Holmes Clarifies

For a comment on Britain's proposed entry to EEC Salient approached Professor F. W. Holmes, of the Economics Department V.U.W. and Chairman of the Monetary and Economic council.

"The British Government thinks that joining the EEC will be good for Britain. it will allow British exporters free access to a large continental market without paying the EEC's common external tariff," he said. "British industry will gradually be exposed to more competition from the continent as trade barriers are lowered, and the British Government hopes this combination of stimulus and opportunity will speed up the low rate of growth of the British economy."

The Professor felt that although it was not publicised, the British authorities were probably worried about the long-run position of sterling as an international currency if Britain remained outside EEC, especially if the Six pooled their gold and dollar reserves. This was likely. He thought the continent would then become a more attractive place than Britain to hold exchange balances.

"Britain could not contemplate with equanimity the substantial drain of gold and dollars which a marked transfer from sterling to 'Eurodollars' would imply," he said. "By joining EEC she would be a more attractive place for foreign investment, and would be able to participate in any arrangement for pooling reserves."

Professor Holmes said these were strong reasons for joining. "They involve a calculated risk that although continental competition may put some firms out of existence and force others to contract operations, British industry generally will be able to hold its own reasonably well in free trade." It was hoped that no serious unemployment would be caused, and the expansion of efficient firms would clearly outweigh the contraction of the less efficient.