journal of european integration history revue d'histoire de l ...

120Alan S. MilwardThis conclusion was not reached in comfortable circumstances, but against thebackground of a weakening balance of payments position and repeated speculativeattacks on the sterling exchange rate, leading to devaluation in November 1967 andto heavy borrowing from the International Monetary Fund. ‘Rescuing’ the balanceof payments was thought to depend primarily on ‘rescuing’ the manufacturingsector and thus on entry into the Common Market. Neither the complex nature ofthe interactions between the service sector and manufacturing were foreseen, northat so high a share of employment in the service sector would in effect be in andfor the manufacturing sector itself, in the sense that the volume and value of salesof manufactures and perhaps their competitive advantage would depend on theservices provided by that share. Indeed, service sector employment wasdiscriminated against fiscally. The model was Germany with its dominant andsuccessful manufacturing sector. Entry into the Community was intended toreplicate the German experience.It was ironic that what stood in the way of these hopes from accession was theCommunity’s agricultural sector with its need for heavy subsidisation. In Britainitself agriculture employed no more than 3.5 per cent of the active labour force andcontributed a smaller percentage of GNP. The dynamic effects to be expected ofaccession on manufacturing would be delayed until British industry had adjusted toits new opportunities. Meanwhile the United Kingdom would have immediately topay its entry charges to the Community and immediately have to face the problemof paying ‘own resources’ to subsidise agriculture in France, Germany and Italywhich would become its main industrial competitors. Worse, a substantial share ofthe subsidies that went to French agriculture would be to exports, an increasingtotal volume of which would be to the United Kingdom at inflationary prices. Thismight also lead to the loss of preferences for British manufactured exports inCommonwealth countries. For several years after entry into the Community theeffect on the United Kingdom’s balance of payments must therefore be to worsenits problem. Would the balance of payments survive the cure?When at the start of 1966 prime minister Harold Wilson began his energeticpush to organise a second application for membership while holding his partytogether, it had become the prevailing view inside the Foreign Office that Britain’spersistence in trying to negotiate special terms in 1961-2 for the entry ofCommonwealth foodstuffs into the United Kingdom for some time after entry intothe common market had played into the hands of the French government byallowing it to spin out the entry negotiations until de Gaulle had felt sufficientlysafely in power to impose his unilateral veto. Officials were keen to avoid anythingwhich would again imply that the United Kingdom was still calling into questionthe principles of the Common Agricultural Policy and Financial Regulation No.25.They wished to modify the effect of these principles on the British economy by apragmatic negotiation rather than a prior statement of disagreement with them.Their hope was, that by not raising issues of principle the United Kingdom couldobtain membership in time to be present at the attempt to negotiate the permanentrules for the provision of ‘own resources’ by December 1969. It was the existence