192. Memorandum From the Director of the Office of British Commonwealth and Northern European Affairs (Parsons) to the Assistant Secretary of State for European Affairs (Elbrick)1
SUBJECT
- U.K. Proposal for Free Trade Area
On October 2, Lord Harcourt2 left with the Department a note (Tab A)3 summarizing tentative HMG proposals for a Free Trade Area with the Messina group on the Continent. He expressed great interest in U.S. reactions to these proposals.
[Page 474]Discussion:
The recent shift in British attitudes towards economic integration with the Continent has been so great that there now exist a real possibility that it may take place if the Commonwealth and the United States demonstrate support (Tab B).4
Establishment of a Free Trade Area, in distinction to a Customs Union (and one which does not apply to agricultural products), will enable the British to maintain their Imperial Preference System, while, at the same time, they would enjoy equal access with Germany, their strongest continental competitor, to the markets of other states within the Free Trade Area. It would also permit Britain again to assume a leading role in the movement for European unity.
There are signs of opposition to the British plan in the U.S. Treasury and it may develop in other Departments of the U.S. Government which fear that it may postpone the day of convertibility and perhaps impede progress toward dollar liberalization. The added strength to the British and European economies which would come of a Free Trade Area would probably have the opposite result, hastening the time when they will be strong enough to reach these desirable objectives.
The British have always considered us to be strong proponents of European unity. Now that they may be buying a piece of this bill of goods themselves, they are doubtless counting on our strong support. Any other policy on our part would be widely construed as capitulation by the U.S. Administration to narrow economic pressure groups and would have a severely adverse effect on British estimates of the integrity of U.S. foreign policy.
Recommendation:
It is recommended that EUR adopt a position of strong, though not necessarily uncritical, support for the British proposals and that it reflect this position in working groups, meetings or on other occasions.