Rt. Hon. Harold Wilson, MP, Leader Party, speaking to a meeting of Canadian Exporters in?
Wilson: "I rate it a privilege - and a long deferred pleasure - to speak at this meeting. The subject I have chosen - Commonwealth trade in the setting of our Atlantic partnership, is one of vital interest to every one of us, to our two countries, to the Commonwealth as a whole and, I believe, to the world. I say this for two reasons. First, because I believe the Commonwealth has a unique contribution to make to world peace and stability, and that contribution cannot be made in full measure unless we are able, through our own internal policies and through the trading links between us, to put forth our full and combined strength. Second, because I believe that the Western alliance for its part cannot realise its true strength until we can develop our combined trade and production to much higher levels, neither can we become the arsenal in the world war against want and poverty which is not only an essential part of the continuing fight for peace, but a categorical moral imperative for those of us who have it in our power to help our poorer neighbours.
"We in Britain and Canada, our links forged in history and tested in the strains of war and of peace, have a very special role. We are both great trading nations. For both of us commerce is the pre-condition not only of prosperity but even of survival. And because of this, we are both outward-looking in our economic policies. In geographical terms you are close to the United States, we to Europe. But neither of us can afford a narrow regionalism. For both of us - and indeed for the U.S. and Europe - economic realities force us to turn our eyes to wider horizons, the Atlantic economic partnership: indeed to the still wider orbit of what I have called in the House of Commons, the two-oceans economic community, because the Commonwealth as a whole, and not just the Atlantic Commonwealth countries, must be a full part of it.
"It was this conception that lay at the heart of the heated controversy over Britain's proposed entry into the Common Market. In the Parliamentary debates which followed Mr. Macmillan's announcement that Britain was seeking entry into Europe, my colleagues and I stressed that the test for Britain should be whether the European Economic Community would be inward looking, dominated by a form of Little European nationalism, or outward looking, a step on the road to an Atlantic, and wider-than-Atlantic trading community. Negotiations with Europe, we urged, should be matched with an urgent drive to strengthen links with the Commonwealth, and if the negotiations led to the inevitability of choice between Europe and the Commonwealth, our choice must be the Commonwealth. On the 3rd August, 1961, three days after Mr. Macmillan's announcement I tried to cut through the verbiage and theology by laying down a single test."
"In, say, seven years from now, on the assumption of going in, do we expect to see as much Australian and Canadian wheat coming to Britain as today, or will it be wholly or substantially replaced by French wheat? The French make no secret of their aim to be the granary of Europe."
"This question should be put, for it is the acid test of the words about the Commonwealth. Shall we have as much of those commodities coming into Britain seven years from now - or coming in to Europe seven years from now - as at present? Will there be the same amount of New Zealand meat, or will it be replaced by French production? New Zealand butter? This question must be put and answered, because it is only criterion by which these fair words about the Commonwealth can be judged."
"I do not propose to go into unhappy story of these negotiations. Her Majesty's Opposition laid down five conditions which, if satisfied, could have paved the way for entry:
1. Strong and binding safeguards for the trade and other interests of our friends and partners in the Commonwealth.
2. Freedom as at present to pursue our own foreign policy.
3. Fulfilment of the Government's pledge to our associates in the European Free Trade Area.
4. The right to plan our own economy.
5. Guarantees to safeguard the position of British agriculture.
Those conditions were then, and are now, the only conditions on which we were, or at any future time will be, prepared to consider entry into the European Economic Community.
"And underlying them was this insistence on seeing whether the terms offered showed our European friends to be outward-looking, moving towards a wider trading partnership, or inward-looking, autarkic, Little European. Even before the brusque intervention of President de Gaulle, we adjudged that the terms proposed were unacceptable, and mainly because they involved a severe disruption of our trade with third countries, particularly the Commonwealth. Quite apart from the problem of developing Commonwealth countries, of Asian manufactures and the rest -to say nothing of certain Canadian products - the common agricultural policy, which E.E.C. was in process of evolving, meant the imposition of penal import levies of almost certainly 60% and 70% and even 100% on British imports of staple agricultural products from the Commonwealth and the replacement of food imports from the Commonwealth by imports from France. This was unacceptable in itself: equally it was proof to us that membership of the Community would not be a half-way house to the wider partnership we demanded: it would be a final resting-place. It is the working of the agricultural policy which has caused the progressive disenchantment of those of our friends in Washington who were originally so keen to persuade Britain to enter Europe."
"This assertion of the two aims of intensified Commonwealth trading arrangements and progress towards a freer wider-than-Atlantic partnership, dominated all Labour Party contributions towards the successive debates on the negotiations, from November 1961, when we pointed to the Clayton-Herter Report to the two Houses of Congress as the long-term aim, right to the breakdown of the negotiations. These two aims equally dominated our approach to the new situation which followed the breakdown, when Britain faced, owing to the total reliance on Brussels to solve all our problems, a vacuum in national and international economic policy, and even in the foreign policy and defence postures that were based on them."
"For throughout, we had said that these two policies, Commonwealth and Atlantic, were needed both to strengthen our hands in the negotiations and to provide a fall-back position if the negotiations broke down, or if we were faced with totally unacceptable conditions: Ernest Bevin, one of my mentors in these things, used to say that before you enter into negotiations you have got to face the question 'what happens if the other man says no?'. Well, in this case the other man did say no and the British Government was left without a policy. Throughout the negotiations, we urged that the Kennedy Round, which we supported from the start, could take place equally well with Britain outside or inside the Common Market. Instead of the grouping originally intended under the Trade 100% on British imports of staple agricultural products from the Commonwealth and the replacement of food imports from the Expansion Act, E.E.C. including Britain, Denmark and Norway on one side, the U.S. and Canada on the other, we suggested a different grouping, with the Six on one side, Britain the U.S., the Commonwealth, out EFTA partners and Latin America (and Japan) on the other. In the event, this is what is now happening under G.A.T.T.
"I should like, Mr. Chairman, to spend my remaining time outlining the conditions of success of these two twin aims.
1. The Economic Partnership
"First, the creation of a freer-trading Western world, defining, as I have said, 'Western' in a pretty elastic way. To achieve this, we need a breakthrough in a three fields, trade, monetary arrangements and development.
"(i) Trade. So far as tariffs are concerned, this is a question for the G.A.T.T. negotiations, and success is going to depend to a very large extent on the attitude of the Six - and since those of five are known, that means France - particularly so far as agricultural commodities are concerned. The end of the year deal on agriculture suggests that France is now willing to go forward to the G.A.T.T. talks, but how constructively we have yet to learn. I would just say this. If the Kennedy Round is further frustrated by E.E.C. agricultural policies, we all, as members of G.A.T.T. - and I was one of the original negotiators as head of our delegation for several months - will have to consider our position. E.E.C. policies in agriculture, particularly the import levies, I have long held are contrary to both the spirit and the letter of G.A.T.T. The E.E.C. can operate them, and remain in communion with G.A.T.T., only if the rest of us approve. I believe in negotiating from strength - my first lessons in international negotiation, 17 years ago, were with the Russians - and we should be prepared to make clear that our attitude to E.E.C. agricultural policies will depend on how constructive are the Six in the wider negotiations."
"Now, I do feel that our own participation in the Kennedy Round is no reason for holding back on closer arrangements for Commonwealth trade. Most of the ideas I am going to put forward in a few minutes are fully compatible with G.A.T.T. and the Kennedy Round: we should therefore continue to improve trading links both with the Commonwealth and E.F.T.A. and they may have to be considerably tightened if, after a reasonable period of time, sufficient progress is not being made with the Kennedy Round."
"(ii) Monetary Policy: In all our countries, there is widespread acceptance of the need, on both national and international grounds, for steady and sustained but much more rapid economic expansion. The experience of Britain, where every production spurt in the past few years has been followed by an immediate and crippling balance of payments crisis, shows tightly this ceiling presses on our efforts to expand. It is a problem we are facing again today."
"This problem will be aggravated, not eased, by our plans and hopes for freeing the mechanism of international trade in the Western world. The more successful we are through the Kennedy Round in removing impediments to trade, the more quickly we shall run into the danger that the whole of our Western trading system will seize-up through a shortage of liquidity, with the same sudden shock that an automobile suffers when it runs out of lubricating oil."
"I am going to speak plainly. You have a shortage of liquidity when countries suffering from unemployment or economic stagnation do not feel free to pursue the expansionist policies they ought to be pursuing and would be of pursuing if their international reserves were higher. Because of inadequate reserves, and a defect in the international system for replenishing those reserves, our great democracies have recourse to policies of deflation which are internally debilitating and which have devastating economic and even political effects on our trading partners."
"This shortage of international liquidity is intimately bound up with international monetary and economic policy, and in particular, with the policy of creditor countries, i.e. countries which over a period gain gold from their commercial and other transactions."
"And the more shortsighted and inward-looking these creditor countries are, the greater the need for liquidity. In this sense we are much worse off than we were when the United States was the main creditor country."
"Increasing trade and increasing liberalization will aggravate this problem. The movement of short-term capital, of hot money, from country to country, has become far more serious in recent years, and these movements have caused chronic and quite unnecessary lurchings in internal economic policies. Speculative raids - intensified by a general tendency of Central Banks to hold their reserves in gold, rather than in sterling and dollars - make the situation worse. There is a general scramble for gold, and this leads to persistent recourse to deflation."
"I would draw attention to three major problems. One, whenever there are doubts about currency, speculative raids develop which can rapidly reach crisis proportions. Two. Because of the growing obsession with gold, the growth of world liquidity tends to be limited by the growth in free gold supply, regardless of the needs of expanding world trade. Three. The problem of financing the development of under-developed countries is greatly intensified. When I was in Washington last year, I referred to the problem of Latin America where the growing burden of debt services has risen above 15% of total exports. If this trends continues, a major crisis will develop in the next four or five years."
"Unless urgent and imaginative action is taken, we scramble for markets culminating in a crisis not dissimilar from that which engulfed the Western world in the early twenties."
"What we are doing in the twentieth century is to fail to apply in international monetary affairs the techniques which in the field of domestic banking, our forefathers developed with such success in the nineteenth. 120 years ago, London was torn apart by monetary controversy as vehement as the Common Market argument of two years ago. To what extent would the note issue on which the country's financing depended, be related to gold reserves? In the event, the argument was resolved, with some degree of irrelevancy, by the Bank Charter Act of 1844. "Irrelevancy" because the Victorian bankers developed the credit system which enabled internal liquidity to develop pari passu with expanding trade. The internal monetary system was freed from the thraldom of gold. But for the development of bank credit, neither our nor the phenomenal industrial expansion of the Americas could have taken place. They would have been throttled at birth."
"But in international economics we are still at the gold bullion stage of evolution. We no longer think of settling our internal debts by transporting bullion about the country. In international affairs we are living in the age of Charles II, with gold-laden stage coaches floundering through the mud, the prey of marauding highwaymen."
"(iii) Development. 1964 is the year of decision for the progress of development of under-developed countries. In a few weeks time, the vitally important United Nations conference on development is to begin: I only wish I could feel it has been given as high a place in the scale of national priorities as it deserves. It is gradually being borne in upon us that the appeal on the grounds of charity for assistance from the industrialised countries to the hungry countries is no longer the only appeal. We owe a tremendous obligation on that ground, but, in addition, there is now also this consideration, that it is clear that unless we make far, far faster progress in bridging the gap between rich and poor in the next fifteen years, then there will be the makings of an imminent split of humanity between the white races, who are well off, and the coloured races, who are not. I believe the problem is as urgent as that. We have got a very few years in which to solve it. Of course, there will not in that period be equality of living standards, but unless, within a very few years we have shown that equality will come about, unless, in other words, a light is clearly seen at the end of the tunnel, then I think a fissure will have been created, a lack of trust, a gap of understanding which no subsequent efforts will be able to mend."
"One of the urgent matters to be settled is provision for international commodity agreements. The post-war Labour Government and Britain and the Canadian Government cooperated with other Commonwealth countries to press this concept in the negotiations of the Havana Charter eighteen years ago."
"It was a central theme of the early work of the F.A.O. and I will always count it a privilege to have headed the British delegation to the Conference which drew up the plan for commodity agreements, including the first blueprint of the International Wheat Agreement."
"Stability and security in the production of primary commodities its of vital interest for both advanced and developing countries. For advanced countries our markets depend on the ability of the primary producing countries to buy from us - many of the slumps of the past have begun with a collapse in the purchasing power of primary countries."
"It is difficult to over-estimate the importance of stable commodity prices and assured markets to countries struggling to develop. It has been calculated that if we total up all the aid multilaterally and bilaterally supplied by advanced countries through the United Nations or directly since 1953 - and it is a formidable total - it has been more than offset by the fall in the primary prices over these same ten years. It is important, therefore, not only to secure stability but to relate financial aid to commodity prices so that when prices fall, a compensating mechanism comes into play."
"Another priority must be the effective mobilisation of food surpluses for hungry countries. Advanced countries in general seem to be pledged to securing a degree of price support for their farms which must lead to a degree of over-production, and if the Common Market proceed with their plans, this over-production will be powerfully reinforced."
"A mechanism must be found to channel it to those in need, and here I have suggested that Lord Boyd Orr's imaginative proposal for a World Food Board which was rejected in the immediate postwar years of food shortage, and dollar famine, should now be revived."
"Another important question is the outlet for manufactured goods from newly developed countries. So far Britain has borne its share and a good deal more than its share of the import of textiles from India, Hong Kong and Pakistan. The fullest support should be given to Mr. George Ball's proposal for all advanced countries to accept a fair and reasonably equal quota for Asian and other manufactured imports."
"But all our hopes for effective international action will depend on the vigour we show in our separate countries. This is why the Labour Party is committed to the appointment of a full-scale Minister of Overseas Aid and Development, of Cabinet rank, to co-ordinate and dynamist our national plans and our contribution to international arrangements."
"Now I turn to the second of my main themes - Commonwealth Development."
"My own view of the situation can best be summarised by freely adapting a resolution moved in the British House of Commons in the reign of George III, a hundred and eighty years ago, and saying that Commonwealth trade has declined, is declining and ought to be increased."
"A month ago, I moved a Motion Censure on Her Majesty's government on these lines. I was seeking to contest a confusing and dangerous theory which has been accepted, quite uncritically, as an almost sacrosanct apart of the mythology of the British establishment - the doctrine that Commonwealth trade is doomed by inherent, intrinsic and endemic factors to an inevitable, secular decline."
"In one of the early Common Market debates, the then President of the Board of Trade, now the Chancellor of the Exchequer, said the decline was due to "historical factors". I said I thought he was flattering himself and his colleagues by calling themselves "historical factors". For myself, I felt it was due to main things. The first of these was British Government policy, and the effect of the Government's policy in disheartening Commonwealth countries and driving them to seek new commercial links elsewhere. The second was the poor effort that has been made - with some honourable exceptions - by many British manufacturers and exporters."
"But the doctrine of the shrinking Commonwealth persists. It has been given the support of the present British Prime Minister."
"Let us look at the figures. Before the war , Britain's imports from the Commonwealth were 35% of our total trade (I am excluding Ireland and South Africa form the calculations throughout to preserve comparability). Under the Labour Government which consciously worked for increased Commonwealth trade, that figure of 35% had risen to 44%. By 1962, it had fallen to 31%."
"Again, if we take trade with Canada over the last ten years, British imports form Canada from 1953 to 1963 rose from GBP305 millions to GBP368 millions, and increase of GBP63 millions, or about 20%. But our imports from all sources rose by 45%. Canada was accounting for smaller proportion."
"Taking 1955-56 to 1961-62, Canadian imports in total rose by GBP220 millions, from Britain by only GBP4 millions, less than 2%.
"We know that there were many reasons at work, your own imports of capital equipment, mainly form the U.S., restrictions of Canadian imports, such as tariff surcharges - now, of course withdrawn - and the anti-dumping regulations which are to be the subject of inter-Governmental meetings in the near future. It would be wrong to underestimate the effect of these factors. But having said all that, the last few years of Anglo-Canadian trade present a pathetic record."
"In other words, of the increase in Canadian imports over these seven or eight years, we managed to get less than 6 1/2% - one sixteenth."
"As I have said, the decline in the Commonwealth proportion of British trade and in the British proportion of Canadian trade must be sought partly in restrictive import policies in Commonwealth countries, but also in the policies at Westminster and the inadequate efforts of British exporters."
"In the House of Commons debate, I outlined three main reasons."
"The first was the trade policy of Her Majesty's Government. The Labour Government had increased Commonwealth trade mainly by long term bulk purchase contracts for Commonwealth food and other materials. Our successors scrapped these in their return to free speculative commodity trading."
"The result was decline in the proportion of Commonwealth trade and in the security enjoyed by Commonwealth producers."
"The second reason was the economic policy followed at home which for reasons I will not enter into today, led to the creation of a consumer economy which I have sometimes described as being too much of a soft-centre or candy-floss economy."
"Commonwealth trade cannot be successfully pursued on the basis of an overspill from the British consumers' home market: a much greater concentration on capital goods is required."
"Thirdly, although some of our exporters have done a magnificent job, far too many have confined themselves to a perfunctory attack on Commonwealth markets, including Canada, or not even made the effort at all."
"If one-tenth of the effort put into exporting consumer goods to Western Europe had been devoted to developing markets in Commonwealth countries, I believe that Britain's balance of payments position today would be in an infinitely healthier state and we should not have been so prone to export crises every time we expand our home production."
"Mr. George Drew, until very recently your own High commissioner in London, said a few weeks ago that there seemed to be a lack of interest in exporting to Canada amongst British business men. He referred to the Toronto Annual Fair - which I remember attending in 1949 with C. D. Howe and the American Secretary of Commerce, the first time that the trade Ministers of the three top trading nations had met together. (I am afraid that the league tables are a little different now). In last year's Toronto fair, Mr. Drew pointed out that Britain had taken only 2,250 square feet of the building and had shown no exhibits. By comparison, Poland had taken 7,500 square feet."
"In recent House of Commons debate, I put forward on behalf of Her Majesty's Opposition, a ten point plan for Commonwealth development. This included a number of points of direct relevance to trade with under-developed countries. But there is one proposal which I made which is, in my view, of general application and can be applied with great success in the Canadian context. I quote Hansard:
"'Arrangements should be made for regular meetings to work through the development and capital investment programmes of each Commonwealth country. We should ask for a specific preference in awarding contracts to Britain - exactly as the United States does in its defence and Buy American Act programmes - from the Commonwealth. I believe that we could get it. I remember that when I was in Canada, the principal utilities, the Ontario Hydro-Electric Scheme, the Toronto subways, and the rest of them slanted purchasing programmes in the direction of Britain. One province, Saskatchewan, has written into its legislation a 'Buy British' Act awarding preference to Britain, providing that prices are not more than 5 per cent or 10 per cent above prices from other areas. I think that instead of tariff preferences we should have preferences in the way of capital contracts and apply to take the part in Commonwealth development."
"'In return, we should undertake to provide guaranteed markets for Commonwealth primary produce in this country - never mind the more speculative markets. This would provide assurance and economic stability in the Commonwealth and ensure that our commonwealth partners were able to afford to maintain and expand their purchases from us."
"'To fulfil Commonwealth requirements for developmental capital we should agree to expand those sections of our industrial system where existing capacity is inadequate to meet Commonwealth needs - both by incentives to private enterprise and by creating new publicly-owned industrial establishments.'"
"I have stressed what this means in terms of the British industrial effort and what could be achieved by British industries which have it in their power to make a major impact on Commonwealth countries."
"In recent speeches, my colleagues and I have indicated the policies that we shall follow by taxation incentives, by the direct application of state-sponsored scientific and technological research, to strengthen and modernise existing industries and to create new industries based on British ingenuity and science."
"But efforts to strengthen our economy will not be enough. A much greater co-ordination of trade policies is required. I welcome the talks this week between Canadian and British Ministers on the limited but important issues that they will be discussing. But this should be a preliminary to a full-dress Commonwealth conference aimed at a spectacular increase in Commonwealth trade. We have long pressed for this. It was our first demand after the break-down of Brussels. We have had no Commonwealth Prime Ministers' Conference for three years if we exclude from the reckoning the miserable and unhappy conference about the Common Market in September, 1962, which we should all prefer to forget. One should be called at the earliest possible moment and Commonwealth trade and Commonwealth development should be high on the Agenda.
"I end as I began. Commonwealth trade is of vital importance to the economic strength of our individual countries and the Commonwealth as a whole. It does more than that. It is essential to the strengthening of the Commonwealth as a creative and dynamic force for peace. For the Commonwealth has evolved as the greatest multiracial association in a world where race relations and the prevention of racial conflict are going to occupy a still more central part of the world stage."
"In the United Nations Commonwealth partners were able to afford to maintain and expand their purchases from us."
"'To fulfil Commonwealth requirements for developmental capital we should agree to expand those sections of our industrial system where existing capacity is inadequate to meet Commonwealth.
"In the United Nations, the influence of everyone of us is strengthened to the extent that each of us can speak for all."
"So far as Britain is concerned, our influence in the world depends not so much on nostalgia, on illusory nuclear posturings, or borrowed deterrents, but as that great Commonwealth statesman, Lord Attlee, said in the House of Lords last week, on the extent to which we can speak for a united Commonwealth."
"It is not for me to forecast the result of the next General Election in Britain but one thing I can say. A Labour Government in Britain will place the United Nations far higher in scale of priorities than the Government we have had for the last 12 1/2 years and the voice which we speak there will be strengthened by a much more vigorous and purposeful effort to promote the closest possible Commonwealth understanding and agreement."
"There are friends in North America who sometimes talk as though they are prepared to write off Britain. They could not make a greater error. They base their arguments presumably on the faltering and uncertain voice they detect in Britain's conduct of overseas affairs and in their assessment of our record in production and exports."
"It is my unshakable belief that we have in Britain, the skill, ingenuity, the craftsmanship, the scientific and technological know-how and the willingness and ability to contribute a far greater leadership in world affairs than we have shown."
"When the energies of our people have been mobilised for the effort that is required, in economic and world affairs, I believe the contribution we can make to peace and progress in the remaining years of this century will transcend anything we have known, even in the greatest days of the past."
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Background: Rt. Hon. Harold Wilson, MP, Leader Party, speaking to a meeting of Canadian Exporters in Montreal on Friday, February 28, 1964, said: