NORTH ATLANTIC FREE TRADE AREA

HC Deb 26 July 1968 vol 769 cc1173-94

11.44 a.m.

Mr. Hugh Fraser (Stafford and Stone)

As I am on my feet by right, may I, on behalf of the House, express our deepest thanks to you, Mr. Speaker, for the way in which you have conducted this very difficult Session of Parliament and to wish you a very happy Recess. [HON. MEMBERS: "Hear, hear."]

I speak on behalf of nearly 100 hon. Members from all parties who, on 6th May, tabled a Motion which proposed that, in view of the position of the Common Market negotiations, a feasibility study of an open-ended Atlantic Free Trade Area initially comprising the United Kingdom, the European Free Trade Association, Canada and the United States be set up. Nothing which has happened since 6th May has reduced the urgency of this request. A few hon. Members may have had time to read the article by Sir Con O'Neill inThe Times this morning. The cleverer a man is, the more danger there is of his being intellectually dishonest. If N.A.F.T.A. is against the provisions of G.A.T.T., how much more so was E.F.T.A., in which the Foreign Office baronet was one of the prime movers? The events which have taken place since 6th May, the proximity of the American general election, the setting up in America of a study into new lines of business and American trade direction after the election, the various crises which we have had, and the danger of a turndown in world trade adds urgency to our request that a feasibility study into this matter should be made.

Why do the Government refuse to consider another option? The hon. Member for Faversham (Mr. Boston) and myself are not asking the Government to withdraw our application to join the Common Market. We believe that every option should be left open to this country in the problems which face it today. All that we are asking the Government to do is to show prudence and some economic and political prescience in this matter. But are: the Government showing either? Surely the most superficial study of N.A.F.T.A., even the one taken by Sir Con O'Neill, would show that the economic benefits to this country would be very considerable indeed. I will not repeat the remarkable speeches made by the right hon. Member for Battersea, North (Mr. Jay) and my hon. Friend the Member for Banbury (Mr. Marten) in our last debate. I wish to talk about the political considerations involved.

What are the reasons why the Government will not undertake a feasibility study? Why will they not allow British ambassadors abroad to talk to the business men and politicians who approach them, as I know they have done, in E.F.T.A., the United States and Canada, asking what are the possibilities of such a study? Why is there this glassy-eyed conspiracy of silence and inaction on behalf of right hon. Members opposite, especially the Prime Minister?

I believe that the Government's reasons are political. They believe that the United States, Canadian and E.F.T.A. Governments might be adverse. But how can they be sure if no consultation has taken place? I am informed by several ambassadors that the dictate issued by Whitehall is not to discuss the subject at all. This is the height of absurdity. Can it be that the Government are afraid of a rebuff? The Government and the Opposition should be pretty happy about rebuffs. Like Job they want to sharpen their potsherds for a possible rebuff. There is not much more that they can do.

Or are they afraid of offending the Europeans by making the suggestion that we should consider other possibilities at this stage? The imagination boggles at the sort of humiliations which they are prepared to see heaped on this country. I quite see that there would be no approach from the United States, E.F.T.A. or Canada while the Government are not prepared to lift a finger. But at this time, towards the end of 1968, it is nothing short of crazy for a Government policy to be based on one of growing improbability, namely, the growing improbability of our getting into Europe. I say that politically and economically. And further, are not events now by-passing the European Economic Community?

Turning to the question of getting in on political grounds, to use a gruesome analogy with heart transplant operations, for all the flowers, for all the whispered thoughts in the nursing home, for all the gentle holding of hands by the lesser European Powers, it is absolutely clear that for us to get a European transplant is simply not on if it means breaking up the vitals of the Franco-Germanentente. It is not a question of the veto of the General. It is a veto which flows inevitably from the position of France and Germany today. It is a veto clinical, simple and absolute.

If we turn to the economic side, I am convinced that since devaluation and as a result of the position of our balance of payments, neither is Europe prepared to face our competitive position nor are we able to pay the price of entrance. It is ridiculous to suggest to the country that we can afford to pay the ticket of agricultural entry at this stage. We should be going back to the Corn Laws. It would mean a worse position for our people, because of the burden of the balance of payments, since Peel was thrown out by the Conservative Party. If it is the view of some of my hon. Friends that we want to get back to Peel in the 1970s, they want another think.

We want for a moment to think about the problems that face us in the 1970s. I beg the House, and especially the Conservative Party, to see the world in the perspective of the 1970s rather than that of the 1950s when the Treaty of Rome was in creation. Looking ahead, I believe that the prime problem of the coming decade must be the further freeing of world trade. The development of backward economic areas by trade and the reconciliation through trade of the Western and Eastern worlds is essentially in Britain's interest.

This, I believe, is a grand strategy worthy of a great political party—a policy of tariff reform downwards for our and other industrial goods and to our and their mutual benefit, a policy not of the flag following trade but of hope being brought by trade to millions, a free market economy on a world scale with all the advantages of a division of labour and free movement of persons and capital, a policy for world growth. Without that, let me remind right hon. Gentlemen opposite, there can be no local economic miracle.

In such a perspective, what part has our membership of E.E.C. to play? Let there be between us military, technical and financial joint programmes, but in this scheme what part has E.E.C. itself to play—this fairly rich men's club? Is it not, I suggest, the possibility of something which by its inward-lookingness would or could become a road block to world progress? Is it not possible that events are by-passing the world value of this organisation? If we look to the east we look to many countries where this federal idea is on the decline. We see what Mr. Trudeau has been advocating in Canada. We see what is happening in Africa. We see what is happening in the Soviet Union. The powers of these central organisations have not proved as successful as many had intended, especially if they are inward-looking.

I believe that to pursue our entry into Europe is not now to pursue the empyrean, but, in the immortal words of my right hon. Friend the Member for Kinross and West Perthshire (Sir Alec Douglas-Home), to pursue a politically dead duck. As the season for party conferences approaches, however much still life there may be upon their platforms the last thing one wants on a platform is a dead duck, especially if it has been dead for several years, and especially if it has been suffering from a continuous process of most unsporting overkill every time it has been exposed to the General. For the main British political parties, to continue to pay lip service to a long-dead duck is not just absurd but becoming idolatrous. Burial is the only service suitable. Let the leaderships bury the bird or the bird will bury the leaderships.

To those who are opposed to my argument, to those who say that the E.E.C. is a dead duck and that the concept of N.A.F.T.A. is an embryo destined to be still-born, my answer is simple—that so long as Britain's main political parties maintain that their joining of a restrictive trading area is their only objective of economic policy, it is unlikely that America, E.F.T.A. or Canada will lift a finger to help.

Therefore, precisely for these reasons we believe that, without commitment, Her Majesty's Government should initiate unofficial talks and studies of feasibility. If that be without commitment, we must be totally committed to the expansion of world trade and—this is important—to the concept of N.A.F.T.A., an instrument which can push forward the ideas of another round of the Kennedy manifestations. Of course, this cannot be done on the same scale as before. There must be a spearhead, and that is precisely where the importance of N.A.F.T.A. lies.

But, above all else, we believe that the idea of N.A.F.T.A. would be a sign and earnest of the world's intention, decision and power not to turn it into rival trading blocs, not to set up more and more non-tariff barriers but to regulate its trading relationship. It is only by doing this that the West can put its affairs to rights.

We are not asking much of the Government today. We ask them simply to set up this feasibility study, but we ask them to act now.

11.56 a.m.

Mr. Terence Boston (Faversham)

From this side of the House, Mr. Speaker, I should like to join in the thanks expressed to you for your work during the Session.

Like the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) I greatly appreciate the chance to debate this subject. The right hon. Gentleman has performed a service by introducing the first debate in the House devoted to this subject. I join the right hon. Gentleman in the tributes to the others who have been active in this sphere, particularly my right hon. Friend the Member for Battersea, North (Mr. Jay) and my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris), the right hon. Member for Thirsk and Mal-ton (Mr. Turton) and the right hon. and learned Member for Hertfordshire, South-West (Sir D. Walker-Smith).

I am not yet, I confess, among the out and out supporters of the proposal itself, but I seek, like the right hon. Member for Stafford and Stone, to make out a prima facie case for a thorough and searching inquiry into its feasibility. This is important because negotiations on Britain's entry in the Common Market are at a standstill and also because there appears to be no early chance of their success. This has been given added point by the overwhelming Gaulliste victory in the French elections and by the appointment of M. Couve de Murville as the French Prime Minister. This suggests that Gaulliste views could well prevail even after the General's departure from office. So we should be failing in our duty if we did not now set about the job of exploring the alternatives anew.

I feel that Britain and her partners are in a sense again at the crossroads. There is evidence of a history of missed opportunities in the international sphere. We cannot afford to go on missing opportunities in future and then, when it is too late, try to retrace our steps—because that, to some extent, is the history of our attempts to get into Europe already.

First, what are the alternatives? I shall make only a brief passing reference to all but one of these. I start, as the right hon. Gentleman did, from the basic assumption that we want freer trade. The first alternative is another Kennedy Round of negotiations in the G.A.T.T., and most people would not feel that there is a strong likelihood of much success with that in the early future.

The second is concentration on Commonwealth trade. This is a doubtful starter, at least on its own, not because of lack of sentiment but because there is little support in the Commonwealth for trade policies akin to the Ottawa Agreements of 1932. Third, associate membership of the E.E.C. There is little enthusiasm for this, especially with no guarantee of full membership later and because Britain would have no say in the policy decisions of the Council of Ministers. Fourth, we could continue as we are, and that is a serious if uninspiring alternative. Fifth, there is the technological community, but that is not an exclusive alternative and one hopes that progress will be made with it anyway.

Finally, there is the proposal we are discussing and because this is the first debate on it I want to go into one or two further details. It has already been receiving considerable study in this country and elsewhere and I want to quote one or two things from some detailed preliminary work done for the Committee of the Atlantic Trade Study in an excellent booklet called, "The Free Trade Area Option—Opportunity for Britain". What is involved? The basic proposal is for a treaty of free trade and economic co-operation between, initially, Great Britain, her E.F.T.A. partners, the United States and Canada. This would be for an open-ended agreement allowing any industrial nation or regional trade group to join which was willing to adhere to the system. This would be developed, therefore, by systematic negotiations rather than by the creation of a supranational authority.

The other basic principle is that gradually, phasing it perhaps over 10 to 15 years, we would bring to an end internal tariffs and other discriminatory restrictions on the movement of industrial products, capital goods, raw materials, investment capital and so on. But it would not include, at this stage at least, agricultural products and it would not require members to adopt a common external tariff.

I come at once to the attractions as I see them for Britain. First, there would be no common external tariff. Each member nation would be free to continue its special preferences with non-members. The area would not be a customs union nor an economic community. For example, there would be no difficulty in our making special arrangements for, say, New Zealand.

Secondly, there would be special facilities for developing countries initially, as they would find it disadvantageous to join at the start. The idea is that the developed nations would extend free access to their markets without expecting full reciprocity until industrial progress in the developing countries made it possible for them to reduce their own trade barriers. Third, there would be no surrender of national sovereignty, as under the E.E.C., so this would have its obvious of Common Market membership, attractions for those who fear this aspect

Fourth, agricultural products would not be included. This is again an advantage compared with the E.E.C. to some minds, as the E.E.C. would involve higher food prices and a rise in the cost of living, at least initially. The idea is that the Atlantic free trade area would be restricted, at least in the first place, to largely industrial commodities and basic materials.

Fifth, an arrangement of this kind need not include movement of labour—another problem on which some people have misgivings about the E.E.C. Finally, the hope is that other nations would join in at the start or later, particularly Australia and New Zealand, and it would also be possible for the E.E.C. itself to join. There are obviously other considerations as well but I think that these are the main ones.

I want to turn now to the effects on Britain and the substantial benefits for our balance of trade. Here again, I draw on the study I have referred to, particularly for figures showing what would happen to our trade balance with the United States and Canada as the first examples. The direct effect of an Atlantic free trade area on member countries would be clearly trade creation from removing tariffs over a period. It is clear that Britain's balance of trade in manufactures would improve substantially, provided, of course, our export prices could be held down. But that is vital whatever we do or whatever group we enter.

Compared with 1965, under the A.F.T.A. system, the United Kingdom would be able to export 243 million dollars-worth more of manufactured goods to the United States but in return would increase imports in manufactures by only 186 million dollars. So our trade balance would improve by a significant 30 per cent. I shall not go into the main products. In trade with Canada, again compared with 1965, our exports would go up by 49 million U.S. dollars— slightly more than a 10 per cent. increase.

That is under the heading of trade creation but there are also substantial benefits to be derived from trade diversion, in which, for instance, we would win trade away from the E.E.C. and other countries. If we compare Britain's entry into an Atlantic free trade area with her entry into the E.E.C, and take into account both the trade created and the trade diverted, we find that the net increase in Britain's trade would be in the Atlantic area some 665 million dollars and in the E.E.C. 221 million dollars.

There is a further important point. These calculations were published last November, so they do not take devaluation into account. Devaluation would have resulted in further benefits, of course. All this is without going into further benefits that would follow from membership of an Atlantic free trade area—through, for example, an attack on non-tariff barriers, such as quantitative restrictions, state trading, Government buying, arbitrary customs classifications and so on—Scotch whisky would benefit —and through other aspects such as the so-called dynamic effects of an association, which mean economies of scale and effects on rates of growth and so on.

On the other side, it is said by some that an arrangement of this kind would mean domination by the United States. But the whole point of the arrangement is that, like E.F.T.A., it would not involve surrendering sovereignty and there is no evidence, as my right hon. Friend the Member for Battersea, North has pointed out, that Switzerland or Sweden, say, have been dominated by Britain inside E.F.T.A. Moreover, if there were the slightest sign of U.S. investment in Britain reaching dangerous proportions, it would not be incompatible with the free trade concept to control this flow. By far the bigger danger is American isolationism, and a failure to show some enthusiasm for developing links with the United States would encourage those in America who actually want her to become more isolationist and more protectionist.

Moreover, there are signs that Eastern European countries would be much more inclined to see an Atlantic free trade area developing than to see Britain in the E.E.C. This is of interest to those of us who want closer links not only with Western Europe but with Eastern Europe as well and, significantly, Czechoslovakia is among those countries which show some interest in this as an idea.

There are those who say that the United States would have to show its interest in an Atlantic free trade area before it would be worth our while to initiate moves. But the Joint Economic Committee of Congress has started reviewing this concept and Mr. William Roth, the American chief Kennedy Round negotiator, was appointed by President Johnson last year to head a committtee on future policy. He said last February that the American Government were studying an Atlantic Free Trade Area plan.

Of course no one need suppose that joining any group would solve our difficulties overnight, and certainly the United State is not going to drop everything to help Britain over her problems, because she has plenty of her own. But, as I have learnt from an extensive five-week tour of the United States recently, there is not only enormous good will among its people generally but is tremendous scope for developing our trade with the United States.

Much of what I have said could be argued about, no doubt, but if there is scope for argument that is all the more proof that there is scope for thorough exploration. I hope that the Government will decide on a full study and will start soundings with the United States and other nations and that we could have a Green Paper initially.

In our debate on the Common Market last year, I spoke in favour of Britain's entry, but I also said that we could not afford to go through the upheaval of applying every five years. What would be unforgivable now, would be for us not at least to satisfy ourselves about the options now open by examining them thoroughly, and this is what I hope the House and the Government will do.

Mr. Speaker

I would point out to hon. Members that the Front Bench spokesman will intervene at 23 minutes past twelve, which is in 13 minutes' time.

12.10 p.m.

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

My right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) and the hon. Member for Faversham (Mr. Boston) have put the case so clearly and cogently that I need concentrate on only one aspect. I have been feeling for many months that, whatever the advantages or disadvantages of Britain being placed under the control of a European Commission, the posture of a rejected suppliant in the ante-chamber of Brussels is damaging this nation economically, spiritually and morally. That is the main point.

My views on this subject represent, I know, minority views in my party and minority views in the House, but not, I believe, in the nation. But I do not believe that there is any right hon. or hon. Member in this House who can honestly say that he expects, in the lifetime of this Parliament, that France will allow the negotiations to begin.

What will happen in the meantime? While we allow our application to lie on the Table, our relations with E.F.T.A., the Commonwealth and the United States continue slowly to deteriorate. Time does not stand still either in politics or in economics. Therefore, our stationary posture is damaging the whole of our sense of purpose as a nation. That sense of purpose is becoming atrophied.

Let us admit that there are limits to our power today, but let us never admit that our influence is subjected to equal limits. We should take Mr. Dean Acheson's advice and look at Britain's rôle today. I believe that our rôle in the world must be to bring together the ageing European civilisation and the young developing civilisation in other continents, to narrow the gap between the rich industrial countries and the poor developing countries, and to secure, by our defence policies, the arteries of our trade, both visible and invisible.

It so happens that this is the area of the trade of this great industrial nation. That is why I believe that now is the moment to work out means of extending the European free trade area to the countries of the Commonwealth and to other countries, such as the United States, which may wish to join. The fulfilment of this concept will take time. It is long term. The details must at the moment be imprecise. However, I want the country and the Government to realise that in Canada, Australia, the United States and Scandinavia there are men who are looking for this.

I would remind the House of what Sir Robert Menzies said only last year: If, as appears to be the case, the consideration of the British application is indefinitely postponed, what is the most important task for the future? It seems to me that, in the period ahead, serious consultations should be put in hand by Britain, the Commonwealth, and the United States, to determine whether special economic arrangements cannot be established. That is why we are pressing the Government for a feasibility study to be started now, just as the Americans are doing. What is the Government's reply? They say that they conducted one before they changed their mind to apply for entry into the Common Market. If that is so, will they publish it so that we can read it? Or do they not want to publish the study because it may appear to damage their suppliant posture in the antechamber and may be misconstrued by those on the other side of the closed door? Or is it perhaps that they are frightened that other parties in the House may deride them and claim that they are being guilty of another change of policy?

This matter is something tar above party politics. It is an issue that affects the whole nation. I believe that the men who do not undertake such a feasibility study will be condemned by the nation for subjecting it to purposeless stagnation.

12.15 p.m.

Mr. Ivor Richard (Barons Court)

I am obliged for the opportunity to take part in the debate. I am more than obliged to the right hon. Member for Thirsk and Malton (Mr. Turton) for taking such a short time.

I would not wish anybody reading this debate in HANSARD to assume that the House of Commons had suddenly become wholly united and that all speakers in the debate were in favour of some kind of alternative association to the European Economic Community. I regard N.A.F.T.A. at best as an irrelevance and at worst as a diversion. It would be asking too much to hope to convince everybody in this Chamber at the moment about those sentiments, but perhaps I may convince our Front Bench spokesman.

I was more than interested when the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) said that he saw N.A.F.T.A. as another option. I do not see N.A.F.T.A. as an option to the European Economic Community. One is not comparing like with like. N.A.F.T.A., even on the most optimistic description we have had today and taking it as if it were established and in existence, is nothing more than a loose non-institutional, non-existent, undefined customs-free economic association. Moreover, it is an association which is capable of the uttermost flexibility. It starts off as the North Atlantic Free Trade Association. Someone mentions Japan, so N.A.F.T.A. becomes P.A.F.T.A., and we have not a N.A.F.T.A. but a P.A.F.T.A. type of association. But one should no longer use the words N.A.F.T.A. and P.A.F.T.A. either together or in association, the one with the other; one should now start talking of something being called M.U.F.T.A., a multilateral free trade association. The proponents of N.A.F.T.A. should make up their minds whether they are proposing machinery for the greater liberalisation of world trade or something, which they should propose in a sensible coherent way, as a real alternative to the European Economic Community. If it is the first, by all means let us examine it, but let us examine it in conjunction with those nations with whom we have cast in our lot, namely, the European Economic Community. If the proposal is for Britain to enter into discussions with the E.E.C. so that we might ascertain whether we could have greater liberalisation of trade across the Atlantic, I, and others on this side, and I hope on the other side, would be prepared to accept it. But I fancy that is not precisely what is in the minds of those right hon. and hon. Gentlemen who are proposing this type of association. It seems that we are being asked to examine something, first, which is clearly non-existent, and, secondly, which is so ill-defined as almost to defy analysis, let alone a detailed examination.

On the other hand, we have the European Economic Community. That at least exists. It is an established organisation, it is a developing organisation, and it has centralised machinery for economic decision making. It is not solely confined to a customs union. It has enormous political content. There is an organisation which is a step towards the greater unification of our continent —and, after all, Europe is our continent. I see no way in which Europe will be united other than on the basis of extension of the European Economic Community. Therefore, those who propose N.A.F.T.A.—and looking around this morning I see a number who would propose it—would not be in favour of a greater degree of unity in Europe.

If the arguments in favour of N.A.F.T.A. are that we do not believe in European unity, and are proposing this as an alternative then at least I understand the argument, although I utterly and totally reject it. One cannot, at one and the same time, approbate and reprobate Europeanism. One cannot go to the Continent of Europe and say, as we have done, that we are part of this continent and want to play a greater part in its affairs, we want a greater influence over what goes on, and in the affairs most directly affecting us and on the other hand turn round and say that we do not think that the E.E.C. is good for us, but would like to look at an Anglo-Saxon type of alternative, the effect of which in Europe, would only be to weaken the credibility of our expressed Europeanism.

This is the greatest danger in this proposal. There are those who say that they want to weaken it and, while I appreciate that point of view, I disagree with it. It is important to emphasise that an attempt by Britain, even of the most elementary and sketchy type, to make overtures towards the United States, towards P.A.F.T.A. or M.U.F.T.A. would only and could only be construed in Europe as a step away from Europe by Britain and a change of direction in the moves towards Europe which this country has been making. As the whole history of Europe since the end of the last war has been one in which national boundaries have disappeared and the nations in Europe have been trying to come together, this step by us would tend, not to hasten unity, but to delay it and therefore I am against the proposal.

12.22 p.m.

Mr. Richard Wood (Bridlington)

I apologise for getting in the way of hon. and right hon. Gentlemen who would no doubt dearly like to continue the debate. I welcome the opportunity of discussing such an important matter and have listened carefully to what my right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) said about dead and embryo ducks, but I still believe that a large majority of hon. Members are convinced that our future lies in some form of close association with Europe. I none the less share the view of the right hon. Member for Thirsk and Malton (Mr. Turton) that there are no prizes to be gained through a policy of static inaction.

We all agree that we must move forward. It is important that the opportunities open to us should be examined carefully, however strong our convictions, which I share, that any course to which we give serious consideration should be compatible with eventual membership of an enlarged Community, perhaps bridging the Atlantic Ocean as well as the narrow strip of the English Channel.

What we cannot do is to take action or initiate examination—and I agree with the hon. Member for Barons Court (Mr. Richard) about this—which might turn us away from a future in Europe, for not only in E.F.T.A., which many supporters would conclude should be included in such a grouping, but also in the Community, we have many good friends, passionately anxious that Britain should play an important part in Europe. Most of us cannot contemplate the idea of abandoning them. As the hon. Member for Faversham (Mr. Boston) said, a considerable number of valuable studies are taking place many of which are inevitably based on assumptions which may be correct but which may be proved wrong.

The main subject of the debate is a concept of this kind, and it is clear that our study of it must be based on assumptions, because it is a concept and not a fact. This underlines the folly of nailing our colours firmly to the ghostly mast of the Atlantic Free Trade Area or, on the other extreme, of assuming that the concept can never become a reality.

I understand that a number of hon. Members see the Atlantic Free Trade Area as an alternative to the E.E.C. Clearly it cannot be such an alternative unless it first becomes a practical possibility. If that happens it may well begin to appear to a great many of us as a step beyond the E.E.C, rather than as an alternative to it. All of us, whatever our views of existing arrangements in Europe or possible groupings across the Atlantic, are wholeheartedly in favour of any steps to liberalise trade both within Europe and with North America and beyond. The essential first step is the successful implementation of the Kennedy Round of tariff reductions.

Other objectives will naturally follow. They may be difficult to realise but they are clear. First, the complete elimination of all tariffs between the Kennedy Round countries and, ultimately, the removal of all non-tariff barriers to free trade. If we and other nations were seriously committed to objectives of this kind, it could be fairly claimed that we were already in spirit, and desired to be in practice, associated in an Atlantic free trade area.

My contention is that while these manifold studies of the Atlantic free trade area make progress and should be encouraged to make further progress, studies upon which we shall eventually be required to pass a political judgment, we can simultaneously determine to give our support to all sensible steps towards lowering trade barriers, in the conviction that it is in this organic way that the concept of a free trade area is likely to grow into reality.

If this were to happen, it might still be possible for us one day to look back on the rejection of Britain by Europe in the last decade as a blessing in disguise because it would, conceivably, eventually have made possible an economic grouping more extensive than Europe, including Europe but with other nations beyond, and even more important than the existing Community.

12.28 p.m.

The Under-Secretary of State for Foreign Affairs (Mr. Maurice Foley)

We have had a valuable debate. It is useful that the House should turn its attention repeatedly to the question of international trading arrangements. We should always be seeking to find the best means of meeting Britain's interests and it is in this spirit that I approach the subject. The idea of N.A.F.T.A. is not new and has a long history. I can recall in the mid-1950s discussing this with Senator Javits, in the context of N.A.T.O. being something other than a military alliance. The dialogue has continued ever since.

Mr. Turton

Will the hon. Gentleman remind Sir Con O'Neill of that fact?

Mr. Foley

He may well read our debates this morning. I want to begin with the more recent developments in this area particularly the Montebello conference in 1956, organised by the Private Planning Association of Canada. At that time the principal sponsors appeared to be business interests in pulp, paper and aluminium who were anxious to achieve a North Atlantic free trade area rather than a new, wider grouping. There were few references to the policy problems that may confront the United Kingdom if it were to participate in such arrangements. Stemming from that conference, Canadian Ministers, particularly Mr. Lester Pearson, and representatives of the United States Government, displayed very little interest in its work or findings, believing that priority should be given to fostering a multilateral approach to the liberalisation of trade.

There is still no evidence that there has beer, any change of mind by the Canadian, or United States Governments. It remains a major factor in considering the relevance of an Atlantic free trade area than there is no evidence of Governmental support for it in either Washington or Ottawa.

Mr, Douglas Jay (Battersea, North)

In that case, can my hon. Friend say whether the present Government have asked the Administrations in either Washington or Ottawa what their altitude is?

Mr. Foley

My right hon. Friend's intervention was a little premature. As I go on I shall be developing that point further.

As the right hon. Members for Bridlington (Mr. Wood) and Stafford and Stone (Mr. Hugh Fraser) said, we want to see tariffs on industrial goods reduced as widely and as much as possible. This is what we have worked for, with considerable success, in the Kennedy Round. When the Kennedy Round reductions agreed last year become fully effective in 1972, tariffs on trade in industrial goods between nearly 50 countries will be reduced by an average of well over 30 per cent. This was achieved without any N.A.F.T.A. It was not needed. Negotiations are going on through the normal channels in G.A.T.T. towards the further reduction of barriers to trade on a worldwide basis. After the Kennedy Round the importance of tariffs as barriers to trade is relatively much smaller as compared with other forms of restriction, such as quotas and tax structure.

Therefore, if N.A.F.T.A. means something more than further efforts to free trade on a world-wide basis, we must consider it in relation to our application for membership of the European Economic Community. This was rightly said this morning in a number of speeches. Clearly, in this context, the French veto which prevented the opening of negotiations cannot be brushed aside, for it has grave consequences for Europe as a whole. But we do not believe, and the Governments of the six member countries do not believe, that it can be the last word on the subject of the enlargement of the Community. Our application remains on the agenda of the Council of Ministers.

In the meantime, we and other European countries must look for ways to prevent a wider split developing in Europe. It is not true to say that everything is static, that nothing has happened, that there are no discussions going on. The Memorandum of the Benelux Governments last January made certain proposals for joint action, which we support. The Council of Ministers is also examining the question of interim trade arrangements. We have said that we shall look at any proposal of this kind if it is made to us by the Community as a whole, provided there is a clear link with our objective of full membership of the Community.

Members have raised the question of our application and its implications. In May last year when the House gave its overwhelming endorsement to the Government's decision to apply for membership it had two crucial considerations in mind. First, there was the wish for an economic and industrial partnership with the countries of Western Europe, and, second, there was the wish for closer co-operation over the whole range of international affairs. We hoped to provide fresh opportunities for the practical application of modern technology and for obtaining the advantages of industrial concentration.

Mr. Roland Moyle (Lewisham, North)

Is my hon. Friend aware that unless the Government make rapid progress in the direction of joining the Common Market the British computer industry, for instance, is far more likely to be linked with the American firm of R.C.A., with which it is negotiating, than any European firm?

Mr. Foley

This is one of the instances where our proposal to develop a European technological community is a demonstration that things are not static, that we are aware of these implications.

Similarly, while emphasising the continuing importance of our membership of the Atlantic Alliance, we see our membership of the E.E.C. as providing a means by which a united Europe can better make its voice heard in the world. In this respect, our decisions to apply for membership of the E.E.C. and to reduce our commitments east of Suez were, taken together, a significant turning point in British foreign policy.

When we look back to the debate in the House and in the country at large last year, we can see that while we were alive to the great economic possibilities which membership of the European Communities would open it was the political considerations which were decisive for us. We recognised and avowed that we were aiming at something far more than material prosperity, that what we were seeking was a greater political purpose for Western Europe and for Britain as a part of it.

These considerations apply equally today, and I ask those who agree broadly with them to consider how far an Atlantic free trade area would satisfy such needs. Clearly there are certain attractions in a form of organisation, if it could be devised, that would strengthen our existing ties with the United States and with one or more of the developed countries of the Commonwealth. But we should have to be very careful of the possible danger that it might provoke the kind of split between the countries of Western Europe and North America which it is one of the main aims of our policy to prevent. It is hard to believe that the E.E.C. at present would have any interest in joining a N.A.F.T.A. Such a grouping would suggest to it that the United Kingdom had irrevocably committed itself to its aims that might be in conflict with its interests. It would be the so-called special relationship with the United States all over again.

As has been evident in our brief debate—

Sir Harmar Nicholls (Peterborough)

rose—

Mr. Foley

I am very sorry. I cannot give way, for I have many more points to answer, and I must finish in about 10 minutes.

Sir Derek Walker-Smith (Hertfordshire, East)

rose—

Mr. Speaker

Order. The hon. Gentleman is not giving way.

Sir D. Walker-Smith

Would the hon. Gentleman have the courtesy—

Mr. Speaker

Order. It is not in order even for a right hon. and learned Gentleman to intervene except with leave of the Member who is speaking.

Sir D. Walker-Smith

With great respect, I am giving the Minister the opportunity of second thoughts.

Mr. Speaker

Order. The right hon. and learned Gentleman must not intervene if the hon. Member does not give way.

Mr. Foley

I am coming to the point raised by a number of Members.

N.A.F.T.A. means different things to different people, as has been evidenced in our debate and was evident at the Conference at Church House earlier this month. There are those who have advocated a nucleus of the United States, Canada and the United Kingdom. Some would include the E.F.T.A. countries; some would include Japan; some would like to see Australia and New Zealand included. Others maintain that it should be a sufficiently open-ended arrangement to accommodate the E.E.C. as abloc. Some see it as confined to an industrial free trade area. Others would include agricultural arrangements, and it is difficult to see how agriculture could be excluded from this wide concept.

As a result, practically any judgment made about the likely consequences of N.A.F.T.A. depends on the basic assumptions made, and these vary widely. The pro-N.A.F.T.A. study published by the Maxwell Stamp Associates described its conclusions as "estimates on the basis of other estimates". Much depends on what assumptions are made about the membership and nature of a new grouping. If one considers trying to determine either a geographical area for N.A.F.T.A. or to establish the principles on which it should be founded, the assumptions which emerge are precisely the kind of thing on which it is impossible to be firm, complete and absolute, as was my hon. Friend the Member for Faversham (Mr. Boston) with the trade figures he quoted as to what would happen in the next few years between ourselves and Canada. It is equally possible to argue that the assumptions of these estimates are too static and unrealistic but that if different assumptions were made the results would appear neutral or even harmful.

I come to the question of trying to quantify the arguments put forward in the terms of a consensus view about membership. The scope and scale of the factors which have to be assessed is such and their uncertainty so great that no one could rely on such estimates over the period on which such a long-term proposal as N.A.F.T.A. would have to be judged. We have no reason to suppose that the United States Administration have any interest in N.A.F.T.A.

Sir D. Walker-Smith

Have you asked them?

Mr. Foley

During the period leading to our application to join the E.E.C., N.A.F.T.A. was one of the options which was open and which we studied. It is not true to say that the information available to us then has been hidden or that the House or country has been misled. In our three days' debate on this subject just over a year ago, all this information was given.

Mr. Hugh Fraser

Publish the study.

Mr. Foley

The facts and information prepared by the Government were given and debated in the House over three years ago.

Sir D. Walker-Smith

Would the hon. Gentleman give way now?

Mr. Foley

I have not the time.

As my right hon. Friend stated last week, it is not true to say that all the studies have shown that such an arrangement would bring considerable economic advantages to this country. Nothing has occurred since then to alter our conclusion that the alternatives, such as N.A.F.T.A. or a policy of go-it-alone, are less attractive to us than membership of the E.E.C., which remains our prime aim.

Mr. Jay

I have listened to my hon. Friend for 10 minutes. Will he now answer my question: have the Government approached the Canadian and American Governments about this matter? If they have not, will they now do so?

Mr. Foley

It is rather strange that my right hon. Friend should pose that question. He was a member of the Government when they were discussing the options which were open—N.A.F.T.A. was one of them—and he will be aware, if my memory is not fragile, that there was continuous dialogue and discussion with members of the Commonwealth, the United States, Canada, our E.F.T.A. partners and other European countries prior to our decision—

Mr. Jay

rose—

Mr. Speaker

Order. I remind the House that this debate must finish at quarter to one.

Mr. Jay

Have the Government made any approaches since the veto by General de Gaulle on our application to join the E.E.C.?

Mr. Foley

Certainly not. The answer was given clearly on many occasions in the House. We did our homework, we looked at the options, N.A.F.T.A. was one of them, and we decided to go for full membership of the E.E.C. on economic and political grounds. There are no arguments in favour of reversing that decision. The matter will be kept constantly under review. I believe that our policy is right.

Sir Harmar Nicholls

Is the hon. Gentleman aware of what he has said— that if we dare to consider any alternative Europe would look upon it as an unfriendly act? As we have been rebuffed on three occasions, does he suggest for a minute that this country has no power or right to consider alternatives because of fear of that possible reaction?

Mr. Foley

The hon. Gentleman had better look closely at what I said. It was my hon. Friend who referred to credibility, not myself.

Mr. Speaker

May I make an observation to hon. Members who were not present earlier? This is not a Consolidated Fund Bill debate. A host of Members wish to speak in the following debate. Most of them will not be called. More Members will be called if speeches are brief. The next debate ends at 10 minutes past two.