The Impact on Britain

Abstract

In the early months of 1970, when the departure of President de Gaulle had once more revived the possibility of British membership of the Community, a Labour government was in office and under its direction a White Paper, Britain and the European Communities: an Economic Assessment (Cmd 4289), was published setting out the official estimates of the likely consequences of membership. The main features of these are shown in Table 11.1. The view was taken that, so far as trade in manufactures was concerned, both imports from and exports to the Community would be increased by much the same extent so that gains from net trade creation in manufactured goods were not expected to be of any significant amount. This was not entirely unreasonable; the average UK tariff was now only around 6 per cent and its abolition on intra-Community trade could be expected to have only relatively small effects. That there would be substantial trade diversion in agricultural products was however a certainty, given the need for Britain to participate in the Common Agricultural Policy and thus switch imports from the traditional low-cost producers — the British Commonwealth and the United States — to relatively high-cost producers in Europe. The magnitude of this would depend on the elasticity of demand for food, and thus the effects of price increases on consumption, and on the elasticity of supply from domestic agriculture and the output responses to those same price increases. On an optimistic view the net loss by 1980, when the transitional period would have been completed, would be the equivalent of about ECU 2.3 bn; on a more pessimistic view it was put at about ECU 3.7 bn.