Z/ 0' a A
ANSWERS 13Y THE PRIME MINISTER, THE RT. HON. R. G.
MENZIES, TO QUESTIONS AT A CHAMBER OF COMMERCE
LUN CHEON
Launceston, 6th July. 1961
Could I ask the Prime Minister: If the Governw nt is opposed
to direct import control what steps will be used to curb the import of
non-essentials and thus maintain a favourable balance of payments?
Mr. Menzies: Mr. Chiairman this is a pretty comprehensive question, and
perhaps letsme in for a rather longer answer than you might want.
I first of all want to remind you that the quantitative
control of imports, such as by import licensing, is available to
Australia only to protect our balance of payments. We are a nation and
we are parties to international contracts; and we cannot face GATT,
we cannot face the International Monetary Fund, we cannot face any of
these bodies to which we are contractually engaged if we use
quantitative restrictions on imports except to protect the balance of
payments, to protect our overseas reserves.
And that, of course, is one of the dominating reasons why,
at a time when our overseas reserves were high and healthy, we did not
feel able to continue import licensing and said that we must revert to
the traditional and proper practice of tariffs to protect Australian
industry. Now what happened last year was this: that the volune of
imports continued at a very high level. Whenever we are well off in
Australia and if I may recall you to these happy events we have been
pretty well off haven't we, as a Nation? it reflects itself in the
buying of imports. Under those circumstances we had to decide whether
we were to deal with that problem, the problem of our overseas balances
by quantitatively restricting imports once more, or by pursuing
internal financial policies which would tend to reduce the demand for
imports. The first was really not lawfully available to us; the
second was. Now I have heard it said by a lot of people, quite a few
people, that if we wanted to do the right thing we would restore import
licensing, this vague, administrative pmtective policy, this
protection of Australian manufacturing industry at the whim of a
Minister, or an official. de could do that, it was said, and, at the
same time, loosen out on what I believe is known affectionately as
" the credit squeeze". The answer to that, quite simply, is you can't
do both. I want to-' have it plainly understood that confronted by a
boom in 1960 we had two weapons that we could employ one was to
increase the supply of goods to match the enormous purchasing power.
The other one was to back up the action of the central bank, the
Reserve Bank, in maintaining a control a close control, of the Banking
policy of the Banks. And we tried both. If we hadn't got rid of
import licensing I just want to tell you that credit restriction in
Australia would have needed to be much more severe than it was.
If you have two weapons to use in a fight against inflation,
and you abandon one, then of course, obviously, you must use the other
one more. We decided to use both; and to use both with discretion.
And, I think, both with some success. -Oecause in point of fact, Sir,
what has happened about imports?. The domestic policies have not been,
you know, half as severe as people think the total of bank advances
today is higher than it was a year ago so don't let's exaggerate
these matters by some particular, personal experience. Imports
maintained themselves at a very high level in January, fell away a
little in February, fell avay a little not too much, not enough
perhaps, in March imports in May and June have come down from what?
from a little over œ lO00m. in January to œ 78m. in May, to œ. 74mn. I read
in the newspapers this morning, in June. The result of that is that
our overseas balances, our overseas reserves, are immeasurably more
healthy at the end of June than we ever expected them to be in
November of last year. So that for better or for worse, for richer
or for poorer, the policies, the domestic policies that have been
employed, have corrected the balance of payments problem.
I don't need to say to any banker here today, or to any
business man here today, that the state of our balances overseas has
the most direct impact on the liquidity of the banking structure in
Australia. All you need to do is to have your overseas balances come
down œ lO0m. a year, œ-150m. a year, and the Head Office of the Bank will
very soon be telling its Branches that " to protect our liquidity in
this state of affairs we must begin to call in overdrafts, we must begin
to be a little careful about making new advances".* These are, after
all, elementary considerations. And I am, myself, very satisfied about
the fact that in the last two months of this financial year results
have been achieved from this unpopular policy they tell me results
have been achieved which I am bound to tell you are better than I
myself hoped for. Of course the effect of that is that so long as we
behave sensibly, so long as we pursue moderate policies not terribly
severe policies, but moderate policies over the last 12 months I
would hope that in the next 12 months we would have no problem on our
overseas balances at all. That is one big factor in the economic
position which, under no circumstances, would be disposed of.
As for the re: st, well, we will see how it goes. I am not
going to tell any of you, because it wouldn't be true that we are
proposing to re-introduce import licensing; we're not, we're not. I
have never believed that import licensing ought to be a second line of
protection and I may look any manufacturer in Australia in the eye and
remind him that at least six times a year, for years and years, I have
publicly stated " This is not a line of protection; this is introduced
to protect our balances of payments and it is not to be regarded by
any industry as a sort of second protective tariff". And if people
don't believe you, well, that's jus'L too bad. It has been said time
after time, " I~ f you want good Government, if you want honest
administration" and of course you do " if you want Australian
manufacturing industry, which has achieved such magnificent results in
Australia over these years, to be healthy, to look forward and grow in
a state of health then let it depend on a protective tariff arrived at
through the proper machinery and don't let it depend on the goodwill of
a few politicians, or of a few civil servants".
Question: Mr. Chairman I would like to ask the Prime Minister, leaving
the domestic scene for the moment, to say something to us about the
implications to the West of the possible signing of a Peace Treaty
between Khrushchev and E~ ast Germany?
Mr. Menzies: Well, Sir, this is a very interesting question to me
because how long ago was it? about 9 months ago, 8 months ago, I
had a long private discussion with Khrushchev in New York. This was one
of the things we talked about. I wouldn't have you believe that
Khrushchev is not incapable of bluff he's the greatest master of it
in the modern world he's got a nice earthy sense of humour, rather
eaflant . n~
farm-yard sense of humour, if you simple Launcestonians understand, and
his favourite threat even then was " Well you know unless you are
prepared to abandon this position that you have about Berlin'I'm going
to sign a Treaty, a Peace Treaty, with East Germany; and I11ll invite
a" ltlh att hme eapneso polef wchoou rsfeo, u gPhrte saigdaeinnts, t Gtehratm anwye wiinl lt heb e lagteet twianrg" . a n Sion viIt astaiiodn,
for Australia to attend?" He said, " Yes, that's quite right, quite
right". -And I said " The idea will be to have a Treaty with East
Germany, and the making of a Treaty with East Germany will mean the
permanent recognition of the division of Germany, the partition of
Germany?" Yes, that's the position.
Now this is going to give rise to the most tremendous problems,
It is very hard for us to know what the Russian mind is: I've seen Old
you know, with the shoe off, beating on the desk with his shoe,
AUI this rather silly propaganda, which is designed to affect weakminded
people -and, therefore, I am happy to say, has no effect
whatever on us -all this kind of guff goes on. But I think that down
underneath it all the Russians are afraid of a unified Germany. And
of course we are pretty broad-minded people ourselves we forget and
we forgive but it is still true that twice in this century a powerful
Germany has set the world at war. Therefore one can understand this
feeling: they are afraid of a unified Germany.
The whole difficulty about it is that they prefer a disunited
Germany at the risk of a world war, to a united Germany with peace.
And that doesn't make much sense to me; nor indeetohrpolei
a position of leadership in the Western worldi. et te epei
Khrushchev, of course, when the time comes, will put this
thing very pleasantly. He will say, " Now we want Berlin to be a free
city. We are not claiming territorial rights over it. We want it to
be a free city. But there are to be no troops of Western communities
ensconsed in W4est Berlin. And we will make a 29aty with East Germany".
And of course a Treaty with East Germany, from the Soviet point of
view, will be like a Treaty with Poland: it willfinally incorporate
East Germany into the Soviet zone. And the result of that, even in
the balance in Europe, would be tremendous. But in the short run, I
want to remind you that it is only a few years ago that the Berlin
airlift incident occurred. I was in Berlin at that time and I saw it
going on an airlift by which the Western world challenged the Soviet
Union and succeeded by feeding and supplying WJest Berlin by air
over this forbidden zone. I think that Berlin is no longer to be
regarded just as a city, just as an ancient capital of Germany, or the
not so ancient, perhaps, but at any rate the capital of Germany; Berlin
has become a symbol. If Berlin passes into the hands of the Communist
group then this is their crowning triumph in Europe. And these people,
when they have a crowning triumph, don't stop there; they decide to
look for the next one. This is another great victory in the cold war
cold war meaning 4 war in which you get all you can without actually
discharging nuclear weapons.
In Great Britain I think that that is understood. I am
perfectly certain that in America It is well understood. There have
been such tremendous achievements of friendship between De Gaulle and
Adenauer, as I know as a result of discussions, myself, with each of
them, that France itself feels that Berlin is a symbol. And I think
we Just have to keep our fingers crossed, because I think that K. will
bluff and bluff and bluff up to the very point at which he feels
convinced that this means a nuclear war. I don't think he wants a
nuclear war. But if he finds that bluff pays off and that people will
retreat, he may ultimately become so excited by his own advance that he
takes the risk. If we reach New Year's Day 1962 with no explosion,
great or small, over Berlin, I will be among the happiest people here
present.
Question: I would like to ask the Prime Minister what his opinion is of
the possibility of Great Britain joining the European Common Market and
the effect that that would have on the sale of our primary products in
Great Britain?
Mr. denzies: Well, Mr. Chairman, you must not tempt me too much on this
matter. When I leave here later this afternoon and go back to
Melbourne this Is a problem I am discussing with Mr. McEwen tonight,
and with Mr. Duncan Sandys tomorrow, and the following day. And of
course it is g tremendous problem, tremendous. It has political
implications, and it has economic implications, particularly for our own
primary industries; and even more for the primary industries of New
Zealand. For two years every time I have seen U. K. representatives
I have said, " WJe must be consulted before you take any steps". And
that has been long since agreed to. So the principle of consultation
has been established very plainly over the last two years, but so far
we haven't had any consultation. But consultation begins tomorrow
afternoon if I see the distance. ' Whether it will be consultation in
the real sense of getting down to brass tacks or not, I don't know,
But just so that you will see the general picture, here it is.
It may be that the United Kingdom should have joined the
Common Market before it began you know that is a bit Irish, but still
you know what I mean. When the six powers were negotiating the-. Treaty'
of Rome it may be that the Unitd Kingdom should have looked forward and
said, " Now we must be in this on the ground floor so that as one of the
original founders we can negotiate to protect the Commonwealth
interests". I think there is an awful lot to be said for that view.
But still that is water under the bridge. The fact is that they didn't.
the & ropean Common Market has been established.
You all of course know, broadly, what it means: here you have
six powers each of them with varying industrial experiences. First,
West Germany, thanks to the German genius for work, tremendously
flourishing, France rather in the doldrums, Italy a bit each way; and
then, as a result of this organisation with free access to the raw
maturials of each other, with a free movement of labour from one area
to another, with, at the end of 12 years of which three have now gone,
or four have now gone, a' cominon barrier in customs against the rest of
the world, this to produce a community of people rather larger than the
United States of America. Wdith all these internal advantages, it is
a tremendous thing. The effect, so far, on the strength of the
European economy has been enormous. And it will grow, and grow.
And so Great Britain comes along now, rather at a
disadvantage, with Europe saying, "' Well if you care to join, all right;
but of course you sign on the dotted line". And if Great Britain says,
" Well we can't sign on the dotted line, we have enormous obligations
and advantages out of the Commonwealth structure. We have
preferences in Australia which are even more valuable to us than the
Australian preferenges into the United Kingdom". Because that is true.
But from our point of view what a calamitous state of affairs it would
be if the goods that we now sell into the United Kingdom, duty free,
had to be submitted to the Common External Customs barrier of the
European Common Market. So you might be paying 15 or 20% duty on
wheat, to take a simple example, into Great Britain.
And this, of course, is a tremendous problem. Can they go
into the Exropean Common Market without sacrificing Commonwealth
interests? Can they go into the & iropean Common Market on terms which
the dther six countries don't accord to any other of their members? I
Would have thought it was rather improbable.
That is why, in the economic field, I regard these
discussions, which will open with a few " sighting" shots in my office
tomorrow afternoon, economically, as perhaps the most important
discussions we have ever had; certainly the most important in my,
political lifetime. So that is one aspect of it. And I assure you
we are not going to surrender at the first blast, or the second, or the
third. I know what the interests of my own country are, and they wiii
be pursued and defended. I have the great advantage of knowing the
people with whom I am conducting the battle.
But there is a second aspect of this matter and I would like
you all to have it in mind; and that is the political aspect. This
Commonwealth of ours has suffered a few changes, hasn't it, in modern
times? I used to be regarded by people under the influence of a good
dinner as a great Commonwealth man. I've got to a stage when I wouldn't
be dogmatic about anything connected with the Commonwealth. I think we
made an awful blunder at London by butting in on the domestic affairs
of a Commonwealth country, a step from which there can be no retreat.
But now, what are we looking at?
The object of the Treaty of Rome is not only economic, but
political: to strengthen the political unity of Western Europe. Now
that is a very fine thing. President Kennedy has undoubtedly been
pressing this for political reasons: he wants to have Great Britain in
the European community politically, so as to exercise judgment and
wisdom and authority, and to maittain that community with an outwardlooking
eye, instead of being too domestic. There is no doubt about
what is in his mind on this matter. At any rate I know what is in his
mind on this matter.
But you know in the old Commonwealth if I may speak with a
certain amount of nostalgia one discussed matters with Great Britain,
these were family matters, you talked to Great Britain not to Great
Britain plus X Y Z, but to Great Britain. We knew their mind; they
knew our mind. We sat around with the other members of the family and
we might agree, or we might disagree; but we all knew in what capacity
we were talking to each other. But if the European Common Market is
to produce its political fruit, then the political fruit must be
political unity in Western Europe.
Unity is an ambiguous word. Italy, and I think Adenauer in
Germany, think of it in'terms of an integration of the Western European
world one great new Western European community. But Charles De Gaulle*
who is, of course, a great nationalist doesn't think of it in those
terms; he won't have integration. 3ut he does believe in
Confederation that an independent France and an independent Germany,
and an independent Great Britain will all be bound together in a sort
of Confederacy of States for the peace of the world.
Now gentlemen I am not pre-judging this matter. It may be a
very good thing. It may be that we are living in a twilight world, and
that this will be the new dawn. I don't know, I'm not automatically
against it. All I am saying to you is that when Great Britaih becomes
not Great Britain, a single home nation of the British Commonwealth, but
a member of a group of European nations with obligations to all the
other members of the group, then the character of the British Commonwealth
will have sustained its final change.