By the spring of 1956 concerns about the customs union project were becoming more widespread within the OEEC. By abolishing tariffs and quotas among themselves but not vis-à-vis the rest of Europe, the Six would be discriminating against other European countries. It is true that Article XXIV of the GATT, which as we have seen authorized the formation of customs unions, specified that any new customs union should not raise the general tariff level facing outsiders wishing to export to the Six. But nevertheless, a Danish farmer (say) would now find himself at a severe disadvantage relative to his Dutch counterparts in the German market, and this was obviously damaging to his interests.
Meanwhile, the success of the OEEC in dismantling quantitative restrictions on trade left low-tariff countries such as Denmark, Sweden and Switzerland feeling that they were now at a competitive disadvantage vis-à-vis those countries that retained higher tariffs. (You will recall that the Netherlands had also faced the same problem.) This meant that they had an interest in securing lower tariffs in their export markets, regardless of whatever the Six might agree among themselves. A Europe-wide free trade area was appealing to such countries.
Britain, meanwhile, had excluded itself from the customs union project and was therefore facing potential discrimination in the markets of the Six. As a result of its decision, it had also excluded itself from the position of leadership within the new Europe that it had always sought for itself. Or had it? It was still a leading member, and perhaps even the leading member, of the OEEC, which brought together no fewer than seventeen European countries, including all of the Six. Perhaps the OEEC could provide the basis for a wider and shallower Europe that would be more consistent with Britain’s preference for intergovernmental cooperation and its Commonwealth commitments?
One important potential obstacle to economic cooperation with the Six involved agriculture, and here the legacy of the nineteenth century loomed large. As was the case elsewhere in Europe, the British government intervened to maintain agricultural incomes and provide incentives to farmers to increase production. However, the UK’s historical commitment to cheap food meant that the government did not wish to raise the market prices facing consumers, while its commitment to the Dominions meant that low-cost agricultural producers in Australia, Canada and New Zealand had to be given easy access to the British market. For both of these reasons agricultural tariffs in the UK were generally low, especially on imports from the Commonwealth. British farmers therefore obtained their guaranteed prices by means of a subsidy, known as a deficiency payment, equal to the difference between the average market price and the guaranteed price. These deficiency payments cost money, but since Britain’s agricultural sector was relatively small the policy was affordable. Elsewhere in Europe, on the other hand, such a policy would have been ruinously expensive.1 Farmers in continental Europe were thus protected by raising market prices above world prices, and this required strictly limiting agricultural imports from the rest of the world. In Britain it was the taxpayer who supported the farmer; elsewhere in Europe it was the consumer. It was hard to see how two such different systems could coexist within a unified market.
In 1956 Harold Macmillan, by now Chancellor of the Exchequer, asked civil servants to provide a memorandum listing alternative mechanisms for integrating the United Kingdom economically with the rest of Europe. The civil servants provided six of these, and the document was forwarded to Peter Thorneycroft, President of the Board of Trade. He suggested that the best option for Britain was a free trade area that would be OEEC-wide, and involve industrial goods only. The new EEC, when it eventually emerged, could become a member of this wider free trade arrangement. Since this was the seventh option to be suggested, it became known as ‘Plan G’, and was soon adopted as official British government policy.2 The hope was that the new free trade area could come into effect at the same time as the EEC so that Britain (and the rest of the OEEC) would at no stage face discrimination in the EEC market.
Plan G had a lot going for it from a British point of view – indeed, perhaps too much. It would be based on intergovernmental cooperation, and would thus require no surrender of national sovereignty. Because it was a free trade area rather than a customs union it would enable Britain to maintain its existing system of imperial preferences. And finally, because it only involved industrial products, and excluded agriculture, it would allow the UK to maintain its existing system of agricultural support. ‘Under its terms, the British government could have its cake and eat it, too, aligning itself with its European neighbours without in any way distracting from its Commonwealth relations.’3 Achieving this desirable outcome would be feasible, since as the Board of Trade put it, ‘the possibility of U.K. co-operation would be so welcome that we should be able to enter the plan more or less on our own terms’.4
Some British officials seem to also have hoped that Plan G might undermine the customs union project. There were some in Germany, such as the Minister for Economic Affairs Ludwig Erhard, who were suspicious of supranational institutions and whose liberal instincts led them to favour as wide a free trade arrangement as possible. If Plan G provided an alternative way of expanding German industrial exports, perhaps this might lessen Bonn’s support for the customs union. Whether this was the main motivation for Plan G, or whether the scheme was a reactive attempt to deal with the consequences of the customs union project in a way that minimized the negative consequences for British industry, and her relationship with the Commonwealth, is a matter of scholarly controversy.5 The truth may have varied over time, but what mattered politically were European perceptions of British motivations. Here Macmillan’s original hostility to the Messina process meant that key actors such as Spaak were deeply suspicious of Plan G.
The British initially hoped that the European free trade area negotiations would take place simultaneously with those establishing the Common Market. However, it soon became clear that the Six would push ahead with the negotiation and ratification of the Treaty of Rome, leaving serious discussion of a free trade area to later. Indeed, the mere possibility that a European free trade area might undermine support for the Common Market, particularly in France and Germany, was a very good reason to get the Treaty of Rome negotiated first.6 The Treaty of Rome was the priority, not the industrial free trade area proposed by the British, and nothing could be allowed to distract from the main task at hand. It was not until February 1957 that the OEEC Council of Ministers decided to enter into negotiations regarding the establishment of a European Free Trade Area. The following month the Treaty of Rome was signed, and it was ratified by the French Assembly in July. Trade liberalization within the EEC was now due to begin on 1 January 1959, which added a sense of urgency to the free trade area negotiations.
The negotiations placed France in a dilemma.7 France was not particularly keen on trade liberalization, but supported the EEC project because of its political benefits. In addition, EEC trade liberalization would be gradual; steps would be taken to ensure that French industries would not face unfair competition; and there were important financial compensations, notably the Common Agricultural Policy (CAP) and the European Development Fund (EDF), that would provide money for French overseas territories. The free trade area, on the other hand, involved all of the costs associated with trade liberalization and none of the benefits. The French were therefore hostile to the proposal from the beginning, but initially could not afford to torpedo it for fear of the international opprobrium, inside and outside the EEC, which this would entail.
Two factors came to their rescue. From January 1958 onwards the new EEC Commission, which had strong federalist sympathies, and wanted to avoid the EEC becoming a mere free trade area, emerged as another force strongly opposed to the free trade area proposals. Even more importantly, British diplomatic ineptness meant that France was not as isolated as it would otherwise have been.8 Not only had Macmillan’s ham-fisted attempts to undermine the Messina process damaged trust; when designing Plan G, UK policymakers had been focused on what was required in order to achieve a domestic consensus on the issue in Britain. Not surprisingly, they had produced a blueprint that was indeed a very good deal for Britain – but in so doing they had paid insufficient attention to other countries’ interests. For example, the proposal to exclude agriculture left Britain completely isolated, not just among the Six, but among other OEEC members as well: a free trade area involving industrial goods only was unattractive to those European countries for whom agricultural exports were important. Britain also underestimated the determination among the Six to preserve their political unity. Even so, it still required some adroit French diplomatic manoeuvring, combined with a direct challenge by de Gaulle – who had returned to power in June 1958 – to Adenauer to demonstrate his commitment to the EEC by rejecting the free trade area, before the French were able to effectively veto it.
Almost immediately, discussions began in Geneva to see if it would be possible to negotiate a smaller free trade area. The countries concerned were the ‘Other Six’, including the UK, plus Portugal.10 Formal negotiations began in June 1959, and the Stockholm Convention establishing the European Free Trade Association (EFTA) was signed in January 1960.
The Stockholm Convention committed member states to establish an industrial free trade area by 1970. It contained no commitments regarding trade barriers erected against third parties. It was and remains a purely intergovernmental organization, whose sole institution was a Council of Ministers that met only rarely, supported by a small secretariat. It thus reflected British preferences. The result was that the OEEC was now divided into three groups: the EEC, EFTA and the rest (Greece, Iceland, Ireland and Turkey). Greece and Turkey would soon negotiate association agreements with the EEC that offered the prospect of future membership, while Ireland would establish a bilateral free trade agreement with the UK in 1965. Iceland joined EFTA in 1970.
The purpose of EFTA in the eyes of the British was not to serve as a permanent alternative to the EEC, but as a temporary bridge to it.11 On the one hand, the British hoped that by presenting a united front, the ‘Other Six’ might maintain some cohesion, and avoid being ‘eaten up, one by one, by the Six’, as Macmillan put it.12 Denmark in particular, with its heavy reliance on German as well as British markets, was seen as being potentially vulnerable to falling within the EEC orbit. Less defensively, the hope was also that the continuing importance of EFTA markets for German industry would lead that country to put pressure on its partners (that is, France) to agree to a trade agreement between the two blocs. EFTA was thus conceived as a new tactic to achieve the British objective of a Europe-wide free trade area.
In the first year of its existence, therefore, EFTA was largely concerned with trying to re-launch Europe-wide discussions on free trade. These efforts came to naught, however. There followed one of the most startling reversals of policy in post-war European diplomatic history: Harold Macmillan’s decision in 1961 to apply for EEC membership. There were several reasons for this, and there is considerable debate as to which were most important. At least three economic considerations mattered.13 First, the UK traded more with the EEC than with EFTA, and in the absence of a wider free trade agreement EEC membership might be required in order to protect Britain’s export trade there. Second, Commonwealth trade was becoming less important for the UK, as colonies achieved independence and opted to pursue inward-looking trade and development policies. Third, the EEC was at this stage experiencing a golden age of economic growth, which heightened the importance of its markets to Britain, and strengthened worries about British economic performance. The hope was that industrial competition with Germany would serve to improve productivity at home.
There were also important political considerations. A 1960 report produced for the Prime Minister was blunt when it came to describing the decline in Britain’s relative international standing since the mid-1950s:
We thought that, even if the Common Market did come off, we should be able to make our own terms for associating with it. The Free Trade Area negotiations proved us wrong … In so far as our previous attitude was influenced by our desire to do nothing which might prejudice the Commonwealth relationship, this consideration is now matched by the fear that the growing power and influence of the Six will seriously affect our position in the world – if we remain outside – and this itself will be damaging to our relationship with the Commonwealth.14
Particularly important was the attitude of the US.15 The EEC imposed a direct economic cost on the US by discriminating against its exporters. The US was willing to accept this since the EEC also promoted European political integration. EFTA also discriminated against US exporters, but did not offer any corresponding political benefits. The US was therefore hostile to EFTA, while remaining strongly supportive of the EEC. Gradually British policymakers began to realize that if they wished to retain a special relationship with the US they would need to join the Common Market, rather than remaining aloof from it. For Miriam Camps, an American State Department official and author, this was ‘a very important – perhaps the controlling – element in Mr Macmillan’s own decision that the right course for the United Kingdom was to apply for membership’.16 On 9 July 1960 Macmillan noted in his diary that he had
Walked a bit – pondered a lot … Shall we be caught between a hostile (or at least less and less friendly) America and a boastful, powerful ‘Empire of Charlemagne’ – now under French but later bound to come under German control. Is this the real reason for ‘joining the Common Market’ (if we are acceptable) and for abandoning a) the Seven b) British agriculture c) the Commonwealth. It’s a grim choice …17
While the British may have been motivated by a mixture of economic and political considerations, Macmillan’s decision to apply for EEC membership triggered three other applications that were clearly economically motivated. The British market was sufficiently important to Denmark, Ireland and Norway that all three lodged membership applications to Brussels: if the UK entered the EEC, they would have to enter it also, or face discrimination in a key market.
Macmillan’s decision was not risk-free. From the beginning, there were Conservatives who worried about the impact of EEC membership on Britain’s relationships with the Dominions, and the supranational nature of the organization the UK might be about to enter. The press was divided on the issue: the Daily Telegraph, Daily Mail, Daily Mirror and The Times were on board but the Daily Express was fiercely opposed to British membership of what its proprietor regarded as ‘an American device to put us alongside Germany’. Politicians were dispatched to explain the new policy to the Dominions, who were however unenthusiastic. On 14 August 1961 the ageing Winston Churchill wrote that if Britain ever had to choose between its historical role as leader of the British Commonwealth and Europe, he would ‘choose the Empire and Commonwealth over Europe every time’.18
Conservatives had been at the forefront of the united Europe movement of the 1940s, and many were still strongly pro-European. It was the Labour Party that was the more Eurosceptic of the two parties. But as Grob-Fitzgibbon puts it, many
pro-European Conservatives … were now sceptical of British engagement with the Common Market. They had hoped to see Britain leading a united Europe founded on the model of the British Commonwealth, a Europe that was intimately connected to Britain’s imperial mission in the world. British entry into an already-existing European organization with a federal structure was not what their vision of ‘Europe’ had been, a vision that they now struggled to articulate following the collapse of the British Empire.19
In the event, those opposed to EEC membership need not have worried – at least, not immediately. As had been the case during the discussions about a European free trade area, there was a division of opinion between France and the other five EEC member states regarding the merits of the UK application, and once again de Gaulle eventually vetoed it, in January 1963. The result was a sharp deterioration in relationships between France and her partners, and an equally sharp improvement in the functioning of EFTA, which decided to speed up the abolition of internal tariffs by three years.
Why did de Gaulle veto British entry? Scholars disagree.20 On the face of it, the French decision seems surprising, since the General shared Britain’s scepticism regarding supranational institutions: the British would have been useful allies in that regard. Indeed, one factor which suggested to the British that 1961 was a good time to try to enter the EEC was precisely the fact that they might be able to work with de Gaulle, and shape the evolution of the Community in a manner that would be to their liking.
Politically, the General was not anxious to see French influence within the EEC diminished in favour of Britain. He also shared Macmillan’s view that the UK might serve as a Trojan horse representing US interests within the Community. Needless to say he was as negative about this prospect as Macmillan and, interestingly, Jean Monnet, were positive. British entry would imply a ‘different Common Market … one that we would build with eleven members. And then thirteen. And then perhaps eighteen … The cohesion of its members, who would be very numerous and diverse, would not last long … We would end up with a colossal Atlantic community dependent upon and directed by America.’21
Alternatively, the American political scientist Andrew Moravcsik argues that economic motives are key to understanding de Gaulle’s veto.22 Crucial for French acceptance of the Treaty of Rome was the assurance that a Common Agricultural Policy would be set up providing French farmers with markets in Germany, as well as high prices. However, the precise details of this policy had not yet been settled, in particular the question of how it would be financed. De Gaulle’s fear was that if the British entered the EEC before the final details of the CAP had been negotiated, France would not succeed in obtaining the favourable terms that she required. De Gaulle vetoed a second British application in 1967; if France later relaxed her views on British entry, according to Moravcsik, this was not just because the General was forced to resign in 1969, but also because the CAP as we know it today had already been ‘locked in’.
For whatever reason, the European Communities (EC) opened membership negotiations with Denmark, Ireland, Norway and the UK in 1970.23 The Labour Prime Minister Harold Wilson, who had long been hostile to EEC membership, had eventually come around to accepting that it was in Britain’s best interests to join; but it was the ardently Europhile Conservative Ted Heath, who succeeded Wilson in June 1970, who actually opened negotiations. New Zealand turned out to be a particularly difficult issue to deal with: in 1970 the UK took 90 per cent of its butter exports, 75 per cent of its cheese exports and 86 per cent of its lamb exports.24 Not surprisingly, the New Zealand government wanted a special deal so that it could continue to sell its dairy products and lamb to Britain. In the event it finally secured the right to sell a reduced amount of dairy products to the EEC as a whole. Nonetheless, there was a widespread perception in Britain that the country was turning its back on its most loyal friends. No fewer than 244 Members of Parliament, including one fifth of the Conservative government’s own MPs, and the majority of the Labour Party, voted against EC membership in 1971.
Nevertheless, the negotiations were successfully concluded in January 1972, and the first enlargement of the EC took place a year later. Ireland and Denmark also joined but Norway did not, its voters having rejected EC membership in a referendum.25 Strikingly, the initial hopes that EFTA would facilitate the negotiation of a free trade area between the Six and the rest of Europe were realized at precisely the same time that Denmark and the UK quit the organization. By this stage EFTA was a fully functioning industrial free trade area, and it was generally accepted that the UK’s former partners could not find themselves facing tariff barriers in Britain as a result of Britain joining the EC. The EC therefore negotiated separate free trade agreements, involving most industrial goods, with the remaining EFTA countries (Austria, Iceland, Norway, Portugal, Sweden and Switzerland), as well as with Finland. In this manner EFTA fulfilled the historical purpose that the UK had designed it for.
The UK joined the European Communities on 1 January 1973. Many of its politicians were unhappy about this state of affairs with the long-run consequences that we know. Indeed, as early as 1975 a referendum was held on whether the country should leave the EC. Harold Wilson had returned to government in the previous year. As has already been mentioned, the British Labour Party that he led was traditionally Eurosceptic. There were a variety of reasons for this. The EEC, and before it the ECSC, were seen as capitalist institutions, membership of which would make it difficult or impossible to pursue socialist policies in Britain. There were impeccably internationalist grounds for preferring the British Commonwealth to Europe, since unlike Europe the Commonwealth was a multiracial organization that ‘by its very nature’ had to ‘think of global not regional problems; of the interest of all races, not just of one’.26 The protectionist policies of the EEC were damaging to the interests of developing countries. And there were Labour politicians such as Anthony Wedgwood (as he was then) Benn who were worried about losing sovereignty. As early as 1962 the Labour leader, Hugh Gaitskell, had famously argued that a federal Europe would mean ‘the end of Britain as an independent European state … the end of a thousand years of history’.27
But there were also passionate Europhiles on the Labour benches, notably Roy Jenkins, who resigned the Deputy Leadership of the party in 1972 because of its anti-European stance. Sixty-nine members of the Labour Party had voted to join the EC in 1971: without their support the UK would not have entered, given that a minority of Tories opposed this. How was Harold Wilson to hold his party together? The fact that entry, while planned by him, had actually been negotiated by the Conservatives, gave him a political solution to a political problem: the deal obtained by Ted Heath had clearly not been satisfactory. It was on this basis that he voted against joining the EC in 1971 and 1972, even though as we have seen he had actually become convinced of the pragmatic case for joining. In its 1974 election manifestos (for there were two elections, in February and October), the Labour Party promised that it would renegotiate the terms of British entry, and ‘consult the people through the ballot box’ once new terms had been obtained.
Wilson returned to office in February 1974 and set about fulfilling his renegotiation pledge. Britain’s European partners were happy to help him save face, especially since he was not looking for much by way of renegotiation. The New Zealanders were given a little more, while a new European Regional Development Fund (ERDF) was created to channel money to poorer regions, of which the UK had several. In June 1975 the people were indeed ‘consulted by the ballot box’: a referendum was held in which they were asked whether or not the UK should stay in the EC. Wilson campaigned in favour of remaining, but his ministers were free to do as they pleased. Tony Benn, then Secretary of State for Industry, argued in favour of withdrawal, as did the Secretary of State for Employment Michael Foot. Foot objected to the loss of sovereignty implied by EC membership in terms that seem strident even today: ‘The British parliamentary system has been made farcical and unworkable by the superimposition of the EEC apparatus … It is as if we had set fire to the place as Hitler did with the Reichstag.’28
The most prominent Conservative ‘No’ campaigner was Enoch Powell, famous for his 1968 ‘Rivers of Blood’ speech denouncing black immigration into Britain. Even at the time the speech was widely condemned for its racism, and Powell was sacked from the Shadow Cabinet by Heath. Powell was a leading proponent of the view that EC membership undermined British sovereignty, and later became what Hugo Young calls ‘the godfather of the successor tribe, to whom nation was not merely something but everything’.29 By the time of the referendum he was no longer a member of the Conservative Party: he had urged the electorate to vote Labour in 1974 because of that party’s hostility to Europe. In the October election he was returned to Parliament not as a Conservative, but as an Ulster Unionist representing the South Down constituency in Northern Ireland. Northern Ireland was fertile ground for an anti-European politician such as Powell, although the religious sectarianism driving many Protestant Ulstermen to vote No was not to his liking. The fervently anti-Catholic clergyman and politician Ian Paisley was a prominent No campaigner in the province, and made no secret of why he was hostile to the ‘Papist Super State’: posters informed voters that a ‘Yes’ vote was a vote for ‘1. Rome 2. Ecumenism 3. Dictatorship 4. Anti-Christ’.30
In a country that still valued moderation, the support of a Paisley or a Powell was not yet an electoral advantage. It was easy for the Yes campaign to portray those opposed to Europe as extremists, and indeed for the most part they were. Ironically, or perhaps not, the terrorist Irish Republican Army (IRA) – Paisley’s greatest enemy – also advocated a No vote, as did the Soviet Union. ‘Yes’ posters made the point simply. On their side were ‘The Labour Government. The Conservative Party. The Liberal Party. The National Farmers Union. Australia. Canada. New Zealand’. Against were ‘The IRA. The Communist Party. The National Front. International Marxists. The Rev. Ian Paisley’.31
The result was an overwhelming rejection of what we now call Brexit, by two to one. The people had conclusively spoken, and the matter was settled.