No. 449 NAI TSCH/3/S15281/A
Note on the proposed European Free Trade Area
by the Department of External Affairs
for the use for Liam Cosgrave at Cabinet on 9 October 1956
Dublin, 9 October 1956
- The so-called ‘Messina Group’ of six countries (France, Western Germany, Italy, Belgium, The Netherlands and Luxembourg), who have already set up the European Coal and Steel Community, have plans to form amongst themselves a European Customs Union. The plans envisage the possibility of a close association between such a Customs Union and OEEC Member countries not taking part therein.
- The Council of OEEC decided on 19th July, 1956, to establish a Special Working Party to ‘study the possible forms and methods of association, on a multilateral basis, between the proposed Customs Union and Member countries (of the OEEC) not taking part therein’. The Council further decided that as a possible method of association the Special Working Party should take into account the creation of a free trade area which would include the Customs Union and such Member countries.
- A ‘free trade area’ is one in which the countries taking part undertake to reduce progressively their customs duties vis-á-vis each other, while remaining free to have different custom duties towards third countries. (Countries in a Customs Union must introduce a common tariff vis-á-vis third countries). The formation of a Free Trade Area comprising the Customs Union of the Six and other Member countries of the OEEC would mean that the six countries forming the Customs Union would have a common and uniform tariff vis-á-vis third countries, whereas the other members of the Free Trade Area would be free to retain different tariffs for their trade with third countries.
- At the first meeting of the Working Party on 24th September, 1956 – at which Ireland was represented by an observer from the Paris Embassy – the lead was taken by the British delegate in concentrating attention on the establishment of a Free Trade Area as the first form of association with the proposed Customs Union which should be investigated by the Working Party. He also succeeded in securing acceptance for the British view that consideration should be confined for the present to industrial products, the question of the inclusion of agricultural products to be left for consideration at a later stage when the general nature of the proposed free trade area would have been more clearly defined.
- All member countries of the OEEC except Iceland and, so far, Ireland, are fully represented on the Working Party. The great majority have accredited senior officials from the home economic departments. Britain’s representatives are from the Treasury and the Board of Trade.
- That Britain is prepared to consider seriously participation in a European Free Trade Area, which her active participation in the Working Party and recent statements of the Chancellor of the Exchequer seem to indicate, represents a revolutionary change of attitude on her part. British thinking appears to be conditioned by considerations such as (a) the Free Trade Area scheme would leave her free to retain existing Commonwealth Preference arrangements; (b) the exclusion of agricultural products would make participation possible without serious effect on Commonwealth imports (mainly agricultural); (c) there would be a serious threat to British exports to the Continent if Britain remained outside the Free Trade area in which, further, in her absence, Western Germany would probably become dominant.
- Consideration of Ireland’s participation in the proposed Free Trade area raises questions of vital importance, such as protection for our industries (participation would involve progressive reduction of Customs duties vis-á-vis the other members) and the maintenance of our special position in the British market. If we elected to remain outside the Area, would we be able to retain our existing rights of preference and free entry in the British market with the concurrence of the other OEEC countries? We are not clear as to what may be involved and we, therefore, cannot afford to ignore the Working Party and the developments at present taking place.
- Particularly having regard to the British attitude, it is essential that Ireland should be fully represented in the Working Party so that our interests may at all stages be fully safeguarded. The outcome of the Working Party’s deliberations will create serious problems for the Irish economy whether or not it is decided at a later date to accept or reject its recommendations. We should, therefore, participate in full so that from the outset the various Departments and the Government can be kept fully informed as to what would be involved for Ireland in the establishment of a Free Trade Area. Reliance on documentation (which, in any event, might not be available to non-members of the Working Party) would not be sufficient. In a matter of such vital importance it is essential that we have that background knowledge of developments which could not be obtained from a reading of documents.
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