Free Trade

However, said the Professor, free trade would aggravate Britain's balance of payment problems if these assumptions proved incorrect, as terms of entry greatly affect this. "Any customs union on a regional basis involves the potential disadvantage for its members, that the arrangement will induce their importers to divert trade from outside countries towards less efficient sources within the union. Losses thus incurred must be set against internal gains."

He felt that the extent of diversion would depend on the height the common external tariff, or the severity of the common import restrictions. As only a relatively small proportion of Britain's import and export trade was currently done with Europe, she had a strong interest in keeping these barriers low.

"Britain must be particularly anxious about the effects of her entry upon other Commonwealth countries, "continued the Professor. "Collectively they form a much more important market for British exports than the Six, though this has been growing very slowly in the last few years." If Britain joined on terms which damaged Commonwealth interests, then the resultant slowing up of Commonwealth growth would offset British gains in Europe.

"Entry would involve for many Commonwealth products, loss of preferences, or the establishment of reverse preferences in favour of European products, or restrictions on entry of Commonwealth products into the U.K.." he said. "Britain must therefore expect an acceleration of the removal of preferences in her favour in Commonwealth markets." He commented that some Britons said these were gradually going anyway, but he still felt that their quickening disappearance was part of the price of entry.