Friday, Feb. 01, 1963

Where Else to Turn

COMMONWEALTH

Since Britain appeared to be shut out of the Common Market, at least for now, its businessmen were already engaged in looking where else to turn. For some, among whom the noisiest was Lord Beaverbrook, the best alternative was to whip the Commonwealth into a kind of super common market. Composed of 16 nations that are threaded together by a complicated system of preferential tariff agreements, the Commonwealth has a population of 715 million, accounts for 23% of the world's trade. The Commonwealth, India's Nehru once mused, is "a rather strange and odd collection of nations which has found some kind of invisible link by seeing that there is practically no link."

Yet despite its size, the Commonwealth alone is unlikely to give Britain the trading scope that its economic health requires. Organized in 1931, its trading charter called for the members to send their agricultural products and raw goods to Britain, buy manufactured goods in return. But during World War II, Britain revitalized its farms, reducing its need for imported foodstuff. After the war, as Commonwealth members began to industrialize, they threw up tariffs to protect their fledgling industries. Last year, even while Canadian Prime Minister Diefenbaker was pleading with Prime Minister Macmillan not to join the Common Market, Canada slapped a temporary 10% tariff on British autos.

Shopping Around Asia. Commonwealth members have been busy lining up new trading partners ever since Britain began to woo the Common Market. Japan is this year expected to replace Britain as Australia's best customer. New Zealand is shopping around Asia for new markets. The African Commonwealth nations appear more concerned about dealing with fellow Africans than with their white Commonwealth brothers. Though world exports have increased 46% in the past eight years, export trade among the Commonwealth nations has risen only 17%. Instead of hoping that Britain would return to the fold, most Commonwealth businessmen hoped that Britain's entry into the Common Market would make it easier for them to use their Commonwealth connections to trade with Western Europe.

A more workable but more daring alternative for Britain would be to adopt a free-trade policy. By taking advantage of President Kennedy's Trade Expansion Act of 1962, Britain and the U.S. could reduce tariffs up to 50% on all the major items traded between them. Since under the GATT convention, these cuts would also be extended to other nations, the effect would be to open Britain to a freer flow of trade and force the inefficient manufacturers who are endangering Britain's economic health to modernize or perish.

Export Worries. Britain's existing economic ties to the Common Market are already too strong for even Charles de Gaulle to break. While trade with the Commonwealth slackened, British sales to the Common Market increased an impressive 17% last year. Still, British businessmen worry about how their exports would fare in case of a European recession or when the Common Market applies a standard 15% to 25% external tariff by 1969. Clearly, if Britain is to survive as a major industrial power alongside, instead of inside, the Common Market, British industry must improve its productivity so that its goods can compete in Europe despite the Continent's rising tariff barriers.

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