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War Economy

The European Economic Community

The European Economic Community

Of even more concern to New Zealand was Britain's determined attempt, in 1961 and 1962, to gain admission to the European Economic Community (EEC).2

Economic co-operation among war-devastated European countries after the war had been encouraged by a United States scheme for post-war assistance for European recovery, the Marshall Plan, which made it a condition for United States aid that there should be ‘some agreement between the countries of Europe as to the requirements of the situation and the part these countries will themselves take.’ The Organisation for European Economic Co-operation (OEEC) resulted in 1948.3 While EEC may not have page 556 been a direct result of OEEC, the habit of economic discussion and compromise which OEEC facilitated no doubt made it easier to find a concensus of opinion in the Treaty of Rome, which set up the EEC in 1957.

Initially the EEC plans for a common market in agriculture, with regulated intake from outside countries, and managed prices at a level much higher than those at which New Zealand could supply, had been seen merely as a threat to hinder New Zealand access to EEC countries. Then it became apparent that the EEC policy of encouraging agriculture and keeping its retail prices high would result in considerable surpluses being dumped on United Kingdom and other markets.1 Finally came the possibility of British entry to the market.

The growing economic strength of the Community2 was increasing the threat that, while Britain stood outside, EEC exports might compete too effectively against British exports to other countries, and that the EEC common market would result in discrimination against British sales to its members.

New Zealand could be vitally affected if Britain gained entry. Though aimed at freeing trade barriers between member countries, the EEC policy was to have a managed market for agricultural products, with rigid definition of the terms of entry of produce from other countries. Unrestricted duty-free entry, which New Zealand enjoyed for most of her food products in Britain, seemed incompatible with this type of market.

Unless Britain's entry to EEC could be negotiated on very special terms, it seemed that, far from having unrestricted entry for her food products, New Zealand would have to compete with other non-EEC suppliers for whatever extra was needed after EEC production had been completely absorbed.3 Moreover, the common agricultural policy was likely to increase agricultural surpluses in a number of member countries.

The hope of British negotiators was to gain admission without sacrificing New Zealand interests,4 but this would not be easy.

There was, in fact, a good deal of relief in some quarters in New Zealand when General De Gaulle,5 in January 1963, bluntly terminated the negotiations for Britain's entry.

page 557

2 Comprising Belgium, France, Holland, Italy, Luxembourg, and West Germany; and moving towards free trade in industrial goods between member countries, common agricultural policies, a uniform tariff on imports from outside, and closer integration of economic and political policies.

3 A useful summary of developments is given in Parliamentary Paper A-21, 1961, the European Economic Community.

1 However, increasing demand, as a result of rising living standards in EEC countries would have a countering effect, as was becoming apparent for some commodities by 1964.

2 Considerably faster than in the looser European Free Trade area (EFTA) to which Britain belonged.

3 New Zealand Economic Survey, 1961, pp. 8, 9.

4 Other Commonwealth countries were affected too, but none so vitally as was New Zealand.

5 President of France since 1958.