Fifth Annual Report 1964/1965 of the European Free Trade Association Fifth Annual Report 1964-1965 of the European Free Trade Association Geneva - September 1965 FIFTH ANNUAL REPORT 1964-1965 Table of Contents Page I. SURVEY OF THE YEAR Introduction: The Year in E F T A .......................................................... 5 The British Import Surcharge........................................ 6 The Vienna Initiatives...................................................... 8 Economic Developments...................................................... 11 EFTA Trade in 19 6 4 .......................................................... 15 Intra-EFTA T ra d e ............................................................... 15 EFTA Trade with E E C ...................................................... 17 EFTA Trade with U S A ...................................................... 18 E F T A Trade with Developing C o u n trie s ....................... 18 II. INTERNAL DEVELOPMENTS IN EFTA Tariffs and Quotas: Further EFTA Tariff Reduction .................................... 19 Quantitative Im port R e s tr ic t io n s ................................ 19 The Origin R ules ............................................................... 20 Annexes D and E ............................................................... 20 Operation of the Free Trade Area: Measures introduced by the British Government . 20 D r a w b a c k ............................................................................ 20 Price Differences for Agricultural Raw Materials . 21 Revenue Duties ................................................................... 21 Non-tariff Barriers to Trade ............................................. 21 Practices of Public Undertakings.................................... 22 Restrictive Business Practices ........................................ 22 Establishment........................................................................ 22 3 Page Double Taxation ............................................................... 22 Patents..................................................................................... 23 Industrial Standardization ............................................. 23 Study of Effect on Prices of Tariff Dismantling . 24 Agriculture: Annual Review ................................................................... 24 Bilateral Agreements.......................................................... 25 Export Subsidies ............................................................... 25 Economic Com m ittee .......................................................... 25 Economic Development Com m ittee ............................... 26 The Association with Finland: Participation of Finland in EFTA Activities .... 26 T a riffs ..................................................................................... 27 Annex I to the Association A g r e e m e n t....................... 27 Quantitative Import Restrictions ............................... 27 The Consultative Com m ittee ............................................. 27 EFTA Parliamentarians...................................................... 28 Information Activities .......................................................... 29 The EFTA Council and the Joint C o u n cil .................. 31 Administration and Finance................................................. 31 III. EXTERNAL RELATIONS The GATT and the Kennedy Round ............................... 33 The United Nations Conference on Trade and Develop­ ment ..................................................................................... 33 Organisation for Economic Co-operation and Develop­ ment ..................................................................................... 34 Nordic Council........................................................................ 34 Council of Europe ................................................................... 34 Exchange of Technical Information with EEC . 35 Technical Assistance to E C A F E ........................................ 35 Appendix I: Communiques of Ministerial meetings. 36 Appendix II: Amendments to the EFTA Convention and the Finland-EFTA A greem ent................................ 43 4 I. SURVEY OF THE YEAR INTRODUCTION The Year in EFTA The year July, 1964— June, 1965, was very eventful for EFTA. Trade between the eight EFTA countries grew more rapidly than in any previous year in the life of the Association. In addition, as described in a later section of this Annual Report, most EFTA countries experienced in 1964 an unusually rapid rate of economic growth. The year also included a serious internal crisis for EFTA—that of the British import surcharge — and ended with a meeting in Vienna at Prime Ministerial level, at which Ministers of all countries voiced their concern at the continuing trade division of Europe and their desire both to restore momentum towards European integration and to intensify EFTA co-operation. There was also a great deal of other activity both in the internal affairs of EFTA and in its external relations. The “ timetable reductions ” of tariffs, which brought them down to 30 per cent of the i960 level, were duly made by EFTA Members on 31st De­ cember 1964, and by the Associated country, Finland, on 1st March 1965; the few remaining quantitative restrictions in EFTA were further reduced during the period. Work continued in committees and working parties on a wide range of questions affecting the EFTA market, including the rules of competition— restrictive busi­ ness practices, establishment, and the purchasing practices of public undertakings. Some preliminary work was done on other matters of vital importance to trade, such as patents, and co-operation in the field of standardization was intensified. A thorough study was made of the problem of drawback in the EFTA context and the ground was prepared for the necessary decisions. In the field of agriculture, the year saw the publication of the first Annual Review of Agricultural Trade in EFTA. This Review pointed to several 5 difficult internal and external problems affecting the EFTA agri­ cultural markets and work has continued on all these questions in the context of the second Annual Review, which was nearing completion at the end of June 1965. In external affairs, the Kennedy Round of tariff negotiations in the GATT continued to occupy the centre of the stage. All the EFTA countries required to do so met the GATT deadline for the presentation of their “ exceptions lists ” in the industrial sector of these negotiations. It was noteworthy that five EFTA countries, Austria, Denmark, Norway, Sweden and Switzerland, submitted nil exceptions lists— in other words, they signified their willingness to offer a 50 per cent cut across-the-board in their tariffs on industrial products if they obtained suitable reciprocal concessions from the other parties to the Kennedy Round. The exceptions lists submitted by two EFTA countries— Britain and Finland— were both very limited; Portugal is in a special category in this negotiation and was not required to submit a list. The exceptions lists put in by the other main parties to the Kennedy Round, however, were much larger and foreshadowed considerable diffi­ culties for some EFTA countries. The first six months of 1965 saw the beginning of detailed Kennedy Round negotiations on industrial products, in which the EFTA countries were involved in a complex of bilateral and multilateral discussions. Talks on agricultural products were also begun during the period. EFTA co-ordination in the Kennedy Round was intensified, so that all delegations could be kept fully informed of the intentions and problems of their EFTA partners. This co-operation was found to be very valuable. The year also saw the formation of the new United Nations Trade and Development Board, which grew out of the world conference which took place in Geneva in the spring of 1964. The EFTA countries played their part in the formation of the Board and in its early deliberations. The British Import Surcharge The year’s work in EFTA began with Ministerial meetings of the EFTA Council and the Joint Council of the EFTA countries and Finland in Edinburgh on 9th and 10th July, 1964. Mr. Edward Heath, then Secretary of State for Industry, Trade and Regional Development of the United Kingdom, was in the chair. As the communique * said, “ Ministers reviewed the whole range of the Association’s internal activities and recent developments in their * The communiques of all Ministerial meetings in 1964/1965 are reproduced in full in Appendix 1. 6 relations with other countries. They expressed their satisfaction with the progress made towards complete free trade in industrial products by the end of 1966 Three months later the new British Government found itself faced, immediately on taking office, with a severe balance of pay­ ments situation, the likely deficit for the year 1964 being about £800 million. On 26th October, the Government announced a series of measures to deal with the situation, the principal emergency measure being a 15 per cent charge on imports from any source, including EFTA, of most manufactured and semi-manufactured goods. The effect, so far as EFTA was concerned, was broadly to nullify the tariff reductions Britain had made towards her EFTA partners. The British Government made it clear that the charge was a temporary measure and would be removed as soon as was Justified by the needed improvement in the British balance of payments; they recognized