Considering that it is necessary to give fresh impetus to the economic, financial and social unification of Europe as a whole, in close co-operation with the Commonwealth countries,
The Assembly recalls its Recommendation of 5th September, 1949, for the convening of a Europe-Commonwealth Conference, and is of the opinion that such a Conference might among other things examine the possibility of setting up an association between free Europe and the Sterling Area.
ANNEX B
CONSEQUENCES FOR THE UNITED KINGDOM OF AN ASSOCIATION BETWEEN FREE EUROPE AND THE
STERLING AREA.
1. The Recommendation makes no attempt to define the nature of the association between free Europe and the Sterling Area but it is no doubt inspired by ideas which have recently been advanced, notably by Mr. Boothby, for a single economic unit embracing Western Europe and the Sterling Commonwealth which, it is claimed, could stand on its own feet and be independent of American Aid. The form and cons ti tution of the unit is left indeterminate except that it would include an extension of Imperial preference to cover Western Europe and would probably involve a unified control over the economy of the area as whole; the abandonment of convertibility of sterling, even as a long- term aim, and a permanent system of discrimination against the dollar area.
2. Proposals of this kind involve difficult issues some of which will need to be studied in the context of the enquiry into future external commercial policy recently decided upon by Ministers (E.A. (52) 9th Meeting). The following paragraphs set out briefly some of the more important considerations which arise in the light of present United Kingdom policies.
3.
Effect on United Kingdom's interests
(i) The position of the United Kingdom as a great power very
largely depends on its economic and political ties with the Commonwealth. Any closer formal association between the Commonwealth and Western Europe would weaken the special relationship between the United Kingdom and the Commonwealth countries.
(ii) Any move to
bring the United Kingdom and Europe closer to- gether in a new association which does not include the Uniteć
States and which involved the concept of a Third Force would at present be unacceptable to the Commonwealth, par- ticularly to Canada, and would be contrary to present United Kingd om policy which is to lay stress on the concept of an Atlantic community, including the United States and Canada as equal partners.
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4.
(Påġ1⁄2Ð control over the economies of tpagetur bf200
Area and Western European countries could hardly be estab- lished without an agreement between all the countries concerned on the detailed objectives of economic policy and it is doubtful whether this could be achieved without a degree of political federation.
(iv) The United Kingdom and the rest of the Commonwealth are
committed to the objective of sterling convertibility. Abandonment of this objective would be contrary to the declaration made after the Conference of Commonwealth Finance Ministers in London last January.
(v) In so far as both Western Europe and the Sterling
Commonwealth are at present in dollar deficit, the amalgamation of the two blocs of dollar debtors would not in itself create a more viable unit. Western Europe might hope to gain more dollars than it can now earn; but this would probably be at the expense of the sterling area.
(vi)Any development where by Sterling Area countries became
individual members of a larger payments organisation on the lines of the European Payments Union would be directly contrary to the objective of expanding the international use of sterling and would lead to the dis appearance of many of the clearing and banking services now provided by London.
(vii) A European-Sterling Area bloc would be likely to reduce the value of the preferential treatment we enjoy in other Sterling Area countries. The Sterling Area countries might be ready to grant preferences to the European countries in return for freer access to the markets of Continental Europe;
but a bargain of this kind would be at our expense. It is doubtful whether we could obtain any compensating advantages.
Position of Colonial Territories
Until it is known precisely what form the "association" would take, the effect on, and the attitude of, the dependent overseas territories (which stand in a special relationship to the United Kingdom) cannot be determined. The effect of any concrete proposal would have to be carefully considered in the light of the differing political and economic conditions, and treaty obligations, applicable to the various territories. The dependent territories cannot be treated entirely as a homogeneous unit in this respect, but in general it is unlikely that they, or the United Kingdom, would stand to gain from any arrangement which weakens their ties with the United Kingdom, as the proposed "association" well might.
5.
Position of Canada
Canada not being a sterling country would necessarily be excluded from the type of economic unit which appears to be envisaged and the consequences for Anglo-Canadian relations might be
disastrous. Moreover, the country that would be excluded is the one Commonwealth country apart from ourselves which has the closest interest in European unity and the closest links with Europe (through its membership of N.A.T.0.). Even if it were found possible to devise a means of securing Canadian participation in such an association, it is quite out of the question that Canada would accept it unless America also were a participant. Canada is in any case strongly opposed to new preferential blocs.