ABSTRACT

The rejection of the free trade area proposal in November 1958 and France's adamantine refusal to resuscitate it had two pernicious consequences for British strategy. Firstly, the OEEC, which from 1948 had been the forum for Britain's attempts to practise leadership in Europe, no longer had any importance in the political arena. Britain was left with no pan-European body through which to exercise pressure. Throughout 1959 the OEEC became increasingly comatose and in January 1960 work began on changing its purpose and composition so that it became no longer purely European. The Organisation for Economic Cooperation and Development (OECD), with the USA, Canada, Japan, Australia and New Zealand as members, came into existence on 14 December 1960. This was a change driven by American policy. Secondly, the US balance-of-payments deficit in 1958, primarily due to the military costs of the Pax Americana, brought Washington to the point of thinking of lower tariffs and freer trade as practical policy for which in its own self-interest it should return to the GATT and bargain. That decision now meant dealing primarily with the Six, the total value of whose trade was much higher than that of the UK. Britain had lost not only its capacity to ‘take the lead’ in Europe but the possibility of making Europe wait for reductions in the British tariff until a grand tariff bargain with the USA might be concluded.