Rekindling old flames? New Zealand, the United Kingdom and the European Union

Hamish McDougall

2022-09-12

EUROPE

INTERNATIONAL HISTORY

This article originally appeared in New Zealand International Review

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To many observers, Aotearoa New Zealand’s signing of separate free trade agreements this year with the United Kingdom and European Union may seem like a reversal of half a century of troubled history.

According to the prevailing view, Britain’s entanglement with European integration from the 1960s onwards marked a ‘shock’ and ‘abandonment’ of New Zealand, which at that time still relied on the UK as its largest trade partner and cultural lodestar. Depending on the point of view, this ‘shock’ was either a bitter medicine for New Zealand, which caused it to suddenly diversify its exports into new Asia Pacific markets, deregulate its economy and stand on its own two feet in a foreign policy sense, or a hammer blow to New Zealand’s economic well-being and way of life, from which it has never fully recovered.

Seen this way, the 2022 free trade agreements could be said to be a ‘fresh start’ and a rectification of what diplomats described as their ‘vale of tears’ in negotiations with Brussels over many decades. But when the historical record of New Zealand’s relationship with Britain and the European Community/Union is closely examined, including from the perspectives of London and Brussels as well as Wellington, a rather different narrative emerges. This picture is more coloured by continuity of relations for the past 70 years, rather than sudden change or rupture.

It may surprise many that New Zealand Governments have historically broadly supported Britain’s involvement with European integration. This goes as far back as 1950, when New Zealand singled itself out amongst its Commonwealth peers by encouraging the British Government’s (ultimately aborted) joining of the European Coal and Steel Community, the forerunner of today’s European Union. The New Zealand Government’s thinking was that Britain would be a more prosperous and effective advocate for the Commonwealth from within European institutions, than without.

It is certainly true that New Zealand pursued economic diversification away from Britain in the second half of the Twentieth Century, but this started long before British membership of the Community, suggesting the causality is tenuous. Moreover, retaining traditional dairy and lamb export receipts in Britain was seen to complement this diversification, which required significant investment and time to implement, especially as global economic conditions worsened from the late 1960s.

In 1960 there was consternation from the outgoing Labour Government in New Zealand about Britain’s decision to investigate membership of the European Economic Community, however the new National Party Government of Keith Holyoake and Jack Marshall was more optimistic. In 1961 it secured a public commitment from British Commonwealth Secretary Duncan Sandys that the UK would not join the Community unless the ‘vital interests’ of New Zealand were safeguarded (primarily meaning New Zealand dairy and lamb exports). New Zealand negotiators clung to these words for years to come.

Although New Zealand policymakers were largely supportive of British membership behind closed doors (presuming a deal for New Zealand could be reached), they were almost always neutral on the issue in public. This left the field clear for the likes of John Ormond, Chairman of the Meat Producer’s Board, and Fintan Patrick Walsh, President of the Federation of Labour, who did much to propagate the persistent ‘shock and betrayal’ narrative amongst the New Zealand public in the early 1960s. Such ideas were later taken up by the emerging political force of Norman Kirk, although he too placed a high stock on continued trade access for New Zealand in the UK. Robert Muldoon also occasionally used the notion, particular to undermine Jack Marshall as a rival leader of the National Party.

As an aspiring and then active member of the European Community, Britain pushed exceedingly hard on New Zealand’s behalf to maintain ongoing trade access, costing it cold hard cash and political capital amongst its European partners. This is often under-appreciated, not least among the New Zealand public. Such British support was not simply altruism towards a loyal former colony, nor was it the result of New Zealand’s effective economic diplomacy. It has more to do with the fractured political environment in Westminster that saw both major parties split asunder on the issue of British membership (a split that remains largely in place to this day).

In the protracted and ultimately failed negotiations for European Community enlargement of 1961-3, New Zealand trade emerged as a crucial political ‘test’ of the merits of British entry to the Community. The debate in Britain was largely characterised by abstract notions of British ‘sovereignty’, ‘loyalty to the Commonwealth’ and maintaining a ‘global role’, meaning the issue of New Zealand’s continued food exports to Britain emerged as one of the few tangible measures; a marker of the British Government’s ability to negotiate and the European Community’s willingness to accommodate. New Zealand’s cause also played into long-running British political ideas such as free trade, internationalism, fairness, and the importance of cheap, good quality food (which became increasingly important during the world food crisis and inflation of the 1970s).

Support for New Zealand did not just come from the British political right. In the early 1960s UK Labour Party leader Hugh Gaitskell saw Commonwealth relations as a weak point in the Conservative Party’s case for British entry, citing it as ‘the nub’ of the reason that his Labour Party did not support the terms. Gaitskell’s successor and later British Prime Minister Harold Wilson also saw a deal for New Zealand as an important part of keeping his party together on the European question. During the second failed British application for membership in 1967 Wilson placed a high priority on continued dairy access for New Zealand. His ministers and diplomats formed good relations with New Zealand counterparts, partly a result of long-standing relations between the political left in both countries.

Wilson’s successor as Prime Minister, the Conservative Edward Heath, was an ardent proponent of British accession to the European Community. He was no great friend of the Commonwealth, but he still saw it as politically imperative to carve out a special arrangement for New Zealand in the negotiations of 1970-71, which ultimately led to Britain joining in 1973 (along with Ireland and Denmark). Heath was terrified that his own backbenchers would see an inadequate deal for New Zealand as reason to side with the opposition and vote down the accession legislation. In this context, New Zealand Deputy Prime Minister and Trade Minister Jack Marshall played a brinkman’s role, holding out until the last possible minute to secure better terms for New Zealand, as the French Government pressed the British from the opposite direction. As it happened, the accession legislation passed in the British Parliament thanks to several Labour opposition MPs defying a party whip to abstain or vote with the Government.

British entry to the European Community has been described in the history books as a ‘black letter day’, ‘betrayal’ and ‘brutal snap’ in economic relations between Britain and New Zealand. However, the deal that Heath’s Government secured for New Zealand, at the behest of Marshall, was a reasonably good one. New Zealand was the only developed Commonwealth country to secure a legally binding arrangement, which exceeded the loose promises given to Australia, Canada and other Commonwealth nations. It guaranteed that just over 70% of New Zealand’s dairy products could remain in the British market after five years, with a scheduled review and possibility of extension, and promises to pursue world agreements on dairy products. Crucially, New Zealand’s sizable lamb exports to Britain were as yet unencumbered by Common Market regulation, with the exception of a 20% tariff that would have been applied unilaterally by the British anyway. Although valuable, New Zealand’s special arrangement was imperfect, with pricing of New Zealand dairy exports failing to take currency fluctuation and inflation into account. This required almost continuous New Zealand diplomatic entreaties to London and Brussels for years to come.

The continental Europeans also played their part in securing an arrangement for New Zealand. The Community included politicians and officials keen to establish coherent foreign and trade policies, pushing back against the Gaullist nationalism emanating from France. They sought to have the Community take up some of the global slack from a retrenching United States and Britain. This meant that several European Community member states pushed hard for trade solutions for New Zealand at various times, including West Germany, the Netherlands and Italy. This, along with enduring Cold War tensions, made the Community less likely to jettison the concerns of a like-minded ally in the South Pacific.

Most historical accounts of this topic tend to end with British accession in 1973, but it important to note that similar patterns remained in the years after British entry. The Norman Kirk and Wallace Rowling-led Labour Governments in New Zealand are often described as demonstrating greater independence in foreign and trade policy, yet they too pushed British and European counterparts hard for continued trade access, and acquiesced to British demands in other areas, such as defence in South East Asia and joint aid projects in the South Pacific. In 1973, during the row about Kirk sending a frigate to the French nuclear testing facility in Mururoa, Trade Minister Joe Walding secured $20m compensation from the British Government and European Community because of a British currency devaluation. Kirk later held this up as his Government’s most important achievement by an individual minister.

In 1975 Harold Wilson came to power again in Britain and, in a bid to keep his party and precarious Government together, promised to renegotiate terms of British membership and call a national referendum on the results. In this context, he and his Foreign Minister James Callaghan seized on New Zealand as one of the few areas of substantive improvement that could be achieved in the renegotiation (coincidently New Zealand’s arrangement was being reviewed that year anyway, meaning a change in European Community Treaty was not required). Yet again, New Zealand was propelled to the forefront of European Community politics at the Dublin Summit of 1975, where Wilson secured an important commitment to keep New Zealand dairy in the Common Market beyond 1977. Wilson’s Government went on to secure endorsement of British membership from two thirds of voters in that year’s referendum.

British advocacy for New Zealand continued under Margaret Thatcher. In 1979/1980, as Thatcher sought to improve the Community budget mechanism in Britain’s favour, her Cabinet seriously considered proposals to break European Community law by continuing to import New Zealand butter. Although this step was ultimately not taken, it showed the continued political influence that New Zealand retained in British politics. This was evident again in 1981, as sheepmeat was introduced into the European Community’s Common Agricultural Policy on reasonably good terms for New Zealand, secured again by British negotiators.

New Zealand’s Fourth Labour Government under David Lange is often remembered as pursuing an independent foreign policy, yet it too placed much store in retaining an ongoing trade relationship with Britain and the European Community. In the aftermath of the 1985 Rainbow Warrior bombing, Lange’s Government was willing to make the publicly unpopular move of returning the perpetrators to French custody, in return for assurances that the French Government would not block New Zealand’s latest dairy trade proposals in the European Community. This was over a decade after British entry, yet the importance of continued trade access remained.

The Uruguay Round of trade negotiations, establishment of the World Trade Organisation and enlargement and creation of the European Union in the early 1990s formalised and extended many of the agricultural trade gains made by New Zealand. The subsequent relationships with Britain and the European Union can be characterised as being taken for granted on both sides, while the more recent tribulations of the WTO and Brexit have underscored the need for New Zealand to achieve bilateral trade wins, as well as seeking to maintain the multilateral architecture. While Britain has slowly declined as a trade destination for New Zealand exports in percentage terms, in volume and value terms the level has largely plateaued while trade elsewhere has grown. British export receipts remained a relatively stable base for New Zealand’s economic diversification.

All this suggests that the ‘shock and abandonment’ narrative needs some reinterpretation. Britain never abandoned New Zealand, suddenly or otherwise, and vice versa. Likewise, the European Community and European Union, despite all its protectionist impulses, particularly in agriculture, still made room for New Zealand within its Common Market, a position that solidified over time, as the Common Agricultural Policy was slowly reformed largely thanks to multilateral pressure. It also suggests that the emergence of New Zealand’s ‘independent’ foreign and economic policies, often ascribed to 1973 or 1985, may well have been overplayed. New Zealand’s independence from British influence was never fully complete, nor was it inevitable as soon as Britain secured entry to the Community. Both sides of the relationship strived to retain its relevance. This even applied to supposedly autonomous political actors like Kirk and Lange. New Zealand’s relationships with Britain and the European Union have altered over time, but there have also been important continuities. The recent free trade agreements, and the broader dialogue between New Zealand, the UK and European Union on strategic competition in the South Pacific, build on this heritage.

Hamish McDougall is Executive Director of the New Zealand Institute of International Affairs Whare Tawāhi-a-mahi i Aotearoa; however, these are personal views, not those of the Institute. They are derived from his PhD research at the London School of Economics and Political Science, completed in 2021.

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