I move:
That Dáil Éireann approves of the decision to reactivate Ireland's application for membership of the European Economic Community.
The issue before the country at the present time is not whether we should join the European Communities but how best to prepare for membership, assuming it is open to us. As I said in my statement in the Dáil on 11th May immediately following the renewal of our candidature for membership, I am convinced that the Government, in deciding in 1961 to seek membership for Ireland, and the Dáil in supporting that decision, judged correctly the response of the Irish people to the challenge of participating in the fashioning of a new Europe.
I do not think there is anyone in this House who is prepared to say that we should not seek participation in an enlarged European Community which includes Britain. If there is, he must be prepared also to demonstrate, and demonstrate convincingly, that there is a valid alternative which can ensure for our people an expanding economy with opportunities of developing our economic potential at least as good as those available within the EEC. He must show how we can continue to sell our agricultural and industrial products in increasing quantities abroad, how we can continue to attract the foreign capital and technical knowhow so necessary for the building up of our industrial arm. For us, these are essential constituents of economic growth, and, if there is anyone who wishes to persuade this House or the people of this country that they can be secured outside an enlarged European Community, he will have to base his case on something more convincing than facile statements about negotiating trade agreements or diversifying export markets.
The traditional type of trade agreement simply will not give us the kind of export opportunities we need, since it will not serve to open doors through the tariffs and levies which would surround our principal export market, namely, Western Europe. An unfavourable trade balance with a country does not necessarily enable us to force that country to take our products on special terms. In the present-day world, in which major trading countries are bound by the rules of GATT, the scope for bilateral bargaining has virtually disappeared. In this situation, substantial trading advantages are not obtainable except inside a wider grouping, such as a customs union or a free-trade area embracing both agricultural and industrial products.
We do not, however, look upon the EEC as merely an economic institution. The Treaty of Rome is the foundation-stone of a much greater concept than the exchange of trading opportunities. This Treaty—and the Treaty of Paris, which preceded it, establishing the European Coal and Steel Community—can rightly be regarded as the first decisive acts in building up a new Europe. In the preamble to the Treaty of Rome, the Contracting Parties affirmed their determination to lay the foundations of an ever closer union between European peoples and their resolve to strengthen, by combining their resources, the safeguards of peace and freedom. The ultimate goal of the Treaty is, essentially, to bring about a united Europe through the fusion of national economies.
The Government have made it clear on several occasions that we share the ideals which inspired the parties to the Treaty of Rome and that we accept the aims of the Community as set out in the Treaty, as well as the action proposed to achieve those aims. This could hardly be otherwise, for Ireland is a part of Europe, not only by virtue of her geographical situation and the bonds of trade and commerce, but also by the shared ideals and values of fifteen centuries. Our friends in Europe are fully conscious of the part played by Irish scholars in the defence of those values at a dark moment in Europe's history, just as we cannot but be mindful of our debt to the European nations for the hospitality and encouragement found there by Irish exiles during our own long struggle for national identity. The facts of history and the links of a common civilisation join our small island to that great land-mass with whose destinies our own are bound up, and we cannot but welcome, support and contribute to any movement aimed at developing and strengthening that European way of life which is a part of our own Irish heritage. Thus, we participated, as founding members, in the establishment of the Council of Europe, the Organisation for European Economic Co-operation and the European Payments Union, and we followed, with the closest attention, all efforts in the post-war years to find ways of giving effect to the aim of European unity. In seeking membership of the European Economic Community, Ireland is indicating her willingness to play her full part in a movement which has the greatest significance for the future of Europe —and, indeed, for the world.
As my predecessor said in his address to the Council of Europe in January of last year,
We believe that the peoples of Europe, with their background of culture and tradition, their community of outlook and spirit and their highly-developed skills, have, in unison, an immense potential for human benefit, not alone in Europe but throughout the world. We look forward with confidence to a united Europe—a Europe firmly committed to its own development in peace and harmony and, thus, the better able to serve the cause of peace in the world and the freeing of all mankind from the scourge of poverty, hunger and disease.
In my recent meetings with Netherlands, German and Italian statesmen, which assured me of the welcome and support of their Governments for Ireland's membership, I observed a growing conviction of the desirability of an expanded and united Europe. The voice of united Europe would be listened to in the councils of peace— divided she is not heard.
We recognise that membership of the EEC would inevitably have political implications for us, that is to say, it would entail certain limitations on our national sovereignty. Every international agreement, such as the Charter of the United Nations or the Statute of the Council of Europe, entails such limitations and imposes certain duties on the participating States.
First of all, the Rome Treaty imposes upon member States a commitment to integrate their national economies to a degree which admittedly involves some derogation from national sovereignty. At the time we might hope to be admitted to the Community, it will have acquired all the characteristics of a customs union and some of the characteristics of an economic union. At that stage, we would be expected to conform to the policies already determined by the Community in the various areas covered by the Treaty, subject, of course, to whatever terms of entry may be negotiated. We would, however, have a voice in the formulation of future policy within the institutional system of decision-making in the EEC, as well as a degree of protection of our interests, which we could not hope to have in isolation.
The Treaty of Rome obliges member States of the Community to delegate certain powers to specified institutions of the Community. These institutions— the Council, the Commission, the Court of Justice and the European Parliament—have supranational features, in verying degrees, under the Treaty. However, the question of the powers of the institutions of the Community, as distinct from national governments, has not yet been finally resolved. A country is normally prepared voluntarily to surrender some of its sovereignty in an international agreement because it expects to derive compensating advantages therefrom. I shall deal later in more detail with the balance of advantage in our case as it appears at the present time.
In regard to the question of what obligations, in the purely political field, we would be assuming by EEC membership, Deputies will be aware from statements already made by me in this House that, while membership of the EEC will, naturally, involve participation by Ireland in all aspects of the Community, the precise political commitments of membership will depend on the progress which the Community can make towards the realisation of its political ideals. The Community in the present stage of its evolution, is committed only to the terms of the Rome Treaty, which does not, in itself, contain any commitments in the political field.
Up to the present time, progress towards the ultimate goal of political union in Europe has been slow. The Bonn Declaration of July, 1961, by which the Governments of the Six recorded their decision "to develop their political co-operation with a view to the union of Europe", was the closest approach to that goal. The Declaration has remained without effect, largely because of the differences which have manifested themselves among the Governments of the Six over the extent to which supranational authority should be vested in the Community institutions. Nevertheless, the quest for political unity has not been abandoned, and, so far as we in Ireland are concerned, we remain determined to play our full part in the new and greater Europe which we hope will, one day, emerge.
It might be asked whether membership of the European Economic Community would inhibit Ireland's activity at the United Nations. There is, in fact, no reason to suppose that such would be the case, and membership of the EEC would certainly not affect, in any way, our commitment to the principles of the United Nations' Charter or our desire to enhance the influence and prestige of the United Nations. In joining the EEC, we would endeavour to put into practice the fundamental principles of our Constitution which have characterised our activity in the United Nations, and we would seek to make the maximum contribution, within the limit of our resources, to the building of the new Europe, just as we have sought to play a useful role at the United Nations in the promotion of human welfare and the defence of world peace.
It will be evident from what I have said that participation in the European Communities involves the exercise, by Community institutions, of certain powers previously reserved to the Governments of the member States. I have in mind, particularly, the functions of the EEC Council in issuing regulations and adopting directives and decisions and the role of the Court of Justice as final arbiter on matters relating to the interpretation and application of the Rome Treaty.
This situation has certain implications for our own constitutional and legal arrangements. As I told the Dáil on 7th June, an interdepartmental Committee under the chairmanship of the Attorney General has been considering the question of whether the Constitution would need to be amended to enable this country to become a member of the European Communities and, if so, in what respects.
Examples of the matters which the Committee is considering in this connection are certain provisions of the Rome Treaty which take effect directly as law, e.g., Article 85, which prohibits various types of restrictive trade practices, the Community's regulations which also take effect directly in the member States, and the reference of cases to the Court of Justice by our Courts required by Article 177 of the Treaty. It is expected that the Committee's report will be submitted to the Government in the near future.
The Attorney General's Committee is also examining, with the individual Departments, the changes in our laws which membership of the Communties would require in the fields with which the Departments are concerned.
I should like to point out again that the Treaties establishing the Communities are mainly concerned with economic and commercial activities and related social matters, and it is in these areas that changes in our legislation will be necessary. Other aspects of domestic law need not be affected by membership.
To round off my remarks on the political aspects of EEC membership, I should like to emphasise that the political consequences of economic stagnation would, by reason of their much graver import, bear no relation to those arising from participation in the Community—and economic stagnation would be our fate if we remained outside a grouping which included our principal trading partners. Our strength and our capacity to develop as a political entity derive from our ability to maintain our position as a viable economic unit in an increasingly competitive world. Cut off from the opportunities for economic growth, our political freedom of action would be weakened.
The decision we have taken, however, rests on something more positive than anxiety to avoid the penalties of isolation, both economic and eventually political. The fundamental consideration which has induced us to seek membership of the European Community is that the Community is based on ideals and aims which appeal strongly to us and to which we can readily subscribe. Furthermore, the means by which these ideals and aims are to be realised accord closely with our own concept of how best we can achieve the kind of economic expansion of which the country is capable, with all that this implies in terms of increased employment, higher living-standards and improved social services. Membership of the Community would not, of course, automatically confer these benefits. It would merely provide the framework within which we would best develop our economic resources and, in this way, make our own modest contribution to the creation of a strong and prosperous Europe.
Here we come to the big question which presents itself to the public mind. To what extent can we expect, within the Community, to realise our economic potential, or, to put it in another way, what will the overall balance sheet of gains and losses look like?
It is clearly impossible at this stage to draw up a detailed estimate of future gains and losses. Any conclusions reached would have to be based on a wide range of hypotheses which, in themselves, would represent an attempt to define precisely the terms on which Ireland would accede to the Community. There are two objections to proceeding in this way. First, the conclusions reached would, of necessity, be extremely tentative and, so, of limited value. Second, and more important, the disclosure of the basis of our calculations could seriously undermine our negotiating position when the time comes to discuss terms of entry with the member States of the Community. I recall that the Leader of the Labour Party said in the Dáil on 11th May that we should fight hard to get the necessary conditions for agriculture and industry to ensure that our people will be employed here. This the Government aim to do but it would be unwise to make our task more difficult by setting out, here and now, the full details of our negotiating position.
The amendment put down by Deputy Corish would make it a condition of Dáil approval of the reactivation of our application that the Government put before the Dáil the terms of agreement they will negotiate for full membership of the EEC under Article 237 of the Treaty of Rome.
I feel it is necessary to spell out, for the information of the Dáil, the implications of any such conditional approval.
In the first place, it would tie the Government to a particular set of entry terms, leaving no room whatever for manoeuvre. In fact, negotiations in the real sense of the word would not be possible. Negotiations, as the term is commonly understood, are concerned with a range of possibilities—what I may describe as optimum and minimum terms—within the limits of which the parties might reasonably be expected to reach agreement. The range of possibilities could vary with the issue involved, and the object of negotiations would be not alone to reach agreement on each issue but also to achieve a reasonable overall balance. If this process is to be carried through to a satisfactory conclusion, the Government must have a certain freedom of manoeuvre, always bearing in mind the minimum terms which they can afford to accept.
The second point I want to make is that, if Deputy Corish's proposal is that the Government should put before the Dáil the minimum terms they are prepared to accept, I shall have to oppose any such move, for the obvious reason that the advance disclosure of minimum terms would immediately rule out the possibility of our negotiating better terms.
Finally, I would remind Deputies that in none of the applicant countries has the national parliament sought to have defined in detail in advance the terms of entry which the government will negotiate. In each instance, the responsibility of the government is to negotiate the best terms it can and to present these terms to the national parliament for ratification. To proceed in any other way would be to confuse the functions of the legislature and the executive.
I recognise the concern which underlines Deputy Corish's proposal, but I hope that the considerations I have put forward will be sufficient to demonstrate that it is not a proposal which should be adopted.
To avoid any misunderstanding about what is negotiable, I would like to point out that, while certain of the Community's arrangements, principally those concerned with voting procedures, financial contributions and representation in the European Parliament, must necessarily be altered in an enlarged Community, a newly-acceding country can expect that it will be required to accept the general body of arrangements already made for the conduct of the Community affairs, whether these are set out in the Treaty of Rome or elaborated in various decisions and regulations adopted under the Treaty. For us, negotiations will consist largely of the revision of voting procedures and similar changes consequent on the admission of new members and the agreeing of transitional terms, as may be necessary, covering other aspects of membership. The Dáil will be given an opportunity of debating the terms of entry as part of the procedure for ratifying Ireland's accession to the Treaty of Rome. For the present, however, any discussion must, in general, be set in the framework of the eventual obligations of membership, which are fully described in the White Paper published last April. Other obligations will emerge between now and the date of our entry, according as additional implementing decisions are adopted by the Community. These will be brought to the notice of the Dáil and public in whatever may be the most appropriate way.
It is in the light of the known obligations for membership and of the advantages which we would expect to derive that I propose to speak about Ireland's position. So far as possible, I will take account of the need for transitional arrangements to enable us to adapt to Community conditions, but I would repeat that it would be contrary to our interests to set out here the full details of any transitional arrangements which we may feel obliged to seek in the course of negotiations.
The two sectors of the economy with which we must principally concern ourselves in any discussion of the implications of membership of the EEC are agriculture and industry.
It is in these two sectors that membership will have the most immediate impact, and it is in these sectors, therefore, that we have concentrated the main thrust of our efforts to prepare the economy for participation in the EEC. I shall, in my remarks following, be dealing with the implications for agriculture and industry, in so far as it is possible to do so at this stage, and with the action taken by the Government to encourage and assist the adaptation of these sectors to Common Market conditions. This action embraces a wide range of measures directed to the remedying of particular weaknesses and also the general reorganisation of our external trade policy in a direction that will enable the economy to meet successfully the challenge of competition in the EEC. The response to these measures has, in general, been encouraging. I do not maintain that it has everywhere been satisfactory but this is a separate issue. The Government can—and do—give financial and technical help; they can advise and persuade but they cannot compel. I repudiate the suggestion in the amendment put down by the leader of the Fine Gael Party that the Government could have taken more realistic preparatory steps to adapt the economy to the kind of conditions we shall encounter in the EEC.
So far as agriculture is concerned, I should like to make some general points at the outset. First of all, Irish agriculture is very much an export industry and, over the years, it has already been meeting the keenest competition in markets abroad. Secondly, the agricultural benefits to be derived from membership of the EEC and participation in the common agricultural policy will depend essentially on the efficiency, skill and enterprise of our production, processing and marketing. Thirdly, our policy in recent years has been specifically aimed at equipping Irish agriculture to compete in the altered conditions which will apply to our entry into the Community and to derive the maximum benefit from membership.
The fundamental attraction of EEC membership for Irish agriculture is something more than the higher prices which will apply to our principal products. It also includes the advantage that we shall be competing in a large market at prices which are remunerative and are also comparable to those paid to other producers within the Community. In other words, the agricultural producers with whom we shall be competing will not have the great advantages over us which most of them have at present. Deputies will notice that the word "competing" keeps cropping up. This is not an accident, since competition, but on equal terms, is inseparable from the common agricultural policy of the EEC. It may be said that, as our farmers have been competing on unequal terms in export markets for so long, competition on equal terms can only be sheer gain. This is broadly true but we must not lose sight of the fact that there will be more competitors, and that there will be competition for our farmers on our own Irish market. Thus, there may be some losses as well as the gains, and it is necessary to bear this in mind when considering our participation in the Community's agricultural arrangements.
The EEC common agricultural policy had begun to take shape when the Government here were drawing up the Second Programme for Economic Expansion in 1963, and the agricultural part of the Programme was directed towards assisting our agricultural industry to develop production, processing and marketing and to improve efficiency in all sectors. In framing the policy set out in the Programme, account was taken of the reports of the Survey Teams appointed to examine the various sectors of the agricultural industry in the context of this country's membership of the EEC. The Government have pressed on with the policy then outlined and have steadily stepped up the aids and supports to agriculture to enable it to prepare for the era of intense competition which lies ahead. I have deliberately come back to this idea of competition because, if one had to sum up in one phrase the implications for Irish agriculture of membership of the EEC, it would be "better prices with increased competition".
A special study of the implications of EEC membership for Irish agriculture is being undertaken by the National Agricultural Council, with the help of an expert group including representatives of the Department of Agriculture and Fisheries, the Department of Finance, An Foras Talúntais and the universities.
A complete definitive analysis of the implications for Irish agriculture of membership of the EEC will not, however, be possible for some time, for a number of reasons. The common agricultural policy will not be fully operative until the middle of next year, and even the existing six member countries will not be in a position to analyse fully its effects on their own agriculture until the common policy has been in operation for a period. Also, the common price-levels which have been fixed may be altered, to some extent, on the admission of new members, and, in any event, they are subject to change and review within the existing Community. Furthermore, as Britain will remain our principal market for agricultural products within an enlarged Community, our benefits from the common agricultural policy may well be affected by the length of any transitional period that Britain may negotiate for changing over to the Community system.
Nevertheless, even at this stage, some broad assumptions can be made. Because of the aim of the common agricultural policy to relate market prices to costs of production under Western European conditions, it is a reasonable assumption that there will be no substantial reduction in the common price-levels which have already been fixed. These common levels are higher than our prices for most products. The common target price for beef is quite attractive in relation to our current price, and the common target price for milk is also appreciably above our price.
On the basis of our 1966 exports and allowing for such factors as the level at which intervention to support the market would apply, the value of cattle and beef exports could increase by, in round figures, about £30 million, while the return from dairy produce exports could increase by £10 million or more. Thus, beef and milk production, which together account for nearly 60 per cent of our agricultural production, should benefit appreciably from membership. Mutton and lamb, which account for about 5 per cent of our agricultural production, are not so far subject to a Community market regulation but. given the opportunity of competing on equal terms with British and Continental producers, our sheep and lamb producers should improve their position significantly.
In the case of tillage crops, which account for 13 per cent of our agricultural production, there is not the same scope for improvement. Our prices for wheat and sugar-beet are already at or above the common target prices in the EEC but our price for barley is somewhat below the EEC level. The Community have not, so far, adopted any arrangements relating to potatoes. In the case of the grain-based products, namely pigs, poultry and eggs, which account for about 20 per cent of our agricultural production, we could expect costs of production to go up to some extent because of higher prices for feeding stuffs but there would also be higher market prices to offset the higher costs of production, and so efficient producers should be able to earn a fair margin of profit. The most sensitive sector for us is likely to be horticulture, which accounts for about 3 per cent of our agricultural production. The present protection of tariffs and quantitative import restrictions would have to be removed under the EEC regulations, and this would expose our producers to keen competition. A new scheme of grants for the glasshouse industry has, however, been recently introduced by the Department of Agriculture and Fisheries to enable the industry to increase its competitive efficiency. A common policy for fish has not yet been adopted by the EEC. While there may be increased competition for our fishing industry on the home and British markets, there would be improved access to Continental markets.
Taking agriculture as a whole, the income of the farming community generally should show a worthwhile net improvement, allowing for some increases in the costs of production and in the cost of living. An important feature of such improvement in farm incomes would be that not only would farmers have more money to spend or to save but that this extra income would come from the market prices for the products and not from the pockets of the taxpayers. For an agricultural exporting country, any system which provides the farmer with a fair return from the market is much sounder than a system under which the non-agricultural sector has to compensate the agricultural sector for uneconomic prices on export markets.
It could happen that, under the EEC system, market developments of one kind or another could depress the market price of a product below the level aimed at as a fair return. To meet this contingency, provision is made, in the case of most agricultural products, for support buying if the overall market price falls a certain amount below the target price. It also could happen that products might have to be exported outside the Community at uneconomic prices. In such event, the regulations provide, subject to certain conditions, for the payment of rebates or subsidies to the exporters. The support measures are financed from a central fund, the European Agricultural Guidance and Guarantee Fund, which, in turn, is financed partly by contributions from member Governments and partly by levies on imports of agricultural products from non-member countries.
We would have to pay a proportionate share of the amount which is met by Government contributions, and this share would be fixed during our entry negotiations. We would also have to remit to the Fund the equivalent of most, or all, of the receipts from levies on agricultural imports from non-member countries. At present, these imports amount to between £20 and £25 million annually, and, if we were to continue to import the same volume from non-member countries and not to transfer our purchases to other members of the Community, the amount of levy payable on them would broadly represent the difference between the world price at the time of import and the EEC price. The present financial arrangements governing the agricultural operations in the EEC are, however, due to be revised by 1969, and so, a detailed analysis of the future financial implications is not possible at this juncture. It seems reasonable to assume that the Irish contribution to the financing of the common agricultural policy would not involve any extra burden on the Irish taxpayer and that the levies on agricultural imports would be far outweighed by the improvement in export earnings. The balance-of-payments position would be strengthened as a result of greater export earnings.
So far, most of my remarks have been related to the price aspect of the common agricultural policy. But there is another important aspect which is now receiving increasing attention within the Community. This is the structural aspect, which covers the whole body of production and living conditions in the agricultural industry. A major task for the member States is to eliminate the structural deficiencies hampering agriculture and the Community has decided that the first step should be to co-ordinate the structural policies of member States. A largescale operation to gather information on farming conditions and the nature and extent of agricultural production within the Community is at present under way. At the same time, the Community is assembling particulars of farm accounts on typical farms in various parts of member States, so that farm income can be assessed.
In the Community, as in the rest of the Western world, the agricultural population is declining. The principles on which the common agricultural policy is based provide, however, that every means should be used to strengthen the economic and competitive capacity of family farms. The Community has not worked out a policy specifically to meet the smallfarm problem, which is regarded as part of the overall task of improving agricultural structure. Individual Governments will be permitted to give aid for structural improvements but the scope of such aid will be subject to scrutiny by the Commission because of the danger that it could distort competition. Financial assistance is provided by the Community for helping to remove structural deficiencies, up to £100 million per annum being available at present for this purpose. Priority is given to projects which form part of a group of measures aimed at encouraging harmonious development of the general economy of an area, and national and local contributions to the cost are expected. On becoming a member of the Community, this country would be eligible for assistance for structural improvements on the same basis as the other members, and we would, of course, be free to put forward projects for consideration by the Commission. The expected improvement in overall agricultural conditions here which would result from EEC membership should greatly help our small farmers and make a significant contribution towards improving the situation in the western areas.
On the whole, it can be assumed that Irish agriculture will derive worthwhile benefits from membership of the EEC. This applies especially to our cattle industry, which, because of the unequal and distorted conditions under which international trade in cattle and beef is carried on, has hitherto been unable to make the most of its comparative advantages. The dairying sector, too, should benefit appreciably but to a smaller extent. On the other hand, the position for some tillage crops and for horticulture could be more difficult. It should not be assumed, however, that entry into the EEC would solve all problems for Irish agriculture. Conditions for our farmers generally would certainly be better but, after the initial adjustments had occurred, such benefits as would continue to accrue to our agricultural industry would depend entirely on the competitive efficiency of all concerned with the production, processing and marketing of our agricultural products.
Participation in the common agricultural policy will inevitably have consequences whose impact will be felt throughout the economy as a whole. I have in mind particularly the effect on the level of economic activity generally of improved agricultural income which will accrue from higher prices in both the domestic and export markets and the less welcome effect of such higher prices on the cost of living.
The agricultural sector accounts for about one-fifth of our national product. Any substantial increase, therefore, in the absolute level of agricultural income will impart a stimulus to the economy as a whole, through the resultant increase in expenditure on goods and services and, I hope, in savings and investment. Furthermore, it will be possible to effect a redeployment of expenditure at present absorbed by agricultural pricesupports, which will no longer be necessary in Community conditions. In this way, economic expansion can be assisted through the direction of resources to other productive purposes.
A direct consequence, of course, of the higher prices which agricultural producers will receive for sales in the domestic market is some increase in food-prices and, to the extent that this increase is not offset in other directions, some rise in the cost of living. The calculations that can be made under this head are subject to various qualifications. The levels of EEC and world food-prices at the time of our entry would be important factors, and these cannot be predicted at this stage. Furthermore, changes in the pattern of consumption which might be induced by the new conditions obtaining would affect the outcome.
However, a provisional estimate has been made, which assumes that EEC target prices and world prices remain unchanged—and this is a large assumption—but takes account of consequential changes in the pattern of consumption of food products. The provisional estimate suggests that the upward adjustment in the consumer price-index as a whole would be of the order of 3½ per cent. This increase would be gradual and would not, in fact, be disproportionate to increases we have experienced in the past.
In the industrial sector, our principal concern will be the effect of the elimination of protection against imports from the enlarged Community and the application of the common external tariff to imports from other countries. On the other hand, we shall stand to benefit from the removal of the import duties which the present members and the acceding countries other than Britain apply to our exports to their markets.
We are already in the course of removing our protection against virtually all our imports of British industrial goods, in accordance with the Anglo-Irish Free Trade Area Agreement. The commitments we have entered into under that Agreement will be a good preparation for the discipline of free trade in a wider European setting; they will also facilitate our entry into the EEC. In general, the timetable laid down in the Agreement requires us to complete the removal of protection against imports from Britain over a transitional period ending in June, 1975. Our aim will be to secure somewhat similar arrangements in the EEC.
The Free Trade Area Agreement left us freedom to vary the level of protection against countries other than Britain but, as members of the EEC, we would be obliged to align our tariffs on imports from non-member countries with the common external tariff of the EEC. The obligation to apply the common external tariff on items which are at present free of duty in the Irish tariff will have some implications in relation to materials required for industry but, against this, there will be the advantage of the removal of duties on Irish products exported to other members of the Community.
The degree to which our entry into the EEC would affect our manufacturers' share of the home market will vary from industry to industry. Where the main competition is likely to come from British sources, then the opening of our market to EEC goods may not be a critical factor, since we are, in any event, committed to free trade with Britain by mid-1975. Where, however, the main source of competition would come from other countries of the enlarged Community, the effects of eliminating protection against Community goods will constitute a significant new element.
Membership of the EEC could result in some increase in competition from non-member countries, since the general level of our protective duties is higher than that of the common external tariff. In addition to adopting the common tariff, it will also be necessary for us to bring other aspects of our commercial relations with non-EEC countries into line with the common commercial policy of the Community, which has yet to be worked out in detail.
It would be foolish to pretend that membership of the enlarged Community will not pose problems for Irish industry. But our prospects for a progressive industrial economy providing a high level of employment depend on our having access to expanding export markets, and our objective could not be achieved in the contracting market which would be available to us if we were to remain in isolation.
We are now entering an era in which the only assurance of survival for an industry will lie in its capacity to produce goods which will match those of its competitors in quality and price and to deliver them to the right place at the right time. Obsolete methods, outmoded restrictive practices, or inefficiency at management or production level will bring swift retribution. These considerations are indeed relevant whether we succeed in joining the EEC or not, because we are, in any case, already committed to free trade in the somewhat narrower area of Anglo-Irish trade. The general industrial advance achieved by all the EEC —and, indeed, the EFTA countries—is an encouragement to expect that, if free trade is properly prepared for, most of the difficulties originally anticipated will not materialise.
When our application for membership of the EEC was lodged in 1961, we were prepared, in return for access to the agricultural and other benefits of Community membership, to accept obligations leading generally to the elimination of protection by 1970. Our industries have had the benefit of the intervening period in which to prepare, and they have had available the financial aids and advisory services provided by the Government to facilitate adaptation and rationalisation. A general transitional period extending from the date of our accession to the EEC up to mid-1975 could not now be regarded as imposing an unreasonable timetable on Irish industry.
The first major step in preparing industry for membership of the European Community was taken in 1961, when the Committee on Industrial Organisation began its survey of Irish industry. The Committee studied the industrial situation very thoroughly and its recommendations were comprehensive.
A review of the progress made by industry in adapting itself to free-trade conditions is at present being carried out. An examination of the implications of membership, in so far as our industries are concerned, is also being made, on the assumption that we shall be allowed a transitional period of four or five years for the removal of protection and for the application of the rules of the Community generally in so far as they affect industry. When I speak of a transitional period of four or five years, I mean a period after 1970, which, as I have said, is taken to be the earliest date by which we are likely to be a member.
Deputies will recall that, in its final report, which was published slightly more than two years ago, the Committee on Industrial Organisation estimated that, if our industries were to survive in free trade conditions, drastic measures of adaptation and readjustments would be necessary. The Committee indicated the measures that would have to be taken if the loss of jobs in free trade conditions were not to exceed what it considered to be a practicable limit, namely 7 per cent of industrial employment. I should emphasise that, as the Committee explained, its estimate had to be seen in the context of an anticipated net increase in industrial employment by 1970. Although the CIO was unable to give, for all manufacturing industries, an estimate of what would happen if suitable adaptation measures were not taken, it did make such an estimate in respect of the twenty-six sectors of industry which the Committee had surveyed. That estimate showed that, with adequate adaptation, redundancy could be reduced to one-quarter of what it otherwise might be, that is, from 21,000 to 5,000.
The most recent information available to me, and, in particular, information about adaptation grants approved, suggests that very substantial progress has been made with the physical aspects of adaptation, such as modernisation of plant and equipment. I cannot pretend, nor does my colleague, the Minister for Industry and Commerce, pretend, to be satisfied with the tempo of adaptation in aspects other than the physical aspects, and, even where the physical aspects are concerned, we should both like to see things going faster. I am aware that the Minister for Industry and Commerce is taking a personal and active interest in this matter, and I have every hope that industry will now realise, wherever it has not yet done so, that we are, at last, face to face with free trade. Broadly speaking, the furthest I should like to go, at this stage, is to say that we are much better prepared for free trade than we were when we first made our application to the Community and, if we are able not only to keep up but quicken the pace, we should by 1970 be able to view the future with reasonable confidence.
The Government, for their part, vigorously followed up the general recommendations of the CIO by providing industry with the means of modernisation, by way of special adaptation finance, increased technicalassistance grants and increased funds for the specialist State agencies which provide such valuable services for industry. The Government have also actively encouraged the establishment and development, within the various industries, of organisations specifically concerned with adaptation activities.
During the period which has since elapsed, investment by individual firms in re-equipment and expansion has been going on apace, and progress with physical adaptation, as measured by the investment plans of individual firms, may be considered good. Up to 31st March, 1967, some 800 applications for adaptation grants totalling some £14 million, has been approved by An Foras Tionscal. These applications involved investment plans of the order of £63 million. The Department of Industry and Commerce is continuing its work of encouraging firms to formulate adaptation and reorganisation plans.
Progress has also been made in such matters as rationalisation, training, co-operative marketing and design. In some measure, there has been a broadening in attitudes throughout industry which has facilitated such desirable developments as mergers, inter-firm production arrangements and co-operative export marketing, and, by and large, industry is now much better placed to meet conditions of freer trade than at the time of the CIO surveys. I should like to make special mention of the importance of co-operative export marketing and to express my gratification at the vigorous lead given in this by certain industries. These changes in attitudes will, I hope, continue to facilitate progress in all aspects of industrial adaptation.
The success of these policies is shown by the increase of 28 per cent that occurred in the volume of production of manufacturing industry in the five years 1961 to 1966. In that period, the contribution of industry to National Income rose from 27 per cent to over 31 per cent and industrial exports rose by almost 80 per cent raising industry's share of total exports to almost 41 per cent.
While it is good to note the effort which has been made in the past, we must be ever mindful of the continuing improvements in industrial techniques which, we may be sure, will be exploited to the full by our competitors. There are, therefore, no grounds for taking it easy. Our advances on all fronts of the industrial campaign must not only be continued but accelerated if we are to continue our industrial development into the era of free trade.
Apart from the measures taken to improve the competitive position of existing industry, there are other reasons why the Irish industrial sector as a whole should be in a better position to stand up to EEC competition than it was in 1961. In recent years, the policy of the Government has been to seek to facilitate the establishment of industries, many of them oriented almost exclusively towards exports, which do not require tariff or other protection. These industries should have nothing to fear, and indeed, much to gain, from participation in the EEC. We should hope that membership of the EEC, which would provide dutyfree access for Irish goods to a vast and expanding market, would enhance the attractions of Ireland as a base for industrial development. Every new industry established would, of necessity, be geared to EEC conditions in terms of both competition and marketing opportunities, thus strengthening further the position of the industrial sector as a whole.
It will be clear from what I have said on the implications of membership for agriculture and industry that it is essential that Ireland's entry to the Community should take place simultaneously with that of Britain in view of our close trading relations with that country. I have stressed this point during my recent visits to Governments of the Six, as well as in my discussions with the British Prime Minister, and expressed our wish that negotiations on our application should, as far as possible, take place concurrently with those of Britain. I am confident that our position in this regard is fully understood and appreciated.
It will be recalled that, in reply to a Dáil question on 13th July arising out of the British Foreign Secretary's speech to the Western European Union on 4th July, I said that I had sought clarification of the British proposal for a standstill of one year after Britain's entry in order to give other countries, including Ireland, time to complete their negotiations.
I have now been assured by the British Prime Minister that, having welcomed most warmly the Irish Government's decision to seek membership of the Community at the same time as Britain, the British Government will do anything they can to further our ends. He has explained that the suggestion for a year's standstill was intended to provide an adequate measure of insurance for the maintenance of Anglo-Irish trading relations in the hypothetical eventuality of Ireland's negotiations falling behind those of Britain, for reasons outside the control of either Government.
It is, of course, of the utmost importance to Ireland that there should be no damaging hiatus in our trade relations and this can be most surely guarded against by the simultaneous accession of Ireland and Britain to the EEC. I intend, therefore, to re-affirm to the British Government, and to continue to emphasise both in our direct contacts with the member Governments of the Six and in negotiations on our application, that it is our earnest desire, for valid reasons, that these negotiations should be so arranged and brought to finality that Ireland will become a member at the same time as Britain. Our position on this matter has been recognised and accepted in the three capitals I have already visited.
Transition to EEC conditions embraces something more than the elimination of protection in the form of tariffs and quotas. It is one of the basic aims of the Rome Treaty to ensure fair conditions of trade throughout the Community in the interest of the fuller and more effective development of the Common Market. Thus, the Treaty contains provisions laying down rules of competition for the purpose. These rules prohibit directly, or provide machinery for the prohibition of, restrictive trade practices such as agreements between trading interests relating to price-fixing, the limitation of production and market-sharing. Similar provisions apply to the grant of State aids, with certain exceptions, such as, for example, aids of a social character or aids designed to promote regional or economic development. Taxation arrangements which discriminate, or can be used to discriminate, in favour of domestic production are ruled out, and provision is made for the approximation of the legislative and administrative practices of member States where it is found that discrepancies operate to frustrate or distort free competition. There is provision also against dumping during the period before the creation of a single Community market.
Compliance with the rules of competition would not, in general, raise any special difficulties for us. Indeed, the rules would be welcome, in so far as they would provide a measure of protection for our industrialists and traders against unfair trade practices and for our consumers against unduly high prices.
Our State aids to industry would come under review to ensure that they are in line with Community principles. It is thought, however, that, by and large, our aids to industrial development would not be significantly affected.
In the agricultural sector, State aids for the support of prices and certain other purposes would, in general, be replaced by the arrangements set out in the common agricultural policy. As I mentioned already, aids to structural improvements in agriculture would continue to be permissible but would come under scrutiny by the Commission, so as to guard against the distortion of competition.
In the field of taxation, the aim is the elimination of discriminatory arrangements which favour domestic products at the expense of imported products and the harmonisation of taxes which affect the production of and trade in goods. The first major step in that direction has been the decision, taken early this year by the Council, requiring the adoption of a uniform system of added-value tax. We must assume that further similar decisions relating to other taxes will follow over the next few years.
In preparation for entry to the Community, we are currently examining the changes that would have to be made in our tax system to bring it into line with Community arrangements.
Our present system of export tax-reliefs would come under review but I would hope that it would be possible, in the negotiations, to secure agreement to the retention of these measures for their statutory life.
An aspect of competition policy in the EEC which causes us some concern is the procedure for dealing with cases of dumping. While we are glad to note that dumping has not been a problem in the Community, we are conscious of the vulnerability of Irish industry in this respect, because of the smallness of the home market and the size of individual enterprises. We would endeavour to ensure that, in so far as this might be a problem, satisfactory solutions would be available.
Complementary to freedom of movement for goods, freedom of movement for workers, freedom for EEC nationals and firms to establish businesses and other enterprises and to provide services throughout the Community, and also freedom of movement for capital are all regarded as necessary for the efficient functioning of the EEC. The Treaty provides for the achievement of these various objectives by 1970.
The right of workers to move freely from one member State to another for the purpose of taking up offers of employment actually made has already been substantially established under regulations adopted by the EEC. The grant of this right in our case would not, it is thought, have more than a marginal effect on the Irish labour market. Given the general scarcity of labour in most of the present member States, it seems unlikely that there would be any large inflow of workers. On the other hand, the degree of outflow would continue to depend primarily, as at present, on the employment opportunities available at home.
Our policy as regards the right of establishment and the supply of services by non-nationals is generally liberal. Our insurance legislation is, however, protective, and some aspects of our practice in this field may have to be reviewed to bring them into line with whatever arrangements are adopted in the Community. Only very limited freedom has, so far, been established by the Community in the insurance sector but it is to be expected that greater freedom will gradually be realised.
The provisions regarding freedom of establishment apply to the purchase of, and settlement on, land. They are subject, however, to the principles of the common agricultural policy, which take into account the distinctive nature of agricultural activity, including its structural aspects. As in the case of insurance, only very limited progress has been made, so far, by the EEC in bringing the provisions into force. Bearing in mind the importance of farming in the Irish economy and the need to improve the structure of our agriculture, we would hope that it would be possible for us to retain sufficient regulation over the disposal of land to enable us to apply policies adequate to our needs.
As regards capital, while there is free movement of capital between Ireland and Britain, capital movements to all the present EEC member States none of which is in the sterling area, are subject to exchange control. Our existing practice under this head would not comply with Community requirements in various respects, even though the Community has still some distance to go before full freedom of capital movement is achieved between the member States.
In common with the other sterling-area countries, the object of our exchange control practice is to protect the monetary reserves of the sterling area, of which we are a member. Our practice generally parallels that of Britain, this being necessary to preserve the free flow of funds between the two countries. It appears that Britain proposes to seek transitional arrangements for the application of the EEC provisions to certain types of capital investment. The question of suitable arrangements in this connection will also arise in our case.
I may add that membership of the EEC may be expected to enhance the flow of investment capital to Ireland both from the Community and from other sources.
The prospect of participation in the EEC gives added impetus to the consideration being given to the decimalisation of our currency and to the adoption of the metric system of weights and measures.
The Government have already accepted decimalisation in principle, and the various practical problems which would arise are being examined. Deputies will have seen the booklet issued recently by the Minister for Finance outlining the considerations involved in the choice of a suitable unit. The views of interested groups and persons have been invited. These will be taken into account by the Government in reaching their decision, which it is hoped to make at an early date.
The question of adopting the metric system is a complex one and has been under examination for some time. The Government hope to be able to make an announcement on this subject in the coming months.
One of the objectives of the Rome Treaty, as recorded in the preamble to it, is the strengthening of the unity of the economies of the member countries. This unity rests basically on the customs union, as extended by the common agricultural policy, the free movement of persons, enterprises and capital and the application of common rules designed to equalise conditions of competition. The effectiveness of these measures could be considerably diminished if the member countries pursued conflicting or divergent economic policies. According as the Common Market develops and economic barriers disappear, the economies of the member countries will become increasingly inter-dependent and conditions in one country will exert a greater influence on conditions throughout the Community as a whole. In these circumstances, inconsistent national policies could damage or impede the functioning of the Common Market and thereby render more difficult the task of achieving economic union.
The Rome Treaty, therefore, includes a number of provisions which are designed to secure the co-ordination of the economic policies of the member States.
I have no reason to believe that membership of the Community would give rise to difficulties for us in the field of economic policy. The aims of the Treaty in this respect are acceptable to us. Indeed, we would support strongly any measures designed to ensure balanced and steady expansion in the countries with which we would be closely linked, since the Irish economy is by its nature, sensitive to the external environment in which it has to operate. The achievement of our own economic aims would be greatly facilitated by Community measures to sustain and ensure a steadily rising level of economic activity.
Reactivation of our application for membership of the European Economic Community and the uncertainty as to its outcome have particular implications for economic planning. They arise midway through the Second Programme for Economic Expansion and coincide with the conduct of a review of that programme. Strictly understood, a review requires no more than measuring progress and shortfalls against the programme targets, but there would be little virtue in a review that did no more than this.
Abundant information, which has been the subject of extensive analysis and comment, has already been made available, from official sources and through the NIEC, on the progress of the economy from 1964 onwards, and there is little that is fresh that can be added to it. The more substantive part of the review necessarily concerns the lessons of our experience, the assessment of future prospects and the measures needed to attain the objectives.
The lessons of our experience are clear and confirm once more the general validity of the conditions of our economic progress stressed in the Second Programme. The difficulties, at this point of time, arise in the assessment of future prospects and the formation of appropriate policies. The development of events up to 1970 and after depends heavily on the outcome of our application to join the EEC. To be worthwhile, a re-appraisal of the potential growth of the economy over this period and the means by which it is to be realised must be based on the firmest possible information on the timing and conditions of membership, the length of any transitional period and other vital considerations. Policies and actions not related to reasonably firm prospects in these crucial areas could prove not just to be badly founded but to be dangerous. They might have to be changed or reversed within a short period, with consequential disruptive effects. Moreover, the publication of plan revisions based on particular views on the timing of the availability of EEC benefits could seriously prejudice the negotiating position of the Irish team in Brussels.
In these circumstances, the Government have decided that the best course is to proceed as follows:
First, to complete the review of progress under the Second Programme, supplementing it by reference to the re-assessment of industrial preparations for free trade now proceeding and linking it with the 1967 review of both industrial and general economic conditions. All this will be done in consultation with the NIEC.
Secondly, according as the EEC position is clarified, a programme of policy and action will be prepared which will be specifically related to the external trading conditions Ireland is likely to face within the next few years. This would most usefully take the form of a Third Programme.
Meanwhile, there will be no hiatus in economic planning. For the immediate future, the objectives will be, first, to get back to a steady, sustainable growth-rate based on a realistic view of what can be attained in the short term, and on careful management of all internal disturbing influences, particularly public expenditure, credit and money incomes; secondly, to improve efficiency and raise productivity in all sectors so as to prepare the economy for increasing international competition; and, thirdly, to initiate the changes in attitudes and policies necessary to set the Third Programme firmly in the perspective of the eventual aim of full employment.
This interim planning will be directed towards making the best use of resources within the limits of a tolerable balance of payments deficit; it will be based on the annual review of industry and of economic progress generally, and will be guided by budgetary and other ad hoc policy.
Preparatory work on a Third Programme will proceed contemporaneously and will be associated closely with the analysis now required to assess in detail the implications of EEC membership and its effects on the economy. As the likely outcome of our application and the conditions of entry, including transitional arrangements, become clearer, the preparatory work can take account of them to provide a realistic basis for economic policy over the period of the Third Programme. Commencement of this period need not necessarily coincide with the expiry of the current programme, and it might also cover a shorter period than the seven years of the Second Programme.
The course of action I have outlined will make the best use of the limited expert resources available in the public service and in the private sector. It will permit concentration of effort on the first priority, namely, the negotiation of satisfactory terms of entry to the EEC and assessing the implications of membership, while, at the same time, integrating the results into the framework of medium-term planning. It would be difficult, if not impossible, to do this efficiently if resources were diverted to a formal reshaping of the final stage of the Second Programme.
The Government have consulted the NIEC on these matters and have had the benefit of the Council's advice in formulating their course of action.
In the Community, as elsewhere, economic progress is not an end in itself but is rather the means by which the improvement of living and working conditions generally is to be assured. The Rome Treaty envisages, in Article 117, that this improvement will be brought about, in the first place, through the operation of the Common Market, which will favour the harmonisation of social systems. This is a reasonable expectation, since, in an economic union, differences in social systems will, in time, tend to be evened out.
I should like to point out, however, that the Treaty does not prescribe a uniform social welfare code, nor would there be any question of our having to make extensive changes in our social-welfare arrangements to adapt them to a Community system. In fact, the social-welfare systems of the present member States differ widely both as regards their structure and the level of benefits. I think it necessary to make this point, as the remarks made by the Leader of the Labour Party in the Dáil on 11th May seemed to imply the existence of a uniform Community system.
The tendency towards harmonisation, which the operation of the Common Market favours, is being assisted by a process of collaboration on various aspects of social policy, such as employment, working conditions, labour and trade union legislation, social security and vocational training. This collaboration takes the form of the promotion of studies, the giving of opinions and the organisation of consultations.
There is one aspect of social policy in respect of which membership of the Community entails a specific obligation, that is the application of the principle of equal pay for the same work as between men and women. In the case of a newly-acceding country a transitional period would, no doubt, be negotiable. The existing member States allowed themselves a four-year period up to 1962, which was subsequently extended, but the principle is not yet uniformly applied throughout the Community.
Membership of the EEC also entails membership of the other two European Communities, the European Atomic Energy Community — EURATOM — and the European Coal and Steel Community—ECSC. Parts II and III of the White Paper on the European Communities gave particulars of the objectives and the provisions of the Treaties which established these two Communities. The six member countries have recently merged the separate Councils and Executives of the three Communities, and this will pave the way for the eventual fusion of the Communities.
As a member of EURATOM, we would have a right of access to the results of that Community's research into the application of nuclear science and techniques in medicine, agriculture and industry and to other nuclear facilities. Looking ahead, this could be very useful in the context of the erection of a nuclear power station, when that question eventually arises.
As far as coal is concerned, membership of the ECSC would not involve any onerous obligation for this country. Policy as regards coal production has been considered from time to time by the ECSC in the light of efforts to evolve a co-ordinated policy covering the different sources of energy. The three Communities, in consultation with one another, are working towards a common energy policy and have agreed on certain general objectives for the eventual policy. It is not expected that these would raise any difficulties for us.
Our entry into the Communities would involve the elimination of import duties, and other restrictions, on trade in iron and steel with the member States but, as in the case of the removal of industrial protection generally, we would hope to secure a transitional period for the purpose. Adaptation measures are already being taken in the steel industry to meet the increased competition which will result from the reduction of import duties under the Free Trade Area Agreement. The position of Irish Steel Holdings is at present the subject of comprehensive examination, which will take account of the implications for the company of our membership of the Communities.
Before concluding my remarks, I should like to deal with the contention, in the Fine Gael amendment, that the Government have failed to take more realistic steps abroad in preparation for membership of the EEC. To refute, once and for all, this contention and, to put in its proper perspective the action taken by the Government externally, I think it well to recall the situation that existed following the suspension of action on our application in January, 1963, consequent on the breakdown of the British negotiations.
The breakdown of the British negotiations ruled out any progress being made, for the time being, on our application. In these circumstances, the Government's first concern, having reiterated their continued desire for membership of the EEC, was to endeavour to come to some agreement with the Community which, in the interim period before membership again became a possibility, would reduce the barriers to trade between us and so obtain for Irish products improved access in the markets of the Six. It was made clear to us that there was no possibility of a bilateral exchange of preferences with the Community which would, at the same time, have enabled us to preserve our special trading relationship with Britain.
Failing the making of such an arrangement, our task remained, in the interim period, to keep ourselves fully informed of Community policies and developments and to assess their likely significance for this country when membership is achieved, to continue to keep before the Governments of the member States our desire for membership at the earliest possible opportunity and to acquaint these Governments and the Commission with particulars of the measures which we were taking at home with a view to the preparation of the economy for membership. This was the Government's essential task in the circumstances that existed at the time, and hindsight has now confirmed that the task was accomplished satisfactorily and realistically. It was accomplished through periodic contacts at Ministerial level with the Governments of the Six and the Commission and through the constant activity in relation to the EEC of our diplomatic missions in Europe.
By the second half of 1966, with the resolution of the crisis in the Community, the major agreements reached by the Governments of the Six in the agricultural sector and the resumption of progress in the Kennedy Round, a situation emerged where the reactivation of negotiations with applicant States for membership again became a real possibility. This coincided with the initiative taken by the British Government in relation to the EEC, an initiative which was essential if there was to be any progress towards an enlargement of the Community. At that time, the Government began to intensify, as the circumstances warranted, their activities and preparations in the external field.
A series of Ministerial visits to the Commission was arranged, beginning with the visit in September, 1966, of myself as then Minister for Finance, and the Minister for External Affairs. This was followed in subsequent months by visits by the Ministers for Agriculture and Fisheries, Industry and Commerce and Labour. The Government also decided that the time was opportune for the opening of a separate Mission to the European Communities, and the Mission commenced its activities, which were concentrated exclusively on the furtherance of our application for membership, in October, 1966. In addition, the activities of our diplomatic missions in the capitals of the Six and in the capitals of other countries seeking membership were increasingly geared to EEC matters.
These Ministerial contacts and the work of our Mission to the European Communities and our Embassies in the capitals of the Six have been supplemented, where necessary, by visits to Brussels of officials of the various Departments for the purpose of obtaining firsthand briefing from the Commission on various aspects of the Communities' policies and developments of concern to their Departments. As a result, the Government are thoroughly informed of all aspects of these policies and developments and have, in the White Paper on the European Communities published in April, made available to the Oireachtas, industrialists and farmers and the public generally, full information on them. The information which we have obtained, and which we continue to obtain, affords the basis for an assessment of the implications for Ireland of membership of the European Communities.
In describing the obligations of membership of the Communities and how we stand in relation to them, I have endeavoured to give an insight into the impact of Community conditions on various aspects of our economic life. It is impossible to quantify, in any meaningful way, the effect of this impact in all its ramifications. As I said earlier, much will depend, particularly in the important industrial sector, on the transitional terms that can be negotiated, and, by this, I mean not alone the duration of any transitional period but also the stages by which the transition to Community conditions would have to be effected.
Much will depend also on the speed with which the process of adaptation to Community conditions is carried through, both in the time that remains before our entry and during any subsequent transitional period. It should not be necessary to point out that measures of industrial adaptation can most effectively be applied during the interval before entry, when we have freedom as to the measures we might adopt. I make this point in order to remind those who have been slow to prepare for free trade conditions of the advantage of acting now.
Another factor which will influence in a substantial degree the performance of the economy in Common Market conditions is the general economic climate, not only within the Community, but throughout the world. There is every reason to hope that economic conditions generally will continue to favour a steady expansion, as has been the experience over the past decade. The continuance of such favourable conditions will greatly assist our own efforts to surmount any difficulties which participation in the EEC may present.
Having carefully assessed the prospects in the light of all the available information, the Government saw no reason to depart from the conclusion reached in 1961 that it was within our capacity to assume the obligations of membership of the EEC and that the national interest would best be served by so doing. It was this consideration, allied to the desire to play our part in the creation of a new Europe, which prompted the Government to revive our application for membership when the opportunity presented itself last May.
There may be some who, while recognising that our destiny must inevitably be linked with that of an enlarged Community, will argue that that link should, as a matter of our preference, take the form of association rather than membership. Those who put forward this proposition must define precisely what they mean by association, a term which embraces a wide range of possibilities. They must recognise that an association agreement would have to provide for a balance of advantages and that any abatement of the obligations assumed, as compared with those of membership, would have to be matched by a reduction in the advantages received.
An obvious question presents itself: what obligations would they wish to see abated and what advantages would they be prepared to surrender? Another question that can be asked is: what is their attitude to the abdication of any right to participate in the formulation of Community policy in areas such as the fixing of the levels of agricultural prices or the negotiation of trade agreements with other countries? I bring up these questions in the hope that, if this issue is raised, it will be in terms worth debating and not in the form of airy generalities.
In conclusion, I would like to say something on the situation we would face if the present initiative to bring about an enlargement of the Community should fail. There is a danger that this possibility may tempt the less enterprising to sit back and do nothing, in the expectation that, if we fail to join the Community, there will be no need to prepare for the more rigorous conditions of free trade. This is a delusion. First, there is our commitment to free trade with Britain. Second, as the Government have repeatedly pointed out, world trade is moving towards freer conditions of competition. An example is the changes wrought by the Kennedy Round negotiations in the GATT, which will result in cuts in industrial tariffs by major trading countries of the order of 35 per cent. This is not the end of the matter. We can expect that there will be continuing efforts to bring about further reductions in tariffs and non-tariff barriers. This will mean increasing competition in our principal export markets. Moreover, the failure of international efforts to secure a corresponding freeing of trade in agricultural products puts an even greater burden on the industrial sector if we are to maintain the rate of economic growth we desire.
Finally, it should not be assumed that failure of the present initiative to bring about an enlargement of the EEC by the admission of Britain, Ireland and other countries would necessarily mean a continuance of the status quo. It is impossible to predict the response to this situation if it should arise. However, the challenge thrown up by such a situation would be likely to generate new thinking and new ideas, with, perhaps, proposals for changed or new trade or economic groupings outside the EEC.
The effort put into our preparations for membership of the EEC would not, in those circumstances, be wasted. In fact, the more comprehensive our preparations, the better placed we would be to participate in any alternative trading arrangements or economic groupings that might be open to us.
It would be shortsighted in the extreme, therefore, to slacken our efforts because of any uncertainty felt about the future. Whatever the future may bring, commonsense demands that we should continue, with all speed, the work of building a strong and competitive economy. This must remain our primary objective in all circumstances.
I think it will be clear from what I have said that, sharing as we do the ideals which inspire the movement towards European unity and accepting the means adopted by the Community towards this end, the achievement of membership of the Community must be a main objective of our national policies. While patience and perseverance will be necessary in pursuing our application, my visits so far to the capitals of the Six have increased my confidence in the ultimate certainty of the Community being enlarged to include Ireland, Britain and other countries.
There may be people who still have reservations about our entry to the EEC, but I think it must be clear that our future lies in participation in a wider economic grouping. Failure to achieve this objective would result in economic and political stagnation. We would be deprived of the favourable external opportunities we need for the expansion of production and the provision of new jobs for a rising population. The economic consequences would be too serious to contemplate even for those whose material wellbeing might hitherto have seemed invulnerable. Our people constitute a community in which each of us suffers if our neighbour suffers, and in which each of us accepts some restraint on his freedom of action in the interests of the community as a whole.
In the wider context of Europe there is taking shape another and greater Community to which we feel we should belong. This Community of peoples is inspired by an ideal which has led countries to accept restraints on their individual freedom of action. This ideal is that of a united Europe, economically strong and a powerful influence for peace. Some pooling of sovereignty is necessary to give the Community life and the capacity to grow into something greater than the sum of its parts. This is an ideal in the service of which we, too, in common with the other peoples of Europe, wish to play our part. The freedom we enjoy has been hard won. Other nations have fought hard for their freedom and they treasure it no less than we do. The countries which have subscribed to the Rome Treaty value what they have achieved as separate nations. They value, too, what they are creating in common. Our wish is to share in this great task.
I, therefore, recommend the motion for the approval of the House.
I should say at this stage that I understand the Whips have agreed that the debate should end at 10.30 p.m. tomorrow. An appropriate motion will be introduced to meet the order of the House tomorrow morning.
