8 April 2019

The experience of the 1950s shows No Deal can be better than a bad deal


Recent days have seen a baffling array of amendments seeking to recast the form Brexit takes.

The prospect of MPs delivering a genuine Brexit on most of them has been remote; no more real indeed than ranchers and prospectors in the Old West could genuinely expect to track down the mythical beasts they heard tell about over the camp fire – the squonk and the goofus bird, the snallygaster, and the hoopsnake that bit its own tail and rolled across the plain.

Most readers will be aware that such disarray over which form of EU arrangement to pursue is by no means a recent phenomenon. But some may be surprised to how far back the division of opinion goes, and the lessons that they expose.

Several years after the creation of the Coal and Steel Community, the future EEC 6 were engaged in slow talks about what to do next. This could hardly escape the attention of London. Between March and May 1956, Eden’s Government reviewed several policy options, largely working under Macmillan as Chancellor.

The core of the choice lay between focusing on the intergovernmental Organisation for European Economic Co-operation (OEEC), which had been set up to foster economic development around the Marshall Plan; or tying in with the emerging but much narrower new mini-bloc of the Six. This was already a hotly-contended choice, as supporters of the future EEC saw the OEEC as a competitor and threat, while the latter saw the former as a risk to wider economic prosperity.

Whitehall reviewed a number of options and gave them alphabetic references –

Plan A: this involved more developed co-operation with the wider OEEC;

Plan B: the political merger of the Council of Europe and the OEEC;

Plan C: cutting OEEC tariffs;

Plan D: a free trade area in steel with the future EEC;

Plan E: a partial Free Trade Area with the future EEC;

and Plan F: The Strasbourg Tariff Scheme (a form of EEC-Commonwealth customs union).

Having failed to tease the six Member States of the European Coal and Steel Community (ECSC) towards these options, the Government then tried a new tack – Plan E was reworked into a Plan G.

Plan G proposed that the UK would join a partial free trade and customs union with the Six, opened up to other interested OEEC states. There would be free trade on everything but foodstuffs, and the gradual removal of tariffs, quotas, and export subsidies. There would be continued privileged access for Commonwealth goods, at the same time as offering improved quota access for Canadian and US imports into the UK market to gain their support. The Managing Board would operate at ministerial and official level; the parliamentary link meanwhile would be delivered not by a new assembly, but by engaging the Council of Europe.

In a Cabinet document marked ‘Secret’, dated 11th September 1956, Macmillan went into certain specifics on strategic thinking. Intriguingly, many of the same questions that he raised then about entering such an arrangement also apply today as we seek to leave it.

There was the economic question – whether the UK economy would flourish either alone, or “in a unified Europe largely under German domination”.

There was the political question – “would it help us to create a new period of British strength and power, or should we be foolishly throwing away what we have. Would it bring us promise for the future, or is it an abdication and betrayal of our past?”

There was the politics of the Plan – “Will our Party accept it both in the House of Commons and in the country? Can we swing from the old policy of insular protection to the new policy of wider free trade areas?”

There was the question of the “Then can we stand for what will happen” – ‘everything that goes wrong will be counted against the new policy, even if it would have gone wrong anyway.’

Additionally, there was question of whether they could get the support of the Commonwealth and United States, especially with the latter over tariffs (an issue on which, from today’s vantage point at least, John Bolton has reassured us in the affirmative).

Macmillan then raised a question that in retrospect proves a little peculiar, given his two subsequent attempts as premier to get the UK to join the EEC. What were the institutional problems that arose from this affiliation, and what mitigatable risk, over whether the UK would “be inexorably drawn closer to Europe”; what were the “possible pressures for harmonisation”; and what risk existed of “economic and monetary policy” later falling under supra-national authorities, even if this model was not yet considered suitable by the Six?

The Treasury here was sounder than it subsequently became: “we see no reason for supra-national institutions to manage the free trade area,” declared Macmillan, going on to add, “the United Kingdom could not in any circumstances join such a Customs Union; to do so would mean giving up our own tariff and our external trading arrangements.”

The Treasury latterly might well have made done with that file still in the building, rather than now consigned to Kew.

The British approach to the Six failed. It sought to generate an alternative to localised and protectionist trade integration that might emerge at UK cost. It came a cropper for several reasons. Of these, perhaps the most important was chance. The Suez Crisis forced Paris to completely re-evaluate its own geo-strategic options. Distrusting Washington, and having three times failed to secure its eastern border by occupying key German economic terrain, the Élysée desperately tried to seize (as it had in the dark days of 1940) a political union with the UK. When this in turn quickly hit a brick wall, the only remaining alternative – France’s own Plan D – was economic union with West Germany to lock in its historically belligerent neighbour. This pushed the EEC option to the top of the table and removed a critical brake, scuppering Whitehall’s proposal. The Quai d’Orsay has yet to find its own Plan E.

The decision meanwhile led to a more profound strategic divergence between Paris and London over 1957-8, as the former displayed increased rigidity over safeguard clauses, rules of origin and tariffs. As it became increasingly clear the French had bought into the EEC model rather than a wider EEC+ approach, in 1959 British attention shifted to setting up a distinct EFTA instead.

I would suggest the early history of the EEC, and UK approaches to it, should remind us of enduring strategic differences in policy and direction that cannot be effaced by wishful thinking amongst Soft Brexiteers. The events reveal that the ambition of ‘having cake and eating it’ is not a new invention, in the sense that it is a longstanding legitimate aspiration to want to trade without deeper political integration. Nor though is it a new sight to witness Whitehall forlornly seeking to create a brand new model of EU association that is impossible to deliver as it runs counter to the trend of the moment – and the trend of our moment is towards deeper EU integration.

It reminds us of Whitehall’s longstanding difficulty in identifying its ideal model; its track record in failing to deliver policy even when decided upon; and its prescient recognition all the same of the long term risks associated with EU membership, even if subsequently forgotten.

It demonstrates the innate difficulty in negotiating even when you do have a fixed objective. If one considers additionally the extraordinary circuit it took to get to Plan H only to return to Plan A, subsequently scrapped to generate yet another new plan later on, one might concede that Theresa May has at least been been more consistent in only trying to repeatedly sell off the one plan to Parliament, even if it is structurally flawed.

But above all, I would suggest the episode should remind us that No Deal really can be better than a Bad Deal. The result of the UK not getting locked into the customs union meant that it went on to form EFTA.

That decision has left the continent of Europe with a legacy today. It means the European Commission does not today have a monopoly on how this continent develops, or how its countries should conform. The UK’s decision to walk away produced a free trading model and intergovernmental approach, one that we would do well now to reinforce.

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Dr Lee Rotherham is Director of The Red Cell, a Brexit thinktank.