imperial dominion in other parts of the world.

In Europe, there is not that fear to the same extent, and, therefore, there is much greater scope for opening up trading opportunities and for political leadership, too. It must be based on the recognition of our common defence and military interests. If we were to push ahead rather more boldly with projects for developing European co-operation in other fields than the economic field, it might well help our negotiating at the present time. For that matter, anything we can do to implement Article 2 of the N.A.T.O. Treaty would be very desirable. But there could be a danger that Europe's growing unity would tend to increase the barrier between the two sides of the North Atlantic, and therefore, there should be some simultaneously closer unity developed between the whole of the N.A.T.O. Alliance.

It may be, too, that the Western European Union on its military side should be developed, again as part of the N.A.T.O. alliance. That should not be forgotten at this crucial stage. It might be that if we were to push ahead there with schemes especially for a common defence fund, which might help us over the support costs problem of our troops in Germany, we might be helping to improve the atmosphere for our trading negotiations.

Our relations with France are in a difficult phase at the moment, and yet I am sure—and it ought to be emphasised—that we all believe that it is a major British interest to sustain and even enhance the rôle and position of France in its national affairs. I sometimes think that a great deal of French political talent especially is wasted through their constitutional difficulties, in dealing with which they have recently been making a little headway.

In a European political community in which British ideas have played a part in constructing electoral systems, and so on, we might be able to find, as exists in the new Parliamentary Assembly at Strasbourg and which already has produced an improved system, that the French rôle would be more effective than inside their own country, which would be to the advantage of this country as well as of France. This country and France would, in fact, be the countries with the greatest Parliamentary experience and might well be politically the leading influences. I hope that we shall find some way over the present difficulties in our negotiations with France and with the other Continental countries, and that a solution will be found.

I think that we ought to be willing to have a change of name. The "Free Trade Area" seems to be one of the chief obstacles in the way of negotiations at present. It needs to be emphasised that some other nomenclature would be more popular on this side of the House, and perhaps, in view of the traditions of the party opposite, on the other side of the House, too. Certainly "free trade" does not seem to be a popular phrase in France, and I should have thought that a little adaptability in matters like that would be very helpful.

On the other hand, we need not overlook the advantages and the help that this trading area may bring us in the solution of the problem which we have largely failed to solve so far by our other legislation against monopolies. It may well be that the successes of the American legislation against cartels and trusts has been due more to the size of their trading area than to the subtlety of their legislation. It might be that we should find a better solution to our problems of monopolies and restrictive practices through widening the area of trade than by the legislative efforts that we have tried so far.

I conclude by saying "Good luck" to the Government in their negotiations. It is understandable, perhaps, if we on this side of the House should hope that the present Government will make some progress, even before it becomes the responsibility of right hon. Gentlemen on this side of the House. I certainly hope that the effort will be continued by the next Government.

1.26 p.m.

Mr. John Grimston (St. Albans)

The thoughtful speech of the hon. Member for Bristol, North-West (Mr. Boyd) has demonstrated again how identical in the end are the views on this matter of the European Free Trade Area on both sides of the House, and, in particular, on both sides of industry. There are so many obvious difficulties and dangers to the various component parts of industry that it is remarkable that there is this degree of unanimity. This must greatly strengthen my right hon. Friend's hand in his negotiations, and I feel sure he wants all the strength and power at his elbow he can get in the difficult stage that matters have reached.

I want to make two rather short and. perhaps, Committee stage points, if they can be described as such, relating to the position of industry if and when a Free Trade Area comes into full effect. In general terms, I think it is a fair summary of the attitude of industry to say that the heavier sections of industry are more apprehensive and the lighter and newer sections of industry are keener on this idea of closer collaboration with Europe.

I must declare my private interest, as I come from the heavier and more apprehensive sector of industry. I are completely in favour of the attainment of a Free Trade Area scheme, and I use such influence as I can amongst my colleagues to persuade them that the future is not one of gloom but that the opportunities greatly exceed the dangers which exist. Still, one must not let one's private enthusiasm, still less must the Government let their enthusiasm, blind us all to the dangers that exist when the tariffs are removed.

One often finds in the technicalities of bargaining, which will be extremely complicated—and my right hon. Friend and his advisers are bound to get intensely involved in the details of trying to reach agreement—that one may concede points which later on one would greatly regret. That has been my own experience in bargaining of various kinds, of which I have had practical experience, and I have no doubt that it will be the same in large Government negotiations of this kind.

The whole of the United Kingdom economy—the employment of our people, the social services which are financed so largely from company profits and taxation, and so on—will be thrown open to the effects of competition with other countries, whether fair or unfair. I have no doubt that in fair competition we shall more than hold our own. All I want to see is conditions of fair competition generally accepted. They could probably not be enforced, because they are not, I think, enforceable, but, at least, a code of conditions or fair trade rules should be drawn up.

In this country, we have the national scheme for disabled men, and the many firms which participate in it show a little coat of arms at the top of their letter heading. I think it would not be impossible, if a code of fair trade such as I suggest were established, for firms in all countries of the Free Trade Area which were members of the club and adhered to the code to show a badge of similar importance upon their letter heading. Undoubtedly, Governments must lay down what is right and what is wrong. I do not think it is too early, even before any agreement has emerged, to talk about drawing up and defining such terms.

We must accept that the commercial outlook on the Continent is different from ours when one get down to the real level at which the bargains are made, particularly in Germany. This may well be a hang-over from our earlier free trade ideas. In this country, if one makes an offer and one's bid is the lowest, the chances are that one receives the order. In Germany, it is not so; the local supplier will nearly always be offered the business at the lower price offered by his overseas competitor. There is nothing we can do about it. We must accept that the dice are slightly loaded against this country when it comes to exporting to the Continent. As long as we recognise it, that is as far as we can go; but it has a bearing on the other two points I want to make.

The Common Market countries have, in their treaty, a provision against dumping. Their remedy is, roughly, that after the transitional period the dumped goods shall be returned with compliments to the country whence they originally came. In other words, if a man sells goods abroad at low prices, someone will buy them and ship them back to him; he will be caught in his own country by his own price levels being depressed. This is probably quite satisfactory in the conditions envisaged in the Common Market.

First of all, the Common Market countries have trains and lorries which can quickly and cheaply cross frontiers; the component of carriage in the goods is probably small. We, on the other hand, have to consider shipment and all its attendant costs. In the industries producing heavier goods—the ones where people are apprehensive, as I explained —freight plays a large part in the makeup of the selling price. If the freight costs of returning goods dumped by one country in another are high, the possibility of retaliating otherwise open to manufacturers in the country suffering the dumping is ruled out. A considerable strengthening of the anti-dumping provisions of the Six will be necessary.

Where distribution of goods is carried out through wholesalers, it is much easier to buy things up and ship them back again, which is the only remedy in the treaty of the Six. In the semi-heavy or heavy industries, it is usual for goods to be sold direct to the ultimate consumer. Therefore, the opportunity does not exist for manufacturers to retaliate.

Mr. John Hay (Henley)

I am very interested in what my hon. Friend is saying. Could he give me the references to the Articles in the Treaty which deal with this particular method of retaliation against dumping?

Mr. Grimston

I am not quite sure, but if my hon. Friend looks at Articles 85 to 96, or thereabouts, I think he will find the relevant provisions.

The second Committee point, if I may so describe it, arises from the differing approaches to restrictive trade practices adopted by the Six and by this country. We have made it extremely difficult for trade associations to have any discussions among themselves on prices or anything like that. Such discussions are prohibited by the Six also, except that there are two loopholes, if I may call them that, in the regulations which are different from the ones we provide for in this country. First, where it can be shown that it is for the good of the consumer—for instance, where the consumer will benefit from the savings derived from a price association—and, secondly, where substantial outside competition still exists, the Authority to be set up can rule that the restrictive trade agreement is in the general interest and is permissible.

We have not the opportunity in this country of meeting together, under the present law, and justifying our association on those two grounds. It is my view that those two provisions in the Treaty of the Six are much better than those which now guide our law as it is in the Restrictive Trade Practices Act. The Act will, of course, have to be amended on the coming into force of the Free Trade Area because different registration arrangements apply under it to export agreements which, equally, are banned by the provisions of the Treaty of Six. When further consideration is given to our Restrictive Trade Practices Act, the opportunity should be taken to make as exactly comparable as possible the rules which apply to manufacturers in this country and to our future competitors in the Free Trade Area.

It is on marginal things that orders are won or lost. It is the last shilling in one's quotation which either brings the order or loses it. In these difficult negotiations, in which I wish him every success, I hope that my right hon. Friend will bear in mind that, in the last analysis, it is very often the small print at the bottom of the agreement which needs the closest attention.

1.38 p.m.

Mr. John Cronin (Loughborough)

The hon. Gentleman the Member for St. Albans (Mr. J. Grimston) has done a service in pointing out some matters of detail which, I think, will be very helpful to the Paymaster-General in his negotiations, but I think that his speech showed an optimism which is not entirely justified. We have not reached agreement on matters of broad principle yet, and we are a long way from the rather esoteric points which the hon. Gentleman raised.

It seems to me that the Government committed some grave errors at an early stage in the Free Trade Area negotiations. I feel that their psychology in handling the whole question a year or eighteen months ago was misguided. Hon. Gentlemen opposite, perhaps, are more familiar with business negotiations than some of my hon. Friends, and I am sure that they will appreciate that, if one is trying to sell something or to negotiate some terms, it is very important to point out to the other person the advantages to him of the deal one wishes to take place. The Government, however, concentrated very largely on the disadvantages to Europe of having us associated with it.

The White Paper published in February last year seemed to be a remarkably pompous and ill-advised document. It emphasised beyond all possible doubt how disadvantageous it would be for Europe, economically, to have us associated with them. The psychological handling was very unfortunate. It would also have been much more fortunate if we had succeeded in associating ourselves with the European Economic Community at a much earlier stage of the negotiations. It appears that we could not be actual members of the European Economic Community, first, because of the Commonwealth and secondly, because of the questions appertaining to agriculture.

It is noteworthy that France succeeded last year in the negotiations in having all her overseas territories brought into the conception of the scheme and also succeeded in getting special provisions to protect her industries. The hon. Member for St. Albans, who is obviously very familiar with the Rome Treaty, will recollect that France obtained an annexed protocol which enabled her to continue export subsidies and certain tariffs which gave her preferential treatment.

I am not suggesting that we should in any way become full members of the European Economic Community, but it seems that we should have taken a leaf out of France's book and got ourselves associated with the European Economic Community at a much earlier stage before the final negotiations were completed without prejudice to the Commonwealth and our agriculture. We did have a quite powerful weapon to use to obtain that association. Quite a few of the provisions of the Rome Treaty are contrary to the G.A.T.T. That could have been used as a strong bargaining point to associate ourselves with the European Economic Community much earlier.

Mr. Hay

Which provisions of the Rome Treaty does the hon. Gentleman consider contrary to the G.A.T.T.?

Mr. Cronin

The whole conception of discriminatory customs union does not fit in with the concept of the G.A.T.T. I cannot quote the article; the hon. Gentleman has the advantage there. But we could certainly have used G.A.T.T. as a weapon to negotiate more favourable terms for ourselves at an earlier stage. The hon. Gentleman will at least accept that point.

I fear that I am bound to share the pessimism of the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) in thinking that it is dubious whether the European Free Trade Area will eventuate at all. If it does come into being, it will certainly not bear any resemblance to what was originally envisaged. It is important to remember that a customs union is a well-tried form of organisation. We have had obvious examples, such as the United Kingdom, or the United States, or the Prussian Zollverein in the last century, but a Free Trade Area is a new idea. It has never been tried before, and we have no experience of it. Therefore, any country that wants to accept a Free Trade Area is bound to adopt a suspicious attitude about the ultimate results.

We are laying too much emphasis in a Free Trade Area on the idea of reducing tariffs without other considerations being given proper weight. This was probably right in the days of Cobden and Bright when the economies of countries were much simpler, but now questions of the harmonisation of economic and social policies must be considered as well as the lowering of tariffs.

We have heard, chiefly from hon. Gentlemen opposite, a lot about the advantages of our entering the Free Trade Area, but it would be a healthy exercise for the House to give consideration to what countries in the European Economic Community feel about our proposals. I do not think that that matter has been given sufficient consideration in the debate. Considerable attention has been drawn in the Press to the objections raised by France during the last few weeks. Probably France has been the leader in these objections, but certainly many of these objections are sustained by Italy and have the support of some other countries of the Six.

First, obviously the European Economic Community gives very substantial political advantages to its members in exchange for any economic disadvantages that they are likely to suffer. But what political advantages will be available to the six countries of the European Economic Community from the Free Trade Area? This is not clear, whereas it is obvious that they will have considerable economic disadvantages.

Probably the principal difficulty, as no doubt the Paymaster-General has encountered, is the awkward question of goods being re-exported from one country having been imported from outside the Free Trade Area. He has probably frequently come across the expression, "détournement de traffique," which summarises the whole difficulty. The Paymaster-General has no doubt suggested in his discussions that there should be strict controls of origin. But, again, controls of origin of this nature have not had any careful trial before, and it is natural for countries like France to be suspicious as to how effective they will be and have doubts whether certificates of origin will ensure fair play.

Another reasonable fear of the countries of the European Economic Community is that capital from outside the Free Trade Area will tend to flow into a country which has low tariff barriers, such as ourselves. That is a real fear. For instance, the French visualise that United States capital would go into the motor car industry in Great Britain rather than the motor car industry in France, for the simple reason that American capital could obtain a profit from the Commonwealth and the European Free Trade Area. That is a difficulty which will have to be met.

The question of the differences of social policy which would exist in the European Free Trade Area is another difficulty which the countries of the O.E.E.C. are facing. The six countries of the O.E.E.C. have substantial similarity of social policy, but they do come across grave difficulties when they are dealing with us. For instance, France has equality of pay for textile workers. It can be pointed out that Italy has not equality of pay for textile workers and, therefore, has an advantage. But, under the provisions of the Rome Treaty, Italy will sooner or later have to modify its social policies and, therefore, will lose that advantage, whereas this country, where there is no equality of pay between the sexes in the textile industry, would continue to have an advantage over France in a free trade area. It seems to me not unreasonable that the French should be anxious that the conception of a Free Trade Area should consist, not only of the lowering of tariffs, but also of some sort of harmonisation of wage, social and economic policies.

I have no doubt that the Paymaster-General in his negotiations has been obliged to give serious attention to agriculture. Very properly, everyone on both sides of the House is anxious to ensure that the agricultural industry of this country has a fair deal. Let us give it all the encouragement and protection that we can. It is obviously unrealistic, however, to think that we shall get much assistance from the six countries of the Economic Community on this point.

In the French National Assembly, practically every Deputy, except those from exclusively urban areas, depends largely on the peasant vote and there is no hope whatever therefore for a country such as France accepting a state of complete protection for the British agricultural industry. It is quite unrealistic to contemplate.

As for the Commonwealth, it seems not unreasonable that the six countries should be interested also in obtaining access to Commonwealth raw materials on at least a comparably preferential basis with us. Looking, therefore, at the picture from the point of view of the people on the other side of the table, our original conception of a European Free Trade Area does not make sense and the prospects of its coming into existence are very small indeed, in spite of the undoubted skill of the Paymaster-General.

I should like to turn attention to one or two matters concerning what is likely to happen if some form of European Free Trade Area does come into existence. First, there are certain industries in this country—particularly cotton, rayon, paper, leather and watches and clocks—which would suffer severely. We would like to know from the Paymaster-General what is the Government's view concerning the unemployment that will arise in these industries. This particular Government may not have to worry about it when it arises, but it would be nice to have a statement now about their feelings towards it. It is quite clear that there will be some unemployment in these industries.

It will, no doubt, be argued that an increase in employment in the other industries will favourably affect and help to mop up some of the unemployment. It must, however, be borne in mind that with improved methods of production, an increase in employment will not go pari passu with the actual increase in production. It can also be argued that there will be a long transitional period when vacancies caused by retirement need not be filled and some sort of a buffer of manpower may be desirable. Nevertheless, we should have a general reassurance from the Government about their attitude to the unemployment that is likely to arise in these specific industries.

Another aspect of our entry into the Free Trade Area which makes one rather uncomfortable is the position of investment in this country. There is no doubt that investment here has been stagnant for the last three or four years. The Paymaster-General looks surprised and will probably say that investment has increased, but it has not increased at the rate at which one is entitled to expect.

How does the Paymaster-General envisage our competitive powers in the Free Trade Area when we have this stasis of investment? Obviously, if we enter the Free Trade Area, we shall do so with considerable disadvantage. We are gradually becoming a low investment economy as a result of the policy of the Government. That is a point to which the Paymaster-General should give particular attention.

I urge the right hon. Gentleman to see that in his negotiations some sort of treaty is arrived at which will obtain ratification from the Parliaments and Assemblies of the countries concerned. That is the crux of the whole matter. The Rome Treaty was ratified in the French Assembly only by a comparatively narrow majority. Obviously, all the right hon. Gentlemen's negotiations will be futile unless they produce an agreement that is ratified by all the countries concerned.

I also urge the Paymaster-General to bear in mind that there is not such a hurry over these negotiations as has been suggested. The target was to get the negotiations completed by July so that the Free Trade Area could come into operation in January. I do not regard that as important, because next January the six countries of the European Economic Community are committed to only a 10 per cent. reduction in tariffs. That will not make a startling difference in competitive positions. It is much more important that we should arrive at a useful negotiated agreement, which will be ratified by the Assemblies of the countries concerned, rather than that we should be in a hurry and rush the present negotiations. It is quite clear that we have missed the bus in not associating ourselves with the European Economic Community under the favourable terms which were possible last year. Let us not now be in a hurry to obtain conditions which will prove generally unacceptable in the long run.

The Paymaster-General has an arduous and difficult task before him. Hon. Members—on both sides, I think—feel that if we must have the present Government, probably the right hon. Gentleman is the best person to cope with this task.

Mr. Ede (South Shields)

He is the least bad.

Mr. Cronin

As my right hon. Friend points out, the right hon. Gentleman is the least bad among the Government. One would describe the Paymaster-General as the white sheep of the Cabinet. At least, we hope that he will be fortunate in his negotiations. We cannot give him quite the same adulation as he has had from his own side of the House today. Nevertheless, we have as much confidence as is possible in him and we wish him every possible success.

1.57 p.m.

Mr. John Hay (Henley)

The speech of the hon. Member for Loughborough (Mr. Cronin) has been of great interest to me, because it shows clearly that some people still have not appreciated fully what a Free Trade Area concept along the lines of that proposed by the United Kingdom Government would entail. The hon. Member's references to unemployment and his request for a statement from my right hon. Friend this afternoon about what action is contemplated to avoid unemployment is familiar to those of us who have been mixed up in this business in the Council of Europe and elsewhere, because it is precisely the sort of thing we hear our Continental friends and colleagues demanding of their own Governments.

It is, in some ways, almost amusing to come here and hear speeches like those made by the hon. Member for Loughborough and by my hon. Friend the Member for St. Albans (Mr. J. Grimston) expressing the utmost anxiety about the consequences of a Free Trade Area and knowing that people abroad say exactly the same thing. In the one case, it is British industry and trade about which people are worried and which fear competition, whereas in the other case the Continental countries fear the competition that will come from this country. The real truth lies somewhere between the two.

Under a Free Trade Area conception of this kind, every country stands to gain something and every country stands to lose something. That is not such a bad thing, because it is inevitable that there must be some measure of inequality in any great commercial undertaking of this kind. It is out of inequality that competition can come, and out of competition can conic trade. If there were no competition or inequality, there would be no trade.

My right hon. Friend the Paymaster-General would, I think, have preferred a debate of this kind a little later, when the situation was somewhat less obscure than it is at present. This is the sort of debate which it must be extremely difficult for him to answer in this House. He is, as the House knows. Chairman of the Intergovernmental Committee of O.E.E.C. engaged in the negotiations for a Free Trade Area. It is awkward for him to have to stand at the Dispatch Box to make a speech this afternoon commenting upon, and perhaps answering, some of the points that have been made, knowing all the time that his obligation to his colleagues in the Intergovernmental Committee is to try to maintain the balance between all the conflicting interests as well as to represent the views of his own Government. So my right hon. Friend has my sympathy, at any rate, in what must be the rather tricky job he has to perform today.

Nevertheless, I think that in some respects the Motion is timely because it does again emphasise the importance of having some kind of arrangement in Europe which will contain this great undertaking which has been set up by the Six. I think that all of us, here and on the Continent, are in danger of losing sight of the great political necessity of having some kind of framework of that sort, and the great economic necessity as well. There is no doubt that if we fail in all our efforts to provide machinery whereby an association can take place between the Six and the rest, we run the risk of dividing Europe politically and, more than that, of risking, at least, the recrudescence of discrimination, which would be quite contrary to all of the O.E.E.C.'s work during the last ten years.

What I always think of in this connection are the needs not only of our own country but also of other countries in Europe quite apart from the Six, because I feel that we have to try to build up a framework in which they can take part. I am not thinking of those countries which are sometimes described as less developed or as underdeveloped, countries like Greece. Turkey or Ireland. I am thinking of other countries like the Scandinavian countries and Austria, which will find themselves, if we have no Free Trade Area or an arrangement of that kind, in the very greatest difficulties.

In a highly competitive world, if we do not have a Free Trade Area, Britain can probably fend for herself. We have our markets in other parts of the world. But this is a second best choice and it might put us in great difficulties if our trade with Europe were seriously hampered. Therefore, we have, if we can, to reach agreement on a Free Trade Area, but without deeming it so vital that we must sacrifice everything else.

I would put before the House one or two basic facts we should all have in mind at this rather critical stage of the negotiations. The first is this. It has not yet been sufficiently appreciated in this country what it is that the Six countries have done. We talk about the Free Trade Area, and our debate today is about the Free Trade Area, just as a commercial and trading affair. The Six, on the other hand, do not look at the European Economic Community as being a purely trading affair. They look at it, as they are entitled to do, as being a widespread and far-reaching means to integrate the economies of the European countries.

The Treaty of Rome, which has already been mentioned today, contains, it is true, as its heart and centre the plans for the Common Market, the reduction of tariffs over a period of up to fifteen years. It is on that part of the Treaty of Rome, of course, that we are negotiating. We are concerned to harmonise in some way the trade arrangements of the Common Market with trade arrangements for the rest of the countries of O.E.E.C., but we must not be surprised if the Six cannot quite divorce the other parts of the Treaty of Rome relating to economic integration, the harmonisation of social policies, of transport policies, and many other matters as well, from the Common Market plans where trade, tariff reductions and quantitative restrictions, and so on, are at issue.

The second major factor we ought to keep in mind is that ever since the end of the war, and more particularly within the last two or three years, there has grown up in Europe an entirely new spirit, based particularly upon a change of attitude of France towards her traditional relationships with this country.

Many wars have been fought, much blood has been shed over the years because of the enmity of France and Germany, but the extent to which the French and the Germans today are cooperating in so many ways and the entirely new spirit which has arisen between them, is really remarkable. I do not think that it is just enough for the United Kingdom Government to say to France the magic formula "Entente Cordiale" and expect that that will solve all problems.

We have to take account of the fact that France has found a new and, in some ways, a more powerful ally in Europe, in some ways a more friendly ally many Frenchmen think, because France has not had with Germany the same rather disagreeable experiences she has had with us in the last two or three years, particularly over her North African policies. Those are two of the major factors we have to bear in mind in the whole of this affair.

I want, now, to turn to the negotiations taking place in the Intergovernmental Committee of which my right hon. Friend is the chairman. I do not subscribe to the attitude of pessimism of the hon. Member for Loughborough, or, indeed, the attitude of pessimism which is quite widespread on the Continent at present. I think that what has been happening has been that the negotiators have been clearing away a lot of the brushwood, the undergrowth; but now they are beginning to get to the major problems—they are getting to the trees, as it were. I do not believe that because they have got up against the major problems now we should say at once that all is lost because there are viewpoints which are very far apart.

I think that in some ways my right hon. Friend may find himself from now on in a slightly more difficult position than he has been up to now, because not only does he represent the views of Her Majesty's Government but he has also to act as chairman of the Negotiating Committee. I can imagine what an extremely difficult task it must be, to "harmonise," if I may use the popular word which is so much used in the discussions about the Free Trade Area, his task as a United Kingdom Minister and his task as the independent minded chairman of a body of this kind.

I would say, without wishing to be flattering him, that the reputation which my right hon. Friend has built on the Continent in the whole of this matter is very great. He has already obtained such a degree of respect and admiration for the fair and careful way in which he has dealt with the negotiations that I do not need—because we do not do so in this House—bestow on him fulsome praise, but I think we ought to give credit where credit is due. I would add that it is due also to the very able people he has surrounding him in the Committee. The Secretary-General and the Deputy Secretaries-General of O.E.E.C., whose particular task it is to handle this matter on the technical and advisory side, are outstandingly brilliant men who are contributing very greatly to the solution that we all want to see.

The main problems which the negotiators are up against now have been already mentioned by the hon. Member for Loughborough and by one or two other hon. Members as being three. I would say a little about them now. I put them in the order of importance in which I think they come.

The first is the problem of what is sometimes called the diversion of trade, or deflection of trade. Secondly, there is still the problem, but not, I believe, nearly so grave a problem as it appeared to be at one time, of agriculture. The third is the harmonising of the costs of production in a Free Trade Area and, in particular, the social charges as they are called, the costs and expenses one has to bear in payment for social services.

On the first, diversion of trade, one comes up against an entirely different conception in the minds of many people, particularly our French friends, of what the Free Trade Area is intended to do. The problem arises in this way, that under the G.A.T.T., in Article 24, we have two different types of preferential area which are permissible, the one the Customs Union, the other, the Free Trade Area.

The three rules applicable to the Customs Union are that the external tariff must be harmonised and be not higher than the average level of the tariff which it replaces; that the whole operation must be carried out within a reasonable time; and that what is done must extend substantially to all the trade of the member countries. Exactly the same rules apply to the Free Trade Area, except the first. That is to say, a Free Trade Area does not have to have a common external tariff. I do not think that any of the classical economists, and particularly those who were engaged in the drafting of G.A.T.T., ever thought that the sort of situation could arise, in which we are now engaged, where we are seeking to surround a Customs Union with a Free Trade Area. This question of a common external tariff for the Six and the absence of an external tariff around a Free Trade Area creates problems.

At the moment there are two points of view. There is the view, taken particularly by the United Kingdom Government and shared by many other countries in O.E.E.C., especially the Scandinavian countries, that any problems which will arise from the fact that we have different external tariffs in a Free Trade Area are likely to emerge gradually, and that we can foresee them as time goes along, and that we may take ad hoc measures as the problems arise. On the other side, and particularly in France and among the Six, there is the view that these problems can be foreseen and that they ought to be taken care of, and that special guarantees and safeguards should be written into the treaty or convention which sets up a Free Trade Area. We must face the fact that this is a critical and crucial problem which must be solved if we are to have a Free Trade Area.

I do not think that it will be easy straightaway to persuade people who do not agree with the "gradual" point of view that their ideas are wrong. I do not know to what extent my right hon. Friend the Paymaster-General today would either want to be, or be able to be, in a position to say anything about the Italian proposals, made by Signor Carli in the Intergovernmental Committee. The Italian proposals for a series of compensating charges to meet problems of diversion or trade might well be the way out, provided—and this is the great test—that they do not result in the whole arrangement being contrary to the G.A.T.T. rules.

When it is borne in mind that one of the rules which must be applied if we are to have a Free Trade Area under G.A.T.T. is that the arrangements must extend substantially to all the trade, and be completed in a reasonable time, the Carli proposals, and the idea of compensating charges, might run the risk of the arrangements not being acceptable to the rules of G.A.T.T. If my right hon. Friend feels that it is diplomatic or politic for him to say something about those proposals, I hope that he will do so.

I believe that the problem of agriculture is much less great than it was when the House last debated the matter, and certainly less great than it was six months ago. That is very largely due to a change of attitude and of position by Her Majesty's Government. I am forced to agree with some of the criticisms made by hon. Members of the way in which the White Paper which the Government put forward handled this matter. The straight fact was that they were not prepared even to discuss agriculture, and for that reason they used that word "exclude." Nothing has been more like the red rag to the bull on the Continent than the very refusal of the United Kingdom, at the outset, to discuss agriculture, and the Government's use of that word "exclude".

We got entangled in an intolerable argument whether agriculture should be "included" or "excluded," yet nobody on the Continent wanted it included in the sense that free trade would extend to agriculture. All that the Continental countries wanted, and still want, is the opportunity of expanding their markets in the United Kingdom, in so far as there is room for such expansion. And it is gradually being borne in upon them that the field for expansion of Continental agricultural products in the United Kingdom is limited. It is so limited that they would not obtain substantial advantage if the remaining United Kingdom tariffs on agriculture were reduced, or even abolished.

Therefore, in these circumstances, the Government did wisely in deciding last October to modify that decision and to agree to Resolution 221 of the Council of O.E.E.C. and say that they were prepared to discuss the question of agriculture. According to the Press, they have tabled a draft agreement on agriculture which is under discussion. Perhaps my right hon. Friend will say something about it. On the other hand, perhaps he would be less embarrassed if he did not say anything. If he does say something, I hope that he will deal with the broad points that such an agreement would cover.

The third difficulty is that of harmonising charges on production in a Free Trade Area. Here again, the Continental attitude is very different from our own. We and the Scandinavians take the view that social charges are rather like the weather. Professor Ohlin once said that if we wanted to start talking of harmonising charges we must begin with the weather. The man growing oranges in Southern Italy, and the man growing timber in the north of Norway, live in entirely different climates. The man in Norway has a very different sort of working week and year from those of the man who is working in a Mediterranean country. It is extremely difficult to see how it would be possible to harmonise all the factors which affect the cost of production of industrial or other goods.

My view is that, here again, this is a problem to be dealt with empirically over the course of years. It would be hopeless to try to write into a Free Trade Area convention or similar document any provisions specifically to enable social and other charges to be fully harmonised. In this connection, it is worth while looking at the Rome Treaty. The same problem arose in the negotiations for that Treaty. France and other countries were keen to have special provisions for harmonising social charges.

The upshot was that certain provisions were put in the Treaty, but they are extremely sketchy in their outline. They are by no means detailed. The only really detailed provision is one about equal pay for equal work. It is the only provision which the negotiators accepted, and they propose to bring that into force not at once but over a whole period of years. I hope, therefore, that when the negotiators get to grips with the problem of harmonising social charges they will come down on the side of an empirical approach and against any idea of trying to write some great code of harmonisation. I believe that it would not work and it would not be desirable.

In the course of the last few weeks, the fundamental disagreement of the French Government with the idea of a Free Trade Area, which is based largely upon their outlook on questions of diversion of trade and the harmonising of social charges, has given rise to certain proposals which are now becoming known as the French counter-proposals. As yet, we have not seen the full text of these proposals. I believe that the present situation is that the French have put these proposals to the European Economic Community and that they are, with the rest of the Six, discussing them. Possibly a document will emerge which will no longer be the French proposals, but proposals of the Six. I say this because it is clear that what the French, and possibly the Six, have in mind for the Free Trade Area is something so far away from what we have been discussing until now that it is no longer a Free Trade Area, but a complete alternative.

Therefore, one has to look at what they are proposing, or are likely to propose, and measure it against the test of the General Agreement on Tariffs and Trade. Here, I come back to the point I made earlier, that G.A.T.T. permits only two types of preferential area, a Customs Union or a Free Trade Area, and lays down the rules. If what the French are proposing, or what the Six may propose, is different from either of those conceptions, then it must be tested against the rules, and it may well be that what has been proposed, although it may be called by another name, is a Free Trade Area or a Customs Union.

The outline of the French counter-proposals, as we have heard them, is that, first, there should be no kind of multilateral agreement; that we should deal simply and solely on the basis of industries; and that as between the Six and the other countries of O.E.E.C. individually, not collectively, there should be special bilateral agreements or protocols to cover the trade which is going between them in a particular industry.

The second important point in the French counter-proposals, as they appear at the moment, is that there will be a time lag of four or five years. This is because it is intended that the protocols, which by that time will have been concluded, would come into force at the end of the first period of the operation of the Common Market; in other words, at the end of that first four-year period the Common Market's second round of tariff reductions would start—the first starts next year—but only the first round of the reductions under the protocols. It is a time lag all along the line. I regard that as being highly dangerous, because it would start us off on a progress of discrimination in Europe which is entirely contrary to the trend of the work of O.E.E.C. in the last few years.

Finally, it appears that the French have made the suggestion that they should obtain some guarantees or compensation for any losses which their industries may suffer, not from us, not from the Six and not from anybody else in O.E.E.C., but from the British Commonwealth. They want the opportunity of exporting their goods to the British Commonwealth countries on precisely the same basis as ourselves, in other words, with the advantage of Commonwealth preference.

If these proposals are correctly reported it seems to me that on all these points they will not work, or they will not be in accordance with the rules of G.A.T.T. A sector by sector approach, industry by industry, would not coincide with article 24 of G.A.T.T., which states that a Free Trade Area must extend to substantially all the trade of the member States. We know already that agriculture is out, because nobody is asking for free trade in agriculture. Something separate, but linked, will be done for agriculture. So, already, the field is greatly limited, and I believe that at once G.A.T.T. would say that any arrangement on the sector by sector plan would not be allowed under those rules.

Secondly, the idea of having separate protocols with a different timing would conflict with the other rule of G.A.T.T. applicable to a Free Trade Area, that the thing must be completed within a reasonable time. I do not see how it can be said that this would be a reasonable time, because it would obviously extend over nineteen or twenty years. So I cannot see G.A.T.T. agreeing to that being a reasonable time.

As regards the British Commonwealth, even if the Commonwealth countries were prepared to agree to this system, which is highly unlikely, and agreed to open their markets to the goods coming from all European countries, which is what it would amount to—

Mr. Bernard Braise (Essex, South East)

It is impossible.

Mr. Hay

My hon. Friend says that it is impossible. I agree. I do not think that they would look at it for a moment. But let us imagine they did. It would still be contrary to Article 2 of G.A.T.T., which is the "no-new-preference rule" or most-favoured-nation clause. For those reasons, therefore, I cannot see that anything along the lines of the present French counter-proposals could work.

Now I turn to the future. I have said that I do not think we are in a position where there need be great pessimism, but we have to face frankly the fact that we may fail in these negotiations. If we do, the whole thing will have to be looked at again. Still, there are a few things that can be done which would heighten the chances of agreement and lessen the risks of failure, and I will put a few considerations to my right hon. Friend. I say again that I do not expect him to comment upon them, because he is in a difficult position, being involved in the negotiations.

First, I hope that now the French proposals are in the ring and are being discussed by the Six, my right hon. Friend will urge that the European Commission, now headed by Professor Hallstein, should take up this matter. After all, the Six have signed the Treaty of Rome, it has come into force, they have set up the European Commission and the Commission must be given something to do. Here is one of the great tasks it could do from the outset, help to negotiate a Free Trade Area or a structure which would contain the great engine that has been built in the middle of Europe in a framework acceptable to the West.

Secondly, I am not too certain, from all I have heard, that the present method of negotiation is the right one. I have a feeling that what may be needed is something more like the kind of negotiations carried out by M. Spaak and the other Ministers of the different countries of the Six at Val Duchesse, which led to the drafting of the Treaty of Rome.

I am not too sure that the present system of negotiating, not continuously but from week to week and from month to month, with my right hon. Friend having to be here to answer Questions about fuel and power and goodness knows what else, then rushing off to Brussels or Copenhagen, is the right method. I incline to the view that if we want to get agreement by July we should lock him up with half a dozen other representatives from the different countries in a chateau and tell them to get on with the job, and let their "slaves" go along with them and help to do the work. I think that we could get agreement in that way.

Thirdly, even if we find that this method does not work I think there is still this to be borne in mind. The heads of States, the heads of the European countries, the Prime Ministers, must eventually be brought into the picture. If we find, within the next few months, that we cannot reach agreement, if these problems appear insurmountable, if by mid-June or early July, it looks as though we shall not have a convention, then I suggest earnestly that careful thought should be given to calling together the Prime Ministers of the 16 or 17 European countries of O.E.E.C. to see whether they, at top level, cannot agree to something.

It may seem rather fantastic to call together so many people of great authority and position, but if we get to a position of deadlock we cannot leave this thing purely to Ministers of an inferior rank. What we are dealing with here is an extremely important matter for the whole future of Europe. I believe that it would be the right thing to do if we had reached the situation where the problem could not be solved in any other way.

The next point with which I want to deal is that of timing. My right hon. Friend is bound by Resolution 221 of the Council of O.E.E.C. to reach agreement on this matter, if possible, so that the Free Trade Area and the Common Market can start in parallel on 1st January, next year. I suggest that he should not worry too much about the timing problem. As the hon. Member for Loughborough said, and as was said in a very sensible and truthful article in The Times yesterday no really great problem will arise if we do not start on 1st January.

There is a tolerable time lag which can be accepted. While it should not be more than two or three months, my right hon. Friend should not feel that he is driven by an inexorable timetable necessarily to come to some agreement by 1st January. It is desirable, if we can get it, but no serious damage will be done if we cannot. I do not want to put that argument too high. It is obvious that we have to get agreement fairly soon and it would be quite impossible to have an arrangement whereby the Free Trade Area did not come into force until several years after the start of the Common Market.

The next point is the question of the name. The hon. Member for Loughborough and several other hon. Members have complained about the name and my right hon. Friend himself has said that the name "Free Trade Area" was very bad It was used originally, of course, because it was mentioned in G.A.T.T. I hope that we will find some other title for this economic arrangement. In the Motion which my hon. Friend the Member for Harwich (Mr. Ridsdale) originally presented, he used "European Economic Union", but he has amended it to take account of the exact name of the body formed and now uses the expression, "European Economic Community."

But something like a "European Economic Union", or "European Commercial Union"—despite the latter's insurance company connotation—might prove to be the sort of name which we should give to this arrangement. The French have taken up a position in their own country where the very use of the name "Free Trade Area" acts like a red rag to a bull and, if they are to agree, we have to find some other name which can help them to ease out of the difficulties into which they would be placed by signing anything like a Free Trade Area convention.

That brings me, happily, to the last point which I want to make. Everything seems to depend on the attitude of France. France is in very grave economic difficulties, not because that country is fundamentally weak—I believe, on the contrary, that fundamentally France is one of the richest countries in Europe and possibly in the world. Anybody who goes to France and who has anything to do with French life knows what the difficulties are, and knows that France is tied down and hampered by the political system which has become riveted upon her and through which it is extremely difficult for anybody to break.

We can imagine what it would be like in this House if one-third of our Members were Communists and nearly another quarter were of the extreme Right wing, while in between the amount of give and take possible was limited by the fact that there were five or six other parties. We would be in an extremely difficult position

Moreover, France is carrying for us in Europe—and I say this advisedly—a very great burden in North Africa. She needs sympathy and help in that, and I do not believe that bullyragging or violent attacks upon France because she will not sign on the dotted line of a Free Trade Area convention will do any good. What is needed is a sympathetic appreciation of her problems. If it is necessary to have in a Free Trade Area convention or some other document, a protocol like the one in the Treaty of Rome giving a special method of treatment to France, let that be discussed and let it not be ruled out straightaway.

I hope that the House will pass this Motion and I hope, further, that the House will continue to keep this matter under most careful review. Unless we obtain some arrangement of this kind in Europe our country will certainly not he lost, but we will certainly be in the very greatest difficulties. Those difficulties will not exist if we can obtain agreement in the next few months.

2.35 p.m.

Mr. R. T. Paget (Northampton)

I bad not intended to intervene in the debate, and I do so only very shortly because I was roused by one suggestion of the hon. Member for Henley (Mr. Hay), and that was the suggestion of a Summit Conference on this issue. For heaven's sake, do not let us have that! The very nature of the problems as they evolve within the Common Market and within the Free Trade Area will gradually force arrangements on various countries, so long as we do not crystallise our disagreements into positions in which prestige is committed to a point where we cannot retire.

I therefore urge that we should show patience on this matter and not bring it to the summit, which in any event I have always regarded not as a means for our agreeing, but as a means for trying to make it appear that it is the other chap who is not agreeing.

2.36 p.m.

Mr. Bernard Braine (Essex, South-East)

My hon. Friend the Member for Henley (Mr. Hay) prefaced his extremely interesting and, to me, instructive speech by talking about the timeliness or otherwise of the Motion. I can well imagine that my right hon. Friend views a Motion of this kind being debated at such a crucially difficult stage in negotiations as untimely, but among those likely to be affected, our Commonwealth friends and producers of commodities and foodstuffs, there is a hunger for information. For them the debate is timely if it produces some reassurance from my right hon. Friend about the way in which the negotiations are proceeding and if he can answer at least one question, which I will put to him later.

I acquit the Government of the charge levelled at them by the hon. Member for Loughborough (Mr. Cronin) of starting off on the wrong foot. It was unrealistic of him to suggest, as he did in the course of his speech, that we could have associated ourselves with the European Economic Community, the six Messina countries, at a much earlier stage. I doubt if at any stage we could have closely identified ourselves with the Six.

It was implicit from the beginning of these negotiations that. the Government would take no step which would in any way adversely affect the pattern of our trading relationships with the Commonwealth. Indeed, the argument was that if a European Free Trade Area emerged, there would be no conflict, that it would be possible to preserve our traditional trading pattern with the Commonwealth and at the same time join in a scheme for widening the trade of Europe and moving towards its economic and, perhaps, political integration.

It was also implicit from the beginning that all Europe this side of the Iron Curtain should be included in a wider Free Trade Area for industrial products. For surely we are all agreed that a divided and fragmented Europe is a danger not merely to itself but to the rest of the world—a prey to the great rival dollar and rouble imperialisms. It is not an accident that when the Six countries met at Messina to discuss these matters they took a look at themselves, saw that they had a population roughly equivalent to that of the United States but with only one-third of the income, and drew the obvious conclusion that this was due to its division, its industry operating in penny packets, its separate markets cluttered up with restrictions.

A truly united Europe would represent a balancing force of immense power and influence—a concentration of economic and scientific resources second to none in the world. To the extent that this would encourage greater division of labour, more specialisation and mass production, it could lead only to greater prosperity for all the peoples of Europe, and to that extent would be of advantage to ourselves and to the Commonwealth.

If that is so, then, viewed from every angle, the European Economic Community, a unity of six major European countries is a step in the right direction, but only if it is a step and not an end in itself. If it leads to the establishment of a wider Free Trade Area in which the United Kingdom and other European countries participate, well and good, but if it does not—if it leads to a little Europe discriminating against the products of neighbouring countries—the results can be disastrous for us all.

Ever since the United Kingdom announced its willingness to enter into the negotiations for a wider European Free Trade Area, about fifteen months ago, there has been a dearth of informa- tion upon which those who are likely to be affected, both here and in the Commonwealth, can base their judgments and make their submissions. I am not criticising my right hon. Friend; he has earned all the praise that has been heaped upon him in the course of this debate and also in Europe. His patience and skill in directing these negotiations have earned our warmest admiration. But it is right to tell the House about the effect which the doubts and uncertainties involved in these long-drawn-out negotiations is having upon our Commonwealth friends abroad.

I have just returned from a fairly lengthy tour of East Africa. All primary producing countries have been going through difficulties in the last year or so. I single out the Colonial Territories because we still have ultimate responsibility for them. In Kenya, for example, there has been a down-turn in export earnings over the last year, and this has caused considerable apprehension, at a time when, because of our own financial and economic difficulties, we have had to reduce the amount of economic aid that we can make available to that colony.

I am not saying that we need take an alarmist view. I believe that the bottom has been reached, and that Kenya has the capacity to weather the storm. Nevertheless, considerable anxiety is felt in that territory due to the fact that we are gearing the whole of African social and economic development to an agricultural revolution which requires among other things the growing of coffee for export. It is an extraordinary thing, but not only is Kenya coffee the best coffee in the world, but the Africans are the best producers of coffee in the Colony. Considerable anxiety exists about the effect of the inclusion of overseas territories in the European Economic Community upon the sale of Kenya coffee in Europe. Germany, for instance, is a far greater buyer of Kenya coffee than is the United Kingdom. Anxiety also exists among the other commodity producers of East Africa. I claim—with some justification, as chairman of the British Commonwealth Producers' Organisation in London—that this anxiety is widespread throughout the Commonwealth.

I understand that it would be difficult for my right hon. Friend to say very much about that matter this afternoon, but I am told that a discussion is now taking place among the Rome Treaty Powers upon the subject of a French alternative to our proposals. Its terms have not been communicated to us. No details are known, but I am told also that the Italians are putting forward some sort of compromise designed to bridge the gap between our views and those of France. May we be told something about this? This sort of discussion hardly encourages confidence in the methods being used to achieve European integration.

There is one aspect of the Common Market which directly affects Commonwealth producers, namely, the proposed agricultural policy to be arranged between the Six, under Article 38 of the Rome Treaty. I understand it was announced yesterday that a conference will assemble at Stresa during the first week in July in order to discuss these matters. The question I should like to put to my right hon. Friend is this: will Her Majesty's Government be entitled to attend this conference as observers, and will a similar invitation be sent to other interested Commonwealth countries? If so, well and good; it will be helpful to the deliberations of the Commonwealth countries at the Economic Conference to be held in September to know what is going on. Our people will be able to adjust their minds and make their submissions in time. If not, however, the suspicion will grow very rapidly that the Six are not genuinely interested in finding a solution which will enable this country, with its Commonwealth commitments, to find a means of associating with them.

I will not press my right hon. Friend any further upon the subject, because I recognise that he has very heavy responsibilities on his shoulders, but I beg him to realise the anxiety which exists throughout the Commonwealth, in particular, in those countries whose economies are almost completely dependent upon the export of basic raw materials and foodstuffs. I ask him to bear this fact in mind and to give us the maximum amount of information.

No hostility exists among Commonwealth countries to the principle of British association with the European Free Trade Area, but suspicion will undermine the confidence which Commonwealth coun- tries have in our ability to do a deal which will safeguard their interests and this suspicion will not die down unless more information is made available. I hope, therefore, that my right hon. Friend will be able to give rue an answer about the Stresa conference.

2.50 p.m.

Mr. Douglas Jay (Battersea, North)

On the whole, I think the hon. Member for Harwich (Mr. Ridsdale) has initiated both a timely and a valuable debate. This subject has not been fully debated since November, 1956, and a very great deal has happened since then. Indeed, all the information we get from every source except the Government is to the effect that a critical stage has been reached in these negotiations at which new decisions may soon have to be taken.

It is not quite good enough for the Paymaster-General today merely to repeat airily what he said at Question Time earlier this week, that he will make a statement when he has something to say at some later date. After all, the right hon. Gentleman made a statement in a Committee Room upstairs a few days ago, but apparently the Press did not think it interesting enough for a full report. I hope the right hon. Gentleman will at least be able to say as much down here today as he said upstairs earlier in the week.

After all, it is not just we in the House or, indeed, in the Commonwealth who are concerned. There are many thousands of firms in British industry which are making plans week by week on the assumption that something on the lines of the Free Trade Area is going to go ahead. If it is not, or if something quite different is coming into existence, British industry ought to be told as soon as possible.

We on this side have always believed that the Free Trade Area was basically the right idea as a framework for expanding trade, though, of course, it is no more than a framework. If in the whole of this rather tangled controversy we make three assumptions as basic points in the argument; first, that there is going to be a Common Market of the Six countries; secondly, that most Commonwealth countries are not going to abandon tariffs on manufactured imports into their countries, and, thirdly, that the United Kingdom would be worse off without Commonwealth preference even if inside a Common Market than it would be with Commonwealth preference outside a Common Market; then, however one argues, one comes back to the conclusion that, from the British point of view at any rate, the Free Trade Area is basically the best solution. Therefore, we on this side of the House and in the Labour Party support the Motion moved by the hon. Member for Harwich.

As the present rather moribund Government are sinking ever more rapidly into the grave—

Mr. Hay

The recount does not finish until four o'clock.

Mr. Jay

—and as their fortunes hang even more precariously on a recount in Torrington, I think I should say that when the next Labour Government come to power it will, of course, be their intention to carry forward the general policy of the European Free Trade Area. That does not mean, of course, that we think that such a scheme will solve all the economic problems of the country. Far from it. We have always had some anxieties about it. Quite frankly, my anxiety has never been that British industry will be unable to compete in Europe.

We have had two other anxieties. One is that such an area might become an instrument of restriction and deflation rather than of expansion. Just as open windows can let in germs as well as fresh air, so, of course, free trade can spread deflation as well as expansion if that is what happens to be going round. Secondly, we have always had some fears that the whole Common Market and Free Trade Area project together might, if the negotiations were badly handled, end not by uniting Europe but by dividing it.

At the moment, that danger appears more serious than when we debated this matter in November, 1956. After all, what is called a Common Market we could just as truly, if we were to look at it from another point of view, call a discriminating tariff bloc. I do not want to argue about the words, but it means that goods from some countries will enter the bloc on preferential terms compared with others.

We have been told today that the Paymaster-General has been going to Paris, disappearing into a fog, harmonising all sorts of things and blowing his whistle out of obscurity. We have to take his great negotiating skill on trust, because, so far as the results yet visible are concerned, very few goals seem to have been scored by or for the United Kingdom.

O.E.E.C., which sprang essentially from Mr. Ernest Bevin's initiative, has really achieved most so far in genuinely uniting Europe since the war, and that was because it was based on a sound foundation. We would all agree that it would be a tragedy if, owing to the failure of these negotiations, we were now to undo the work done by O.E.E.C. in the last ten years.

But the brute fact is, according to our information—unless the Paymaster-General can deny it—that the whole movement for freer trade in Europe is threatened by something of a crisis as a result of the fierce French opposition to the Free Trade Area plan. As far as I know, there is no evidence that it is just the opposition of the French Government. It appears to be the opposition of almost all sections of French opinion. We are told that the French Government are concocting an alternative of their own, which we have not yet seen, and which the Paymaster-General says he has not seen either. However, as I understand it, the French opposition to the whole Free Trade Area is really a more important factor in the situation at the moment than the precise details of the French alternative.

There is some truth in what The Times said a day or two ago, that the French objection is not so much to the Free Trade Area as to free trade itself. Indeed, there is some irony in that the French, who have always prided themselves on their virginal purity as believers in European unity, should now become almost the odd men out in this movement towards greater European free trade. It would be more ironical if France, having first devised E.D.C. and then later killed it, should then devise the free market and then, by her attitude towards the Free Trade Area succeed in killing it, and, in effect, frustrating the whole movement towards free trade all round.

I realise that the French argument would be that all countries, including Britain, ought to join the Common Market. If we do not, why should we expect that British goods should go tariff free into the French market if, at the same time, British goods are getting a preference over France in markets such as Australia, India, and so on? It is natural that a Frenchman should put forward that argument. It seems to me that the French sometimes forget—I am sure that the Paymaster-General has been pointing this out to them—that Indian, Hong Kong and Australian goods come into our market, to a very large extent, both tariff- and quota-free. I rather doubt whether the French textile industry would be pleased if the French Government were to give that same concession to these Commonwealth countries.

Nevertheless, I want to make it clear that we on this side of the House would deeply deplore it if these negotiations entirely broke down, and if, as a result, there was a relapse of Western Europe back into separate tariff blocs, into two or more separate blocs. That would be both economically and politically regrettable, and great efforts and some sacrifices ought to be made to prevent it.

If, of course, which I hope will not happen, French intransigence or anything else were to force this country, against its will, into choosing between membership of the Common Market on the one hand or the Commonwealth and the rest of Europe on the other, I think there is no harm in making it plain that, in that sense, this country would be bound to choose the Commonwealth alternative. That must be so for two reasons, either of which is decisive in itself, one political and the other economic. Politically, it must be so, because the strength of Commonwealth unity and coherence must always be a paramount aim of British policy. I think we are all agreed on that.

Economically, also, there is another reason, which is not, perhaps, quite so often understood. It is that the truth at the root of a great deal of this verbal controversy is that, though trade with Western Europe is extremely valuable to this country, trade with the Commonwealth and the American Continent is absolutely indispensable. I sometimes think that if we talked a little less in terms of tariffs, of percentages and quotas and the rest, and a little more in terms of actual commodities, it would throw more light on this aspect of the problem.

The fact is that of the commodities such as grain, oil, wool, rubber, copper, tea, timber and so on which Great Britain has to import from abroad in order to live, few come in large quantities from Western Europe—or even from North-East Essex, although I am sure the hon. Gentleman was quite right in paying such tribute to his constituency. Those goods come from the Commonwealth, from the Middle East and from the American Continent. Indeed, almost the only really essential commodities that the United Kingdom buys from Western Europe in large quantities are timber and paper from Scandinavia—and, perhaps, we may add dairy products from Denmark.

It follows, therefore, that if this country were forced—and I put this only to carry the argument to extremes—to stop trading with Western Europe altogether, as we were between 1940 and 1945, it would be extremely unpleasant and inconvenient; but if we were forced to stop trading with the Commonwealth and with the American Continent, we would be faced with starvation in a few months. We must keep that fact in mind. That is how we would have to look at it if finally driven to it.

I hope that the Government, therefore, are to give some thought, while these negotiations go on, to the possibility of strengthening the economic links between the Commonwealth, Scandinavia and some other parts of Europe outside the Common Market. That does not mean, of course, creating a closed trading area, because in any case we shall do a great deal of trade with Western Europe. I may say to the Paymaster-General that I can bring him no comfort from the result of the by-election at Torrington. We are compelled still to regard the present Government as a moribund and declining one, soon to be replaced by something more effective—

Mr. Hay

Would the right hon. Gentleman tell us why he and his right hon. Friend are so pleased, seeing that their candidate is at the bottom of the poll?

Mr. Jay

I think I ought to remain in order.

I was about to say, since we are discussing the Free Trade Area, that our main aim must be to prevent this threatened breakdown with the Six and with the Common Market, both for manifest political reasons and because, let us also remember, Western Europe does offer a large and expanding market to the United Kingdom. The commonsense solution is obviously to trade with all these areas of the world to the maximum extent possible.

Since we all want to avoid this breakdown, I should like to ask the Paymaster-General whether the Government are exploring alternative ways of bridging the gulf between ourselves and the French Government at the present time. Is it considering, for instance, the valuable suggestion made by the hon. Member for Henley (Mr. Hay) that the Economic Commission of which he spoke might, perhaps, take some part in these negotiations in the immediate months ahead? Although it has been said that there is no absolutely urgent crisis of a catastrophic kind that will arrive next January, we must not forget that, if nothing is settled, we are moving year by year into a situation in which there is growing discrimination against British goods in a very large part of Europe. We ought to remember that.

I shall not attempt to spell out all the alternatives today—they are too complicated—but it does not seem that compromise is impossible between the extreme French position and the position that this country has hitherto adopted. It would be economically possible, of course, leaving aside the political and legal technicalities, to have a Common Market of the six countries and, in addition, a Free Trade Area of all the present prospective Free Trade Area countries, less France. That would be rather contrary to the present mystique of European enthusiasts, but it would be economically possible. If that were to fail or be unacceptable, have the Government considered or investigated some possibility such as that of the Common Market, on the one hand, supplemented, not by the Free Trade Area, which we should prefer, but by some form of European preference area? I think that would be not far from what one hon. Member quoted the present Prime Minister as having suggested under the name of a low tariff area way back in 1949; and, of course, there is the Strasbourg Plan, which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) mentioned.

If the French opposition to the present plan turns out to be insuperable, I hope the Government may consider some of these alternatives, without leaving it too late. I realise that some of the possibilities I have mentioned would in themselves be contrary, as I think the hon. Member for Henley, who is obviously very expert on the legal aspects of this matter, would agree, to either the Rome Treaty, on the one hand, or G.A.T.T. on the other; but even the Rome Treaty has its annex, protocols, footnotes and other such extensions, and I do not think we ought to regard these man-made constructions such as that Treaty or even G.A.T.T. itself as absolutely unalterable in the last resort.

If that is the alternative to avoiding a total breakdown and a new split in Europe, we feel that these difficulties ought to be faced, if necessary, to avoid the disaster of the collapse of the whole plan and a new division of Europe. In any case, I believe that the British public, this House, the Commonwealth and British industry have a right to be told by the Paymaster-General what the realistic possibilities are now, as far as he can, and what the Government intend to do about them.

3.8 p.m.

The Paymaster-General (Mr. Reginald Maudling)

I should like to join with other hon. Members who have congratulated my hon. Friend the Member for Harwich (Mr. Ridsdale) in bringing forward this Motion for discussion today. I think that both the proposer and seconder of the Motion made speeches of very great interest and very great comprehension and that that general spirit has been continued throughout today's discussion, so that we have had a debate which is extremely valuable. Not the least part of its value is the clear demonstration of very considerable identity of view expressed on both sides of the House.

There are quite a number of individual points on which clearly individual hon. Members may disagree, but it quite clearly emerges from today's debate that both the Government and the Opposition have shown their belief that the establishment of a Free Trade Area is of the greatest importance, not only to this country, but to the whole of Europe, and that in this matter our policies are similar. I think it will be of great value if it is widely reported and noted in Europe that, were there to be a change of Government by some strange occurrence, there would be no change of policy.

Mr. Frederick Willey (Sunderland, North)

Has not the right hon. Gentleman heard the result of the Torrington by-election? Does he not know that there will have to be a change of Government immediately?

Mr. Maudling

I gather from the figures that, if there were a change, the hon. Member should not assume it would be his party that would take office. I understand that the view of the Liberal Party on the Free Trade Area is that it is very strongly in favour of it, and that if it were in power it would have been in effect already. That is a little unrealistic.

I welcome this opportunity of saying something about the Free Trade Area and about the negotiations which, as some hon. Members have generously recognised, it is difficult to go into in too much detail, with the negotiations going on, as they are, at the moment. There are two reasons for that: first, in any negotiations it is impossible to disclose one's hand completely in public, otherwise negotiations cannot proceed; and secondly, because of the particular character of this negotiation, for in a sense each country feels that final acceptance of the convention or plan, whatever it is, depends upon the total picture, and the countries will say as we go on negotiating on individual points, "We are prepared to accept your point of view on this so long as later on we get what we want on another point." Therefore, to disclose partial agreements would be misleading, and might cause many Governments involved in negotiations considerable embarrassment.

We have together, as a Committee, agreed that these negotiations would have to remain confidential, but notwithstanding, I think I shall be able to deal with the points hon. Members have raised. Perhaps I should start by reading the terms of reference under which the Intergovernmental Committee is working, because these are extremely important and they were unanimously agreed by all seventeen countries of O.E.E.C. In the Resolution they declare their determination to secure the establishment of a European Free Trade Area which will comprise all member countries of the organisation. which would associate on a multilateral basis the European Economic Community with the other member countries and which, taking fully into consideration the objectives of the European Economic Community, would in practice take effect parallel with the Treaty of Rome. What is important there is that that was agreed by all concerned. They all registered their determination, and they all registered agreement with the principle that the Free Trade Area should come into being or, to quote the Resolution, take effect parallel with the Treaty of Rome. Of course, the purpose behind that is to avoid what several hon. Members have referred to—namely, the emergence of discrimination in Europe. The right hon. Member for Battersea, North (Mr. Jay) referred to that himself. My good friend Professor Hallstein, the very able President of the European Commission, takes me to task sometimes for using the word "discrimination," because he and others in Europe maintain that it is wrong to talk of "discrimination" and that it should be "differentiation" It is argued by them that if the Community care to treat their members on a different basis from the basis on which they treat people outside, but leave membership of the Community open to others, it is not truly discrimination. I would not bandy words on that point. The fact is that to the British businessman, the British exporter, it will look like what we normally call discrimination if he finds his motor cars paying a duty in Holland which the German motor car manufacturer does not pay. However, I hope we shall not get mixed up in this terminology, and I will happily use the word "differentiation" rather than "discrimination."

I think it is most important that there should not be a new outbreak of differentiation in Europe. That is why I think it is important, as O.E.E.C. as a whole recognises, to start the Free Trade Area in being parallel with the Treaty of Rome. As hon. Members have pointed out, the first tariff reductions under the Treaty of Rome start on 1st January next. I know it is sometimes argued that they are only a 10 per cent, reduction. I cannot believe that is a valid argument. I think the principle here is enormously important. Once the Community of the Six starts moving ahead on this road towards tariff reduction at a more rapid pace than the rest, there will be created within O.E.E.C., which up to now has been a highly satisfactory and successful multilateral organisation, a new principle, and I think it is not the amount of tariff reductions which are important, so much as the principle.

That is why I have maintained that we must aim at getting agreement on the main matters of substance by the end of July. That does not mean that we must have tied up all the details by then. There will be many details which will take a long time to tie up. But people should not forget that we have the Treaty of Rome text to work on, and we have also the experience of officials who have worked on the Treaty of Rome and the experience of O.E.E.C. officials.

I am myself confident that, once we can reach agreement on the main questions of substance, the conclusion of the final detailed convention will be more rapid than people sometimes realise. But we must have agreement in substance, and if we part for the summer holidays, in August, without having reached any agreement in substance, there will be great danger indeed that in many countries support for the project will dwindle away. If negotiations on a project of this kind are carried on too long, it is very difficult to maintain the sort of will to succeed which has, I think, grown up in many European countries.

The negotiations have been going on for a very long time. No one can pretend that in asking, as we do, and, indeed, as the seventeen countries agreed, that this plan should come into effect parallel with the Treaty of Rome, we are asking for anything unreasonable. The question of a Free Trade Area has been under study in the O.E.E.C. since July, 1956; that is over eighteen months. The negotiation and ratification of the Treaty of Rome was a political operation of great magnitude. Representations were made to the British Government that the Common Market treaty should be secure before we pressed forward with the Free Trade Area negotiations. We thought that this was reasonable, and willingly agreed to it. At the same time, we had the clearest assurance of support, including that of the French Government for the general concept of the wider association and for proceeding quickly with the negotiations after the Treaty of Rome had been ratified by France.

The French ratification of the Treaty of Rome took place in July, 1957. It would not be unfair, therefore, if we look for agreement on the main principles of the Free Trade Area by the end of July, 1958. I should like to stress strongly —I am glad that my hon. Friend the Member for Henley and the hon. Member for Loughborough (Mr. Cronin) raised it also—that, in the opinion of Her Majesty's Government, it is important to adhere to the timetable which all countries of the O.E.E.C. have imposed upon the negotiating committee which now meets in Paris.

My hon. Friend the Member for Harwich dealt with two very important subjects, agriculture and the Commonwealth, and my hon. Friend the Member for Ashford (Mr. Deedes) also discussed agriculture. I think the position is now fairly clear. The old argument about exclusion or inclusion has, I hope, been finally disposed of. T made a statement in the O.E.E.C. last year, which was recorded in HANSARD, in which I said that it was a misleading question to ask whether agriculture should be included in the Free Trade Area. I went on to say: So far as I know, none of the countries represented here, with possibly one or two exceptions, would propose a system whereby their agriculture would be exposed to competition in the way that industrial production will be exposed in the Free Trade Area. We all protect our agriculture in one way or another, and intend to go on doing so."—[OFFICIAL REPORT, 29th October, 1957; Vol. 575, c. 27.] What we are doing is, simultaneously with the conclusion of, or with the negotiation of, a Free Trade Area agreement, to negotiate an agreement, in the words of the Resolution which contains our terms of reference— on methods of further co-operation between all member countries, in agricultural matters, with a view assuring an expansion of trade in agricultural products. I think it is generally recognised in Europe that we regard agriculture, as do all other European countries, not only as an industry but also as a way of life, and that the principle of agricultural pro- tection is accepted throughout Europe. We do not consider that we are highly protective. In fact, we think that we are very liberal in our agricultural import policy; we are the biggest importers of agricultural produce from the O.E.E.C. countries. We made it perfectly clear that we do not intend to change our policy in this matter.

As I say, we intend to continue our liberal policy of importation, and we intend also to continue our policy of supporting our own agriculture, although we have indicated that we are quite prepared to enter a system whereby there is a mutual exchange of views, a mutual scrutiny and justification of the agriculture policies of the European countries. We may thus find—indeed, I think that we will—that all of us protect agriculture, that Britain is by no means the most protected, and that we can work and co-operate together to expand trade, having freer and fairer trade in agricultural products, within those limitations.

The other special feature is our position with the Commonwealth, which is another reason why we could not possibly enter into a Free Trade in agricultural products.

Mr. Paget

As there has been such misrepresentation on this matter, can the right hon. Gentleman make clear, as far as our agricultural support goes, that it is merely the means which enables us to take in from abroad vastly subsidised agricultural products miles below our cost of production?

Mr. Maudling

That would be an inaccurate description of our policy. But it is right to say that our policy of subsidising agriculture is merely one form of protecting agriculture of which tariffs and quotas, and so on are others. Of all the various forms of protection, I should have thought that quotas, for example, do far more harm to the would be exporters of agricultural produce than our system of subsidising the home farmer and having a free market.

The other reason why we must take a different view is because of our special connection with the Commonwealth. As the House is aware, we have given a clear undertaking to the Commonwealth countries to maintain their position in our markets for foodstuffs, drink and tobacco. I have found that our friends in Europe well understand our position in that matter. There is less understanding of the true nature of the Commonwealth system. I have been very disappointed to find that, even among some of our closest friends, there is apprehension about the way the Commonwealth and sterling system operates. There seems to be a failure to recognise that it is a balanced system and that, against the preference that we obtain in Commonwealth countries, we give in exchange almost duty-free and quota-free entry to a large range of commodities.

We also maintain a sterling system very often at considerable cost to our own economy, which is of great benefit not only to the Commonwealth but to the trading areas of Western Europe. It is important to continue to point out to our European friends, when they think about the Commonwealth system, that it is a balanced system and must remain so. It is a system which has contributed not only to our own prosperity, but has immensely contributed to the prosperity of Europe and the whole Western world. If we look at the trade statistics, it is remarkable how trade between the Commonwealth and Western Europe has rapidly expanded in recent years. That is largely because of the existence of the sterling system and the fact that the sterling system comes into the E.P.U. arrangements.

It is through that system that Continental countries can obtain access to the raw materials of the Commonwealth on an exactly equivalent basis to ourselves. I sometimes still find it said by countries—France, for example—that we can buy Commonwealth products much cheaper than they. I do not understand that. It is open to Frenchmen to go to the Australian auctions and to pay for the wool through the E.P.U. clearing. There is still apprehension on this point which would be well cleared up. As I say, we have assured them on more than one occasion that we shall maintain our position in the British market for foodstuffs, drink and tobacco, which is by far the preponderant part of Commonwealth trade with this country.

With regard to the import of industrial goods, to which my hon. Friend the Member for Chigwell (Mr. Biggs-Da vison) referred, the situation will have to be different. As we open our frontiers to Continental goods free of duty, so, clearly, in so far as Commonwealth countries have preferences in industrial goods, those will disappear compared with their Continental competitors, but not compared with the rest of the world.

Mr. Jay

Is the right hon. Gentleman referring to manufactured goods or raw materials?

Mr. Maudling

Manufactured goods. So far as raw materials are concerned, the position is the other way round. The Continental people complain that Commonwealth production is so cheap that they cannot compete with it. This is the case in the motor car industry and other matters referred to by an hon. Member. On the basis of the maintenance of the market in foodstuffs, I have found that our Commonwealth colleagues take an extremely understanding view of the European Free Trade problem.

I can sum up fairly the attitude of the Commonwealth Finance Ministers at the Montreal Conference last year by saying that anything which strengthens the European economy, and, particularly, strengthens the United Kingdom economy, must be of real benefit to the Commonwealth nations, because we are their main customers and their main suppliers of capital. Therefore, the stronger our economy, the better it is for them. That is the attitude which we would take on the two important points of agriculture and the Commonwealth, to which my hon. Friend the Member for Harwich referred in moving the Motion.

I repeat what has been said by one or two other hon. Members, including the right hon. Member for Battersea, North that it is important for our friends in Europe to understand the nature of the Commonwealth and the fact that it contributes not only to our strength, but also to the strength of Europe. As I have said in public more than once, it would be a sad thing indeed if we were forced to choose between Europe and the Commonwealth. I am quite convinced that there is no necessity for any such choice to be made. It is important for people to realise what a sad day it would be, not only for the Commonwealth, but also for Europe as a whole, if Britain were forced into the position of having to make any such choice.

One other matter to which my hon. Friend the Member for Harwich referred was the name of the new arrangement and it was referred to also by the hon. Member for Bristol. North-West (Mr. Boyd). I agree with him. "Free Trade Area" is a poor name, even in the light of the result of the Torrington by-election. If anyone can produce a better name, particularly if the French can suggest one, we shall be very glad to consider it.

Another matter which needs emphasising is that British agriculture is not more protected than the agriculture of other European countries, nor is it less competitive. British agriculture, in fact, should not think—I am sure it does not think—purely in defensive terms. If there is more trade and fair trade in agricultural products, there should be opportunities for us as sellers and not merely as buyers.

The hon. Member for Stechford (Mr. Roy Jenkins) made, as usual, an interesting intervention. I shall not go into any argument with him about the past. I still do not accept his arguments about discrimination, because I should have thought that by the most favoured nation clause in the G.A.T.T. we were bound very much in what we can do concerning tariffs, whereas in the field of quotas and import restrictions we are, surely, completely bound by the International Monetary Fund agreement to use quotas only for balance of payment reasons. Therefore, I would have thought that the degree to which we are entitled to discriminate was much more hemmed in than the hon. Member appeared to suggest. I was, however, encouraged when he finished his remarks by saying that if there were a change of Government, there would not be a change of policy in this matter.

The hon. Member then went on, as one or two other hon. Members have done, to talk about alternatives, about which I should like to say a word or two. I believe that it is our duty to achieve agreement on the Free Trade Area and to do it within the time I have mentioned. It would be wrong for us as a Government to be turned aside to consider alternatives now, but it is also important for people generally to realise that if the Free Trade Area does not come into being, the situation will become extremely fluid.

People in Europe must not assume that if there is a Common Market but no Free Trade Area, everything else— E.P.U., O.E.E.C, and so on—will go on as before. It certainly will not. It would be wrong for us at the moment, as a Government at least, to start thinking in terms of alternatives. It is, however, equally right to make it clear that no one should assume that the failure of the negotiations will not leave the situation otherwise than it is at present.

My hon Friend the Member for St. Albans (Mr. J. Grimston) made two or three interesting points about whether competition would be fair. It is clear that if we are to have freer trade, we must have fairer trade, and in the convention we must have rules—I hope, enforceable rules—to ensure that the competition is on as fair a basis as possible.

As for antidumping, we have our anti-dumping legislation and we have also the anti-dumping provisions of G.A.T.T., and I should have thought that those together would have been quite adequate, and that if anything can be put in to strengthen the anti-dumping legislation so much the better.

On restrictive trade practices, my hon. Friend the Member for St. Albans, I thought, was assuming wrongly that it would be necessary to alter our own Restrictive Trade Practices Act. Without going into too great detail, I would say that the articles in the Treaty of Rome on the subject of restrictive trade practices are a little confusing at the moment. So far as the Free Trade Area is concerned, I think that all we need on this subject is not a new code relating to restrictive practices but provisions to ensure that the purpose of freeing trade is not frustrated by barriers of a private character replacing barriers of a public character.

The hon. Member for Loughborough was a little more critical than others. It is always interesting to get the other point of view put on these things, but I am afraid that I cannot agree with him in many of the things that he said. He said that from the point of view of the Six for example, there would be disadvantages in a Free Trade Area and he asked what political advantages would be gained. This is an argument one does hear advanced. I think it starts from the assumption, which we would not accept, namely, the assumption that in entering a Free Trade Area Britain will gain industrially more than she will give. Though the Six will have the disadvantages of competition from British industry they will have the advantages of entry into the United Kingdom market.

I should have thought that the political advantages to the Six of a Free Trade Area are not only the maintenance of their relations with Britain and Scandinavia, not only the maintenance of unity of purpose and action that the O.E.E.C. has achieved in recent years. I believe myself that the Six will also find it easier to maintain their own cohesion and their own union within a Free Trade Area than they would do in a Europe divided into two conflicting trade camps.

The hon. Member referred, rightly, to the problems of the rules of origin which are causing us considerable thought. As my hon. Friend the Member for Henley said, Professor Carli, the Italian Minister, has produced a new scheme which is now being examined by a group of trade experts. We are going to give further consideration in Paris on Monday or Tuesday to that, so I am afraid that I cannot say more about it at the moment.

On the subject of certificates of origin, I think the hon. Member for Loughborough was a little under-estimating the experience we have had in the operation of Commonwealth preference. The problem cannot be a serious one, in any case in the first four or five years in the Free Trade Area. There will be exactly the same problem in the Community itself because there are no rules of origin here. On the other hand they do not start harmonising external tariffs until after the first four-year period.

So there is a strong argument for saying that we should not try to jump the fences before we reach them, and these problems can be serious only in so far as we have disparity between the tariff policies in the different countries, and in so far as they arise they can be solved by external methods or by other methods when they come along and when they can be properly assessed.

The hon. Member said that in investment we have a stasis. I shall not follow him into that, partly because I do not know what the word means and secondly because I have no statistics with me. Perhaps I may take it up on another occasion.

He raised another matter, the possibility of fractional unemployment, as the official phrase is, which may arise in certain industries when they feel the pressure of competition and he instanced one or two British industries which will feel Continental competition quite severely. Much will depend, of course, upon the general economic climate in which this takes place.

These difficulties are probably much less than they are thought to be. It is probable that the tariff reductions will take place over 12 or 15 years, which is a long period, and we have had an interesting experience in Lancashire, for instance, in the last ten years or so, of how, when transfers take place from one occupation to another, there is not unemployment so long as there are conditions of fairly considerable economic expansion.

Therefore, once again, this is a problem which one should not try to solve in advance, because it may never arise in any acute form. We must keep our hand free to meet it if it arises. The Six have a resettlement fund and they will have the ability to use that to support or help industries suffering from serious competition. In practice, they may have some difficulty in determining whether a firm is suffering from competition from another European country or competition from an Asiatic country, or even just suffering from sheer inefficiency. These are the sort of tests that one has to make if one is to operate any scheme of assistance to companies of that kind. But in negotiations we, as the United Kingdom, must make sure that our hands are just as free as the hands of the Six to do what we think right when the time comes.

My hon. Friend the Member for Henley spoke on these matters with very great knowledge. I should like to pay a tribute to the immense amount of work he has been doing recently in the Council of Europe on this whole matter. It has been of very great value to this country, because I think that the shaping of opinion in Strasbourg and its various subordinate organs is extremely important, and it has been useful indeed to us that our case has been so well and eloquently put.

My hon. Friend raised the question of Professor Carli's plan, and the fact that it is being examined, and he asked about a British paper on agriculture. The British proposals on agriculture were set out in the form of a draft agreement. The statement to which I have referred, which appears in HANSARD of 29th October, is our statement of principle, and our document is a draft convention based upon that statement. There has been no further British paper. There has been a certain amount of misunderstanding in the Press. I, as chairman of the Committee, am awaiting papers from one or two other countries. I have found it a little difficult when the British Government are expected to put forward all the suggestions for other people to shoot at and others do not put counterproposals. I am expecting shortly to have other proposals on the basis of which we can resume negotiations on agriculture.

As to the question of harmonisation, one can get rather mystified by words. If one starts off by trying to harmonise all the factors of competition, one is trying to abolish the only reason for international trade. As to social charges, there are particular points in the Treaty of Rome which we can perhaps repeat in suitable form in the Free Trade Area. We must bear in mind, first of all, that in this country Governments do not, cannot and would not interfere in matters of wage negotiation. That is quite out of the question.

Secondly, we should bear in mind that if there is to be any harmonisation one of the most important things to be harmonised is the true cost of labour. If there was any harmonisation of the real cost of labour, some countries with high social security services might find that they would have to harmonise upwards rather than expect us to harmonise costs upwards. We can tackle this problem be recognising that within the Free Trade Area people will inevitably work to come closer, in their own interests and of their own volition. It would be unwise to try to make too detailed and too precise commitments beforehand in these matters. One of the essential differences between a Free Trade Area and a Common Market is precisely the fact that one does not have in a Free Trade Area this integration of policies which one has in a common market.

My hon. Friend the Member for Essex, South-East (Mr. Braine) referred to a conference which is to take place at Stresa. I know nothing about this conference of the Six, and I do not know what their plans are. They are just as much entitled to discuss agriculture among themselves as we are entitled to discuss it among the Commonwealth countries. Therefore, I do not think that we could claim observer status with them any more than they could claim it with us. I am sure that the Six are anxious to keep their friends in Europe fully informed of what goes on.

Mr. Braine

The timing of this is enormously important. My right hon. Friend has told us that he hopes to reach his conclusions by July. This conference is to be held in the first week of July. The burden of my query was to find out how soon all those who are likely to be affected on our side of the fence, particularly in the Commonwealth, will receive information that will enable them to form a balanced judgment. Is it impossible to ask for an observer at that conference?

Mr. Maudling

I think my hon. Friend is confusing the Free Trade Area with the Treaty of Rome, because the effects to which he refers which are causing so much concern in Commonwealth countries, particularly as regards Kenya coffee, are the effects of the Treaty of Rome, which is a signed and ratified document that is being examined in G.A.T.T. at the moment. The right way to pursue the problem is through examination in G.A.T.T., and not through the Free Trade Area.

I will conclude by saying one or two things about the state of the negotiations. We have gone through practically every subject on our agenda in Paris and we have cleared a lot of matters out of the way. Yet it is only right to say that we have reached the stage where serious problems have to be solved. One always foresaw that would happen. We have cleared the ground and we can solve the basic problems which are inherent in the difference between the Free Trade Area concept and the Treaty of Rome concept, namely, to what extent can we reconcile our ideas based on the practice of O.E.E.C., and on the idea of freedom of trade, fair trade and mutual cooperation, with the rather different approach of the Treaty of Rome, with its concept of integration, leading finally. I would judge, to a common currency and presumably to some form of political integration.

It is often said in the Press that the argument is between the French and British Governments. On many of these things we take different points of view, but I do not think it is accurate to look at it as a Franco-British problem, because there are differing strands of all kinds in this matter and there are many things on which the British and French agree on which many other European countries would disagree with us.

I should make it clear that there is nothing in the nature of a French plan The French Government have always felt considerable misgivings and have expressed many reservations about the Free Trade Area proposals. I understand that these have now been embodied in a document of a more positive character which they are discussing with their partners in the European Economic Community. What is intended to emerge as regards the Free Trade Area negotiations is a document agreed among the Six Treaty of Rome Powers. It is important that this should be generally realised, because of the great significance which our European friends attach to the Treaty of Rome, on which their foreign commercial policy is to be based in future.

It is also important to realise that the French Government face many economic difficulties of a serious and particular character, though fundamentally their economy is an extremely strong one. The special character of the French difficulties was recognised in the Treaty of Rome itself. It is right that we should take full account of these difficulties and of the strains to which the French economy is subject. It is right not only because of our duty to have regard for the interests of our old friends and Allies, but also because it is clearly in the fundamental interests of Europe as a whole that the French economy should be as strong and sound as possible, and that the great developments in our industrial and economic strength that can now be foreshadowed should go forward with the minimum of disturbance. What we must seek in our negotiations, therefore, is a means of meeting the difficulties which the French foresee, without preventing the launching of the kind of Free Trade Area which it clearly is the general desire of the countries concerned in the negotiations to see established.

That is the key to the problem as it is at the moment. From that one can see different possible lines of approach. All the suggestions which the right hon. Gentleman and hon. Members have made are valuable, and in so far as we have not studied them already we will study them and also re-study them, because I share the view expressed on all sides of the House that it would be a tragedy for Europe if these negotiations failed. They have been long, they have been arduous. We are now running into an extremely difficult period, but it is not an occasion for despair in any sense whatever. The more the difficulty looms before us, the more at the same time the terrible danger of failure looms beside it. Therefore, caught between the difficulties on the one hand and the necessity of agreeing on the other, I am confident that we shall find a solution and find one soon.

Question put and agreed to.

Resolved, That this House, while recognising the reasons which have led to the formation of the European Economic Community, urges the need for a close association of that Community with other countries who are members of the Organisation for European Economic Cooperation.