EUROPEAN FREE TRADE ASSOCIATION

HC Deb 14 December 1959 vol 615 cc1055-178

3.55 p.m.

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)

I beg to move, That this House welcomes the Resolution adopted at the Ministerial meeting at Stockholm on 20th November and the action of Her Majesty's Government in approving the Convention establishing the European Free Trade Association contained in Command Paper No. 906. This Motion seeks the approval of the House for an important step in our foreign economic policy. I should like to try to explain how this step came to be taken and why it is important. To answer those questions, I think that we must look some way back into the post-war history of European and world economic affairs, into the evolution of the rules and ties which have governed international trade in those years.

Even before the war ended, there was a strong impetus to get rid of the import restrictions, high tariffs, bilateral dealing and discriminatory exchange practices which had been such a strangling influence on international trade in the years between the wars.

The countries of the free world saw the great material advances which were within their reach if they could release their trade from those impediments. By 1947, they had created two potent instruments for this purpose: the International Monetary Fund and the General Agreement on Tariffs and Trade. In the years following, both have made most effective contributions to the removal of barriers to trade and payments throughout the free world. By 1958, the volume of world trade was 60 per cent. higher than it was ten years before, but action on a world-wide basis was not enough.

Western Europe had been ravaged and weakened by war. Its industrial strength was very slow to revive at first. Real recovery began when Marshall Aid came along and the O.E.E.C. was founded. By close economic co-operation on a regional basis, supported by generous dollar aid from the United States, it was possible to begin freeing inter-European trade from the quantitative restrictions which had been the worst and biggest obstacle.

At the same time, the creation of the European Payments Union removed one important brake on trade by providing for credit and making possible multilateral settlements in the whole area of the O.E.E.C. countries. Indeed, the benefit extended wider than that, because trade in sterling with the sterling area and with other countries was included in those settlements, too. In ten years industrial production was all but doubled and intra-European trade rose to nearly three times its former level. These were tremendous achievements by any test. But with a momentum of this kind there was, clearly, still more to be done.

Though a great deal of progress was made, the tariff problem had not yielded a great deal to treatment on a world-wide basis, and it seemed to some European countries that there was a better prospect of tackling that problem on a narrower front. So we saw Belgium, Holland and Luxembourg come together in the Benelux Economic Union, and then we saw the Coal and Steel Community embrace those three countries and Germany, France and Italy as well.

Working in the same direction was a strong and growing urge towards political integration. The old strifes and old frontiers seemed to many minds not in keeping with the new European spirit and the new technological age. Those were, I think, the powerful influences that led to the signing of the Rome Treaty. We in the United Kingdom were impressed with this bold new venture and wished it well. We liked the prospects of stronger allies and more prosperous friends, but we had to accept the fact that we could not join it ourselves.

The reasons for that decision are, I think, familiar to the House. First, our strong ties with the Commonwealth could not be thrown overboard. If we had agreed to bring our tariff into line with the common external tariff of the Six, that would have meant the end of Commonwealth Preference and the end of Commonwealth free entry into this country.

The second reason was that our ideas of political links in Europe were different, and I do not believe that there would have been general support in this country for the aim of our political federation with Europe on the terms of the Treaty of Rome.

There was another problem. To submit our world-wide commercial policy to the decision of a group with which we did only one-seventh of our trade did not seem really realistic. Lastly, we could not honestly subscribe to the agricultural policy proposed under the Treaty of Rome, which would have entailed taking off the tariffs on agricultural and horticultural products within Europe. I think that there was general agreement between the Government and the Opposition about the difficulties which I have mentioned.

It has been suggested, I know, from time to time that we could get over the Commonwealth difficulty by bringing the Commonwealth countries into the negotiations. We discussed that possibility on several occasions with our Commonwealth colleagues without being able to see any daylight there. This is really not a matter in which, I suppose, we could expect to get a clearly defined Commonwealth view, because of the very different impact that Europe makes on different parts of the Commonwealth from the economic standpoint. One of the particular interests of the Commonwealth countries would, of course, be to expand their markets for foodstuffs in Europe, and that is not something which would fit very well into the pattern of European interests which would have to be reconciled.

Several of the European continental countries shared our inability to join the Common Market for the same or different reasons. But, though we could not take part, we certainly did not wish to stand aside. The prospects of a new economic division of Europe, perhaps leading to the break-up of the very successful co-operation in O.E.E.C., caused us a lot of misgivings, and we were not willing to contemplate with equanimity the political implications of such an economic division of Europe. We wanted to be able to share in the prosperity that a great single trading unit would bring with it, and we thought that we, on our part, could contribute a full share to it.

So, those were our motives in putting forward at the end of 1956 proposals for a Free Trade Area which would embrace all the members of O.E.E.C. A number of other European countries were motivated by exactly the same aims, and these proposals at that time received wide support—at the beginning almost unanimous support, in fact—and that seemed at one time to augur well for the success of the negotiations, which, as the House will remember, went on throughout 1957 and almost to the end of 1958.

Now, I should like to ask, if I may, because I shall not get another chance, precisely what is meant by the reference in the Liberal Amendment on the Order Paper to "association"? I must not talk about the Amendment much. I am really asking a question. If full membership is meant, then surely the Amendment should say so. If that is meant, and if the object of the hon. Gentlemen concerned is to set aside the formidable objections which I have just mentioned to joining the Common Market, then I hope that they will tell us how and why. If they really mean "association", I would remind them that with the broad support of both sides of the House we have been seeking to associate ourselves and the rest of the O.E.E.C. countries with the Common Market for over two years. That was, indeed, the object of the Free Trade negotiations to which I have referred, and it was an object which was approved by the Opposition, too.

Here, I should like to pay a tribute to the devoted work of the late John Edwards in the cause of closer European understanding. His work will be long remembered.

Hon. Members

Hear, hear.

Mr. Amory

These negotiations, unfortunately, did not succeed, and we had to think afresh. What were the choices which faced us then? The first choice was to join the Common Market, if we could. The objections to that course, as I have already mentioned, seemed just as compelling as they had done three years previously. Indeed, the negotiations for the Free Trade Area, I think, brought home to us still more clearly how grave the practical difficulties would be.

The second choice was to revive our own proposals, which had been so recently rejected. We came to the conclusion that that course would have been fruitless at that time. Another choice was to stand aside and do nothing. Would that have been a justifiable course? We judged not. All our instincts told us that it would not be. We were not alone in holding those views. Sweden, Switzerland and Austria had special reasons for not being able to join the Community, and they and the other Scandinavian countries and Portugal believed, as we did, that trade arrangements could be made to work without a common external tariff.

All of us felt that something positive was needed, so, in a series of meetings which led to the drafting of the Stockholm Plan, as it was called, last June, the Seven reached the conclusion that they could make practical arrangements to free trade between each other. We believed that this step would be not only of great value to the development of our own economies, but also the most useful step that we could, in the then circumstances, make towards freeing free trade arrangements throughout Western Europe, an objective which we all shared.

Mr. Harold Wilson (Huyton)

Will the right hon. Gentleman tell us when the Government decided to embark on these Outer Seven negotiations, since we recall that in the debate on 12th February this year the then Paymaster-General, now the President of the Board of Trade, referred only in passing to the proposals and was, I thought, extremely discouraging about the possibilities? At what stage did the Government positively decide to go forward with the proposals?

Mr. Amory

My right hon. Friend will no doubt be dealing with that period.

Our discussions with the other members of the Seven naturally took some time, but we began our discussions very shortly after the failure of the negotiations in December, 1958. The Stockholm Plan was approved by the Ministers in July, and we then called for the preparation of a convention embodying the proposals. The text was negotiated in a remarkably short time. The drafting began in Stockholm at the beginning of September and the Convention was initialled by Ministers on 20th November, and is now in course of being signed.

I mention that partly because it demonstrates the community of ideas which inspired the Seven Governments and their wish to come to agreement and partly because its success was in no small degree due to the preparatory work of a technical kind which had already been done in O.E.E.C. in 1957 and 1958. The result is before the House in the White Paper, Cmnd. 906. I should like here to pay a tribute to the work of my right hon. Friend the President of the Board of Trade in all these negotiations, which have now come to a fruitful stage.

As will be seen from this historical perspective, the E.F.T.A. Convention—the European Free Trade Association Convention—is a significant landmark in our progress towards closer economic co-operation. The objectives of the Association give the key to its scope. Those are not limited only to the expansion of foreign trade. Along with our partners, we are working to raise the whole level of economic activity in our respective economies, to ensure that our resources of manpower shall be fully employed, and to provide better living standards for all our people. So the scope is very wide.

The Convention is given in full and is summarised in the White Paper and I do not want to burden the House with a detailed description of what it contains. Essentially, it provides for the removal of tariffs and quantitative restrictions over as wide a field of trade as possible among the Seven by stages over ten years. It lays down the minimum of rules to ensure that the freedom which is created in that way shall not be frustrated by other obstacles to trade, such as export subsidies. In certain special circumstances, there has to be some temporary escape from the full rigours of the pace of removal and that also is provided for, together with the necessary minimum of institutional arrangements to run the organisation.

Perhaps I should call attention to one or two of the most important features of the Convention. The key Article is Article 3. That provides for the removal of protective tariffs on goods eligible for Area tariff treatment over ten years. The first reduction, of 20 per cent., is due to take place on 1st July next and the last of eight further reductions, each of 10 per cent., is to take place on 1st January, 1970.

The goods which are eligible are defined in Article 4. To qualify, they must be consigned from the Area and either be wholly produced in the Area, or, if they are not wholly produced, have undergone a listed qualifying process in the Area, or they must contain not more than 50 per cent. of non-Area materials. We are satisfied that those rules will enable us to maintain a proper control over imports from the Area, though, of course, they have yet to be tested in practice.

Mr. H. Rhodes (Ashton-under-Lyne)

Would the right hon. Gentleman's formula about "wholly produced in the Area" apply to wool tops and to the manufacture of worsteds from worsted yarn?

Mr. Amory

As that question falls so squarely within the responsibility of my right hon. Friend, I will ask him to take note of it. It is extremely complicated. Meanwhile, I refer the hon. Gentleman to the Blue Book, which will keep him occupied until my right hon. Friend replies.

In operating the origin rules, which are very important in a matter like this, we shall be relying on measures of cooperation among Customs authorities in the various countries. Provision is made in the Convention for that under Article 9. The rules of origin are very liberal. A glance at the list of qualifying processes in Schedules I and II of the Blue Book will give hon. Members some idea of those rules. For instance, the basic materials list in Schedule III contains more than 200 headings of raw materials which will be regarded as of Area origin, even though they are produced outside the Area.

At first hearing, that sounds rather strange, but as a result of it we estimate that the vast bulk of the existing trade within the Area will qualify under the rules to receive Area tariff treatment. That is a point of some importance to the rest of the world, since it means that there will be a very minimum of interference with the exports of materials and components from, for instance, primary producing countries. There is also nothing to prevent members, if they wish to do so, from changing their external tariffs on goods from third countries in furtherance of their wider trading interests.

Under Article 10, quantitative restrictions, as against tariff reductions, on imports from other members are to be removed as soon as possible and, at any rate, not later than the end of 1969. Meanwhile, quotas will be put on a global basis from 1st July next and, beginning at the same date, there will be annual increases in quotas of 20 per cent. Here again, there will be nothing to prevent members who wish to do so from enlarging these quotas for the benefit of third parties outside.

The E.F.T.A. countries have made it absolutely plain that it is not our intention to use quantitative restrictions as a means of creating a preferential area. In our own case, of course, we have abandoned the use of such restrictions on all but a handful of the industrial products which we import. I mention that point to stress the outward looking character of the Association.

We have tried to keep the institutional arrangements as simple as possible. In fact, we and our partners are showing ourselves to be very anti-Parkinson, if I may put it like that, in this matter. The Convention provides for a Council on which each member will be represented and have one vote. Its duties are laid down in Article 32. It will be for the Council to decide what other organs it needs to assist it. The fact that there is no express provision for consultation with organisations representing employers or labour is no bar to arrangements of that kind. The United Kingdom has taken up with our partners in the Seven the question of what arrangements for consultation with both sides of industry might be appropriate.

In voting, unanimous decisions will be necessary in the more important cases, including any extension of members' obligations for instance. But majority voting will be the rule in many cases, in particular under the procedure for dealing with complaints and where members are seeking authorisation for relief from their obligations in certain circumstances. The majority will be four out of seven votes. We believe that majority voting will allow much more effective operation of this part of the Convention, which deals with matters not of the very first importance.

What economic benefits do we expect from joining in these arrangements? The population of the area covered is about 90 million people, as against 160 million in the Common Market area, or in the United States. Our partners at present take about one-tenth of our exports as against about one-seventh in the case of the Common Market, but most of these countries are rich countries, with a high and rising standard of living. National income per head in Sweden and Switzerland comes closer to the American level than in the case of any other countries in Europe. These countries are traditionally dependent on overseas trade, and for all of them imports amount to more than one-fifth of the gross national product.

While the E.F.T.A. is little more than half as big as the E.E.C. in terms of population, in terms of national income it is about two-thirds as big and in terms of foreign trade about three-quarters of the measure of the Six. Our partners have an annual import bill of nearly £3,000 million. Of that, just over one-third is accounted for by foodstuffs and raw materials and over £1,800 million by manufactured goods. Their present imports of manufactured goods from the United Kingdom amount to little over £250 million. Most of those goods are subject at present to protective tariffs which, over ten years, will disappear. I think that that is some measure of the opening provided for our traders.

We do not look for any dramatic increase in exports, because many of the tariffs are low and the process of their elimination will be gradual. Moreover, these are rich markets and, for that reason, selective markets. The absence of tariffs will not secure us their favour unless we send them the goods that they want, but a great and growing opportunity is there for those with the initiative to take advantage of it. By the same token, our market will be open to goods from our partners. They will look to supply more of our imports than the 10 per cent. which they sent us last year. Some of their products compete with our own, but we ought not to reckon that as an alarming feature or as a disadvantage.

As consumers, we shall welcome the wider range of articles which should come within our means, and we should, indeed, be complacent if we felt that we should derive no benefit from the stimulus of fair competition from, let us say, the industries of Sweden or Switzerland. I do not envisage that this would ever be a large factor, but in our preoccupation with the stability of our general price level it is one which should not be disregarded. If hon. Members are interested in further details about current trade—I will not inflict on them any further statistics—a useful summary will be found in the issue of the Treasury Bulletin for Industry, which was published last Friday.

How will the Commonwealth be affected by the E.F.T.A.? We have been very careful to bear the Commonwealth's interests in mind all along and have been in consultation with the various countries interested throughout our negotiations. As a result of the outward-looking nature of the Association, and because of the greater economic activity that we should expect to engender in the Seven countries, I would hope that demand for many of the products of the Commonwealth countries could be increased. I certainly should not expect these arrangements to affect adversely our trade with them.

I should like to say a word to those who may think that the United Kingdom, in its anxiety to press forward with this Association, has ignored the interests of some of our own industries in this country. First, it is obvious that in an arrangement of this kind there will be increased competition, and there must be reasonable reciprocity—an exchange of benefits. From that point of view, it would be unrealistic to suppose, for instance, that the paper-making industry could be excluded from the plan. Nor would it have been possible for Denmark to enter the area or to provide an adequate quid pro quo for the fish exporting countries if nothing at all had been done about those products.

But agricultural products are not subject to the ordinary rules of the Convention on the removal of tariffs and quantitative restrictions, nor is fresh fish. We have made certain limited and clear concessions. Let us get the significance of these concessions into perspective. We agreed with Denmark to take the tariff off four agricultural items—bacon, blue vein cheese. canned cream and canned pork luncheon meat. In all these cases, because of our system of price support, any loss which may arise—some will arise; for instance, the loss of the revenue on the tariff—will fall on the Exchequer and on the taxpayer, not on the farmer; but home production of pigmeat is safeguarded not by the tariff which was put on for revenue purposes, but by the guaranteed price, buttressed by the long-term assurances, both of which will remain completely intact.

Major H. Legge-Bourke (Isle of Ely)

I entirely agree with my right hon. Friend that there is a proper safeguard for the producer through the encouragement given under the First Schedule of the Agriculture Act, but would he not agree that what matters from the point of view of the producer over the long term is that the consumer wants to go on taking up the production which has been stimulated artificially by the Government at the Annual Price Review? Will my right hon. Friend say how that can be assured now that we are in process of removing all controls on the importation of bacon?

Mr. Amory

Importers will not send imports of pigmeat into this country unless they are satisfied that they can sell them, nor will they send them in at give-away prices. But whatever comes in and whatever is produced will be sold. If it is sold at lower prices than otherwise would have been the case, the consumer will gain, but the taxpayer will lose, because the agricultural subsidies will be that much higher. The producer in either case will be protected by his guaranteed price.

We also agreed to take the tariff off frozen fish fillets, at any rate during the intermediate period of ten years, subject to a ceiling and an important reservation on fishing limits. As my right hon. Friend the Minister of Agriculture, Fisheries and Food has made clear, imports of frozen fish fillets at present are running at about 6,000 tons a year, which is equivalent to about 2 per cent. of total landings of fresh fish. Even if the ceiling of 24,000 tons is reached, that would be only equivalent to less than 6 per cent. of our landings of fresh fish. We are satisfied that the interests of our farmers and fishing industry have been effectively safeguarded. Unless we had been satisfied on those points, we should not have proceeded with the Agreement.

Such concessions as we have made have been very carefully chosen so as to have a minimum impact on our trade with the Commonwealth. Naturally, we did not get our way on every point in these negotiations, but we are sure that the Convention will cover our essential interests and that we shall obtain great advantages from it. That, I think, is also the opinion of organised industry in this country. I understand that about 70 per cent. of the trade associations approached by the Federation of British Industries positively favoured the proposals and more than half the rest were prepared to accept them.

Of the wider implications of the Association, I shall speak in a moment, but, even in isolation and seen solely as an exchange of economic benefits. I am satisfied that it is a good deal for this country and one which we can rightly ask the House to approve.

What of the next steps? The Convention is due to be signed by those who have approved it now. Early in the new year, we shall introduce the legislation we need to implement certain parts of the Convention. This will be a short Bill of a minor and technical character. because most of the powers needed already exist in the Import Duties Act, 1958. By the end of March, we hope that all the signatories will have ratified the Convention and when they have done so, it will then enter into force and the first tariff reductions and quota increases are due to take place on 1st July next.

Meanwhile, there is a lot of work to be done to ensure that the institutions of E.F.T.A. can begin to operate as soon as possible after the Convention comes into force. For this purpose the Seven have set up a preparatory committee which will meet in Paris shortly. That will not deal with exciting matters, but with arrangements for a secretariat and headquarters, framing a budget and national contributions to it, working out procedures for the Council and its subordinate bodies, and so on. That, however, is essential groundwork and our first duty is to get on with it in the same spirit of co-operation that has animated our discussions up to now. It may well be that we shall then have to work out arrangements for extending the scope of the Convention. There have been indications, for instance, that Finland would wish to be associated with the Seven. I would like to say, in passing, that that would be a development very welcome to the United Kingdom.

I should like now to turn to the first part of the Motion, which refers to the resolution passed by the Seven at Stockholm on 20th November. I will read its two concluding paragraphs: For these reasons, the seven Governments who will sign the Convention establishing the European Free Trade Association, declare their determination to do all in their power to avoid a new division in Europe. They regard their association as a step toward an agreement between all member countries of the O.E.E.C. To this end the seven Governments are ready to initiate negotiations with the members of the E.E.C. as soon as they are prepared to do so. Meanwhile views should be exchanged through diplomatic channels or in any other way, on the basis upon which such negotiations may profitably be opened. Let me explain why we regard the E.F.T.A. as a step towards the ultimate goal of wider association embracing all members of O.E.E.C., because that is still our goal. First, we believe that the formation of the Seven as a group is likely, in the circumstances which have been reached, to facilitate negotiation. The very fact that the Seven are acting as a separate group should dispose of the fears that the non-members of the Common Market are anxious to sink the identity of the Common Market in a wider association. There was never any truth in those suspicions, but they were a source of difficulty in the past.

Secondly, the Convention has been deliberately written in such a way that the timetable for carrying out the principal obligations—on the removal of tariffs and quantitative import restrictions—can be adjusted so that the Seven can keep pace with the Six if they want to. Thirdly, it shows that these countries believe that a free trade area without a common external tariff can be made to work. The practicability of such arrangements was a disputed point in the earlier negotiations of last year. Finally it demonstrates that the Seven, like the Six, are ready to expose their own industries to tariff-free competition. They are prepared to face what may sometimes be difficult adjustments in order to have free trade amongst themselves. That ought to make the next stage easier.

Of the desire of the Seven to come together with the Six, there is no doubt whatever. We have said in the same resolution that we are ready to initiate negotiations just as soon as the Six are prepared to do so. On our side, the Seven have kept in being the committee of senior officials which was responsible for drafting the Convention. That will prove a forum for discussion between us of relationships with the community.

Mr. Martin Maddan (Hitchin)

I do not understand from the White Paper, or from what my right hon. Friend has said, whether the plan is that the Seven initiate negotiations, or whether we wait for the Six.

Mr. Amory

We cannot initiate negotiations in that sense unless, of course, the Six are willing. But we do not mind from which side the suggestion comes. I shall be saying a word about that presently. All we want is to initiate negotiations at the earliest moment they can usefully be initiated.

Mr. Arthur Holt (Bolton, West) rose—

Mr. Amory

Will the hon. Member allow me to make just a few more remarks, which may cover the point he wants to make?

It would be premature to try to predict now exactly what proposals will be put from either side, and when, but we have left the Six in no doubt whatever where we stand. We have, however, had no proposals from them and it would be a mistake to rush into negotiations without preparation of the ground beforehand. When we start, we must make sure that we shall not fail. I assure hon. Members that we on our side will lose no opportunity, in any of the formal or informal contacts that we have with Ministers in other countries, of exploring each other's minds and deciding the best way forward and how soon substantive negotiations can usefully start. The right atmosphere cannot be created overnight and we shall have to devote a lot of energy and diplomatic effort over the coming months to persuading our friends in the Community that the economic division of Europe must be avoided if its political cohesion is to be maintained.

Mr. Holt

As negotiations on the Free Trade Area have broken down after great striving, and as, basically, what the Government apparently are trying to do is to start them again, I would have thought that when one talks about the initiative of the Government this must mean something new and that the Government will not get these negotiations started unless they have something new to offer to the Common Market countries that they have not offered before. Does the Chancellor have something new?

Mr. Amory

We must remind ourselves that it takes two to make a negotiation and an agreement. For the past year, our friends in the Common Market have been telling us that they will shortly make some proposal to us as a counter to the proposals that we have made to them. So far, however, no proposal has come. We hope that it will come before long. We on our side will lose no opportunity that we can see. Directly something occurs which gives us a renewed prospect of useful substantive negotiations, every member of the Seven will be keen to grasp it.

Mr. H. Wilson

The Chancellor said that he was expecting the Six to make some approach to us. By "us", does he mean the United Kingdom, or the Seven?

Mr. Amory

To the Seven, in response to the proposals that members of the Seven have made to the Six during the past year. In our opinion, still the best plan is something very much on the lines of the wider free trade association, in principle at least.

The attitude of the United States to these developments is also of great importance. In this connection, we have had some most useful exploratory talks with Mr. Dillon last week. Some of the accounts of these talks which have appeared in the Press seem to have appeared in a rather garbled form. There is no question of any American opposition or hostility to the Seven. We have the assurance of the United States on that score. Like other contracting parties, the Americans, naturally, have their views to express about the arrangements when they come to be discussed in the G.A.T.T., but there is no disposition on their part to question that the principles of the E.F.T.A. reflect the G.A.T.T. concept of a Free Trade Area.

As to the future, the Americans have expressed their interest in participating more closely in discussions about future trading arrangements in Europe, and we unreservedly welcome this interest. Mr. Dillon will be attending the meeting of the O.E.E.C. which is fixed for 14th January, and we shall look forward to some further discussions with him and our European partners on that occasion.

I began my remarks with some reference to the history of our wider external economic policy, and I have tried to explain why the European Free Trade Association is a new and important step in that direction which we have been continuously following in that policy. I should like to end on a similar note.

Our own economic growth in the United Kingdom is, first and foremost, dependent on increasing opportunities for selling our goods abroad. We have a tremendous interest, therefore, in the progressive removal of obstacles to trade in just as many markets as possible, and this is an interest which we share with the rest of the Commonwealth, and it is an interest, too, which we share with the United States, which, by its generosity and its example, has given a powerful impetus to progress in this direction in the years since the war.

That is why we have always given, and will continue to give, the firmest support to the initiatives which have been taken through the International Monetary Fund and the General Agreement on Tariffs and Trade to disencumber world trade from the restrictions which have impeded its development. That is why we have always hoped that the Six countries of the European Economic Community would be outward-looking in their policies, and we shall sincerely welcome any move on their part to reduce their external tariff or to extend the benefits of their cooperation outwardly in any other ways. That is why we have chosen a form of association in the European Free Trade Association which is not designed merely to secure preferences for the members in one another's markets, but to create new trade, rather than merely to divert existing trade from other countries. That is why we see in the European Free Trade Association not only benefit for ourselves and our partners, but an effective stimulus to the expansion of world trade.

We should be under no illusion as to the significance of the project. It marks a further major move by the United Kingdom into closer association in Europe. The rapidity with which the Seven countries have reached agreement and the good will evidenced among the partners during those negotiations is, I believe, a good augury for the success of the Association's economic objectives. Nor is the Agreement devoid of political meaning and achievement. Successful co-operation for broad ends such as those set out in the preamble to the Convention is itself a fact of great practical political significance and should contribute to further progress and working together in the political field.

I end by recapitulating again the three objectives that we have here. First, to bring into working order the European Free Trade Association, to which we have all set our hand. Secondly, to renew our efforts to inaugurate a fruitful negotiation with the European Economic Community, keeping in mind the interests of the Commonwealth and other members of the Organisation for European Economic Co-operation and of our allies across the Atlantic. Thirdly, to seize every opportunity of accelerating progress towards more liberal trading arrangements on a world basis through the G.A.T.T.

It is our firm conviction and resolve that with this outward looking attitude on the part of our partners and ourselves this new Association will make a positive and important contribution towards the closer welding together of the nations of Europe beyond the purely economic field, an objective which must surely attract the enthusiastic support of every Member of the House.

Mr. Rhodes

As the right hon. Gentleman leapt gracefully from Article 20 to Article 33, may I ask him, before he sits down, if he would just say a word on Article 17?

Mr. Amory

As I have spoken rather longer than I meant to, I would hope that the hon. Gentleman would wait and allow my right hon. Friend the President of the Board of Trade to deal with that.

4.45 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

The Chancellor began by giving us a fairly leisurely and wide-ranging survey of the history and course of European trading problems and then gave us a moderately detailed account of the Stockholm Convention. I am bound to say that he did not make this sound a very exciting departure in our trading policy, and, in form at least, he was not very controversial. I do not intend to try to make the Stockholm Convention sound more exciting than he did, because I do not feel it is subject to that, but I do intend to make one or two points which will be a little more controversial than the Chancellor has been.

Perhaps one may begin non-controversially, by congratulating the President of the Board of Trade, in particular, because he has shown us that at least when associated with the Chancellor and not with the Minister of Education he can negotiate a Free Trade Area, and that is something.

However, it is, of course, a Free Trade Area of very limited scope, and one which, in itself, will certainly not solve the major problems of our political or economic relations with Europe today. It is a Free Trade Area, too, which, I think, is modelled much too closely upon the old Free Trade Area which we failed to sell to the Six a year ago to be really healthy for the future.

Of course, we on this side of the House are not opposed to arrangements for close economic co-operation with these other six countries which are our partners in the Seven. Indeed, I think the idea was originally put forward in this House by my right hon. Friend the Member for Huyton (Mr. H. Wilson), and in a debate two years ago, which I looked up today—I cannot remember debates as easily as my right hon. Friend—I found that I made a mention suggesting this at the time of the private Members' debate initiated by the hon. Member for Harwich (Mr. Ridsdale).

We are certainly not opposed in principle to the arrangement with these other countries. They are close trading partners of ours. The type of Government of many of them is such as to commend itself to my hon. Friends, though I am not sure that that applies so strongly to Portugal as it applies to some of the others. Moreover, there are obvious advantages in enlarging our own market and in organising a group which can try to deal with the Six, without the necessity for an almost endless series of bilateral arrangements.

At the same time, do not let us exaggerate what has been achieved. First of all, although seven is a greater number than six, we must not be deluded by that fact into thinking that this Free Trade Area is remotely of the same importance as the one which we wanted to get and could not, or of the same importance as the Common Market itself. The Chancellor told us that the population of this area was 90 million and that of the Common Market was over 160 million, but, of course, of the 90 million we contribute more than 50 million. We are associating ourselves with a population of only about 35 million.

It is perfectly true that national income per head is higher in the Seven than it is in the Six, but I was a little doubtful of the adjectives about a "high and rising" national income which the Chancellor there slipped in, because certainly it is not rising as fast in the Seven as it is in the Six, which is another consideration we have to take into account. The Six have been for some time past and unfortunately show every sign of continuing to be a far more dynamic economic unit than the Seven.

Between 1950 and 1958, the growth in industrial production in the Six was no less than 50 per cent., and in the Seven over the same period it was only 25 per cent. The indications are that this is not something which is past and over but something which is going on. If one looks at how countries in Europe have come out of the recession of the last few years, one sees that there are only three countries whose industrial production is now more than 10 per cent. above the mid-1957 pre-recession level. Those three countries are the main countries of the Common Market—Germany, France and Italy. We ourselves and our partners are not in that position.

Furthermore, Germany is alone among the Western European countries concerned in having hoisted herself out of this slight recession by means of a spurt in industrial investment, and France is the only one who has hoisted herself out by means of a spurt in exports. All the other countries, including ourselves and our new partners, in so far as they have hoisted themselves out, have done so by increased consumption. That is a lesson which must be looked at in the future.

Furthermore, our partners in the Seven are already mostly low-tariff countries. Therefore, independently of the size of the market, the value of free entry into it is less than would be the value of free entry into relatively high-tariff countries, such as France, Italy and the Six as a whole. These are all considerations which we must take into account in evaluating what has been achieved.

There is something else slightly outside the range of economics which must be taken into account. It is that the partners in the Seven are not and never can be the heart and centre of Europe. They are countries on the periphery—culturally, militarily and politically—and any arrangement we make with them must be from their very nature peripheral to the problems of our relations with Europe as a whole.

Another point is the question of British dominance within this new area. Britain is undoubtedly very dominant within E.F.T.A., and 65 per cent. of the gross national product of this area will be accounted for by this country. We express concern about the dominance of Germany in the Six, but it is as nothing compared with British dominance in the Seven. It is 30 per cent. of the G.N.P. of the Six as compared with our 65 per cent. of the G.N.P. of the Seven.

Speaking only for myself, I think that one of Britain's greatest dangers in the world today is trying to live with Powers superior to herself and not being willing to live with her equals. As a result, there is a real danger that so far from achieving the power of one of the great power giants, she will find power slipping away from her more rapidly than from those countries who do not attempt to compete in this race and accept their position in the world more easily. Our dominance in this association may exacerbate that difficulty and foster our illusions of grandeur.

Therefore, whilst I am in no way against an agreement in principle with these countries, I agree with the Chancellor of the Exchequer in thinking that we must try to bring the Six and the Seven together. With luck and great concentration, I hope that in exploring the possibilities of this I shall not use as many clichés as the right hon. Gentleman used today. I would go further than him and say that the value of the Seven is largely to be judged by the extent to which it facilitates an arrangement between the Seven and the Six. And I must express some doubts as to whether the way in which the E.F.T.A. has been constructed is most likely to bring this about.

At this stage, another point should be made. It is really extremely important that British industry should know that the Government will decide at an early stage whether this Free Trade Area of the Seven is something which should stand on its own account or is to be something which definitely should lead at an early stage to a wider entry into the Six. For industry to adapt itself to new trading conditions and new tariff arrangements will be difficult and, to some extent, may be a painful task.

It is worth while, in the broader interest, to maintain the competitive and dynamic position of our industry, but it is undesirable to leave British industry in a position in which over a long period it will not know whether it is being asked to adjust itself to a favoured position in the Scandinavian market, for example, in return for a favoured Scandinavian position here or whether, in a short time, it will have to return to the position in which Germany will be in an equally favoured position in Scandinavia and ourselves correspondingly favoured in Germany, and the other members of the E.E.C.

The President of the Board of Trade (Mr. Reginald Maudling)

I absolutely agree about the importance of the position of British industry being clear, but it does not rest with the Government. It rests with the Six and with their attitude. The responsibility cannot rest with us, much as we should like to have it.

Mr. Jenkins

Of course. I will come to discuss what is involved in that consideration in a few minutes. What I was pointing out at present is that it is not a satisfactory position to say to British industry "In the short run we have given you this limited arrangement and maybe in the long run we will give you a wider arrangement0" and industry then finds that it has to go along in that condition for a very long time. That would be an undesirable position to present to British industry.

The point I was making before the right hon. Gentleman's interruption was that I am unconvinced that the form, as compared with the principle and idea of E.F.T.A., is likely to make it easier for us to have the rapprochement between the Six and the Seven that we all say we want. I have a feeling that in negotiating the E.F.T.A. we have been too much concerned with showing the Six that what they rejected is a perfectly workable arrangement. I think that the E.F.T.A. will be perfectly workable, but I do not believe that in the last resort the Six rejected the Free Trade Area because they thought it would not work. They rejected it because, whether it worked or not, it was not what they wanted. They wanted something much closer, with more political content, not based purely on the negative concept of old-fashioned free trade; and they feared that if they linked themselves to a free trade penumbra, concevied purely in these terms, they would weaken their own constructive purpose.

The Stockholm Convention does little to lessen those fears. The Chancellor said that it was negotiated remarkably quickly. It was certainly done quickly, but I am not at all sure how surprising that was because, apart from agriculture, it was the 1956 British White Paper expressed in treaty form. There are, of course, no supra-national institutions. The Council of Ministers deals with everything, occasionally operating under majority decisions but generally requiring unanimity; and the universal panacea of the "complaints procedure" is all we have to deal with any difficulties which may arise. There is no parliamentary assembly and not even an advisory committee or council on which the trade unions could be represented and to which, I certainly understand, the British T.U.C. would attach great importance.

The dogmatic anti-political approach enshrined in the Convention is summed up by what, I think, has been the Government's reply to that point—that the association is nothing more than seven Governments acting in consultation and that the correct approach for the trade unions should be directly to their own Governments. There are no arrangements or funds for helping backward areas; there are no arrangements or funds for readapting redundant industries and workers; and there is no arrangement for the upward harmonisation of social policies and wage levels, such as is contained in the Treaty of Rome.

There are some rules of competition under the Stockholm Convention. There are two rules which are about as tough as those which are contained in the Treaty of Rome. but they are purely negative. First, there is the rule which states that there shall be no export subsidies and, secondly, there is the rule which states that nationalised industries must operate on a purely commercial basis. However there is no provision, such as there is in great detail in the Treaty of Rome. for dealing with private cartels or private monopolies or private restrictions on competition. Full employment is written is as a general objective, but there is nothing specific, and again there is nothing to meet the representations which I understand the T.U.C. have made about this.

In the most recent debate we have had on this subject, on 12th February, John Edwards spoke. As the Chancellor said, we deeply regret his death. He will be greatly missed not only in this House but throughout Europe. He said that what we wanted was free trade with a difference; with such a difference that we might almost have to give it a new name. What we have here is free trade completely without a difference; free trade which is, to a large extent, in the classical, negative sense.

It cannot be expected that we on this side of the House would get very enthusiastic about an agreement based almost exclusively upon that. There is the further disadvantage that the negative approach enshrined in this Convention will make it much more difficult to negotiate an arrangement with the Six. One disadvantage of the Stockholm Convention is that it is designed far more to compensate for the blows to their self-esteem which the President of the Board of Trade and his colleagues received at Paris last year than to provide a bridge towards the Six. That is a major disadvantage.

If the Seven are not likely to be a particularly strong carrot for the Six,,are they then likely to be a particularly strong stick against the Six? Are the Government depending upon that to bring the Six round and to make them more willing to negotiate? If this is the Government's view, I doubt if it is a wise or well-founded one. I think we can discount the attitude towards the Seven which some people expressed in its early stages, that we should not join because it would provoke the Six. I think that would be altogether too weak and defensive an attitude and there is no evidence that it has provoked the Six, but equally I think there is no evidence that it will put effective pressure upon them.

It is true that the French, to some extent surprisingly, have given quite a warm welcome to the negotiations in Stockholm. There may have been an element in this of the French being anxious to keep the British Government occupied and not too eager to deal with the Six. There may even have been a feeling that if the President of the Board of Trade was in Stockholm, at least he was not in Paris worrying them. Whilst I do not suggest that this was exclusively their view, there may have been an element of this in it.

What we must not do here is in any way to under-estimate either the self-confidence or the coherence of the Six at the present time. To do that would be to repeat the main, basic mistake which the British Government have made in their approach to Europe for many years past, namely, to underestimate the force, particularly the political force, of the movement towards unity.

What, then, should we think in terms of doing? The basis of our approach must be something which I am bound to say I did not detect in the speech of the Chancellor. We should recognise that we have more to lose from a continuance of the present situation than have the Six themselves, and that the only basis for negotiation is to put a rather more attractive proposition to the Six than we have yet done, if we can do that without any sacrifice of our real interests.

Having signed, and being about to ratify, the Convention, we must move in future with our partners in the Seven, but do not let us under-estimate our strength there. I have already outlined this in numerical terms but we are also in a crucial balancing position. Some members of the Seven, notably Austria and Denmark, are more pro-European than we are and are more attracted by the Six and do more of their trade with the Six. Some members—Sweden and, perhaps rather paradoxically, Switzerland—are rather less pro-European than we are, but we are in the crucial balancing position and without doubt we can exercise a great influence upon our partners in the Seven. I believe that if we give them a firm and reasonable lead, they will largely follow it.

Neither do I think that the difficulties about the Commonwealth associated with a fresh approach are insuperable. After all, as the Chancellor hinted, the position of the Commonwealth is somewhat similar to that of the other members of the Seven. Some members of the Commonwealth have proved to be more pro-European than we have; certainly New Zealand was for a long time, and to some extent Australia. By all means let us have the fullest regard for legitimate Commonwealth interests, but do not let us erect the Commonwealth into an excuse for not doing something which we do not want to do for quite different reasons. I think the ease with which this agreement was reached without the Commonwealth proving an insuperable problem shows that when the will is there a great deal can be done without the Commonwealth proving difficult or without our letting the Commonwealth down.

What we must do above all in our approach to Europe is to move away from the purely commercial shopkeepers' attitude to this question because this has done us more harm than anything else in the past. I see the President of the Board of Trade looking quizzical I will give the right hon. Gentleman an example of what I mean. In the debate last February when we were discussing the 3 per cent. quotas—an issue about which to some extent all hon. Members felt worried—the right hon. Gentleman said that if the Six were to spread the 3 per cent. quotas generally over the whole Seventeen it would not cost the Six any more than if these were merely confined to the Six. The strong implication was, why on earth are they doing it unless it is out of pique? I think they did not do it—rightly or wrongly, and harmful though it may have been to us—because they were trying to make a new political community. That is what the President of the Board of Trade's agreement completely failed to appreciate. That is why he showed a fundamental misunderstanding of the forces at work in Europe, a fundamental misunderstanding which has done us great harm over the past four years.

Surely the political aspect of the position in Europe must worry the Government more than anything else at the present time. Of course, Franco-German rapprochement is a good thing, and a good thing for us, but the dilemma into which we have got ourselves is that Franco-German rapprochement seems only to have occurred in circumstances which exclude us from Europe and put us politically and economically in a worse position. It is that dilemma from Which I think we must break away. Therefore, I should like a little less of the shopkeeping approach and a rather more positive approach within the Stockholm arrangements.

I would like a more positive approach to be made instead of the purely negative arrangements which I have enumerated at length and which cause us on this side of the House considerable concern on their own account, let alone their effects in Europe. We must also do what we can to move towards tariff harmonisation with the Six. John Edwards spoke about this in the debate on 12th February and pointed out that he thought this was a much less difficult task than many of us had assumed. He was then setting on foot an inquiry conducted by P.E.P., the results of which we now have. That detailed inquiry certainly showed that every word he said then was correct and that the approach to tariff harmonisation is not nearly as difficult as we may have thought.

On this basis, in co-operation with our partners in the Seven, we should make an approach to the Six. We should do it at a propitious moment, and I am not by any means saying that the present is a propitious moment. I think a little time should go by, but not too much time. When we come to make the approach, it should not necessarily he made through O.E.E.C. We certainly do not want O.E.E.C., with its great record in Europe, to die. I do not believe that it need die, partly because I think that there can be a great future for it now in organising aid for under-developed areas between the Six and the Seven, and with America coming in.

I think it is very significant that Mr. Dillon is coming over again to attend the meeting in the middle of January. It is supremely important that we should make a response and get the Seven to make a response—I hope the Six will also make a response—to this American initiative, which, in a way, can be as important as the Marshall initiative in trying at this moment to get a more co-operative approach to world aid, because if we cannot do that with America staggering under the shock, after not having to give a thought to its balance of payments for a whole generation, suddenly discovering that it has been running a deficit at the rate of 4 billion dollars a year, there may be some extremely undesirable consequences so far as the American economy and political attitude are concerned.

There is a great future for O.E.E.C. there, but I am not entirely convinced that we must stick to O.E.E.C. as our chosen instrument for negotiating between the Seven and the Six. I think it arouses some suspicions, which may be misplaced but which should none the less be recognised. I hope also that we will not negotiate too self righteously. I know that when it comes to a detailed account of what went on in Paris, the President of the Board of Trade can give an extremely persuasive and convincing account of why he did everything at each particular stage. Also, I know that, looking back, one can find many very strong reasons indeed for Britain not associating herself with the various European initiatives of the past ten years. Yet, if we stand back a little, is it not the case that Europe has gone ahead and that we find ourselves increasingly on the side lines, both economically and politically? Can we feel entirely happy about that, or about the prospects for the future? Can we believe—all of us that it is always everybody's fault but our own?

We on this side of the House are not against the Outer Seven association. We certainly have doubts about its exact form, because of the extremely negative line which it has taken. We shall judge it by its success in working itself, and I hope in leading to something better and bigger in Europe. We do not minimise the difficulties of achieving that bigger and better arrangement, and, in particular, in view of their record of complacency, misappraisal and sometimes petty-mindedness, we are doubtful of the ability of this Government to achieve that bigger arrangement.

5.14 p.m.

Mr. T. H. H. Skeet (Willesden, East)

I think it was F. E. Smith who, on an occasion in 1906, succeeded in speaking on a fiscal Measure for a whole hour and succeeded also in giving support to his own side and exasperating his opponents. I hope that I can avoid either situation—the situation of exasperating the hon. Member who has already spoken from the opposite side of the House and also of speaking for too long.

I think the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) has been a little gloomy in his prognostications. Here, we have in Europe a great opportunity, and I think that the President of the Board of Trade, in his negotiations, is certainly to be congratulated on having initiated a step which is only a new interim arrangement which will ultimately lead towards a multilateral arrangement. I feel that at this stage Mr. Dillon, who is now in Europe, wants to do something to mediate between the Six and the Seven, and that this might probably be to our disadvantage.

I think that ultimately, if we could have slightly more co-operation on the part of the Commonwealth—and I am thinking of certain commodities from countries in Africa—and they could be associated with the European Free Trade Area, considerable progress should be made towards an ultimate solution. I think our bargaining factors will be manifest in this country. It appears to me that, when one deals with the per capita income of the Seven, that is in fact larger than that of the Six. When we take per capita trade of the Scandinavian quartet, which as a customer is second in importance to the U.S.A., the following facts emerge. In fact, the Scandinavians are buying from us at the rate of about £15 per head, whereas the United States at present is buying from us at the rate of about 35s. per head. I see prospects of expansion in the Scandinavian market.

One other factor which we should bear in mind is that France has a lot to lose in that 16 per cent. of her trade has been placed in jeopardy, and we should realise that France has a favourable trade balance with six out of the seven members of the E.F.T.A. We should remember, too, that Western Germany is extremely vulnerable. While 30 per cent. of her trade is with the E.E.C., 27 per cent. of it is with the Little Seven. Western Germany seems to be in a position in which she wants the best of both worlds, and what we have learned in the negotiations is that she would like to be a member of the E.F.T.A. and at the same time a member of the Community. I hope that ultimately a bridge will be formed, and it will be wrought by the attitude of Germany in these negotiations.

I hope hon. Members will appreciate the importance of Switzerland in this setup. Switzerland is the focal point at the present moment, apart from the United Kingdom, of United States investments. Over one hundred companies are represented there, and when one considers that Germany, for her part, exports to Switzerland about five times as much as we do in the United Kingdom, and when we consider, too, that West Germany exports to Austria about nine times as much as we do, we begin to realise the dependence of the E.E.C. on some of the important members of the little Free Trade Area. I say these things with some degree of confidence. It is probably erroneous to attempt to denigrate the value of the bargaining factors that we have available.

If I may mention another point, while the Commonwealth preferences seem to have fallen a little into disrepute, it is strange that we should find a compact of European States broadly acknowledged, and, at the same time, accorded certain privileges which are denied to the Commonwealth itself. I feel that we have to accept the inevitable and make the most of it. After all, Europe is extremely important to the Commonwealth, and that should not be sacrificed.

I should like in particular to mention the case of one firm in my constituency, that of S. Smith and Sons (England) Limited, more familiarly known in this House as manufacturers of watches and clocks, motor accessories and a host of instruments for industrial application. This company has been faced both with liberalisation of trade and the onset of the little Free Trade Area. It has been extremely seriously affected by the negotiations which have recently been going on. If we take the demand in United Kingdom for watches as approximately £6½ million, £3½ million is provided by the home market, £2.6 million is provided by the Swiss allocation, and a much lesser figure is provided by the global quota, principally from West Germany and France. When one realises that the Swiss manufacturers control and operate approximately 60 per cent. of the world market, one can understand how easily this domestic industry could be crushed. There are good grounds why it should be safeguarded. It is largely a post-war venture. In several instances the industry in this country has been located in Development Areas pursuant to Government policy, and further depends upon many skilled operatives who, if lost from the industry, would be lost altogether.

I hope that the President of the Board of Trade, when he replies to the debate, will confirm that an arrangement has been entered into with the Swiss authorities whereby the Swiss allocation is to be increased by 5 per cent. in 1960 and by 6, 7, 8 and 9 per cent. in the ensuing years. If that is the case, will he say whether he considers that this is safeguarding the watch industry in the United Kingdom, and whether he is prepared to take further steps under the Convention—namely, under Article 10 (8), Article 17 and Article 20, the second of which applies to dumping and subsidies and the third to industries which may be in distress?

The clock industry is surrounded by many difficulties. Approximately 60 per cent. of the world market is controlled by Western Germany, which can compete with the United Kingdom by surmounting the 33⅓ per cent. tariff. Western Germany can do that because her wages are 40 per cent. below the wages paid in this country and the hours worked weekly are 2¾ hours longer than in this country. If, on the other hand, she desires to work inside the framework of the little Free Trade Area she can do this by buying a factory in Switzerland or Austria and then she will be able to compete with us here with even greater force.

Another difficulty that I see is this. If we care to expand our sales in the Scandinavian markets, and on the assumption it is open to the Scandinavian countries, being low-tariff States, to arrange a low external tariff, we shall be in difficulties. This can be surmounted easily by the Germans and can imperil the exports already going from this country.

I apologise for having spoken at so great a length. I conclude by saying that I approach this subject with great confidence. I feel that if the negotiations which are in hand are conducted in close collaboration with the Commonwealth, and if we manage to win the confidence of thinking people in Europe, these negotiations will be brought to a satisfactory conclusion.

5.23 p.m.

Mr. F. J. Bellenger (Bassetlaw)

By a strange coincidence, the last time that I spoke in a debate of this kind in February it was my privilege to congratulate a maiden speaker, the hon. Member for Morecambe and Lonsdale (Mr. de Ferranti), and today I have the same duty to perform for the hon. Member for Willesden, East (Mr. Skeet). I think the House will agree when I say that he spoke cogently, fluently and briefly, all of which qualities the House always approves. Therefore, I think I can say on behalf of the whole House that the hon. Gentleman's maiden speech has been approved unanimously.

I should like to enter into a debate with the hon. Member, although I do not know whether I should be in order in doing so on such an occasion. I wonder whether the hon. Gentleman is quite right when he says that the working hours in Germany are longer than they are in this country. I am inclined to think that on average they are not.

Mr. Skeet

They are.

Mr. Bellenger

I believe that the average is less than in this country. The basic hours are 41½ per week. The actual working hours with overtime may be longer than they are here, and that is why so many people say that the Germans work harder than we do. I think those are the facts. I was studying them yesterday. They come from a German source, and, for what they are worth, I offer them to the House.

In listening to the Chancellor of the Exchequer this afternoon trying to explain the pros and cons—although I think he was dealing mostly with the pros—it struck me that perhaps, as my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) said, we are so inclined to consider clichés or platitudes in these matters or perhaps to do as the Chancellor has done and make a balance sheet of credit and debit items, that we overlook the real issue behind these conventions and treaties. I agree that in the main they are concerned with economic matters. The Rome Treaty was concerned with such matters, but there is no doubt that its main purpose was political and not economic. It is true that economic advantages were obtained by the six Powers, as economic advantages were obtained by the Coal and Steel Community, but their purpose was undoubtedly to form a strong partnership with which they could confront the great Powers, the bigger Powers, in their negotiations politically.

I should not be at all surprised, if the truth were known, that Germany in the shape of Dr. Adenauer, the Chancellor, was concerned overwhelmingly with the political issues. Indeed, I think I have mentioned once before that he even overruled the objections of very important and powerful industrialists who came to him protesting that the Treaty should not be signed. He told them, "Gentlemen, it is going to be signed; the political considerations are overwhelming."

Free trade as explained to us by the Chancellor is, in my opinion, a somewhat misleading term. It is evident to anybody who reads the Convention that it is shot through with all sorts of reservations, restrictions and qualifications. It is not really free trade. It is an agreement between the seven Powers to lessen the restrictive methods which now operate in the form of tariffs or quotas. To that extent I am in agreement, as I think most hon. Members are, with my hon. Friend who, though at one moment he said that he spoke for himself, was speaking from the Front Bench and, therefore, presumably for the Opposition.

I think "Common Market" is probably a better and more realistic name, and we can understand far more of what in intended when we examine the Rome Treaty. As my hon. Friend pointed out, it is quite different from this Convention in the attempt that it makes to alleviate the position of those trades, industries or countries which may be adversely affected for the time being by the operation of that Treaty. I suppose "Customs Union" would be the best description of any of these agreements. We have not got it in the Stockholm Agreement, as we have in the Common Market Treaty of Rome. I, for my part, accept the Stockholm Convention, as indeed I accept the G.A.T.T. and the Common Market. The whole purpose of these instruments is to lower tariffs and quotas. Perhaps they are selective in their impact, but I believe that these regional arrangements may lead to a much wider arrangement which will reduce restrictive action which is now operating to lower trade instead of increasing it in the world.

Having said that, I think it is necessary to examine the Government's policy in relation to European trade as a whole. Let us not forget that O.E.E.C. was set up for that very purpose and it seems to me—I do not know whether I am being unduly apprehensive—that the Common Market and the European Free Trade Area are to some extent, perhaps even to a large extent, whittling away the importance of O.E.E.C. If that were to happen, and if, concomitant with it, there were a loss of unity between the N.A.T.O. Powers confronted with a common enemy militarily, then, I suggest, the European Free Trade Association Convention would not achieve the purpose which the Chancellor mentioned, namely, bridging the gap between the Seven and the Six. There, I suggest, lies the test which we all ought to apply today. If it merely means another regional arrangement just like the Common Market, then, as sure as fate, at some time or another, rivalry will develop which will split Europe, not unite it. Hon. and right hon. Members do not need me to underline the danger of any split in Europe.

It seems to me that the Government have shifted their ground somewhat, and, probably that is why they have come to a mutually satisfactory arrangement with the other six Powers. In their earlier document, Cmnd. 72, they took up a very rigid attitude about agriculture. Speaking from memory, I think they said that agriculture would have to be excluded from any negotiations for the Free Trade Area which they were suggesting at that time. In Cmnd. 823, which contains the proposals put forward by the Government preliminary to the Convention they have entered into, they hedged somewhat on agriculture. I do not know—I leave it to hon. Gentlemen opposite to say—whether that is a good plan or a bad one; but what I do say is that the Government, in order to make this Convention, have made—I do not know whether to call them sacrifices—alterations in their views in regard to agriculture. Instead of excluding agriculture entirely, they now say that they will go some distance in order to reach a Convention by allowing certain interests, notably Denmark, to export more food products which are conveniently called manufactured products, particularly fish, into this country.

There is no doubt about the reason. "Needs must when the devil drives." The devil in this case is the Common Market, a successful organisation of six European Powers. Just as in the case of the Coal and Steel Community, which has been successful, the Government know that, if they maintain a rigid attitude, British interests will, in time. be affected as the other area organisations become more successful.

I ask, therefore, that the Government should be a little more flexible still. I do not think that hon. and right hon. Members on both sides of the House received the impression, at any rate from the speech of the Chancellor of the Exchequer, that Her Majesty's Government would do anything at all except wait until the Six approach us. It is fairly certain that the Six will not approach us. Why should they? They have got what they wanted and they have said that they will not depart one iota from the Common Market. So we must accept that as a fact. The Common Market is there and will stay there, probably because of political reasons, as I have previously suggested.

What do the Government intend to do? Even one of his own supporters intervened to ask the Chancellor what he really meant by taking the initiative. As far as I could understand it, he meant that he will wait for the other side, the Six, to take the initiative. If that is so, he is adopting what we might call a "Micawber" attitude or, as Mr. Asquith would have said in days gone by, a policy of "wait and see".

That is not a policy with which Her Majesty's Opposition can agree. We believe that the Six and the Seven may divide Europe and may affect British interests in the long run. I hope very much that the occasion will come when we shall not only urge the Government but move a Motion, expressing our view in that way, not by a thin attendance in the House on a thin one-line Whip such as we have today. I hope that the Opposition will put down a Motion censuring the Government and condemning them for their Micawber-like attitude.

Mr. Amory

I hope that the right hon. Gentleman will read carefully what I said, because that is not at all what I conveyed. We shall not simply wait until the Six approach us. I read the terms of the Resolution and I said that no opportunity which could be provided would he too early for us. We should be very glad to negotiate, but it requires both parties to be prepared to negotiate. The sooner we can enter into negotiations, the sooner shall we be pleased.

Mr. Bellenger

That reminds me a little of differences between husband and wife. They separate, and then they may be able to go to a marriage guidance counsellor to bring them together. The Government have available to them all manner of diplomatic means. Why not take the initiative? When the right hon. Gentleman reads his own speech tomorrow, he may be satisfied about what he said, but there are doubts in my mind—other hon. Members will say whether I am right or wrong—about whether he would be particularly anxious to pursue the initiative. It is true that there are officials left behind, contact men, as it were, between the Six and the Seven who, somehow or other, will get together over a lunch or something like that; but I want more than that. I want the right hon. Gentleman the Chancellor or the Exchequer, speaking on behalf of Her Majesty's Government, to assure the House that the Government will do something.

Mr. Amory

The right hon. Gentleman will recall that I said that, in every one of our formal and informal contacts with other Ministers, we should be exploring each other's minds and trying to find a basis for a start of negotiations. It is no good starting negotiations unless there is some common ground. We want to start, and we are perfectly prepared to make our contributions there in order to find that common ground and start negotiations as quickly as we can.

Mr. Bellenger

I do not know what contributions we are prepared to make. We have only the documents before us and the speeches made in the House and elsewhere, but, so far, there does not seem to have been much contribution offered by Her Majesty's Government. What I am saying is that the Government, in order to reach this Convention, have departed from the rigid attitude with regard to agriculture they took up on the earlier, wider free trade negotiations. I hope I am not misrepresenting the right hon. Gentleman. I turn to the official document which says, To this end the seven Governments are ready to initiate negotiations with the members of the E.E.C. as soon as they are prepared to do so. What does that really mean? Do we wait until they tell us that they are prepared to do so, or are we to endeavour to pursue with them the end to which reference is made?

Mr. Amory

We have asked them already whether they are willing to enter into negotiations.

Mr. Bellenger

Perhaps we shall have to question the Foreign Secretary on the matter. Obviously, we have here only the chartered accountant in the case, and what we want is an assurance from the Foreign Secretary that he will pursue through diplomatic channels the end the right hon. Gentleman says he wants to achieve.

Where are we now? We were told in the last debate by, I think, the President of the Board of Trade, that the previous negotiations failed because of France. I looked up his speech only last night. He seemed to indicate that France was the "nigger in the woodpile." No doubt, France is a difficult country to deal with, especially under her present Government. Nevertheless, where do we go from there?

The right hon. and learned Gentleman the Foreign Secretary recently made a trip to Paris. He told the House very little of the results of the discussions he had with his opposite number there. I believe—and when I have said it on previous occasions I have received the approval of the President of the Board of Trade—that it is the Foreign Secretary who must take the initiative and not the Chancellor of the Exchequer or the President of the Board of Trade. The issues are political and until the political differences are removed we shall not get any link between the Six and the Seven. If the French are still reluctant, what will the Stockholm Convention do to induce them to come and talk with us, or at any rate to receive negotiators?

It will be obvious to the House that I have considerable apprehensions about what will happen. I am not so much worried about the trade position, because the E.E.C. and the Coal and Steel Community arrangements have, strangely enough, resulted in increased production and exports, at any rate from those markets. It is possible that the Convention will result in an expansion of trade to a certain extent. I cannot say to what extent because no estimate has been given by the Chancellor of the Exchequer today. Perhaps the President of the Board of Trade can give us some idea of the figure when he replies to the debate.

I cannot help feeling, in the same way as other right hon. and hon. Members who were in this House before the war cannot help feeling, that once again the Government are displaying the apathy and lethargy which the Government of the day displayed in the negotiations with other countries, particularly Russia, which ultimately led to war. [HON. MEMBERS: "No."] Hon. Members may not like to admit that fact, but it is on record that the Government sent an "office boy" delegation to Moscow to deal with Russia which at the same time was dealing with Ribbentrop in Germany.

Those incidents and events underlie my apprehension. In those days we thought that we had plenty of time and that something would turn up, and something did turn up. I do not want to be alarmist and say that there is danger of war. There is not a danger of a military war, but there is a danger of a trade war. If that trade war assumed the proportions which I apprehend, it would have considerable political results which might be unpleasant for this country.

The real issue is not Europe. We have two power blocs, Russia and America. Russia has the whole of Eastern Europe geared to manufacture goods for her own ends. It is a monolithic enterprise. We have here, on the other hand, two sets of Western European nations ranged loosely together in two groups to cope with that danger. As we know, it is a danger because Russia in her cold war is now using her economic advantages to gain admission into countries where she is prepared to lend money cheaply and where trade will certainly follow the flag.

Could not the Government do more than they are doing at present? Those of us who know something about Germany know that, with the exception of heavy industry, practically all the industrialists there are in favour of an agreement with Britain. They have said so. Even their Economic Minister, Professor Erhard makes public statements to that effect. Had a Cabinet Minister done the same thing in this country his resignation would have been demanded. Professor Erhard showed clearly that he was not in agreement with his Chancellor, but apparently Dr. Adenauer has power to overrule any of his Ministers. There is no doubt that in Germany there is an intense desire, at any rate amongst industrialists, to come to terms with this country.

Within the D.B.I. in Germany, which is the equivalent of the F.B.I. here, the chemical association has, through its president, expressed alarm at the isolation of the Rome Treaty. There are certain other industrial organisations in Germany under the aegis of the D.B.I. which think the same way. I do not know how we can reach those organisations. After all, industry plays a powerful part in any economic negotiations. But for the approval of the F.B.I. and the T.U.C. in this country, the Government could not have concluded the Stockholm Agreement. Surely it would be possible, without formal representation, to bring that point of view in Germany nearer to our own. That is what I mean by "taking the initiative".

If the Chancellor of the Exchequer feels that I have misrepresented him to the House after hearing his speech today, the President of the Board of Trade ought to tell us precisely what is meant by "taking the initiative". Does it mean, as I gathered from the Chancellor's speech, waiting for the approach to come from the Six—

Mr. Maudling indicated dissent.

Mr. Bellenger

—or does it mean waiting for the Seven to take the initiative? It is all very well for the President of the Board of Trade to shake his head. Right hon. Members opposite are all very much misunderstood men, but the fact remains that the President of the Board of Trade did not get his own way in the negotiations in which he took part. If he had been successful he would have claimed the credit, but there is a lot that goes to his debit.

Mr. Maudling

We have invited the Six to sit down at the negotiating table with us. Until they come there is precious little point in sitting down by ourselves.

Mr. Bellenger

I urge the right hon. Gentleman to continue his good deeds. I cannot for one moment believe that the Six have definitely said, "No, we do not want to negotiate with you." Indeed, we know that they have contacts on the official side ready to deal with people on our side.

If the Six are refusing to deal with us at all what is the good of putting into the Convention the phrase: … the seven Governments are ready to initiate negotiations …". The President of the Board of Trade ought to come clean and tell us whether the Six have refused to negotiate with us at all, or whether there is any hope if we initiate negotiations with them.

In conclusion, there is one factor which strikes me as favourable. When the Common Market was set up America expressed approval of it. She did so on political grounds. She wanted the Common Market to combat the danger from the East which, in spite of the projected summit talks, is still very real.

The Chancellor of the Exchequer told us today that America has not disapproved of the Stockholm Convention and that Mr. Dillon was engaged in talks with Her Majesty's Government. I wish that the Government would tell us a little more about the talks. We could then understand what these talks mean or at any rate understand the Government's difficulties in initiating discussions with the Six. So far we have not been told very much. After all, America used her influence in a big way with the Marshall Plan, which put Europe on her feet, and the Common Market countries were the principal benefactors from that plan.

If America used her influence on the Common Market—we understand those countries are the obstacle to agreement between the Six and the Seven—I believe that she might be able to achieve what this Government so far have failed to bring about. I should not mind if that happened. There is no question of prestige so far as I am concerned. I believe that the long-term issue is so serious that the sooner we get a united Western Europe the better it will be, not only for our political safety but our economic improvement.

Although once again, as they did in February, the Government escape with merely mild reproofs from the Opposition, this cannot go on for ever. Hon. Members on this side of the House have, I hope, assisted in a responsible fashion to give an opportunity to the right hon. Gentleman who was negotiating for the Government. We have even abstained from debates while the negotiations have gone on, and so I do not think it can be alleged that we have not added our weight to that of the Government. But the Government have produced nothing concrete except this Free Trade Association Convention. I do not disapprove of it, but I do not believe that it will bring great advantages to this country. Therefore, it is up to the Government to deliver the goods as soon as possible.

5.51 p.m.

Mr. R. H. Turton (Thirsk and Malton)

This is not an easy speech for me to make, but I feel that it would be wrong not to voice my very grave misgivings over the Stockholm Treaty and the policy that it represents. The right hon. Member for Bassetlaw (Mr. Bellenger) referred to mild reproofs from the Opposition. My misgivings stem from a completely opposite pole.

The right hon. Member for Bassetlaw referred to Britain and Europe, in a euphonious term, as husband and wife—that was our only relationship—and to the need to try to keep a bridge between the Outer Seven and the Common Market. As I see it, the importance of Britain's position in the world lies in the fact that from Britain radiate the sea lanes and air routes throughout the world. I agree that our position should be that of a bridge, but a bridge between Europe and America. Asia and Africa. That is our position as head of a Commonwealth of primary producing countries which depend for their standard of life upon our ability in our relations with Europe to get more of the Commonwealth trade into Europe.

Thus, our influence, our employment and our own standard of living depend upon that Commonwealth partnership. That is the setting in which I look at this Stockholm Treaty and this White Paper. If we neglect the Commonwealth, if we become so engrossed in Europe as is suggested by the Liberal Party Amendment, let there be no doubt at all that we shall sink back and become a small, insignificant, over-populated little island, and we shall not be able to support our population.

In the 55 pages of the White Paper which my right hon. Friend the Chancellor of the Exchequer summarised in his speech, I have not found one mention of the Commonwealth. We, the head of a great Commonwealth, enter what is supposed to be a significant Treaty without once mentioning the Commonwealth. Let me be fair. Under Article 43, Cyprus will have this Convention applied to her so long as she has international relations with us. But when Cyprus attains sovereign status, even though she chooses Commonwealth status, those advantages—if they be advantages—will be torn from her and never returned.

It is true that Gibraltar and Malta are specifically excluded from this Stockholm Treaty, although I agree that under Article 43, paragraph 2, they can apply later to be members. But, by and large, this Stockholm Treaty does not, in my view, take account of our position as it should be, as a bridge between Europe and those other Commonwealth countries.

The Chancellor of the Exchequer mentioned the amount of trade involved. Even though it be the fact that the Commonwealth share of our trade has, unfortunately, been declining year by year since 1955, let us at least remember that trade with the Outer Seven represents only 9 per cent. of our total trade, with an adverse balance last year of £45 million.

I have been trying to work out what is the amount of trade done by the Commonwealth with the Outer Seven. I have not the figures, but reading "International Trade," published by G.A.T.T. last year, one finds that the whole of the overseas sterling area, including some non-Commonwealth countries, as a whole sent £84 million worth of exports to the Outer Seven. It suffered an adverse balance of trade of £55 million and that total represented merely 2½ per cent. of the trade of the overseas sterling area. Surely, if that trade is so small, and if it is also showing such an adverse balance, in our negotiations at Stockholm we should have done something to improve the Commonwealth share of the trade with the countries comprising the Outer Seven.

My right hon. Friend the Chancellor said that five industries were to be sacrificed for this advantage, and my hon. Friend the Member for Willesden, East (Mr. Skeet), in an able maiden speech, added a further industry from his constituency. I admit that there are occasions when, under free trade, we may have to sacrifice, or harm, home industries to achieve greater compensating advantages, especially where an industry is able to change over to new processes; where factories can be retooled and the labour brought from the places where they live to those new processes. We cannot have the rigid dogmatism of protection or free trade now. We have to look to the full advantage of the nation as a whole.

But let us examine the five industries which will be harmed by this Agreement. First, there are the pig farmers; secondly, forestry; thirdly, the young ancillary of forestry, the pulp industry, which is just beginning to get going in this country; fourthly, paper making; and, fifthly, the fishery industries. The great difficulty is that the small farmer, whose mainstay is pig breeding, the foresters in the State forests or in private woodlands, and the fishermen, cannot move into another factory or another industry in the places where they live. We cannot retool any factory to provide them with fresh employment.

The result, therefore, is that they have to escape the effects of this Treaty by moving from the country to the town. The unfortunate part of free trade with these particular Scandinavian countries is that it adds to the depopulation from which we suffer. It means that the urban areas get more congested and the whole population structure of the country gets even more top heavy.

We have been told that that is all right, we can make it up in a Price Review, but the forester and the fisherman do not have a Price Review. Let us not have the wool pulled over our eyes on this matter. If the Chancellor says that we must get this Agreement to help the Danes, or to help the Swedes, that we are to take more of their pigs, more of their timber, or more of their pulp, it must mean fewer pigs, less timber and pulp produced in this country. We must get away from the delusion about the Price Review.

Let us see exactly what we get from this Treaty. At present, the Outer Seven countries take £1,400 million worth of imports from the Common Market. As the Chancellor said, it is expected that under the Agreement there will be some deflection of trade from the Common Market to ourselves as a result of the Agreement. The hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) was perfectly right; we are, quite clearly, the dominating partner in this. The advantages of deflection will come to British industry rather more than to other countries' industries, but if we are to deflect imports from Western Germany—which is Sweden's traditional customer-to ourselves, how are we to avoid deep division and suspicion in Europe?

It cannot be surprising that when we go to Western Germany we find deep suspicion of these negotiations and of the Stockholm Treaty. We cannot be surprised that our policy is not understood in France. I know that, as the Chancellor said, in the resolution all these countries have declared their determination to do all in their power to avoid a new division in Europe. If it fails, if there is no deflection_ these five industries will be sacrificed to no purpose and there will not be division in Europe, but, if it succeeds, it must create further division in Europe.

My main misgivings are of a quite different character. That is what has impelled me to speak this afternoon. We are living in a period of military and nuclear co-existence—very largely due to the bold initiative of the Prime Minister in his mission to Moscow. But do not let us be under any delusion, that while there is a form of military stalemate in Europe, the Communists, the Russians and the Chinese, are waging an economic and ideological war in the areas of the uncommitted countries of Asia and Africa.

My chief criticism—I felt this strongly as I listened to the right hon. Member for Bassetlaw and the hon. Member for Stechford—is that our preoccupations in Europe are being seriously misunderstood in Asia and Africa. Anyone who has travelled lately in Asia and Africa finds that the peoples of those countries are suspicious of Europe ganging up against them. I found that wherever I travelled in recent months.

There is in this Agreement nothing to increase trade with the underdeveloped countries in Asia and Africa. If we cannot give them some help in our arrangements, quite clearly others will take our place. Figures of our international trade show that the under-developed countries generally have been suffering from grievous adverse balances in recent trade. Last year, Europe took 12 per cent. less in primary products from the primary producing, semi-industrialised countries outside Europe than in the previous year. Last year, the Commonwealth trading deficit, excluding Britain, amounted to £914 million, which was an increase of about 20 per cent. over the previous year.

In the G.A.T.T. Year Book, this comment is made on page 123: The trading results of 1958 again brought to the forefront the disturbing trends which have characterised the recent trade developments in the non-industrial countries. It is abundantly evident that the non-industrial countries cannot continue to experience indefinitely trade deficits of such extraordinary magnitude as those recorded in 1957–58, and any further expansion in their imports can only take place if there is a corresponding expansion in their ability to export. The real danger of this Agreement—

Mr. Roy Jenkins

Does not the right hon. Member think that the difficulties of the primary producing countries in 1958 were due not to European trading arrangements so much as to the fall in industrial production in the world?

Mr. Turton

I think that it was due partly to a fall in commodity prices and an American recession, but a great deal of this was due to our failure to take active steps to promote trade between Europe and the underdeveloped countries. Quite contrary to the hon. Member, I believe that the great failure of both sides of the House in recent years has been that our preoccupation with Europe has caused us to neglect opportunities for trade with the Commonwealth and under-developed countries throughout the world.

That is my great criticism of this economic policy. I believe that at present we in this Chamber should be seeking to devise an economic policy to help the Commonwealth primary producing countries and to arrest that trend. If we do not do that, I am quite certain we shall lose the economic war with the Communists.

I know that I shall be told that that is impossible because of our international commitments and because our preferences are bound. At present, it is against policy to enter bilateral agreements and the idea of reciprocity is regarded as an impolite word in international circles. We are the only country which regards these chains as binding us to a policy which is not to our advantage. The Common Market itself is a new preferential area at a time when we have to keep Commonwealth Preference out of date. The shipping policies of all countries in the world except ourselves are founded on discrimination. Our tenders in the United States and our trade generally with that country are subjected to discrimination which is contrary to the whole idea of multilateralism which this Government so slavishly worships.

It must always be Britain's function to keep her agreements, but it is not her function never to revise them. The chains ought now to be refashioned if they are not to be renounced. We must have freedom to work out a Commonwealth economic policy which will help to stabilise commodity prices, which will increase the amount of inter-Commonwealth trade and which will seek to do what this Agreement does not—to increase the quantity of trade between Europe and Commonwealth countries. Those should be our three aims.

At the Montreal Conference, the Government, with ceremony, laid a most important foundation stone for the building of that economic policy. I sometimes feel that since that date the architects and builders have been absent, playing a game of sixes and sevens in Europe. I hope that the Government will recall them to their task so that by the time the Commonwealth Prime Ministers meet, in May, as I hope they will, we shall see at least the first storey of the building—an economic policy for an expanding Commonwealth.

6.12 p.m.

Mr. John Cronin (Loughborough)

I am surprised that the right hon. Member for Thirsk and Malton (Mr. Turton) made such a sweeping condemnation of the Stockholm Convention. We on this side of the House sympathise with his wish to develop the Commonwealth and to give more help to the under-developed countries, but we feel bound to give some praise, if only faint praise, to the Stockholm Convention.

An interesting circumstance of the Free Trade Area debates is the way in which they demonstrate the extraordinary Parliamentary ability of the President of the Board of Trade. I am sorry that he is not here to hear this praise. He was in charge of the negotiations throughout most of the last Parliament, and every month he had nothing to report but failure and stalemate. One feels, therefore, that on this occasion, when he has had a minor success, he ought to receive a thunderous ovation from his hon. Friends.

Going back some time, I cannot help feeling that a grave error was made when this country did not participate as a negotiator in the Messina Conference. The Chancellor of the Exchequer today pointed out, quite legitimately, that we could not subscribe to the Treaty of Rome because of our obligations to ensure that the Commonwealth continues to have free entry to and preferential tariffs with this country. Equally, we could not subscribe to our economic policy being dictated by the countries of the Common Market. The small proportion of our trade with those countries could not justify any sweeping changes in our economic arrangements. We obviously could not accept the present position of the Common Market in respect of horticulture.

All this, however, is based on the supposition that the Treaty of Rome would have been just the same even if we had taken part in the negotiations. Surely, if we had sat down at the conference table as negotiators we could have overcome most of the difficulties. I do not say that we could necessarily have joined in the economic arrangements as they are now drafted, but we could have so modified their nature that we could have associated ourselves with the European Economic Community much more closely than can be hoped for now. I feel that a very helpful opportunity to further our economic purposes was lost in 1955.

Even the Stockholm Convention has not been negotiated at the initiative of Governments. It was hon. Members on this side of the House who first pointed out its desirability. We drew attention to the necessity to reach some arrangement with countries outside the Common Market, and subsequently it was the Federation of British Industries and the industrial organisations of Great Britain and Sweden which took the initiative in starting to seek a basis for negotiations and commencing studies of the plane. The Government acted so tardily that although all negotiations in the Common Market broke down in November 1958 it was not until June of this year that any serious action was taken.

Although the Stockholm Convention obviously has some useful purpose and will give some marginal help in our export trade—a very small help but always worthwhile—and although it also holds up the creation of bilateral agreements between Common Market countries and countries excluded from the Common Market which would be detrimental to our interests, nevertheless the Stockholm Convention has some serious intrinsic disadvantages.

It has something of a house-of-cards stability. It contains numerous escape clauses. Countries of the European Free Trade Association can change the Treaty substantially if they have security reasons for it. According to Article 19, they can change it if they have balance of payments difficulties. According to Article 20, they can change it is they are in any difficulties in certain industrial sectors. There is also a clause in the Treaty whereby the whole time-table can be changed. The Treaty is very loose and certainly cannot be said to have anything like the binding force of the Treaty of Rome.

Another unhappy circumstance of the Stockholm Convention is that all the signatories tend to have different interests. There is no close combination of interests. Austria, by nature of her trade and her geographical position, would obviously have a better bargain if she joined European Economic Community. Sweden would prefer a low tariff structure rather than a high structure. Switzerland, Austria and Sweden all want to guard their neutrality jealously, Switzerland as a traditional feature, Austria because of the international peace treaty and Sweden because of her proximity with Soviet Russia. Norway and Denmark are far from satisfied with the agricultural and fishing clauses of the Treaty, and it is certain that they will want more and will exert pressure to obtain more. Above all, we cannot escape from the fact that the other members of the European Free Trade Association cannot afford to wait and delay some arrangement with the Common Market, because their interests are suffering all the time.

The Chancellor of the Exchequer spoke of the economic value of the Association. He gave us a build-up which would certainly get him into trouble if it was a company prospectus. He told us, rather glibly, that we would now have 90 million people to sell our goods to. He did not mention that 65 million would be the population of Great Britain. He mentioned that there would be a big expansion in an organisation of countries as far as gross national products and trade were concerned. Again, he did not mention that in gross national products and trade we completely dwarf all the other countries in the Association. We always think of the Chancellor of the Exchequer as having a built-in halo, but one feels that on this occasion he was misrepresenting to the House the advantages of the Convention.

There is no doubt that the countries of the European Free Trade Association are expanding their economies very slowly. We shall certainly not have the advantages from joining them which we would have had with the rapidly expanding Common Market countries. It is not likely that there will be any appreciable effect on our domestic price structure, because most of our raw materials and semi-manufactured imports come in duty free. Scandinavia and Switzerland are already low-tariff countries, and it is very difficult to believe that there will be more than a very small marginal improvement in our exports to those countries. The tariffs are so low that it would be a simple matter for our competitors, such as Germany, to scale their prices accordingly. Germany could easily deal with a tariff of a few per cent., which is all we are dealing with. It would be very simple for Germany to keep her prices down until such time as she can put her factories into the European Free Trade Association countries and build up her trade accordingly.

It was suggested by the Chancellor of the Exchequer that the Association will be valuable from the point of view of negotiating with the European Economic Community—the Common Market. Here again we will meet serious difficulties. It is not likely that any value will be obtained by economic pressure, because the country which will suffer most from the discrimination of the Association will be Germany, and Germany is the country which has done most to try to accommodate us with the European Free Trade Area concept in association with the Common Market. After Germany, the country which will suffer most is Holland. Holland, again, has been most anxious to help us with a European Free Trade Area. The country which will suffer least is France, which has a comparatively small trade with Scandinavia and Switzerland. France has been the principal objector to the European Free Trade Area.

I do not think that we can adopt a "holier than thou" attitude to France, because we are a high tariff country in the same way as the French are and have had the same protectionist traditions. It may be argued that the European Free Trade Association will show that the Free Trade Area concept has some validity, but there is no real analogy. Great Britain is the giant in the Association, surrounded by relative dwarfs, and Great Britain is a high tariff country which has only to make minor modifications to her economic policy to meet the difficulties which might arise with her partners in the Association. There is no real analogy between the European Free Trade Association and a possible European Free Trade Area including the Common Market.

I go so far as to suggest that Great Britain will be hampered in future negotiations, because by joining the Association our freedom of action will be considerably reduced. It would have been much easier for a high-tariff country like Great Britain to obtain some accommodation with a high-tariff country like France than for low-tariff countries like Scandinavia and Switzerland to do so. Sweden, Switzerland and Austria will be compelled by their strict obligations towards neutrality to avoid any closer commitments with the Common Market than we might suggest to them. In that respect, we will be hampered in negotiations. Perhaps the most important aspect of that matter is that, although obviously we had obligations, being the leader of the countries outside the Common Market, those obligations were loose, but they are now formalised by the Convention and will therefore hamper our activities accordingly.

We on this side of the House would like to know what the Government intend to do. So far, we have merely heard from the Chancellor of the Exchequer that the Common Market countries will produce alternative suggestions and we shall wait until we hear from them. There has not been the slightest indication that the Common Market will produce alternative suggestions. I should like the President of the Board of Trade to tell us when winding up what we will do if the Common Market does not produce alternative suggestions. Will the whole case go by default and will we do nothing further? This is clearly a grave situation—not only economically and because of the danger of the high tariff wall in Europe which will face our exports, but on account of the serious political danger. Europe has never been so hopelessly divided. The Soviet bloc of countries is standing by as a tertius gaudens. The Eastern horizon is dark with the threat of economic and even political encroachment. We can look for no great help from the United States. She already has her own serious problems with her balance of payments and is not likely, whatever Mr. Dillon may have said, to go out of her way to encourage a tariff wall against her exports. The view is bleak unless some positive action is taken by the Government. There is not unlimited time for action. I hope that we shall hear definitely from the President of the Board of Trade that the Government intend to devise some sound plan for negotiation with the Common Market countries. Great Britain can now unite Western Europe as far as possible by exertions and hearten the free world by her example.

6.28 p.m.

Mr. Neil Marten (Banbury)

This is another maiden speech. The custom is for an hon. Member on his debut to make a preamble asking for the indulgence of the House. I should rather like to take this opportunity of thanking the House for the indulgence it has shown to many new hon. Members so far. I hope that it will continue to show indulgence for the next few minutes. It is true that a new Member speaking from this side carries away with him the image of those sitting on the Opposition benches. Therefore, my thanks are particularly due tor the expressions of indulgence, tolerance and patience which we watch on the faces of hon. Members opposite as we make our maiden speeches.

I have the great honour to represent the Banbury division of Oxfordshire. Many hon. Members will no doubt think of my constituency as one of rolling countryside and very pleasant Cotswold stone villages. In terms of population, it is about 60 per cent. industrial and about 15 per cent. agricultural, so that the Free Trade Association comes into it on both sides. For example, in Banbury itself we have the Great Northern Aluminium Works and, further south, near Oxford City, live many of those who work at the Pressed Steel works and the British Motor Corporation works. They work outside my constituency, but sleep in it. Further to the west, at Witney, we have, as has the hon. Member for Willesden, East (Mr. Skeet), the firm of Smith's. In his constituency he has Smith's Clocks, and in mine we have the same Smith's, which is engaged in work for the motor car industry. We therefore have a fair interest in the Free Trade Association.

Among the 15 per cent. farming population there is, of course, a great number of pig farmers, but while the pig farmers have made their protests to me, there have been no comments from the industrial side; and, in any case, I think that the pigs have had a fair ration, if I may call it that, of debate in this House, so I do not propose to talk about them now.

I want to deal with only one aspect of the Free Trade Association. Many speeches have been made and many articles have been written referring to a degree of alarm at the danger that failure to bridge the gap between the Common Market and the Free Trade Association will lead to a political division of Western Europe. The right hon. Member for Bassetlaw (Mr. Bellenger) and the hon. Member for Loughborough (Mr. Cronin) both mentioned this.

Without wishing to be contentious in my maiden speech, I want to question that theory and to ask how far the political division of Western Europe is possible in the present context of politics; and, also, to ask whether, in fact,we are not underlining a little too heavily this fear of political division in Western Europe. Before the war we certainly had a political division of Europe, thanks to Hitler and Mussolini. who approached the whole way of life in a manner that we could not accept. That caused a political division. Post-war, we have a political division of Europe with the Iron Curtain. That is a political division. But I cannot conceive of a political division of Europe being due to the fact that we have a separate Common Market and Free Trade Association.

If that is so, we might, perhaps, stop using this fear of the political division of Europe as one of the pillars for the bridge that we are trying to construct between the two trading areas. I think that we have perfectly honest and genuine reasons for trying in the Free Trade Association to "cosy up," as it were, to the Common Market. We have a fear that if we do not do that we will lose our export markets in the Common Market countries. That, in turn, could produce unemployment here. That is a very sound reason for wanting a bridge between the two trading areas.

Again, we want to be quite certain that from those exports we generate enough capital here to pass it out to the Commonwealth and to the under-developed countries. Those are good reasons; and better than the somewhat doubtful reason of fear of the political division of Europe. Europe, as I see it, is so interwoven these days that it will be very difficult to divide Western Europe in the former context unless political philosophies are altered, as they were by Hitler and Mussolini.

Let us examine this question for a moment. The first thing is that, broadly, we in Western Europe have common ideals about freedom, and we hate all dictatorship. Then, we have the United Nations, which we have joined, where very often the countries of Western Europe act in concert with one another. We have the North Atlantic Treaty Organisation, with common defence and integrated common structures. It is under stresses and strains at the moment, but I think that those may be overcome.

Next, we have Western European Union, where we sit with the six members of the Common Market. That is a bridge. We have the Council of Europe, where the countries of the Free Trade Association and of the Common Market are mixed up. That is another bridge. There is the Organisation for European Economic Co-operation, which has already been referred to-both the Free Trade Association and the Common Market countries are in that. In finance, we have the European monetary area and the International Monetary Fund. The threads go back, criss-crossing all the time to keep Western Europe fairly well welded together. In addition, we have the General Agreement on Tariffs and Trade.

All those are bridges, but running through the whole theme is the thread of American co-operation, which is one of the most useful bridges that we can use to try to get some agreement between the Free Trade Association and the Common Market. We must now go out positively to encourage America to remain in Europe, and not to start withdrawing to America. As has been mentioned by the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), with America's present balance-of-payments deficits, that might be a danger.

In trade—the very subject of this debate—we have great companies like Shell and Unilever's spanning both trading areas, and I see in The Times today that the British and French aircraft industries are to get together in the production of modern aircraft and guided missiles. Therefore, in trade, we have the bridge working. Again, our diplomacy continually works towards that end. Disarmament talks join us together, and, indeed, the summit talks themselves show that there is a vital common interest where we have the Free Trade Association and the Common Market countries all working together to the same end.

There are difficulties in Europe; sometimes they are great, sometimes they are small. There will always be difficulties in Europe, but I believe that the political difficulties we have today are not caused in any significant way by the Common Market. Even if, in the event, there is political integration in the Common Market, with their own Parliament, I do not think that that closer political integration necessarily spells a division of Europe. After all, we may see common markets arising in other parts of the world. The Arabs may have a common market, the countries of South-East Asia may have one, and there may be a common market in Latin America. We cannot say of each, as it emerges, that there will be a division in the world, otherwise the world would be hopelessly divided.

That being so, I conclude by asking that we should not get too alarmed about this threat of a political division in Europe. I do not think that it is quite so real as many people make it out to be, but by tending to talk too much about it we tend to make it greater than it really is.

6.39 p.m.

Mr. Arthur Holt (Bolton, West)

I am glad to follow the hon. Member for Banbury (Mr. Marten), and to offer him, on behalf of the House, the warmest congratulations on his maiden speech. He is in, as it were, the fortunate position of being a sort of neutral in this argument between the Six and the Seven, as I believe that he gave great assistance to the resistance movement of one country in the Six during the war and, later, great assistance to that of a country in the Seven. He also has the great advantage of having been educated in Lancashire, and may have learned something of the old ideas of Lancashire free trade.

The hon. Gentleman made a very pertinent point when he said that we could emphasise too much this idea of a split in Europe. If I may say so, from the very beginning of these debates I have always been against the negative attitude. I have always said that we ought to go into Europe because we think that it is a good thing to do and not because we do not want a split. I still maintain that position. The hon. Gentleman is quite right in saying that Europe will probably survive—certainly, the Common Market will survive—if we do not manage to achieve any association with it. Nevertheless, it is a very important matter for Great Britain, and, after all, in this House it is primarily the interests of Great Britain about which we are concerned.

I should, at the outset, like to answer the questions asked by the Chancellor of the Exchequer as to what exactly we meant by our Amendment on the Order Paper, which is not to be called by you, Mr. Speaker. We say that we regret … the failure of Her Majesty's Government to associa'e Great Britain with the countries comprising the European Economic Community. The right hon. Gentleman asked what we meant by "associate". It has reference to what has gone past. We certainly believe that the original Free Trade Area idea was a very good idea and that, had negotiations been conducted with far greater elasticity, it could, in fact, have been brought to fruition. We could be wrong on this. I do not pretend to be dogmatic about it.

We have made various suggestions from time to time as to how the Government, quite reasonably, could have gone further than they did. Nevertheless, the thing has failed. Our view is now that the old Free Trade Area is as dead as the dodo, and that the sooner the House recognises this fact, and decides what the alternatives are, the better There is not the remotest chance of getting it again. I think that if we start off—and this is my chief complaint about the Seven—with new negotiations, making some concessions and hoping to get a Free Trade area again, that will fail, also, but I should like to develop that as I go along.

It seems to me that the Chancellor, unfortunately, has not moved at all. I find this very extraordinary, because I wonder what he expects to achieve. Presumably, he expects to achieve something by setting up the Seven. That is certainly what it says in the Convention. It hopes that this will be the means of getting some agreement between the Seven and the Six. Yet when the Chancellor listed the four special points which he thought would help get this, they were, that this would facilitate negotiation; that the timetable arranged was the same as the Common Market; and that by setting up this Free Trade Area it would show that it could work. The fourth thing was to demonstrate that we were ready to explore any other possibilities. I cannot see that the Six will be impressed by the fact that the Little Seven area does work with the use of certificates of origin and the like, because I do not think that that was the stumbling block originally.

The hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) seemed to agree, in his speech, that many more things should be accepted by the Government than they were ready to accept before when they started to negotiate the Free Trade Area. I can imagine some other things that he may have had in mind. He mentioned some of them, particularly the harmonisation of social services, bringing up at an early date the question of equal pay for women, and also, I think he mentioned, the harmonisation of the outside tariffs. I would accept all those things, but I still do not think that they will now, although some of them would certainly have helped before had we been prepared to accept them, encourage the Six to open negotiations again and make progress towards some kind of agreement between the two.

I should like to illustrate some of the points which I want to make on the problem of the Commonwealth, about which the right hon. Member for Thirsk and Malton (Mr. Turton) was so concerned. He said that our suggestions for going into the Common Market would have the effect of making Britain sink back to being a little, over-populated island. I think that those were his words. I hope that I can reassure him. It is to some extent largely because we think that if Britain does not go into the Common Market, exactly that will happen, we want her in. If Britain allows herself to be side-tracked into a kind of backwater in Europe, while the main stream of European progress goes on without us, what will the Commonwealth be attracted to—to us in this backwater, or to the main stream of European development?

Mr. Turton

Is the hon. Gentleman suggesting that if we went into the Common Market we could retain the whole of the Commonwealth preferential system?

Mr. Holt

I am coming to that. It is something which I am quite prepared to face up to. I would say that the answer is "Yes", so far as the kernel of the thing is concerned, but there would have to be some trimmings on the edges.

May I refer, for convenience, to the debate which took place on 26th November, 1956, the first debate that we had in the House on this subject. The Chancellor of the Exchequer at that time was the present Prime Minister. He said: … I believe that we all agree that it is quite impracticable for the United Kingdom to join such a Customs union … If the United Kingdom were to join such a Customs union the United Kingdom tariff would be swept aside and would be replaced by this single common tariff. The right hon. Gentleman said, "Swept aside". I should like to draw the attention of the House, once again, to how one can misinterpret words in this whole business, which has been going on for so long.

Mr. Geoffrey Hirst (Shipley)

The hon. Gentleman is a past-master at that at the moment.

Mr. Holt

If the hon. Member has some point on which he wishes to correct me, I shall be very glad to have it. I am only wishing to keep to the facts as I see them.

When the Prime Minister used the words "swept aside" that is not, in fact, true. I think that many of us thought so at the time—I certainly did. What has appeared, as we have examined the facts of the situation, has been this: so far as the tariffs on manufactured goods are concerned, our tariffs are very similar in the result to the tariffs which the Common Market are to have as their common tariff.

So, when the right hon. Gentleman talks about sweeping ours aside, actually, if we were to amalgamate with the Common Market tariff, there would, on the whole, be less change in our tariff than probably in that of any other country's tariff in Europe. That is the first point which I want to make. There are a number of countries in Europe: Benelux, Germany, Sweden, Switzerland and Denmark, which are low tariff countries, and France, Italy, Austria and Portugal, which are high tariff countries, and we are in between and a bit on the high side.

The next point that the right hon. Gentleman made was this—and I am not saying this in criticism of the Prime Minister, because I think that many of us felt the same thing at that time: We could not expect the countries of the Commonwealth to continue to give preferential treatment to our exports to them if we had to charge them full duty on their exports to us. He went on to say: I do not believe that this House would ever agree to our entering arrangements which, as a matter of principle, would prevent our treating the great range of imports from the Commonwealth at least as favourably as those from the European countries."—[OFFICIAL REPORT, 26th November, 1956; Vol. 561, c.37.] We all say, "Hear, hear", but was that, in fact, what would have happened?

An examination of the figures has since shown that in the great range of imports which come from the Commonwealth duty free, about £700 million, in 1958, was the value of the agricultural group, for which there is, in any case, a separate agreement in the Common Market negotiations. There is no reason to think that we could not have achieved a duty-free importation of agricultural goods from the Commonwealth even if we joined the Common Market.

In addition, there is a further £700 million worth of raw materials which comes in from the Commonwealth duty free. What is the position about that in the Common Market? Many of those are to come in duty free. Decisions have not been made on many of them because they are on what is called List G, but it was thought at one time that there might be some difficulty because there were suggestions that there would be a small duty. But the latest discussions in the Common Market have produced the suggestion that these might be dealt with not by putting a small duty on them, but by providing a subsidy in some Common Market country which would otherwise require protection. The commodities included in that reference are sulphur, lead and that sort of thing.

There is no decision as yet. I should not like to mislead the House into thinking that all these raw materials will come in duty-free, but the indications are that the majority will. There may, however, be some with a small duty imposed on them. If there were some with a small duty imposed on them, and we were in the Common Market, this would be an interference with our policy of free importation from the Commonwealth, although that would be a small area in which, I suggest, it would be proper for us to negotiate.

Mr. Anthony Kershaw (Stroud)

Would the hon. Gentleman explain how, if we are bound to give to countries in the Common Market a duty-free import into this country of their various products, we are to continue to afford to the Commonwealth and other countries an equal share of our market as before?

Mr. Holt

A large part of our imports—about six-sevenths—come in duty-free now. Our tariffs are confined largely to manufactured goods. In that group the Commonwealth does not greatly compete. That is the next point that I was coming to.

In the last group of Commonwealth imports—manufactured products, including textiles, motor cars from Canada, and so forth—the imports into this country last year were about £139 million. If we were inside a common tariff ring of the Common Market, these would be subject to the tariff which was agreed for those articles, whether textiles, motor cars or machinery. But that is a small group, valued at about —139 million.

We are, therefore, left with this situation. By our going into the Common Market, our policy of importation from the Commonwealth would be infringed to the extent of £139 million of manufactured goods and a few raw materials. I am not suggesting that we should give that up immediately, but that is the extent of what I would say we should have to bargain about.

If we once told the Common Market, "We are prepared to come right into the Common Market; we are prepared to adhere to it", it does not seem to me that the difficulties about the Commonwealth importations into the United Kingdom are so great that they could not be resolved in the bargain to some extent.

Sir Arthur Vere Harvey (Macclesfield)

It seems to me that the position of Australia, as the hon. Gentleman described it, is fairly accurate, but he is discounting the tendencies of countries like Australia which are already sending to this country manufactured goods, such as motor cars and fountain pens. He ought to anticipate that that trend will increase rapidly over the next few years.

Mr. Holt

I agree that one should look at trends. But this is where I disagree with the right hon. Member for Thirsk and Malton and with the hon. Member for Macclesfield (Sir A. V. Harvey). It seems to me that in the light of development of Commonwealth trade it is much more likely that the trade of our Dominions—Australia and New Zealand, for example—will develop naturally and geographically with places nearer to them rather than extend greatly in our direction.

Let us take South Africa as an example. The pattern of trade between ourselves and South Africa has changed tremendously over the years. Whereas it used to do most of its trade with us, it now trades with Central Africa, America and the American Continent generally. New Zealand is one Dominion which has maintained her trade remarkably with the United Kingdom. I do not know, however, whether one can expect that pattern to continue much longer, if one considers merely the geographical point of view and the natural development that is likely to take place in Asia. There has already been a tendency for Australia to increase her trade with America.

Mr. Turton

The hon. Gentleman is trying to explain how Commonwealth preferences could be retained in the Common Market. But I ask him to consider Australia. Australia gets preferences on butter, cheese, meat and wine. How could we, by going into the Common Market, get the other countries to agree to these preferential treatments?

Mr. Holt

When the right hon. Gentleman talks about preferences in that way I agree that they cannot be obtained. But the important point, surely, is that we should keep an open door into the United Kingdom.

As to whether one should continue increasing preferences, as I think is the wish of the right hon. Member for Thirsk and Malton, I would merely say that so far as I can see, the interests of both the Commonwealth and ourselves will be best served by keeping the open door, but not increasing the preferences, and, as far as the Common Market is concerned, reducing the preferences. This has already happened with bacon.

Mr. Rhodes

While the right hon. Member for Thirsk and Malton (Mr. Turton) is getting his breath for the next round, may I say that he is making very heavy weather of all this? The right hon. Member was quite right, and I think that the hon. Member for Bolton, West (Mr. Holt) agreed with him. But there is another reason why the Common Market does not wish to take us with the Commonwealth, and that is Hong Kong.

Mr. Holt

I do not quite see the relevance of that. We in this country have accepted the importation of textiles from Hong Kong, and they have been coming in in much larger quantities. I think that we should still make such arrangements as we can with Europe to allow these things to come in.

But this is part of what would have to be bargained for. It is relevant to this extent, that, of course, countries in the Far East wish to export a great deal more to Europe. Whether they particularly want to export textiles to Europe or other things is another matter. It is more likely that other products will be developed for export to Europe. [An HON. MEMBER: "Come on."] The hon. Member for Ashton-under-Lyne (Mr. Rhodes) put me off my place in my notes.

The third point about Imperial Preference, which can be brought to the bargaining table, is simply what the Commonwealth countries give us in preference in our exports to them. I should think that Europe would be very interested in this. The Imperial Preference benefit which we gain has been dwindling over the years. It is not a matter of great moment, except in a few cases. But it is worth a great deal in the general atmosphere of negotiations within Europe. It is one thing which the Europeans have always complained about. They have said that, if we do not bring Imperial Preference in all its forms to the bargaining table, we want to get the best of both worlds.

We in Britain should say that we are prepared to give up the benefits which we have in the Commonwealth through Imperial Preference. It will then be up to the Commonwealth countries to say whether they will allow European exports to go into Australia or New Zealand, for instance, on the same basis as ours, or whether they will use the actual tariff height which we have and apply that to all those having most-favoured-nation clauses and not just to Europe alone. The latter, I think, would be the better way.

It seems to me that the whole problem of the Commonwealth in regard to the Common Market has been greatly exaggerated. There is really no reason whatever, within the Commonwealth, why Britain should not go into the Common Market. Quite the contrary. If Britain stands aside from the main stream of European development, the Commonwealth will become less and less interested in London and this country and will turn to developments in Europe, because there will be a large expanding market with which the Commonwealth will wish to trade.

Apart from all that, of course, the political implications are even more important. Before I close down—[Laughter.] I have been sidetracked by several hon. Members—I want to say a few words about the Seven. After his statement on 23rd July about the Stockholm discussions, the Chancellor of the Exchequer said, as he indicated also in the White Paper, that the agreement with the Seven was a step towards a wider association."—[OFFICIAL REPORT, 23rd July, 1959; Vol. 609, c. 1540.] The right hon. Gentleman said, also, that he considered that it was a perfectly viable association. I have, I think, already made clear that I do not understand how the Chancellor can maintain that it really is a step towards a wider association, because apparently he is not prepared to move at all from the position in which the original negotiations for a Free Trade Area fell down.

I asked the right hon. Gentleman about this specifically while he was speaking, and other hon. Members have put the same question since. He has not given any reply at all. It is rather surprising. The Government have had a reappraisal and they have decided that they cannot now go further than they did before, but, if they cannot go that much further, I really cannot see how the Chancellor of the Exchequer can expect the Common Market countries to respond any better than they have.

As for whether it is a viable association, it seems to me that the matter needs careful study. I agree that it is just possible that it might work and continue, but I should have thought that all the facts, particularly when one considers the countries in it, indicate that it is much more likely to suffer from great internal pressures which will break it up very quickly.

Austria has 50 per cent. of her export trade with countries of the European Economic Community, not with us. Forty per cent. of Swiss exports and 30 per cent. of Danish exports are with the E.E.C. I understand that there has already been a debate in the Austrian national Parliament, in which, for the first time since Austria had her freedom, her bipartisan foreign policy has been broken up. The Daily Telegraph reported on 9th November that Austria would review her membership of the free trade area—the little Seven—if the two groups failed to link up.

Of course, she is not prevented by anything in her Treaty, as is commonly thought, from joining the Common Market. She is, however, concerned about whether there might be pressure from the Soviet Union. That will, in any case, diminish. It is certainly in the interests of Austria to go into the Common Market at any time if she could once make the decision, and the pressure will certainly grow on her to do so.

The same applies to Switzerland, I think. It is often suggested that Switzerland is neutral and would have no interest, but, of course, Switzerland was neutral, because she had elements of Germany, Italy and France within her community. Now that these three are in, it seems very likely that there will be pressure also for her to join the Common Market. If successful links are not made between the Seven and the Six, Switzerland also may break away. The same applies to Denmark. Denmark very nearly joined the Common Market, in any case. It may apply even to Norway, and, later, to Sweden.

Sir A. V. Harvey

Will the hon. Gentleman explain on what he bases the suggestion that Switzerland might do what he said she might do?

Mr. Holt

Her trading interests are much more with these Six than with us, and she is geographically right in the middle of the Common Market. It is much more likely that her political connections will naturally develop with the Common Market rather than with us. If Britain decided to enter the Common Market, these other countries would follow very quickly.

On the balance of probabilities, it seems that the association of the Seven is by no means certain to be viable. I think that it is a very doubtful starter altogether. The interests of various countries adhering to the Six will grow, and, I think, should grow. Still, from an economic point of view, that leaves out the political aspect. If we are to have the influence which we want in the Common Market, which is growing in strength every day, I am sure that we must be members of it.

7.10 p.m.

Mr. Peter Thorneycroft (Monmouth)

Now that the hon. Member for Bolton, West (Mr. Holt) has finally closed down, I can assure him that he has made one thing clear, at any rate, and that is the innate complexity of the subject which we are discussing. Although this is not a maiden speech, I will try to emulate the brevity and clarity of the maiden speeches to which we have had the honour to listen this afternoon. If I know anything about this subject—and after the speech of the hon. Member for Bolton, West I am rather doubtful about it—I have learnt it the hard way, at meetings concerning that General Agreement on Tariffs and Trade and O.E.E.C., and at a number of Commonwealth talks, some in Canada, some in New Zealand. I want to make a few observations on these themes.

I want to talk about one subject only, and that is what we should do next, because it seems to me, after listening to the speeches, that that is what is exercising the minds of most people today. We can talk for ever about the details, but it is a question of what we should do next and where we go from here. I agree with what is written in The Times this morning, that there is little or no excuse for not facing that issue squarely. I think that probably the greater part of the House shares that view, too.

In my judgment—and I shall make assertions rather than argue in detail if only out of mercy to others who wish to speak—we ought to seek to participate in the work of institutions which cover the whole of Europe. We ought to seek to arrive at a position where we remove all our tariffs vis-à-vis other European countries. I shall not argue that at great length, because I think that that is the Government's view as well, and has been for a long time. What we ought to do is to prepare urgently to enter into negotiation on those lines.

The question whether we can achieve that will turn, I think, not on some obscure technical difference between a Common Market and a Free Trade Area, but on whether we and our partners in the Free Trade Association wish to join, and are prepared to make some sacrifice of our future freedom of action in doing so. In other words, this is a political, not essentially an economic, problem.

In truth, all treaties involve some sacrifice of sovereignty. The old free trade idea involved some sacrifice, and this Free Trade Association involves quite a lot. The General Agreement on Tariffs and Trade, which was and still is an organisation subject to majority decision, involves a very great sacrifice of sovereignty. If we are to enter into the kind of arrangement about which we have been talking and to seek to have greater influence over European affairs, it follows as night follows day that Europe will have a greater influence over some of our decisions as well. That is the price that we must be prepared to pay. I am not particularly frightened of that. Of all the dangers confronting Europe today, I should not have thought that the danger of too much integration ranked very high.

I compliment my right hon. Friend and the Government on the speed with which they have achieved a Free Trade Association and the fact that they have, in the White Paper, expressed it all in relatively simple terms. They have said throughout that they want to build a bridge towards the rest of Europe. I think that I must say in fairness that the two paragraphs in the White Paper in which they express their intention are of almost studied complexity. One recognises the drafting—the civil servants concerned have been told to produce something which could not be interpreted with any great clarity. That may be wise, but I am quite certain that it was intentional. I hope that my right hon. Friend the President of the Board of Trade will seek to elucidate this matter, about which he has been pressed in serious speeches from all parts of the House, in his reply.

Europe is already divided. It is sadly, perhaps, even permanently divided between East and West. For the purpose of this discussion, at any rate, we must accept that that division exists. We must contemplate whether the rest of Europe, the Western half, is to be left divided between the Six and Seven, with some neutral countries. I agree with hon. Members that that matter is more relevant for the consideration of the Foreign Secretary than of the Chancellor of the Exchequer. I agree with my hon. Friend the Member for Banbury (Mr. Marten), who made an able maiden speech, that we cannot assume, and do not let us assume, that because there is a Common Market and a Free Trade Area the whole of Europe will disintegrate tomorrow morning. Bait we must realise that there are great positive achievements if we can somehow get 250 million people to work together. We must recognise, if we look at what is happening in Europe every month, that the tendency to pull it apart as it exists in these two different areas is at least very considerable.

All this is covered up with very soothing phrases. I am not saying that I take them all from my right hon. Friend, but we are told that we must avoid the worst examples of discrimination and that we must get an agreement based on the principles of reciprocity. That is a good-sounding phrase, and the phrase that we must accept the problems of the Six in a word context is another. I noted this morning that we must bring in the new world to redress the balance of the world, and that we must aim, if necessary, at a North Atlantic community. I do not say that all my right hon. Friends use these phrases, but they can be found in all the newspapers. Most of these phrases mean practically nothing at all. If they are kidding themselves—with all respect to Mr. Dillon, when he goes to the O.E.E.C., we will not find that North America is adopting free trade. It may be right that we should aim at a world context, but these phrases have little relevance to the problems confronting us this afternoon. Anyway, none of these phrases is a substitute for a multilateral European arrangement to remove all internal tariffs and to join together in some form of community of thought and action. The crunch may be postponed for a year or two, but meanwhile the difficulties in the way of eventual merger or agreement are more likely to grow greater rather than less.

What should we do? I have never opposed the free trade concept. Indeed, now that it is dead, I do not suppose that anyone will object to my saying that, as President of the Board of Trade, I drafted the original proposal and placed it before my colleagues. There was a time when everyone would have been proud to claim paternity for this proposal; but, now that it has ceased to be an active member of this world, I can say that I had some prominent part in it. Having said that, I am bound to say that I see no prospect whatever of my right hon. Friends resuming useful talks with Europe on the basis of this proposal. I think that I am in a strong position to say that and I beg them to recognise that, if we are to start again, it must be a fresh start.

In my judgment, this time it ought to be a political start. This time, it would not be bad if it stemmed from the Foreign Office rather than from the economic Ministers. It could as usefully take place in the Quai D'Orsay as in the O.E.E.C. Its purpose must be plain. Its purpose must be that Britain and her new partners in Europe must seek full participation with the rest of Europe in the removal of all tariffs and in the sharing of common institutions.

The sacrifices of sovereignty which are likely to be involved are not likely, at least in the immediate future, to be very large. The French nationalism is riding high, but we should participate with our eyes open and realise that if we are to enter into serious talks, a pooling of responsibilities and some limitation on our future freedom of action will be necessary.

Once that political decision is taken —and I am not satisfied that it has been taken yet—it seems to me that most of the economic problems fall much more easily into place than is generally supposed. I shall not follow the argument, which the hon. Member for Bolton, West started, on harmonisation and Commonwealth problems. It has been argued at enormous length in many journals and in this House of Commons. I agree, however, that the harmonisation of tariffs which at one time was thought to be the biggest problem, is manifestly much less of a problem than it used to be.

I take it that the Government are not adopting the position that there is something wrong in principle in having their tariff the same as that of the Common Market. There may be simply an example of a tariff which is embarrassing and we say that it must be something different from a Commonwealth point of view, but as a matter of principle I imagine that the Government will ensure that, wherever possible, we should have a tariff the same as that of our other friends in Europe.

If we make it quite plain to the Commonwealth what we want and why, I do not anticipate that we shall have much difficulty in getting the Commonwealth to support us. My right hon. Friend the Chancellor of the Exchequer said in opening the debate that we had not had a clearly defined view from the Commonwealth. Why should the Commonwealth give a clearly defined view? This is a complex and politically difficult subject and we are at the very centre of it. If we are to get the help and support of Commonwealth countries, we must tell them what we are asking them to do and why. It is not so much consultation at the official level but the giving of leadership at the Ministerial level that is necessary from us if we want that support to come. If that was done, I think that arrangements could be made.

I do not know, nor do I seek to forecast, at what precise point between a uniform external tariff and absolute freedom agreement will finally be reached, but I am satisfied that a bargain could be struck somewhere between those two extremes. My right hon. Friend said that he wishes to build a bridge, but almost all one's European friends want to build a bridge. There is Dr. Erhard —six plus seven plus two equals one—and that able man Dr. Etzel, and there are the Belgians, the Dutch and the Italians. The trouble is that although all these people are trying to build a bridge, not a brick so far appears to be effectively in place.

It is relatively easy to isolate the French in this matter. I want my right hon. Friends in the Government to contemplate, even if they do not tell us when it was done or when it will be done, that the French will be told in clear and specific terms precisely what we want to negotiate and asked whether they realise that we are prepared, if they are, to make a fresh start which does not relate to an old proposal with all the bitternesses that were associated with a series of negotiations which have broken down.

My sole purpose is to ask my right hon. Friend the President of the Board of Trade, when he replies to the debate, to give a clearer indication of these matters. I do not share the view of the hon. Member for Bolton, West that the Free Trade Area was a brilliant idea spoiled only by the ham-handed handling of my right hon. Friend, who in all these matters conducted very difficult negotiations with great skill. These are not simple matters. For my part, I watched only with admiration the work done by my right hon. Friend. That, however, is now past history.

What we want to know is where the Government stand. If they were to say that they wished to be politically cut off from the rest of Western Europe, that it was vital that they should have the right to move the whole of their external tariff without any possibility of negotiation, I should regret it but at least we should know where we stood. If they were to say, on the other hand, that they wanted to bring the Free Trade Association and the Common Market together to share in a common European adventure in which all tariffs were removed and in which they were prepared to go, say, at least as far as France in that kind of balance of national and community decisions at present being worked out on the Continent of Europe, again we should know where we stood.

There are arguments for either of those courses. We cannot simply go on saying that we have asked the other people when they are ready to talk. We have got to go a little further than that. We have got to say where we stand. If we regard new negotiations as urgent, we must talk urgently with the Commonwealth and urgently with our new partners in the Free Trade Association. We must be straining all our energies to get to a point where we can put new proposals in front of the Europeans. Are we trying to do that? That is what I want to know from my right hon. Friend the President of the Board of Trade. I watched his work in these matters with admiration and respect and I believe that it still lies within his hands to make a contribution to Europe that will be of great benefit not only to Europeans, but to the world at large.

7.28 p.m.

Mr. Robert Edwards (Bilston)

We have all listened with great interest to the speech of the right hon. Member for Monmouth (Mr. Thorneycroft). I have learned an important lesson from his speech, because I know from his speeches at the great Congress at The Hague, back in 1948, that he was a good European.

The lesson we learn is a simple one. We have heard a powerful plea for a political decision to settle the problems of Europe. We have had many pleas for political decisions from leaders of the Conservative Party when they are out of office. We have had many speeches from the Prime Minister at The Hague, at the Westminster Economic Conference, at the Rome Conference, and at the Economic Conference in Brussels. We have had many speeches from the present Minister of Aviation in nongovernmental organisations building up the will for a united Europe in all the capitals of Europe. Right hon. Gentlemen opposite are revolutionary in opposition and isolationist when they have the responsibility of government. But I do not believe that they are dishonest.

Somewhere between the Opposition back benches, the opposition in the country and the Government Front Bench, changes take place which make political decisions extremely difficult, almost impossible. Why is this? Why is it that every statesman of experience is now saying, "We must make political decisions in Europe"? Why do we not make these political decisions? If we are to inject some common sense into this debate, let me follow the excellent speech of the right hon. Gentleman the Member for Monmouth and make a few realistic observations on the problem of Britain and Europe.

The real problem in the world today is not to impose or maintain restrictions or the flow of trade. It is not to impose further difficulties. The real problem today is how to get rid of surpluses, to build up an organisation which will put more loaves on the tables of the peoples of the world, particularly more of them on the tables of the poorest in the underdeveloped areas. The problem is no longer scarcity. The problem is no longer maintaining restrictions on trade by tariffs and protection and all this machinery which is based upon organised scarcity. Now we are moving into an entirely new world where, step by step, we are moving towards superabundance.

Two great new sciences are developing simultaneously. There is the great science of nuclear energy for peaceful purposes and there is the great science of automation and electronics. These are changing the whole industrial landscape of our country and the world, and the problem now is to face the chal- lenge of plenty. Any plan which breaks down frontiers, which releases the restrictions on the flow of trade and capital is, in my view, progressive and should be supported by Socialists and all intelligent men and women who are concerned about the future of the Western world.

My criticism of the Stockholm Convention, which we are discussing today, is that it is a miserable makeshift which has no relationship whatever to the immense opportunities for this country, for Europe and the world, which would come out of active British leadership in the Common Market countries of Europe.

What have we in this Convention? We have no institutions at all, but a list of Governmental arrangements which is really the basis of our difficulties in Europe—our refusal to accept, except upon the military side, the fact that we have to give up some of our sovereignty. We are ready to give the whole works away for military purposes, but not for the purposes of constructive economic and social advance.

The treaty of the Six has great institutions. None of those institutions is to be found in the Stockholm Convention. The Six have a miniature Parliament of Little Europe, with accountability—a most important necessity today—at every level; a social and economic council which brings in the industrialists and the trade unionists, and where there is consultation on all the social problems which affect industrial workers. There is no such machinery in the Stockholm Plan.

On the whole question of a compensation fund for workers who lose their jobs because of the wiping out of tariffs, there are no similar proposals here, yet they are written large in the treaty which governs the Europe of the Six, wherein very important conditions are laid down for the payment of workers who are declared redundant because of the closing of uneconomic pits and factories. There is no such compensation here.

It seems to me fantastic that we talk about widening the scope of European trade when we are bogged down in all these niggling, small problems affecting small industries which are completely uneconomic. The problem of compensating these industries is such a relatively small one. It does not amount to millions of pounds. It amounts to small strategic sums of money which would take care of all the people who lose their employment or who lose their industries. Very small sums of money are involved when we consider the major political problems which arise out of this kind of development.

Let us look at what is happening in Europe today. American capital investment in the Six since 1950 has increased by 340 per cent. Here is a terrific dollar invasion of the Little Six of Europe: 340 per cent. Enormous sums of capital have gone into chemicals in the European Six. American firms have extended their chemical interests into Europe. They have granted licences to all kinds of new European firms to produce American drugs and chemicals and compounds under licence. The impact of this kind of developing and extending of American investment in the Little Six of Europe has never been really considered by the starchy economists of the Civil Service who have been advising us about what we should do about Europe.

What advice did we get? We were told by the experts, who are supposed to have their ears to the ground, that this grand Free Trade Area proposal, which is now repudiated as nonsense by the Minister who was negotiating at the European conferences, would receive the support of the Germans, that it would receive the support of the Dutch and Belgians, and we were told that we would very soon eliminate the opposition of the French. But they were wrong, completely wrong.

We have heard now from the experts the story of what de Gaulle, the French nationalist, would do. He would smash the supranational institutions of Europe and make it possible for the British idea of inter-governmental institutions to take its place, and we were told that de Gaulle and his French nationalists would support us in the Free trade idea. They were wrong again, because all that has happened in the Little Six of Europe is that de Gaulle's French nationalism has now become the nationalism of the Little Six of Europe, not because they have accepted French nationalism but because they want to institute some kind of nationalism to defend themselves against the isolationism of this country.

It has always been my view, as a Socialist and an international Socialist, that no evil consequences can arise for a nation by the sweeping away of frontiers and the elimination of restrictions on the flow of trade. Here we have to consider the consumers. We talk about the industrialists, we consider the agriculturists, we consider the trade unionists, but we forget the trade unionists as consumers. As we reduce the tariffs, as we eliminate restrictions on trade, then, automatically, we should lower prices to the consumers, and everybody gains. We have all agreed that the easing of world conflict has now reduced the danger of a military campaign between the two great super Powers of the world.

We have all agreed now—and almost every speech that I have heard on these subjects in the House underlines the fact —that the real challenge from the East is economic and social. If it is economic and social, let us face it. The Americans can ring the changes in a few months. They can make decisions with the Russians to divide this world as easily as anything, and there will still be a vacuum between East and West. The vacuum cannot be filled by the British Commonwealth, as one hon. Member said, because the twin powers of the British Commonwealth—maritime supremacy and imperial empire—have disappeared into the depths of history and will never come back.

We can fill this vacuum only if we are able to build a powerful economic market, and it must be built in Europe and in the overseas territories, which are still traditionally linked with Europe, some free, some semi-independent, some waiting for their independence. This is the great new force for which the world is crying out, a great new economic power that would bring some reality into the world, ease tension and lay the basis for an expanding world economy which would give men and women the decency, security and dignity which they should have enjoyed many years ago.

7.41 p.m.

Mr. Gordon Campbell (Moray and Nairn)

In rising to speak for the first time here, I ask for the indulgence which the House kindly extends on these occasions. I am glad to have been so fortunate as to catch your eye, Mr. Speaker, because my last post in the Foreign Service was in our Embassy in one of the countries which is now becoming a member of this new Association. My work there included preparations and negotiations for a Free Trade Area.

I am glad also that I have the opportunity of speaking on a foreign affairs subject which is not a main issue of contention between the two sides of the House, though after two or three of the interesting speeches I have heard today I cannot be too sure of that. But it is appropriate for me that it should not be contentious, because I have had the pleasure of working for hon. and right hon. Members opposite, particularly during the time when I was a member of our permanent delegation to the United Nations, and I think that I worked most harmoniously with them.

My duties at that time were to give them all the assistance within my power and, when appropriate, to tender advice. I understand that in my new rôle here I must forgo the privilege of carrying out the first of these functions, but it is still open to me to try my hand at the second, namely, when appropriate, offering advice. I know, however, that I cannot expect any increased likelihood of the advice being accepted.

I will not conceal my regret that the original concept of a free trade area did not come to life. I should like to be the first publicly to congratulate my right hon. Friend the Member for Monmouth (Mr. Thorneycroft) on his declaration today of paternity of that original scheme. Certainly in the summer of 1956, when it was clear in Europe that Britain was putting forward this idea as its chief promoter, our friends in Europe rejoiced. They had had the picture, unfortunatey, of a Britain which was dragging along and would eventually come into association with Europe when she had to. That Free Trade Area would have associated us and other European countries with the six countries of the Common Market without requiring us to proceed to the economic integration upon which they seemed determined. There were difficulties, of course, but the advantages to all concerned were great.

It was no fault of Britain's, in my opinion, that that Free Trade Area did not reach fruition. I will not pursue the question now of where to place the blame, but I think that the Government were right, when they found that the project was not being attained and time was running against them, to go for the next best thing which is an association of seven countries. It will bring the Seven into step with the Six of the European Economic Community in the agreed and orderly reduction of tariffs within the next ten years. Although I know that several hon. Members disagree, the most important point, to my mind, is that the Convention improves the position with a view to negotiating an association with the Six. I agree with other hon. Members that we cannot allow a division of Europe to take place.

It may be asked what advantages there are for Britain in this Association, in our agreement with six neighbours to reduce trade barriers over the next ten years. The answer lies in the extended and simpified markets which it makes available. As a trading nation we must seize any new opportunities to expand markets. There is no doubt that most of our industries stood to benefit from the Free Trade Area project, and I consider that they will still benefit, to a lesser extent albeit, from this new Association. I am particularly thinking of Scotland when I say this, because we in Scotland need the increased industrial activity that expansion of trade can bring.

There are two or three industries in Scotland which do not see any advantage in this agreement and which may in practice find difficulties with it. I hope that the assurances we have had from the Government on these will prove well-founded. But if it is granted that the majority of industries will benefit from the agreement and therefore that the nation will benefit as a whole, the community comes under some obligation to look after industries which may suffer through no fault of their own. Those last words are important, because I am not suggesting that inefficiency should be protected nor that changes made necessary in the modern world should be postponed.

I am glad to see that Article 20 of the Convention provides for action to be taken if there are difficulties in certain sectors of industry. I hope that in that event the Government will take adequate action under that Article. There is one industry with which I should like to deal as an example, since it very much affects my constituency. This is the fishing industry. There are Press reports that representatives of the trawlers have already made it clear that they are disturbed about this agreement. There are no trawlers in Moray and Nairn. The fishermen there are inshore fishermen in smaller boats. They are busy at their jobs and I am not sure that they and their representatives have had time yet to get down to looking at the effects of the agreement.

The fishermen of the East Coast of Scotland, whom I know, work tremendously hard, with unexampled cheerfulness, at a very tough job; and we have recently been reminded of the dangerous conditions in which they work. In the last twenty years they have modernised their boats and their methods. They have acquired the experience, knowledge, and skill required first to find the fish and then to catch them with these modern methods, and they have provided us with the fresh fish which perhaps we are inclined to take for granted.

If the imports of fish from Scandinavia, which this agreement permits, cause a setback to the industry, through no fault of its own, I urge that special consideration be given by the community, through the Government, to a remedy or recompense. It may be that we should all eat much more fish, but if one looks at the figures of consumption in the past, of the amount of fish caught and of the new quantities coming in, I can see why the representatives of the trawlers have been disturbed. Perhaps if we all remember that the phosphorous in fish is good for the development of the brain, that information spread widely may help us all in this country to eat more fish.

The working of the Convention will require a great deal of co-operation and confidence between the parties and I hope, like many other hon. Members, that a way will quickly be found of associating with the six countries. A lot has been said about making a bridge. The hon. Gentleman the Member for Birmingham, Stechford (Mr. Roy Jenkins) does not like clichés so I will move from that and suggest that what is needed is a filling in of the whole length of the moat between the two areas in Europe. I realise that it is not easy to suggest solutions today, but the importance remains of getting the two parts together.

Whilst the difficulties of certain industries must be considered, we in Britain should not shrink from further steps to form in Western Europe a large market for our goods. I believe that this need not harm our friends. It can be done in a way which need not harm our friends in the Commonwealth, though they must be closely consulted all the time. Co-ordinated progress in this direction can benefit the people of our country as a whole, both as producers and as consumers.

7.52 p.m.

Mr. H. Rhodes (Ashton-under-Lyne)

May I congratulate the hon. Gentleman the Member for Moray and Nairn (Mr. G. Campbell) on a first-class maiden speech. His mention of fish has made me very hungry because I did not have much lunch and I am ready to eat. I shall remember his remarks about phosphorus being good for the brain. I recall going up to his part of the world when I was a Minister at the Board of Trade. In his constituency I met some of the finest people I have ever met in my life amongst those fishing folk who felt they were being diddled by having to pay too much for their nets. I wish the hon. Gentleman well and I am sure the House will look forward to hearing what he has to say on many occasions in the future.

I am sure that if this had been one of the days on which the House was being televised, the performance would have had the shortest run of any show in London, because there is nothing like putting on a debate on free trade and persuading the Liberals to put down an Amendment, for blasting us with boredom and allowing the Government of the day to get away with anything. The right hon. Gentleman the Member for Monmouth (Mr. Thorneycroft) made a fine speech and livened the proceedings a little while ago. I believe he did himself a slight disservice by referring to this job as being a Foreign Office one. We have been bedevilled by Foreign Office action for a long time, and it is true to say that the imagination which has been forthcoming from Governments in the last few years has come through the economists. If I may say so, the right hon. Member for Monmouth was no exception to the rule, because he showed great imagination and vision when he was at the Board of Trade.

It always seems to me, watching the procession of events since I came into the House, that the Foreign Office still has in its head some of the principles which were put into a famous memorandum by Sir Eyre Crowe in 1907, when he said: Britain in her rôle in Europe should throw her weight now in this scale and now in that, but ever on the side opposed to political dictatorship of the strongest single State or group at a given time. During the last fourteen years while I have been in the House, I have seen some chances of Britain leading Europe, though not many. We had one immediately after the war when there was a Labour Government, and when the late Ernest Bevin was Secretary of State for Foreign Affairs. He helped, through Marshall Aid and O.E.E.C., to start a new era in Europe, but he was still foreign Secretary when, in 1951, the Schuman Plan was suggested and he turned it down. He did so because he was a British Socialist before he was a European, and at that time the Labour Party was nationalising the economy and the party felt that it would be rather infra dig if we were to be subject to any interference from outside.

In 1953 and 1954 the opportunity came again in terms of the European defence plan. The Service chiefs remembered the situation in 1940, when the French asked us to send over there the few remaining squadrons we had, and so that was turned down. In 1955 Sir Anthony Eden, at that time flushed with success from the election, turned down an invitation to send a Minister to Messina. He said, "We will send a senior official". They said, "If you cannot send a Minister, we will not have anybody." The result was that nobody went.

Since then the Common Market has gone ahead. It has developed at a speed which nobody could have thought possible in 1955. We in this country have been watching it and hoping that we could join in. We have dragged our feet in some ways but, on the other hand, with the thread of the old Foreign Office policy running through our thinking, coupled with the difficulties of equating Commonwealth interests with the Common Market, it has been a very difficult job.

When the present President of the Board of Trade was sent to do the job of guiding the negotiations on the Free Trade Area, a very good man was sent. I do not know anybody who could have done the job better or more imaginatively. The right hon. Gentleman really tried, and to blame him for the failure is neither fair, just, nor common-sense. He made a valiant effort, but he was on a loser. The time was not opportune.

What I should like to ask the President of the Board of Trade at this point is what is to happen with regard to the Finns and E.F.T.A.? Who is to make the initiative? Will it be left to them? Are we to make it, and, if so, on what sort of conditions? It was said this afternoon that they would be considered if they wished to join, but what about the barter agreement they have with Russia?

One of the biggest problems in the set-up that we now have with the Seven and the Six is the speed at which technological development is taking place in the Common Market countries, where cartelisation is taking place on an increasing scale. In the Outer Seven, there are not enough cartels to do the job of parcelling out the work that has to be done in various technological fields.

An example came to my notice during the last few months. Friends of mine went over to the Milan Fair, where internatonal makers of textile machines were exhibiting last September. Apart from one or two outstanding British exhibits there, the rest, according to some astute observers, were a laughing stock. When one wants the best machines and technological advance in one's factory one becomes aware of what is being done in the Common Market. It is my belief that it is coming through the cartels, through the apportioning out, throughout the Common Market of the jobs to be done. That is one of the disadvantages of the Outer Seven, because we happen to be the big boys amongst some comparatively small ones.

When one starts to learn to play chess, one does not play with someone who knows less than oneself. When one starts to learn to play a game of any sort, one plays with somebody who can play it a bit better than oneself, but there is nobody, in the technological sense, unless it is Switzerland, who can give us the impetus we need. The Common Market countries are getting the impetus by contacts one with another. Those of us who are engaged in its direct application in industry feel that industrialists in the Common Market countries have a better start than we have by the fact that they are able to take advantage of the technological progress which is being made together.

It was suggested that the Outer Seven can somehow threaten the Common Market countries into acceptance of the Outer Seven into a—

Mr. John Hynd (Sheffield, Attercliffe)

Who said that?

Mr. Rhodes

If it is a case of threatening them or of setting up the Outer Seven in opposition to the Common Market Six, we shall make a mistake, and I think that notice ought to be taken of the remarks of the right hon. Member for Monmouth. I would remind the President of the Board of Trade of the old saying in the old Book: Or what king, going to make war against another king, sitteth not down first and consulteth whether he be able with ten thousand men to meet him that cometh against him with twenty thousand? Or else, while the other is yet a great way off, he sendeth an ambassage, and desireth conditions of peace. Or is it much simpler than that? Are we the big boy in the playground who cannot get the little boys to play with him unless he gives them sweets? Or is it just a kind of bluff? Or is it a sort of political game?

I would like to make one or two comments on the White Paper. In 1957 when the Customs Duties (Dumping and Subsidies) Act was passed I raised some objections about the onus of proof of dumping having to be provided by the injured parties. Also, the Board of Trade has not adequate power to establish the facts of dumping. I objected, too, on the basis of the country of origin requirement in Section 8, which prevents the Board of Trade from taking action against indirect dumping.

During the discussions on that legislation, the then President of the Board of Trade said that it was impossible for the Board of Trade to accept any respon- sibility whatever for the establishing of facts regarding dumping. I put it to the Government and to the Board of Trade that surely the verification of claims under E.F.T.A., under the rules initiated at Stockholm, now means that the Board of Trade ought to be able to satisfy itself of the reasonable nature of requests made by United Kingdom industries and ought to take power.

Another thing I wish to say about Section 8 of that Act is that the country of origin requirements are out of line with those in the E.F.T.A. agreement. I wish to know from the President of the Board of Trade whether action is to be taken to bring the country of origin requirements in the 1957 Act into line with those in the Outer Seven Convention. In the E.F.T.A. Convention, Article 17 permits members to take action in accordance with their international obligations against dumping in their own markets. Provision also is made in the same Article for member country A to complain to member country B if member country C has dumped goods into the markets of member country B which are subsequently exported to member country A. If we were importing goods from Austria, part of which came from third-party Portugal, presumably, under the terms of Article 17, some action could be taken. But in Article 17 the country exporting is merely required to "examine the possibility" of taking action.

How can member countries act at all if they have no anti-dumping legislation? Switzerland has no such legislation; Portugal has none; Austria relies on the advice given by a Parliamentary Committee; Norway has a little legislation but has not exercised it and Denmark is now considering a Bill. But there is no provision whatever to deal with third-party indirect dumping, and Sweden has no legislation to make provision against third-party dumping either.

I wish to know from the Government whether the members of the E.F.T.A. Convention accept the obligation to introduce anti-dumping legislation, including a provision against third-party dumping. If they do not, it is grossly unfair. Will the President of the Board of Trade give an assurance that action to introduce anti-dumping legislation by fellow-members of the Convention will be insisted upon? Unless the provisions relating to anti-dumping in Article 17 are not drawn tightly enough, it will mean that the Common Market countries like Italy and the wool manufacturing area of Prato could very well get an advantage without any corresponding advantage by E.F.T.A. countries.

If the Government had accepted the recommendations of the wool industry and taken the process formula for the total processing of exportable products as the criteria, I think they would have done what they ought to have done and been able to control dumping in its entirety. Instead of that, they have adopted what is known as the two-out-three formula and it will be possible to export from Outer Seven countries to this country worsted piece goods with the benefit of the tariff treatment even though the tops come from Czechoslovakia, Austria, Poland, Russia or elsewhere. Frankly, we do not like that.

The President of the Board of Trade would agree that the wool industry has played a very important part in the economy of this country since the war. We have had many bitter disappointments with the inability of the Government to influence opinion in America about the one-sided arrangements for quotas which favour the Japanese simply to keep Japan quiet and to build up a bulwark against Communism in the Far East. Yorkshire interests have been sacrificed as a result. There will be an opportunity, I hope, to discuss these questions in detail when the Bill for ratification comes before us.

It is even worse with outer garments. The added percentage will be particularly damaging, as the cloth can be imported from countries outside the Area and if the percentage is not more than 50 per cent.—if it is 49 per cent. —it can come in under the new tariff arrangements. The Government should press on, bearing in mind that we have to be fair to the industries which are exposed to difficulties in the process.

I do not think there is anything to stop the eventual integration of Europe as a whole. I think differently from many of my colleagues and many hon. Members opposite. I think that the speed of integration will be forced by the speed-up of technological development which will take place. That, I hope, it will be our fortune to share. We are fortunate in that Switzerland is in the Outer Seven, which gives some stimulus. But I think that we should look forward to the time when we shall all be members of the Common Market, sharing the technological progress which is being made, and going forward to doing another job for the under-developed areas.

8.24 p.m.

Mr. Maurice Macmillan (Halifax)

The one thing on which we all seem to agree, even the hon. Member for Ashton-under-Lyne (Mr. Rhodes), is that our club is not as good as the other one. There seems, however, to be some doubt as to which club hon. Members opposite —and indeed, some hon Members on this side of the House—want us to join.

I think that the most important thing is not to miss this opportunity. We have missed many in the past. It was in 1897 that Lord Salisbury said it was the duty of this country to sustain the federated action of Europe, not necessarily to join it. I think that not many hon. Members on this side were convinced by the hon. Member for Bolton, West (Mr. Holt) in saying that we should join the European Economic Community immediately. He certainly did not convince me, although I must admit that my right hon. Friend the Member for Monmouth (Mr. Thorneycroft) very nearly did. So far as I could see, his argument differed from that of the hon. Member for Bolton, West only in so far as it dealt with the harmonisation of external tariffs.

I do not think that this is the moment, in any case, when such a course could be considered, at least on this side of the House with the view we hold about the Commonwealth. I think it worth remembering why some of the countries within the Commonwealth can be expected to remain in it, not only out of loyalty but out of what use that association can bring them. I am sure that one of the uses is that we of the United Kingdom can make it easier for the Commonwealth countries to trade and compete with Europe. We shall not do that by joining the European Economic Community on the terms that have been set out.

Whatever solution we may adopt to the problems of our relations with the Commonwealth and with Europe, I am sure that industry in this country has to face increased competition. I think that industry can face it. The Government have started giving some help and it is their job to continue to do so. I believe that they can frame that help in a way which will improve our bargaining position with the Six and with Europe. Whatever else a divided Europe may mean—and I agree with my hon. Friend the Member for Banbury (Mr. Marten), who said in his admirable maiden speech that we can exaggerate the dangers of political division—divisions are bound to be a threat to the sort of united aid to the backward and underdeveloped countries which is being worked out and suggested now.

Quite apart from anything else, if we cannot trade in our manufactured goods with the countries of the Six it will become more and more necessary for industries in this country to set up their own factories and establishments within the European Economic Community, using for the purpose capital resources which, from every point of view, would be better used to develop the Commonwealth and the under-developed countries. I do not believe that we can separate these two problems. In my opinion, the connection is far closer than many people suggest.

For instance, I am sure that capital development within the under-developed countries is not in itself enough. If it is to be successful, and if we are to induce people in those countries to devote the time, energy and work which such capital development needs for its success, we must give these people some inducement and create some demand for consumer goods, so that they are prepared to work for them rather than to enjoy the leisure. We must provide an alternative, and this means an expansion of the exports of our manufactured goods.

We must also provide a market for the increasing industries of those developing countries. This country has accepted that provision. My noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) referred in an earlier debate to the fact that we had accepted the principle of subsidising free trade. In some senses the Cotton Act, with all its possible imperfections, has done just that. We have accepted the fact that the under-developed countries, in creating exporting industries of their own, are competing with and damaging industries in this country, and in the Cotton Act we have decided to protect one of our industries not by tariffs, but by direct measures. I think that my noble Friend was right in saying that, in effect, this is subsidising free trade, although I do not agree with his conclusion that it is a bad thing to do. To some extent, the Local Employment Bill is doing the same thing.

If we are to create a demand for consumer goods in under-developed countries by offering goods at a price which they can afford to pay, we must widen our home base, and that includes making some agreement between the countries of the Seven and those of the Six. Unless we have within Europe freer trade and a move to liberalise tariffs, I feel that the aid which we propose to give can do more harm than good. If we go back to the situation which helped to develop nationalism in countries between the wars, by harbouring our own capital and even encouraging the United States to raise tariffs, it can do nothing but harm.

My right hon. Friend the Member for Monmouth agreed with the Observer in ruling out the possibility that negotiations between the Outer Seven and the European Economic Community could lead to a wider Atlantic community and, in that way, to freer trade. I do not think that this can altogether be ruled out, particularly if the plan to use the O.E.E.C. to canalise aid to the underdeveloped countries comes to fruition.

All these are details, and before we can consider them we must know what are our objectives. As many hon Members have said, that is a political decision. When we have made that political decision we can consider far more coherently the various techniques at home and abroad, such as the question of bilateral agreements and how we can get round some of the difficulties which G.A.T.T. imposes upon multilateral negotiations between the Six and the Seven.

In this country, we can work out alternatives. There is the question of trade within the Commonwealth. I do not believe that our work within Europe rules out the development of Commonwealth trade. There is the question of trade with the Iron Curtain countries. I do not think that it is contrary to our interests in the United Kingdom or the Commonwealth, or indeed the West as a whole, to allow, and, indeed, encourage, Russian capital development in the underdeveloped countries.

I am glad that this debate takes place now, not only because it seems to be very well timed, with all the various discussions which have been taking place on aid to underdeveloped countries, but also because it is at the right period before the Budget to enable us to make pleas to the Chancellor of the Exchequer with some hope that he may not be able to escape from them into his pre-Budget purdah. If we are to face the competition which the development in Europe will bring, we need fiscal help from the Chancellor for our industries.

The hon. Member for Ashton-under-Lyne mentioned technical development. The Chancellor of the Exchequer could do much more to help industries, particularly small ones, to keep their capital equipment up to date by allowing more rapid depreciation for tax purposes. There is the obvious method of helping the textile industry—in which I, too, in my constituency, am interested—to export both within the Commonwealth and to the United States without having to face prohibitive tariffs.

There are the various difficulties faced in my constituency by various small machine tool and other engineering firms, especially when they begin to export and increase the percentage of their turnover in the export market, which means that they have to wait longer for their money and have difficulty in financing their increased stock. I hope that the Government will implement those paragraphs of the Radcliffe Committee's Report which refer to export credit aids to small firms and helping such firms to raise new capital for development. These methods can help us in our competitive position in Europe and the world.

Both sides of the House will agree that the welcome given to the Convention must depend on what is to be made of it. By itself, it is not much, but it might become something worth having. As long ago as 1931, Lord Cecil of Chelwood, commenting on a proposal by M. Briand to form a European Com- mittee, pointed out that the unity of Europe was not enough unless it led to a wider unity, both political and economic. He said that the United Kingdom could never be part of a system which appeared to set up a continental bloc in potential antoganism to other international groups. He said that this country could never sacrifice our alliance with America to the interests of our European allies, and that our position in the Commonwealth could never allow us to join an exclusive European system.

The last paragraph of Lord Cecil's commentary is as true now as it was then. He said: These are not arguments against a sustained system of co-operation between European Powers, including Great Britain and Ireland. They are simply facts which must be borne in mind in building up such a system. I hope that the Government will bear that in mind and continue to build up such a system

8.37 p.m.

Mr. John Hynd (Sheffield, Attercliffe)

I hope that the President of the Board of Trade, who has been very attentive to the debate, has been impressed by the fact that every speech from back benchers on both sides has been directed to the main issue facing us today, namely, the division of Europe into two economic blocs, which can become—some of us would say will inevitably become unless something is done about it—political blocs as well.

When I listened to the Chancellor of the Exchequer this afternoon I was astounded at the equanimity with which he presented the subject, as though it was nothing more nor less than just another trade agreement. He made no reference to the political implications of it, the background against which it must be set and the deeper context of the subject. As a pure trade agreement, possibly this would be a fine thing, but it is not. That has been made clear by every speaker.

The Chancellor of the Exchequer referred to it as though we were simply developing and expanding the opportunities for British trade. He made the same kind of statement when he announced the Convention. He said: It will present our exporters with new and growing opportunities for increasing their sales in the markets of the member countries …" —[OFFICIAL REPORT, 23rd November, 1959; Vol. 614, c. 34.] It is not that at all. This is not a question of presenting new and expanding opportunities for our manufacturers, but of facing a situation in which Government policy has led to a direct threat to the expansion of British trade, or even the maintenance of British trade at its present level. The Government are presenting us with a second-best, not with something new, offering great and unlimited opportunities.

The right hon. Gentleman made no reference to the history behind all this, and I do not propose to go right through all that dismal history again. It has been quoted time and time again in our debates—the deplorable record of the present Government in this matter ever since The Hague Conference. One could go over that in detail. I do not think that there is any story in our history which more justifies the term "perfidious Albion" from the point of view of our Continental friends than the way in which we have betrayed the European idea right from The Hague Agreement, through E.D.C. down to the Messina Agreement.

I was delighted to hear my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) adopt a much more realistic attitude, and explain exactly what is involved, not only the great new hopes born for the countries within the Six, but also the great dangers with which that development faces this country and our trade unless we can do something much more dramatic and widespread than this Convention of the Seven.

The fact of the situation was expressed very graphically by Dr. Neal, Chairman of the Committee on Economic Development in the United States, when he said: The Common Market's potential economic and political repercussions may be greater in the long run than those of the first atomic bomb. That may prove to be not such an exaggeration as it may seem.

What has happened in relation to the Common Market? It is the conclusion of the great surge forward of the European countries after the war, after all the lessons of the divisions and rivalries of Europe which led to one world war after another, until they reached a position where they decided to give up their antagonisms and rivalries. The incredible position, as it would have seemed only a few years ago, has now been reached of Germany and France being combined in a single community, with a single controlling body over them, divisions gone, customs abolished, and trade carried on freely between the two countries—and not only between those two countries but, of course, between their other partners as well.

Is this a good thing, or is it not? We have encouraged it, so I presume that every hon. Member in the House would agree that it is a good thing. Is it a good thing without the United Kingdom? Apparently, we are not so agreed about that, because all the apprehensions that have been expressed today are evidence of the fact that we do not consider that this is a very good thing without the United Kingdom.

Whose fault is it that the United Kingdom is not in the Common Market, if it is not our own? What we have done in our early encouragement of the development of European unity and our subsequent withdrawal from participation in it has been, not to unite Europe, but to divide it more deeply than it has been divided since 1945.

How is the E.F.T.A. arrangement to help us? I know that it is supposed to be used as a bridge, but we know that that is not the real cause. We know that it was a sudden, panicky reaction when we realised that the Free Trade Area was not to come to reality. The European Free Trade Association is intended as a lesson to the Six that we can go it alone. The E.F.T.A. is intended to be used as a bludgeon to try to force the Six to come to reason, and to accept our terms. That is what it is intended to be. That, of course, is not avoiding new antagonisms, but creating them.

In any case, what is the E.F.T.A.? We have had comparisons between it and E.E.C., but there really is no comparison. The E.F.T.A. is merely an old-fashioned trading agreement, slightly developed, from which any country can withdraw at any time. It is true that they have to give twelve months' notice of that intention, but the member countries can give that notice of their intention to terminate their connection with this organisation whenever they like. There is nothing to stop them doing so.

There is no overall supervision in the terms that apply in the Common Market. This is no more or less than an ordinary trade agreement and has none of the features of the new economic and political community of E.E.C. How long will it last? Can we be assured that this will last at all unless by some arrangement we are able to tie it up with the European Economic Community?

How long will Austria be able to maintain her position in this Community? Austria is entirely remote geographically from the main body of the Community. Austria does 50 per cent. of her trade with the Common Market countries and only 6 or 7 per cent. with the countries of the Seven. How will Austria be able to maintain such a position for very long? Are we certain that Denmark will be able to sustain her position if she finds than the E.F.T.A. is not effective for the building of the bridge?

What about the Commonwealth countries? What about Germany, with 50 per cent. of her trade with her partners in the Six and 50 per cent. with the Seven? Germany will not stand for that for long without developing a very serious antagonism against the Seven. The whole effect of the Seven, if it becomes more competitive with the Six, will be to reduce Germany's trade ill a very important market and force her to try to find alternatives elsewhere. If the feeling develops in Germany that she will be closed out of 50 per cent. of her European market because of our action, will this help Anglo-German relations?

I have mentioned the Commonwealth. Are we sure that the Commonwealth countries, individually, will remain entirely loyal to the old Commonwealth conception if they find that they are to be closed out of the Common Market because of it, when we know that many of the Commonwealth countries which provide raw materials—cocoa, coffee, and all the rest—are to be closed out of this tremendous European market because of their loyalty to the Commonwealth link? Of course they are not.

Hon. Members opposite appear to think that we are living in the nineteenth cen- tury, that the United States, India, Ceylon, Burma and Pakistan are still colonies of Great Britain, that there has been no development in the African territories, which are gradually developing their own independence. Countries like Nigeria will be entirely free to decide whether they will sacrifice themselves to the Commonwealth tradition, or whether they themselves will go on individually to seek access to the Common Market possibly by being directly associated with it. These are some of the considerations which we have to face. The fact is that the Commonwealth as we used to know it is a declining factor in the trade prospects of this country, whereas the Common Market countries are rapidly developing and becoming the most important aspect of the world market so far as we are concerned.

Because time is short, I want to emphasise where this will lead unless the Government do something about it. We are creating an alternative community, a community which can give rise to new antagonisms between ourselves, with the Scandinavian countries, and Germany, France and other countries of the Common Market. What has happened as a result? Does not the House realise that this has something to do with the insistence of France on developing the atomic weapon and experimenting with the hydrogen bomb in the Sahara desert?

There is a direct link. What is happening is that France and other countries of the Six are beginning to get the feeling of a community and are realising the fact that Britain is not a member of that community. Looking into the future they see that they will have to develop their own defence resources independent of Britain and possibly of America, and if that is not a reason it is at least a very good excuse for France going ahead with the development of her atomic bomb and undertaking her independent experiment in the Sahara desert. This is only one symptom of the kind of deepening division that will be created between ourselves and the mainland of the Continent unless we are prepared to try to make one further effort such as was suggested by the right hon. Member for Monmouth (Mr. Thorneycroft).

We started this movement for a united Europe; we deserted it; we have now split Europe effectively. When I hear the compliments paid to the President of the Board of Trade, who is known as "Mr. Europe", I must say that I cannot share those compliments. He may have done his best. He may have been a clever negotiator within the limitations set by his own Government. But these limitations themselves made it inevitable that the mission would fail, because the limitations did not permit of any kind of association with the Common Market countries such as could be acceptable to their conceptions of their mission. If the right hon. Gentleman is given the designation "Mr. Europe" for his contributions in this sphere, all I can say is that Herr Ulbricht deserves the title "Mr. Germany". We have divided instead of united. We have, therefore, the responsibility to take the first steps towards a final reconciliation.

My right hon. Friend the Member for Bassetlaw (Mr. Bellenger) challenged the Chancellor on who was to take the initiative between the Six and the Seven to find a reconciliation and the Chancellor said, "We shall be ready to take the initiative." He said, "We are ready to meet them at any time, but not until we have consulted with other Ministers and have made up our minds what we are going to do." The President of the Board of Trade might look at the OFFICIAL REPORT and he will find that this is the case. He said, "It is no good entering into negotiations until we have made up our minds on what we are going to negotiate." The President of the Board of Trade, on the other hand, said that we are ready now to negotiate. There is a complete lack of harmony between the two Ministers. I hope that the President of the Board of Trade will tell us what is the position—whether we are ready now to enter into negotiations and, if so, whether he will make a statement to that effect which will be clearly understood in the community of the Six. We can and we must make a new and more generous effort than we made in the negotiations in the Free Trade Area.

The Commonwealth has been quoted over and over again. I have already referred to the effects on Nigerian trade unless we can get a bridge built between the Six and the Seven. Other Commonwealth countries will suffer severely. At no time in the history of this discussion in the last few years has any Common- wealth statesman uttered any kind of suggestion that his country was against Britain going in with Europe. Indeed, I think that the general feeling in the Commonwealth is that they would much prefer to be taken into Europe along with Britain for trade and economic purposes than simply to be left out until we are in some kind of political struggle leading to physical hostilities in Europe before inviting the Commonwealth to come into the Continent with us.

I am satisfied that the Commonwealth is ready for a much bigger step than the Government have yet been prepared to make. Unless something is done, I am sure that the E.F.T.A. area with all that it represents will do more to destroy what is left of the Commonwealth than save it from the dangers which have been referred to. What can we do about it? I suggest that the issue is so important that the Government should seriously consider setting up a Minister responsible for European affairs either under the Foreign Office or independent of the Foreign Office. I suggest that we could do a great deal to bring the Six and the Seven together if we were to make it clear now that we are prepared to go on to modify the Stockholm Convention and bring it more into line with the kind of provisions which are made in the Common Market Agreement.

I believe that, if we were prepared to suggest, for example, that within the Seven we would establish measures for seeking to harmonise social conditions, in the same way as is provided for in the Common Market agreement, and if we were prepared to suggest that we should set up a common basis for a development fund for the underdeveloped areas, which could be administered through O.E.E.C. or some other body, or a specially created institution, then we should he able to persuade our European friends that we really meant business.

All the arguments about the Commonwealth and about agriculture are really not valid in this discussion. We have heard them over and over again. We know very well that, had we gone to the first discussions at Brussels in 1955 or to the Messina Conference, we might well have got conditions which would have covered our agricultural problem and our overseas problem just as the French were able to do. It was no good the Chancellor saying, as he did, that one of the reasons why we could not go into these things—I took his words down in shorthand as well as I could—was that we could not be committed to the proposed agricultural policy of the Six at that time, and the Commonwealth's desire to extend its market within Europe would not be possible within the proposed arrangements. They were proposed arrangements. It is the business of those going to a conference to propose alternative arrangements, as the French did, with considerable advantage to themselves. To speak of the Commonwealth and of agriculture is to make excuses.

The Government know very well that the one thing which has prevented us from taking a full part in Europe and having the closest possible association with the Common Market, or within any wider common market which might have been achieved if the Messina discussions had developed properly, is that we are afraid—this applies to both parties—to give up any more sovereignty than we can possibly avoid. That is the real answer. Commonwealth and agriculture are incidental. Both parties are responsible, and there have been elements within each which has showed great hesitation in giving up more sovereignty than we can avoid. The right hon. Member for Monmouth made this very clear.

When we had this argument against giving up sovereignty in the old days we were told that we could not be expected to mortgage the British Navy to a lot of foreigners. But we have since mortgaged the British Navy, and the British Army, and the British Air Force to N.A.T.O. It is no longer a question of whether Britain can afford to give up sovereignty. The question is only the degree to which Britain is prepared to extend the giving up of sovereignty, in our own interests, in the interests of the Commonwealth, and in the interests of peace and development in the world. When we discuss this matter of sovereignty, we must consider very carefully the advantages as well as the disadvantages of the modification of sovereignty in the modern world. As we have recognised that, through N.A.T.O., the merging of sovereignty with greater communities is not a disadvantage, so we must learn it in economic matters, also.

I do not believe that the position is hopeless, though it is depressing and discouraging. The division between the Six and the Seven is a serious backward step in our development. At the same time, there are certain hopeful features. Amongst these is the very fact that we panicked after the failure of the Free Trade Area negotiations into this very poor alternative. This indicates that, on both sides of the House and in every section of the country—those concerned with economic matters and others—there is a recognition of the seriousness of the position.

Mr. Hirst

Pure filibustering.

Mr. Deputy-Speaker (Major Sir William Anstruther-Gray)

Order.

Mr. Hynd

The Germans are concerned about the possibility of a split with Britain and the loss of a great part of their European market. Austria is cerned about her special position and difficulties. Turkey and Greece are now very worried about the situation in which they find themselves. The fact that everyone is now much concerned about the seriousness of the situation suggests to me that there is still some hope that, out of a recognition of the nature of the problem, there may be some new prospects of more reason being applied to bring the two sides together and enable us to solve it.

Mr. Cyril Osborne (Louth)

On a point of order. May I ask for your guidance, Mr. Deputy-Speaker? You called my hon. Friend the Member for Shipley (Mr. Hirst) to order when he was speaking to me. Does that mean that in future we shall not be able to speak to one another during a long speech?

Mr. Deputy-Speaker

As I heard, interruptions were being made, and I thought it my duty to allow the Member addressing the House to be clearly heard.

Mr. Hynd

I was about to complete my speech, Mr. Deputy-Speaker. [Interruption.]

Mr. Deputy-Speaker

Order. When I give a Ruling, I hope that it will be listened to with respect. I try to give Rulings which I believe to be correct.

Mr. Hynd

May I conclude by repeating what I said at the beginning of my speech?

I hope that as a result of this debate the Government will realise, as has been said on both sides of the House, that this is a situation which cannot be allowed to continue. A definite and immediate initiative is required from the Government. It is their responsibility and I hope that they will be prepared to accept it.

Mr. William Baxter (West Stirlingshire)

On a point of order. As one who has waited here since half-past two to express a point of view on this important matter, Mr. Deputy-Speaker, I should like to have your guidance. We have had only one maiden speech of an uncontroversial nature by a Member from across the Border, from the nation called Scotland. I have not had an opportunity of expressing my point of view. I should like to crave your indulgence for a moment, Mr. Deputy-Speaker. This Convention is of paramount importance to the well-being of the nation which I seek to represent, and I should like to have your guidance—

Mr. Deputy-Speaker

Order. The hon. Member has not been fortunate in catching the eye of the Chair. He cannot now make his speech on a point of order.

Mr. Baxter

I protest very much about that.

9.3 p.m.

Mr. Harold Wilson (Huyton)

I am sorry that my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) and, I understand, an hon. Member from across the Irish Channel, who wanted to make a maiden speech, have not been fortunate in catching your eye, Mr. Deputy-Speaker.

Mr. Hirst

It is the fault of the right hon. Gentleman's hon. Friend, the Member for Sheffield, Attercliffe (Mr J. Hynd).

Mr. Wilson

I thought that the Chair had already given a Ruling on that matter. I did not think that my hon. Friend spoke for an excessive length of time, and he made some important contributions.

Despite the disappointment of hon. Members, I think that this has been a useful debate. We have had three maiden speeches. I did not hear the speech of the hon. Member for Banbury (Mr. Marten), but I heard that of the hon. Member for Moray and Nairn (Mr. G. Campbell). The debate has also been marked by the return of the right hon. Member for Monmouth (Mr. Thorneycroft) after his illness. We are all very glad to see him back in this House, apparently restored, as far as we can see, to health and, judging from his speech, to vigour and energy.

All of us were impressed by the tribute of the Chancellor of the Exchequer to the late John Edwards who, I think, I can say but for his untimely death would have spoken from this Box. His last two major speeches in the House were on the subject of European free trade. I think that all of us would wish to associate ourselves with what the Chancellor said on the death of our late colleague.

Before coming to the main issues of the debate, I should like to refer to anxieties which have been expressed, both inside and outside the House, about the effects on individual British industries. The hon. Member for Moray and Nairn referred to the fishing industry. We have heard a great deal during the last few weeks and months about the paper industry and many others which have been affected. We understand the very considerable anxieties which have been felt about those industries. I think we can fairly say that the anxieties of the paper industry, and probably the fishing industry, would have been a great deal less if we had had a general Free Trade Area in Europe and not this narrower one.

When the Prime Minister, then Chancellor of the Exchequer, first put forward in the House the proposal for the European Free Trade Area—I think it was on 26th November, 1956—I said that we as an Opposition did not propose to take a protectionist line or to try to make any political advantage out of the sufferings of individual industries—and there might be such sufferings—as a result of the development of European free trade. That is certainly still our attitude. We have not at any time lent support to those who would oppose a Free Trade Area on protectionist grounds.

What we say is that quite apart from the measures in the Stockholm Convention designed to temper the wind, for a time at least, to these industries, the increased competition which we must expect underlines the need for a much more vigorous distribution of industry policy. That must be the lesson of the increased competition, whether coming through the Free Trade Area or through other means.

The House has debated at some length —my hon. Friends, I gather, would say at inadequate length—the proposals of the Government in the Local Employment Bill, but other stages still remain. The President of the Board of Trade will realise that he has not reached the beginning of the end. To use his right hon. Friend's phrase, he has reached only the end of the beginning concerning that Bill. This debate and the anxieties in many industries underline the need for the most vigorous possible distribution of industry policy.

The President of the Board of Trade will agree about the difficulties that we are all facing, and that many of our new industries and developments require a great deal of capital in relation to their output and provide relatively little employment. We have the problem of these great new industries being set up which the Economist would call "capital intensive" industries. Even though millions of pounds may be spent on one factory or development, it does little in the way of providing employment.

Having said that—and I hope that the President of the Board of Trade recognises it as the main anxiety of many hon. Members—we are debating today what we all recognise as a second-best, a perhaps useful but scarcely adequate substitute for a more generalised European Free Trade Area. We supported quite vigorously the original proposals for a Free Trade Area. The Government had our full backing in all their negotiations, although we emphasised the safeguards that, we felt, should be written into the creation of a European Free Trade Area. In particular, more than once we criticised the Government's attitude for what we regarded as a purely negative Free Trade Area which would merely remove trade impediments and which lacked the positive momentum and expansionism based on development and growth.

Over a year ago, when it was clear to all except the Government that the Free Trade Area proposals were breaking down, we first put forward in this House the idea of the Outer Seven. I remember asking the President of the Board of Trade then if his mind was closed to such a proposal. He replied that his mind was not closed to anything. Even in the debate of 12th February, however, two months after the breaking off of the negotiations, the right hon. Gentleman in a full and comprehensive speech barely referred to the proposal for the Outer Seven. He merely touched on it and again said that he had an open mind, but he stressed the disadvantages rather more than the advantages which he foresaw from such a proposal. That was on 12th February.

Mr. John Edwards dealt with the proposal in that debate rather more fully than the President of the Board of Trade. He was opening the debate from this side of the House and he outlined the Outer Seven proposal, certainly not as a measure in any sense hostile to the Common Market project and not in any spirit of retaliation. Anyone who knew John Edwards would know that that would be the last thing he would do. He was completely averse to putting forward any proposals that could be regarded as in any sense inimical to closer European unity. Nevertheless, he put forward the Outer Seven proposal.

Despite the fact that the President of the Board of Trade had so little to say about it last February, we have now got this agreement initialled. I should like to deal first with the Free Trade Area proposals on their own merits. We must ask the Government, are we to regard this as a tactical manœuvre to help them in their negotiations with the Six, or as a measure which they commend as being worth while in itself?

I am not trying to suggest that the Outer Seven proposal was done out of pique on the part of the Government. I am sure that that was not in their mind. I do not think it was made as retaliation against the creation of the Common Market, but there was reason to think that in their mind it was building up a situation of strength to enable us to deal more effectively with the Six. I think that was their view, at any rate when they embarked on the Stockholm negotiations, but, of course, as the President of the Board of Trade will hasten to tell us, obviously the proposal has intrinsic merit, merit made the greater, I think, through the creation of the Common Market.

I do not want to make too much of this, but certainly in the Common Market area German manufacturers, for example, have differential advantages over British manufacturers. For instance, German car manufacturers have advantages over British manufacturers in the Netherlands because of the tariff differential which they are now beginning to enjoy. Now, as a result of the creation of the Free Trade Association area we shall have an area where our goods will possess certain tariff advantages against those of manufacturers of the Common Market area. As I said, I do not want to make too much of this argument because, as my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) has pointed out, it is a much smaller market, the one we are now joining, and secondly, because, as also he pointed out, it is already a relatively low-tariff area. We are not going to gain so much by tariff reductions among our trading partners as, for example, might be the case in the Common Market.

I do not intend to go through the White Paper. It is all right as far as it goes. It largely follows, as far as it can, the European free trade proposals. I would mention one or two points in it. The reference to full employment is still, I think, a very perfunctory one. It is put forward as one of the objectives, but I think all of us would like to have seen specific provisions proposing common action for dealing with any threat to full employment in the area and specific proposals for helping to develop any relatively under-developed parts of the area.

I was interested to see that the right hon. Gentleman or his colleagues have put in a section on access to raw materials. I think this is valuable. I think it is worth doing. I should like to see them pay more attention to this problem in a more generalised trade setting. We are always hearing of the virtues of free trade and of doing away with the many impediments to free trade. Yet it is a fact that not enough attention is paid to the problem of access to raw materials. We cannot really have free trade in the real meaning of the phrase if some manufacturers in the area do not have the same advantages as their competitors in access to raw material.

For example, one industry in this country which is suffering very severely today is the leather industry. All of us, I think, are aware from our constituents' representations that tanneries have been closing down over the last twelve months and of the very formidable problem of leather imports which they are facing. If they were facing competition on a straight basis, if they were just facing it on the basis of efficiency, cost and price, it would be one thing, but the British leather industry is facing a very formidable problem of access to raw materials in one country after another. I am not thinking only of countries in Europe. I am thinking more particularly, I am sorry to say, of Commonwealth countries. The difficulty is that this country is facing free imports of finished leather, and our industry still cannot get hides on a basis comparable with that of its principal rivals and competitors.

I should like to see the Government be much more vigorous on that question before they go on pushing ahead with the problem of free trade in other directions.

Now I want to turn to the problem of bridge-building, the so-called "sixes and sevens" problem. The right hon. Member for Monmouth was right to ask, "Where do we go from here?" When we pressed this scheme on the Government a year ago, quite frankly it was partly as a bargaining weapon to help them get a wider Free Trade Area. I think that it was certainly in the mind of the President of the Board of Trade when we debated it earlier this year, though I have a feeling that he is not so optimistic now about building a bridge between the Six and the Seven.

Does he still hope for a Free Trade Area covering the whole of the original Free Trade Area countries? Or does he expect to see two blocs continue? Or does he expect to see some relationship between the two blocs, not a generalised Free Trade Area covering seventeen countries, but some sort of carve-up between the two blocs? If that is so, it raises big questions so far as the G.A.T.T. is concerned and the American attitude is concerned.

The Chancellor referred to the visit of Mr. Dillon and I think that all of us were glad to welcome him. We all know him as a statesmanlike and forward-looking member of the American Administration. Few have tried to do more for Europe both economically and politically than he. I should like to hear more from the President of the Board of Trade about the Government's discussions during Mr. Dillon's visit. One understands—though this may be a misunderstanding—that the American Government support the Rome Treaty on political grounds, quite apart from any economic arguments that there may be. Could we ask the President of the Board of Trade whether the American Government, through Mr. Dillon, expressed any view about the bridge-building between the Six and the Seven? Did they want it to happen? Did they want some kind of tariff and trade deal between the two blocs, or did they feel that such action would be discriminatory and contrary to the G.A.T.T.? I hope that the right hon. Gentleman will answer frankly on that question.

What is the Government's position on the Common Market? I must ask this: I think that it is very much in the mind of the right hon. Member for Monmouth. I gather that they are against the United Kingdom joining the Common Market. Would that still be their attitude if the bridge-building—and I use that shorthand for lack of a better and longer phrase—between the Six and the Seven becomes impossible, either because the Rome Treaty Powers set their face against any bridge-building, or because of the opposition of the United States or other members of the G.A.T.T.? I think that all of us agree that it is a very difficult problem and it is pretty clear, at any rate on all that we have heard so far today—though I hope that it will be put right in the next half-hour —that the Government have no answer to the question of the right hon. Member for Monmouth, "Where do we go from here?"

It is perfectly fair for the Government to ask where we on this side of the House will go from here. That is a fair question, though one hopes that one would not have got into the situation which the Government have got into. If I were challenged to say where we go from here, I would commend once again to the Government the proposals put forward by Mr. John Edwards in the debate of 12th February. They still hold the key to the next advance.

I would refer hon. Members in particular to the rather lengthy statement in column 1398 of the OFFICIAL REPORT for 12th February in which Mr. Edwards suggested that if we cannot have a common tariff over the whole field with the Common Market Powers, what about having it over a substantial part of the field? He suggested, for example, a whole range of goods where the difference in tariffs even at present is very limited. He pointed out that the final Common Market tariff will be lower for many products than our own is today. Secondly, he pointed out that our tariff, if it remains where it is today when the European Economic Community has established its common tariff, will probably be the highest in Western Europe, with the possible exception of Austria.

He added: Third, our tariff in very many cases is nearer the final Common Market tariff than the tariffs of the Six are at present. I wonder, therefore, whether it is possible to contemplate, over quite a wide range the harmonisation of tariffs …"—[OFFICIAL REPORT, 12th February, 1959; Vol. 599, c. 1398.] He pressed that further consideration be given to possible harmonisation of tariffs while fully recognising, as we all know, the tremendous problems with which the President of the Board of Trade has spent the best years of his life—certificates of origin, definitions of processes, definitions of percentage of materials, Carli proposals and all the other compensatory schemes, which the right hon. Gentleman now seems to have largely left behind.

At the risk of the right hon. Gentleman having to spend some more years on that, I hope that the Government will give earnest consideration to the proposals made last February, which I can do no more than repeat this evening. I would point out again, as my hon. Friend the Member for Stechford pointed out this afternoon, that those proposals, first outlined in the debate on 12th February, were later embodied in the P.E.P. study of the proposals which was initiated by John Edwards.

Finally, I want to ask the Government their conception of the wider problem of world trade, because the last year has been one of significant developments in trading matters. At the end of 1958 we had convertibility, we had the French devaluation, we had the end of E.P.U., we had the breakdown of the Free Trade Area proposals, we had the Treaty of Rome and the creation of the Common Market.

We have had since then the expansion of the reserve position of the International Monetary Fund. We have had further positive developments and ideas on the part of the World Bank. This year we have had a widespread removal of restrictions on dollar imports. We have had the end of the restrictions on travel allowances. We have had the continuance of the world dollar problem which is now, of course, a continuing American deficit not on current trade account, but the position created by a current trade surplus, which is much more than offset by defence expenditure, by aid and loans, and by a massive, though perhaps not very well directed, volume of private American investment. We have had the European boom, in which Britain is sharing, even if we are still lagging behind a little, and we have the contrast, too, that whereas the boom in this country is largely a consumption boom, in France and Germany it is more consciously based on increased investment.

Then we have, as a growing factor in that boom, an increasing volume of American investment in Western Europe. One wonders how far that is detrimental to this country. How many cases do the Government know of American firms, who had planned to come here on the expectation of the creation of a Free Trade Area, who are now going across the Channel? Incidentally, there is a big problem for British firms. Some are wondering whether to establish subsidiary undertakings on the other side of the Common Market tariff wall. Some are already doing it. There are others which are wondering whether to license royalty arrangements to manufacture goods made under a British patent on the other side of—I will not call it an iron curtain but it is clearly a tariff wall. One would like to ask the Government what advice they are giving those firms. Is it better for them to hold on and to hope for a Free Trade Area, or to cut their losses and licence such a development? There have been significant developments, not all to the advantage of this country, probably more to our disadvantage. I suggest to the Government that it is time for a new look at the world trade problem.

Many times we have warned the Government of the potential Russian export competition. I remember doing so six years ago, when few hon. Members of this House thought of Russia as an exporter of industrial goods. For the last two years the Government have been living on favourable import prices. I wonder what would happen if Russia realised the logic of her position and became a major importer of food and feedingstuffs, pushing up primary prices by so doing, and at the same time entering with ruthless export competition into the market for industrial goods, because that is a very real possibility.

Another reason for a new look at world trade is the fact that there are two problems now. There is the problem of freer trade between advanced countries and the problem of a much more purposeful drive for an advancement of the under-developed countries. Some are beginning to wonder now whether G.A.T.T. is not more suitable merely for advanced countries, with a different body with different rules; in other words, a different club for the under-developed countries.

After all, it is twelve years since we signed G.A.T.T., and I would remind the House that when we signed the Agreement it was meant as a provisional, interim body until the International Trade Organisation was set up, and some of the parts of that international trade organisation have never come into being. For example, it was always envisaged that there would be considerable intergovernmental action on international commodity agreements as part of the international trade. organisation. We have got very little in the way of international commodity agreements, but we have got G.A.T.T., which, very largely, I think, favours the more advanced Industrial countries.

I hope that the Government will have a look at that, and I hope also that they will look at the whole question of the relationship between trade and monetary institutions. We had something to say on that in the debate on the Radcliffe Report, because, of course, our trade bodies are based on the removal of impediments to free trade, which is rather a negative concept. Our financial institutions are based very largely on the concept of restoring equilibrium. We can get equilibrium in one of two ways, either by holding things down by imposing deflation in a country which gets into difficulties, or, by a programme of systematic expansion and development, creating new export markets.

We have that problem particularly in relation to the primary producing countries. When this country embarked on deflation—the right hon. Member for Monmouth with his 7 per cent.—that, of course, had a very serious effect on the export position of the primary producing countries all over the world, not least in the Commonwealth.

This brings me to my final point It is the question of the Commonwealth. Many references have been made to the Commonwealth as a reason for particular action or inaction in Europe. Have the Government any ideas for the future of Commonwealth trade? It is a fact that the sterling area as an economic reality has largely been broken down by Government policy. There is no longer any discrimination in favour of other sterling area countries, and it has no longer any meaning as a trading unity. I ask if the Government have really considered the possibilities of a Free Trade Area within the Commonwealth, with, at any rate, those countries which would be willing to join it. This proposal was put forward by Ernest Bevin and Sir Stafford Cripps, and I remember pressing it on other Commonwealth countries at Geneva.

We are now at a decisive turning point, and I say to the right hon. Gentleman, "Do not give all your thoughts to Europe". If one-tenth of all the energy which the right hon. Gentleman—and we commend him for his energy—has put into the European Free Trade Area had been devoted to strengthening inter- Commonwealth markets, and aiming at creating a Free Trade Area for the Commonwealth, we might have been in a far stronger position today. This is a new Parliament. It is a time for new ideas, and I hope that the Government will think again about that point.

Finally, whatever we do in trading arrangements in the Commonwealth, in Europe, in East-West trade, I stress again the need for greater investment and greater competitiveness. We are told that we are nearing the peak of a boom. The Governor of the Bank of England is already warning that it might be necessary to impose some measures of restraint, and that we are being carried along in that boom, by increased consumption and by a very significant speculative position, to the point where the monetary authorities are thinking of imposing monetary restraint. It is a tragedy that we have gone so far in this boom that we are thinking of putting an end to it without any increase whatever in industrial investment in private manufacturing industry.

I say again to the right hon. Gentleman that we wish him all success in his negotiations in Europe. None of us can be content to stay where we are in this Outer Seven Free Trade Association; but, whatever arrangements he makes or fails to make, the future of this country economically will depend on the volume and purposiveness of our investment in British manufacturing industry.

9.29 p.m.

The President of the Board of Trade (Mr. Reginald Maudling)

In view of the importance of this subject perhaps it is a little disappointing that the House was not more fully attended than it has been throughout this debate. But, as a consolation, I think that we may say that all the speeches which have been delivered have been both well-informed and penetrating. In particular, I should like to refer to the three outstanding maiden speeches from my hon. Friends the Members for Banbury (Mr. Marten), Willesden, East (Mr. Skeet) and Moray and Nairn (Mr. G. Campbell). All of them, I think, made very significant contributions to this important debate.

May I, also, on my own behalf, say a word about a voice which we did not hear, that of John Edwards, with whom I had many very cordial and friendly relations, and whose contribution to the problems of Europe was, indeed, an outstanding one.

The right hon. Member for Huyton (Mr. H. Wilson) ranged over a wide area. I resist the temptation to dwell upon his rather belated conversion to Lord Beaverbrook's policy of Empire Free Trade. I will, if I may, stick to the problem of Europe.

Mr. H. Wilson

May I inform the right hon. Gentleman that I have never been converted to that view? What I put forward tonight is what I put forward when I held the same position as does the right hon. Gentleman, and represented other Commonwealth countries. It was publicly announced as Government policy by the late Mr. Ernest Bevin and Sir Stafford Cripps, so there is nothing very new about it.

Mr. Maudling

If that were their policy, they made singularly little progress with it.

The purpose of this debate is to ask the approval of the House for the Agreement reached in Stockholm and I have confidence that the House will give that approval. I thought that the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) and one or two other hon. Members were a little inconsistent in that, having proved this was their idea, they then said that they did not think much of it. I well understand the difficulty of their position in their own party at present.

It is true, as was said by hon. Members opposite, that this is a second best. I absolutely accept that this is nothing like as good an arrangement as a Free Trade Area for the whole of Europe. In my view, however, it is not true that there is no political content in this Association. It is true that there is no provision for a parliamentary assembly or an advisory committee, including the trade unions, but neither is ruled out as the Association develops. Indeed, the Government have often made clear their interest in this particular suggestion.

I should like to refute the suggestion, which often comes from across the Atlantic, that there is no political content in our Agreement. We cannot measure the political unity by the form of an institution. That can be measured only by the will. It is just not true to say that without a common Parliament or a common currency or institutions we cannot have political unity. Were that true, there would be no political unity in the British Commonwealth. We must recognise, and hope that our friends in other continents will recognise, that the political unity of any group of countries depends on the will to work together.

Mr. Roy Jenkins

Will the right hon. Gentleman tell us what he means by the phrase, "often comes from across the Atlantic"? I thought that the Chancellor this afternoon was at pains to point out that the Seven was just as acceptable to the Americans as the Six.

Mr. Maudling

Perhaps I may make myself clear now on this point. I think that it is true that our American friends are very interested in the political content of the Six and, therefore, welcome it very much. They have made equally clear to us that they would not oppose the establishment of the European Free Trade Association, nor would they oppose any agreement between the Six and the Seven which was consistent with the rules of the G.A.T.T. I am glad to have the opportunity of making that absolutely clear.

Whatever the political content of this Agreement, I think that we must recognise that this is a most significant step forward in Britain's relations with the continent of Europe. I believe that we should not underestimate the very deep and lasting significance of the move which we have made. The Association is devoted to the two principles of European unity and freedom of trade. Despite what was said by the hon. Member for Stechford about a shopkeeper's attitude, I do not think that either of those principles are particularly ignoble ones for us to follow. Surely the ideal of European unity is one which we in this House must cherish, and I do not believe there is anything in it offensive to sentiments either in Asia or Africa.

I appreciate the concern of my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), but I would say again that the unity of Europe is of fundamental importance to Asia and Africa, because we are the best market for their products and the best source of capital for their development. I am sure that that would be generally recognised by them.

We in this island have suffered enough in recent generations from a disunity of Europe to realise our own interest in the unity of Europe. I wish our friends on the Continent would understand that a little more clearly. We have no interest in preventing the unity of Europe. We have a deep and abiding interest in assisting it, but the fact is that we cannot build Europe as we could build a new continent composed of people coming as immigrants from many different lands. Europe has so many traditions, so many ingrained interests and positions.

We cannot impose on Europe a federal structure of institutions which might work in other regions of the world. We in the United Kingdom are part of Europe, but more than a part of Europe. We cannot exist and flourish unless Europe exists and flourishes, but we have responsibilities going far beyond the confines of Western Europe alone.

As my right hon. Friend the Member for Thirsk and Malton made so clear, we have the responsibility of helping to build a bridge, not only between us and the Six, but between the Western European grouping and the British Commonwealth. It should be generally recognised that the close relations between the Commonwealth and Western Europe, which can only depend on the action of the United Kingdom, are of interest not only to us, not only to the Commonwealth, but to Western European countries themselves.

Maintenance of European unity is one principle to which we are rightly attached. The second principle is maximum freedom of trade and the removal of barriers to trade in the Western nations. I do not think that anyone who has seen the success of O.E.E.C. over the last ten years can doubt the political and economic importance of this process.

The signing of the Treaty of Rome brought for Europe many possibilities—and we welcome anything which strengthens our friends—but it also brought, in our view, the danger, first, of a division in Europe between the Six and the rest. With tariff barriers between them, and, secondly, of the regeneration of protective forces after years of liberal trading policies. It is of importance not only to us, but also to the United States of America, that Europe should remain united and prosperous. We believe that it is still very much in the interests of Europe and of the world as a whole that there should be within the framework of the G.A.T.T. such a multilateral association of European States as that to which my right hon. Friend the Member for Monmouth (Mr. Thorneycroft) referred.

I am a little concerned at the development in some European quarters of a new doctrine, which I can only describe as the doctrine of the non-existence of Europe. There are some who argue that, the Six having been established, relations between the Six and their other European neighbours must be just the same as relations with other members of the G.A.T.T., Latin America, North America, or any part of the world. I find that doctrine difficult to accept, and I do not think that it can be reconciled with the concept of a United Europe. We want a multilateral and specifically European organisation by which we can trade one with another on the same multilateral basis precisely because we are all Europeans.

A relation of that kind, which, we believe, is of importance not only to ourselves, but to all the free world, is what we were aiming at in the original Free Trade Area. That negotiation, as has been said, failed. I shall not go into the reasons, but it has been asked this evening, particularly by the Liberal Party spokesman, why we could not offer to join the European Economic Community. I leave on one side the question of whether such an offer could be accepted by the Community without destroying its prospects of developing its unity.

The point is: how could we make such an offer in real faith? The difficulties must not be underestimated. I thought that the hon. Member for Bolton, West (Mr. Holt) did underestimate them, as did the hon. Member for Sheffield, Attercliffe (Mr. J. Hynd), who pursued a similar point of view. In the first place, joining the Community would involve abandoning our own agricultural policies and accepting a common agricultural policy to cover our agriculture and the agriculture of the European countries. I cannot see how that would be consistent either with our agricultural legislation in this country or with our policy on the import of Commonwealth foodstuffs. Here is a clear disagreement.

Next, there is the general point that it is difficult to accept that we should tie our hands in dealing with 86 per cent. of our products throughout the world in accordance with what we agree with friends who make up only the remaining 14 per cent. of the market for our products. That in itself is a little difficult to support. It is particularly illustrated in the question of the Commonwealth preferential system, to which much reference has been made this afternoon.

I should like to be as clear as possible on this subject. There are two very important points. The first is that of Commonwealth duty-free entry, and however much the hon. Member for Bolton, West may try to whittle down the problem, as I think he tried in his speech, it is the principle of duty-free entry for the vast bulk of Commonwealth goods which holds together the Commonwealth trading system; and the Commonwealth trading system is still responsible for nearly half our trade, and, more important, it is the basis of all our political relations with the Commonwealth, with the vast significance which they have for the whole of the Western world.

I have already said that agricultural imports would be affected by a common agricultural policy. When we turn to raw materials, we find that to join the Community would mean accepting the obligation, if it were so decided, to impose duties on raw materials now entering this country duty-free from the Commonwealth. Vegetable oils and metals are among many examples which could be quoted. Could that make sense in Commonwealth terms? Could it make sense, in world terms, to begin putting duties on raw materials, in particular, putting duties on raw materials coming from the so-called underdeveloped countries? I can think of no more retrograde step, economically or politically. Indeed, I am shocked to find representatives of the Liberal Party advocating such a policy.

Beyond the question of the tariff level, there are the other implications about commercial policies. I will come a little later to the question of harmonisation, which is very important, but it must be recognised that one of the terms of the Treaty of Rome is that a common commercial policy will be commonly decided and negotiated in common. If we were a member of the Community we could no longer negotiate commercial agreements with Australia, New Zealand or Canada. The Community would do it. Is that a situation which the House could accept? I do not believe that it is.

Mr. Donald Wade (Huddersfield, West)

I understood the right hon. Gentleman to say that the present situation was a second-best. Are we to understand that joining the Community would be the best or the worst?

Mr. Maudling

The best answer I can give to the hon. Gentleman is that it would be the third-best. At the moment I am concerned only with the second-best.

What I am trying to point out is that when the Liberal Party so gaily criticises the Government for failing to reach an agreement it forgets that it takes two parties to reach an agreement. When it says that we should join the Community, it must look at the consequences of doing so. If the Liberals are prepared to go into the Lobby tonight to support the proposition that this country ought to join the European Economic Community, let them realise the consequences to British agriculture, British trade and Commonwealth connections inevitably inherent in the proposition which they are supporting.

Mr. Holt

In the debate on 12th February the right hon. Gentleman admitted that there were difficulties to joining the Community, but said that it was not impossible. Would he not agree that, since the discussions over the Free Trade Area and the Common Market started, two or three years ago, many people on the Continent have become very interested in our method for the support for agriculture and would like to introduce it into their countries in preference to their own method?

Mr. Maudling

I am all for exporting ideas as well as products, but the point is whether we control our own policy and how, without that control, we can fulfil our obligations to the Commonwealth.

Mr. Roy Jenkins

Why is the right hon. Gentleman addressing so large a part of his remarks to the rather small target of the Liberal Party instead of to the rather larger target of his right hon. Friend the Member for Monmouth (Mr. Thorneycroft)?

Mr. Maudling

First, because my right hon. Friend's point is entirely the same as mine and entirely different from that of the Liberal Party. Secondly, because the Liberal Party tabled the Amendment. Thirdly, I believe that the Liberals might vote upon it, which seems almost unbelievable.

I return to the European Free Trade Association. When the negotiations broke down, at the end of 1958, we had the choice between letting things drift or doing something different. We chose to support the idea put forward of forming an association of the Outer Seven, which I gather, on the whole, hon. Members opposite say we should have done because they say they told us to do it, which seems a very unconvincing argument.

On timing, the right hon. Member for Huyton asked why it was that as late as February of this year in a debate I made no mention of the proposal. That was for a very good reason. After our experience in the initial negotiation, we and our colleagues in the Outer Seven thought that it would be very foolish to make any public statement of our desire to negotiate an agreement of this kind until, by private discussion, we had assured ourselves that there was a very good chance of success. Therefore, we deliberately pursued some very intensive discussions amongst ourselves for some months before we came out and had the Conference at Saltsjöbaden.

One of the reasons why this whole process has been so rapid—and, I claim, so successful—is precisely because the way was prepared in advance, and prepared in advance in confidence. The right hon. Gentleman is making a perfectly fair point on this, and I am trying to give him an absolutely truthful answer. We were deliberately keeping confidence about the possibility of having a negotiation of this kind until enough spade work had been done, particularly by the Swedish and Norwegian officials, to whom I wish to pay a particular tribute, to make it clear that, once we embarked upon a negotiation, we were likely to succeed, because we could not stand another failure.

Mr. H. Wilson

Had these negotiations or exchange of views, either formal or informal, begun even before the debate on 12th February?

Mr. Maudling

I rather doubt it. We always maintained that we would not look at any alternative to the Free Trade Area until that collapsed. As the Free Trade Area negotiations did not collapse until the very end of 1958, I do not think that any other exploratory discussions started for a little while after that. That was why we were not able to respond at the time to the right hon. Gentleman's excellent suggestion, which we have now adopted and which I am sure that he will now support with the consistency for which he is well known.

We have three reasons for suggesting to the House that hon. Members should support the Motion. First, we believe that the Association is a good thing in itself. Secondly, we believe that it will prevent further disintegration in the European economy. Thirdly, we believe that it will provide the foundation on our side for building the bridge between the two groups. I will not go into great detail on the extent to which the Association is a good thing in itself. The thing to do is to study the volume of imports of our partners in the Association which, as my right hon. Friend said, was £3,000 million per annum, a large proportion being manufactured goods which we could supply if we went at it really hard.

Also, while it is true that the general level of tariffs among the other members of the Seven is probably not as high as our own—ours is a high tariff for non-Commonwealth goods—nevertheless, their general level of tariffs is high enough to provide our exporters with significant opportunities for their exports if they are prepared to seize them.

I was very encouraged when I was in Stockholm, talking to the Anglo-Swedish Chamber of Commerce there, to find that inquiries from British businessmen about possibilities in Sweden had multiplied many times over in recent weeks. There can be no doubt that there are considerable opportunities here for the expansion of British trade, and this we must balance against the increased competition that a number of British industries will certainly face.

I accept straight away that the paper-making industry, all forms of timber products, the watch makers and one or two others, will face increased competition, but I believe that in some cases this competition can be exaggerated, and, certainly, the provision for safeguards is as much as we could possibly hope for in a Convention of this kind. If we want to do more trade, we must do it in both directions. We cannot expect to have all the exports and none of the imports. It is only reasonable that, in reaching such an agreement which will greatly benefit our exports, we should make a proper reciprocal arrangement for the exports of our friends and associates to have more opportunities in our market.

The hon. Member for Ashton-under-Lyne (Mr. Rhodes) asked particularly about Finland. As my right hon. Friend said, we very much welcome the interest of the Finnish Government in the opportunity of joining or being associated with the E.F.T.A. It is up to them to say what they would like to do. Clearly, if they want to be full members they will have to be in a position to fulfil the obligations of full membership, which was what I think the hon. Member had in mind, but if they want some other form of association with us we will be very ready to listen to them and see if we can meet them, because we do attach much importance to the possibility of the association of Finland—

Mr. Baxter

The right hon. Gentleman has mentioned the possibility of the paper-making industry being affected by the terms of the Convention and having to face stiffer competition. Does he realise that the nullification of the 16⅔ tariff now in operation will mean to that industry in Scotland alone a net loss of roughly £7 million? As that is a considerable sum of money for any industry such as this to lose, how can he prove that it will be able to compete?

Mr. Maudling

I am quite certain that they will be able to compete. Competition will undoubtedly be stiffer, but it should not be disastrous, and should any disaster befall any industry there are provisions in the Convention to meet that situation.

The second reason for the E.F.T.A. is that it will enable us to prevent further disintegration in Western Europe. Apart from agreements of this kind, all the rest of Europe outside the Six might have disintegrated into a series of bilateral agreements that would have damaged not only ourselves, but the whole fabric of the General Agreement.

I agree with the hon. Member for Stechford that the most important purpose of the Association is to provide the foundation for the bridge that we want to build between the Seven and the Six. I think that the Stockholm Convention helps this in two ways. First, it should dispose of the idea that we are trying to undermine the institutions of the Six. There was undoubtedly a fear amongst the countries of the Six that their institutions might be swamped or lost in a wider free trade area. If, now, they have their Commission, and we have the set up of the Seven, there is no danger of the one overwhelming the other, and I think that that will be a great gain in negotiation.

Secondly, we have shown that there is nothing inconsistent between our Commonwealth tie and a European free trading association. To answer my right hon. Friend the Member for Thirsk and Malton, the fact that there is no mention of the Commonwealth in the Convention shows that there was never any truth in the argument that it was inconsistent to have our Commonwealth situation and a European agreement at the same time. That is also a great gain.

The talks at Stockholm have shown that a free trade area—or a free trade association is, perhaps, a better word—is technically possible. As I have said, I think that we have proved to the European Economic Community that the integrity of the Commission and all the institutions that the Six are setting up are not threatened in any way by our activities. Finally, we have proved that there is no need to think that there is any inconsistency between the Commonwealth connections of the United Kingdom and a European trading association.

What is the next move? Clearly, as so many hon. Members and other people have said, negotiations must be resumed. Equally clearly, they must be well prepared in advance. It would be folly for Europe again to launch on another negotiation unless we have considerable confidence in its success. I agree entirely with my right hon. Friend the Member for Monmouth that our objective must remain a multilateral European association—multilateral and non-discriminatory, specifically European, and one in which there are no barriers to trade between our various countries.

To achieve this, we must, of course, be prepared to make sacrifices. Any agreement, any negotiation, involves sacrifices. I do not think, however, that it is very wise to declare in advance what sacrifices one is ready to make. Nor, with respect, do I think it very wise to say in advance of negotiations that we must negotiate, because we are in a much weaker position than those with whom we are to negotiate. If I may say so. I do not feel that those are good negotiating tactics.

The way to achieve successful negotiation is, first, to make sure that we all want the same objective. That, I regret to say, is by no means entirely certain at present. One of the purposes of our conversations in Stockholm, and of the resolution passed there was to say to the Six, "We want to resume with you as soon as possible a negotiation for a multilateral settlement in Europe, and as soon as you are ready to sit down with us we shall he ready to discuss it with you."

We cannot do more. After all, as I have said, we cannot sit down alone. But we must, of course, fill in the time until they come to talk with us in discussion with our partners in the E.F.T.A. and our friends and associates in the Commonwealth. That must be the right step. Before we can resume negotiations between the Seven and the Six we must, first, have an agreement as to what is our common objective and, secondly, we must have on both sides, and between both sides by diplomatic channels, the ground sufficiently prepared for us to know whether we are likely this time to succeed.

I would suggest to the House that the position we are adopting is the only one that can be adopted for the future health of Europe. We, as I say, are still profoundly convinced that a division between the countries of Europe at present in economic terms is something that Europe cannot afford. When Europe dominated the civilised world perhaps we could have afforded the luxury of quarrelling among ourselves. We cannot afford that any more. Nor can our friends in the Commonwealth or the United States fail to recognise that it is in their own interests that there should be a European agreement and a European settlement. The responsibility that devolves upon us is to see that we have our own minds clear as to precisely where we want to go and precisely what we can do in the course of the negotiations.

We have made an opening move in this by pointing out to the Six that we are ready to talk to them and we now hope and believe that they are engaged in preparing an answer to us and will tell us when they will be ready, in what form they will be ready, and in what forum they will be ready to talk to us.

In the meantime, I suggest that our priorities and purposes are threefold, as my right hon. Friend said. First, let us ratify this Association. I hope that we shall have the approval of the House of Commons this evening to go ahead with the Seven. Let us bring substance, reality, and meaning into it to make it a living and significant thing. That will be our foundation for the bridge and the Community of Six will be the foundation on the other side. When the foundations are firm and settled between both sides we can start to build the bridge between them.

At the same time, we must continue to consult with our friends in the Association and the Commonwealth about the shape, form and substance that the Agreement covering all European countries should take in the future. Also, we must not neglect to press for a general reduction of the barriers to trade throughout the Western world. All these things are our objectives. There can be no doubt that the developments of the last year or two have come as a profound disappointment to all of us in the House who cherish the cause of European unity.

The right hon. Member for Huyton said that I had spent my best years on these negotiations. I trust that the truth is that I can say, like the Rabbi ben Ezra: Grow old along with me! The best is yet to be. There must be better to come, because neither this country nor Europe can afford to fail to solve this problem.

Question put:—

The House proceeded to a Division—

Mr. Dudley Williams (Exeter)

(seated and covered): On a point of order. A number of hon. Members are standing by the entrance to the "No" Lobby and

obstructing the entry into the "No" Lobby of those hon. Members who wish to vote against the Motion. I venture to suggest, Mr. Speaker, that this is not in order.

Mr. Speaker

If that be so, I hope that hon. Members will see to it that access to the "No" Lobby is clear to those who desire to vote "No".

Ayes 185, Noes 3.

Division No. 21.]	AYES	[9.59 p.m.
Agnew, Sir Peter	Gurden, Harold	Pearson, Frank (Clitheroe)
Aitken, W. T.	Hare, Rt. Hon. John	Peel, John
Allason, James	Harrison, Col. J. H. (Eye)	Percival, Ian
Alport, C. J. M.	Harvie, Anderson, Miss	Pickthorn, Sir Kenneth
Amory,Rt.Hn.D.Heathcoat(Tlv'ton)	Heald, Rt. Hon. Sir Lionel	Pitman, I. J.
Arbuthnot, John	Hendry, A. Forbes	Pitt, Miss Edith
Ashton, Sir Hubert	Hiley, Joseph	Pott, Percivall
Atkins, Humphrey	Hinchingbrooke, Viscount	Powell, J. Enoch
Barlow, Sir John	Hirst, Geoffrey	Prior, J. M. L.
Barter, John	Hobson, John	Prior-Palmer, Brig. Sir Otho
Batsford, Brian	Hocking, Philip N.	Proudfoot, Wilfred
Bell, Philip (Bolton, E.)	Holland, Philip	Ramsden, James
Bennett, F. M. (Torquay)	Holland-Martin, Christopher	Redmayne, Rt. Hon. Martin
Bennett, Dr. Reginald (Gos & Fhm)	Hope, Rt. Hon. Lord John	Rees, Hugh
Berkeley, Humphry	Hornby, R. P.	Rees-Davies, W. R.
Bishop, F. P.	Howard, Gerald (Cambridgeshire)	Renton, David
Bossom, Clive	Hughes-Young, Michael	Ridley, Hon. Nicholas
Bourne-Arton, A.	Hulbert, Sir Norman	Robinson, Sir Roland (Blackpool, S.)
Box, Donald	Hutchison, Michael Clark	Roots, William
Bryan, Paul	Iremonger, T. L.	Royle, Anthony (Richmond, Surrey)
Bullard, Denys	Irvine, Bryant Godman (Rye)	Russell, Ronald
Burden, F. A.	Jackson, John	Scott-Hopkins, James
Campbell, Gordon (Moray & Nairn)	James, David	Seymour, Leslie
Carr, Compton (Barons Court)	Jenkins, Robert (Dulwich)	Sharples, Richard
Chataway, Christopher	Johnson, Eric (Blackley)	Shepherd, William
Clark, William (Nottingham, S.)	Johnson Smith, Geoffrey	Simon, Sir Jocelyn
Cleaver, Leonard	Kerans, Cdr. J. S.	Skeet, T. H. H.
Cooper-Key, E. M.	Kershaw, Anthony	Smith, Dudley (Br'ntf'rd & Chiswick)
Cordle, John	Kitson, Timothy	Smithers, Peter
Costain, A. P.	Leburn, Gilmour	Stanley, Hon. Richard
Coulson, J. M.	Legh, Hon. Peter (Petersfield)	Stoddart-Scott, Col. Sir Malcolm
Critchley, Julian	Lilley, F. J. P.	Storey, S.
Curran, Charles	Litchfield, Capt. John	Studholme, Sir Henry
Dance, James	Longden, Gilbert	Summers, Sir Spencer (Aylesbury)
d'Avigdor-Goldsmid, Sir Henry	Loveys, Walter H.	Sumner, Donald (Orpington)
Deedes, W. F.	Lucas-Tooth, Sir Hugh	Tapsell, Peter
Digby, Simon Wingfield	MacArthur, Ian	Taylor, W. J. (Bradford, N.)
Donaldson, Cmdr. C. E. M.	McLaren, Martin	Temple, John M.
Doughty, Charles	McLaughlin, Mrs. Patricla	Thatcher, Mrs. Margaret
du Cann, Edward	Maclay, Rt. Hon. John	Thorneycroft, Rt. Hon. Peter
Elliott, R. W.	Maclean, Sir Fitzroy (Bute&N. Ayrs.)	Turner, Colin
Emmet, Hon. Mrs. Evelyn	McMaster, Stanley	van Straubenzee, W. R.
Errington, Sir Eric	Macmillan, Maurice (Halifax)	Vickers, Miss Joan
Erroll, F. J.	Macpherson, Niall (Dumfries)	Vosper, Rt. Hon. Dennis
Farey-Jones, F. W.	Madden, Martin	Wakefield, Edward (Derbyshire, W.)
Farr, John	Maginnis, John E.	Wakefield, Sir Wavell (St. M'lebone)
Fisher, Nigel	Maitland, Cdr. J. W.	Wall, Patrick
Fletcher-Cooke, Charles	Marten, Neil	Ward, Dame Irene (Tynemouth)
Fraser, Ian (Plymouth, Sutton)	Matthews, Gordon (Meriden)	Watts, James
Gammans, Lady	Maudling, Rt. Hon. Reginald	Webster, David
Gardner, Edward	Mawby, Ray	Wells, John (Maidstone)
George, J. C. (Pollok)	Maydon, Lt.-Cmdr. S. L. C.	Whitelaw, William
Glover, Douglas	Mills, Stratton	Williams, Dudley (Exeter)
Glyn, Dr. Alan (Clapham)	Molson, Rt. Hon. Hugh	Wills, Sir Gerald (Bridgwater)
Glyn, Col. Richard H. (Dorset, N.)	Moore, Sir Thomas	Wilson, Geoffrey (Truro)
Godber, J. B.	Nabarro, Gerald	Woodhouse, C. M.
Goodhew, Vlotor	Nicholson, Sir Godfrey	Woodnutt, Mark
Gower, Raymond	Noble, Michael	Woollam, John
Grant, Rt. Hon. William (Woodside)	Nugent, Richard	Worsley, Marcus
Green, Alan	Orr-Ewing, C. Ian
Gresham Cooke, R.	Osborne, Cyril (Louth)	TELLERS FOR THE AYES:
Grimston, Sir Robert	Page, Graham	Mr. Finlay and Mr. J. E. B. Hill.
Grosvenor, Lt.-Col, R. G.	Partridge, E.
NOES
Bowen, Roderic (Cardigan)	Thorpe, Jeremy	TELLERS FOR THE NOES:
Davies, Rt. Hn. Clement (Montgomery)		Mr. Holt and Mr. Wade.

Resolved, That this House welcomes the Resolution adopted at the Ministerial meeting at Stockholm on 20th November and the action of Her Majesty's Government in approving the Convention establishing the European Free Trade Association contained in Command Paper No. 906.