8 Nov 2019

Brentry: 48 hours in Luxembourg that changed NZ forever

From Two Cents' Worth, 2:00 pm on 8 November 2019

Back in 1973, New Zealanders saw the UK’s ‘Brentry’ into the EEC as an existential threat to our nation’s future - and it preoccupied us for a decade.

Bernard Hickey recalls what it was like for a young boy on a remote dairy farm...

Subscribe to Two Cents' Worth for free on Apple PodcastsSpotifyStitcherRadioPublic or wherever you listen to your podcasts

England Prime Minister Edward Heath (C) signs the UK accession Treaty to the European Economic Community in Brussels on January 22, 1972.

England Prime Minister Edward Heath (C) signs the UK accession Treaty to the European Economic Community in Brussels on January 22, 1972. From left to right: Sir Alec Douglas-Home, Minister of Foreign Affairs Edward Heath, Prime Minister, and Geoffrey Rippon, Chancellor of the Duchy of Lancaster and in charge of accession negotiations. Behind at the 1st rank : Joseph Bech (L), Paul-Henri Spaak (2nd L). (Photo by - / EUROPEAN UNION / AFP) Photo: AFP or licensors

Bernard Hickey: This isn’t another ‘Brexit: will-they-or-won’t-they' story where everyone gets very excited about a fresh deadline or Parliamentary vote and then nothing really happens. 

This is a story that most New Zealanders living and working in a multicultural and diversified economy won’t even recognise.

It’s the story of ‘Brentry’ (nearly 50 years ago now) and how we thought it could wreck our economy, which at that point exported 90 percent of our butter, lamb and wool to the ‘mother country’ - a country our parents and grandparents had fought for to protect in two world wars in the sure knowledge it would always protect us and buy the bounty of our land. Until it didn’t.

The hero of our story is a ‘gentleman’ politician (and his trade diplomats) fighting for the nation in a 48-hour period of intense trade negotiations.

“In Luxembourg, we had what we call our battle headquarters,” said ‘Gentleman' Jack Marshall, who was New Zealand’s Deputy Prime Minister in June 1971 when access for New Zealand’s butter, lamb and wool into Europe’s virtually-closed agricultural product markets was decided.

The "battle headquarters" was a conference room that Marshall had been told by British diplomats might be bugged by our European adversaries.

Back here in New Zealand, I was four years old and living on my family’s dairy farm in the Eastern Bay of Plenty valley of Galatea, nestled between the Kaingaroa Forests and the Ureweras. It was a farm broken in by my grandfather, a veteran of the trenches of France, as a ‘rehab’ farm to help him start a life after the war. My father and uncles had helped him clear the land and find a way to make a living through the 1930s and 1940s.

Deep In Te Urewera National Park, looking towards East Cape

Deep In Te Urewera National Park, looking towards East Cape Photo: Wikimedia Commons

The way I heard it in during those tense negotiations in the early 1970s, our very livelihoods and futures were at stake because the British had betrayed us. All we could do was read the Dairy Exporter and hope Jack Marshall and his team somehow secured us the tonnes of butter quota we needed.

“We were really constantly involved throughout a period of nearly 48 hours," Marshall recalled in an interview with RNZ after the deal was done, "I did lie down along once along four chairs in our battle headquarters and two of the top officials who were with me lay down on the carpet on the floor and we got a few moments of relaxation in that way.”

New Zealand was relying on Marshall's execution of a strategy devised across the political spectrum in the early 1960s after the awful shock of realizing Britain wanted to join this Common Market.

The six nations of the European Economic Community (EEC), as it was known then, wanted only to secure a protected market for farmers in France, Italy, Germany, Belgium, Holland and Luxembourg.

But to understand how New Zealand fought its corner so doggedly, we have to go back to July 31, 1961 when Britain’s Prime Minister Harold MacMillan gave a speech in Parliament. He was the one taken down by the Profumo scandal, but in '61 he had realised Britain was basically broke and needed to join the EEC.

The Common Market, as it was called then, was surging ahead thanks to all of America’s Marshall Plan aid and trade after the war. America wanted to rescue Europe to create a bulwark against Russia and the growth of communism but didn’t help the ‘victorious’ Britain much.

The irony is Britain may have won both the world wars with America’s help, but years of conflict did for the British economy and stripped it of its lucrative territories of the empire.

Britain initially refused to join the Treaty of Rome that created the EEC and the Common Agricultural Policy because it was worried about the ‘Dominion’s' and still thought the pound should be the world’s reserve currency.

no caption

Photo: 123RF

But by 1961, Britain was humiliated after the 1956 Suez Crisis and realized the dream of empire was over. It needed friends and a much bigger trading partner right on its doorstep.

So MacMillan told Britain's parliament he would seek to join the EEC.

“After long and earnest consideration, Her Majesty's Government have come to the conclusion that it would be right for Britain to make a formal application under Article 237 of the Treaty for negotiations with a view to joining the Community if satisfactory arrangements can be made to meet the special needs of the United Kingdom, of the Commonwealth and of the European Free Trade Association."

“No agreement will be entered into until it has been approved by the House after full consultation with other Commonwealth countries by whatever procedure they may generally agree,” he said.

The news was a thunderbolt to New Zealand, a country that saw itself as an outpost of the empire and the ‘farm of Britain’. Suddenly, we faced being locked out, as Britain’s membership of the EEC meant it was joining a trade bloc that we definitely not part of.

New Zealand then had a choice. It could cry foul and try to embarrass Britain into not joining Europe by playing the blatantly emotional card of pointing to the sacrifices of war and painting the entry as a betrayal.

Emotions ran high here in New Zealand. I remember those kitchen table conversations. For many, Brentry was not just an economic event. It was a breach of a sacred trust formed in blood, sweat and tears. It would have been easy and understandable to let emotions rule over sense.

Instead, our politicians, diplomats and business leaders plotted a more cautious path along a high road. We publicly supported Britain’s move as an inevitable geo-strategic event that would help us all in the end. Publicly, we saw the bigger picture and worked to keep both the British and the Europeans sweet.

Realism and hope wins over bitterness and despair

Former Prime Minister Jim Bolger grew up the son the Irish dairy farmers in Taranaki. As a young man, he moved to Te Kuiti to start a family and farm sheep and beef in the early 1960s. By the late 1960s, he was active in farming and National Party politics and knew exactly how it felt in those sometimes-isolated farming communities felt about 'Brentry'.

Jim Bolger

Jim Bolger Photo: RNZ

“Many were either returned men themselves or were families of returned men. They've felt greater hurt than others,” said Bolger.

“I think there was a realism that Britain was part of Europe. Europe was moving in one direction and New Zealand was not part of Europe, despite the belief for a long time that we were, and that we should be realistic and look at the markets closer to home.”

“Was that painful for some? Very painful. But there was a deep underlying, belief of the realism of the shift. We couldn't continue as we were before,” he said.

Brian Lynch was one of New Zealand’s most senior trade diplomats through the late 1960s and 1970s, he said the decision to publicly back Britain’s drive into Europe and avoid anger and bitterness was a deliberate one.

“There was certainly resonance in that emotional card, and frequently one would be the recipient of comment like that from various parts of the British community,” Lynch said.

“However, whatever that temptation might be, it was certainly not going to be in our own interests to try to play that card. If we had sought to go over the head of the British government and the Whitehall officialdom and appealed along the lines of poor New Zealand, [it would] ruin us,” he said.

“If we had done that, our conclusion, and I'm sure it was the correct one, was that we would be on a losing wicket. We would I'm sure have poisoned relations at the political level and we would have soured our contacts carefully built up over decades with British officials.”

Heathrow Brinksmanship

Long-time economist and economic historian Brian Easton reckons we could even have scuttled Britain’s entry into Europe if we’d pleaded desperately enough. He tells a great story of how Jack Marshall used the threat of playing that card very carefully. And with great success.

As Easton tells it, when Geoffrey Rippon - the British negotiator - swore he'd got the best deal possible. Jack Marshall quietly accepted it and said he'd just head home then - via Heathrow and the UK media.

When Rippon asked what he would tell the press, Marshall said he wouldn't say anything.

But Rippon concluded that the baying press would think the silence meant New Zealand was upset with the deal, so he went back to the negotiating table and improved the deal by about 5,000 tonnes.

“And that's how crucial we were in the initial deal," said Easton, “Rippon was afraid of us ending up on the front pages of the anti-European newspapers saying "New Zealand against deal”.

Just the suggestion we might play the card was enough to scare the British, but we never actually did.

The end result was New Zealand kept access to Europe for more than 80 percent of its sheepmeat and butter in the early years and that bought us time to find new markets in the Middle East and Asia.

“On balance, I think we did extraordinarily well. It was a huge team effort by what we like to call today New Zealand Inc, which involved the government, the public sector, private enterprise, civil society,” said Lynch.

“That campaign through the 70s, 60s, 70s and 80s was the toughest battle we had outside the field of human conflict to enable this country to survive and prosper,” he said.

‘We could have stopped ‘Brentry’

It seems ironic now given the way most New Zealanders see Brexit as a self-inflicted wound, but we could have actually become the heroes of Nigel Farage and Boris Johnson if we had been intransigent.

British Prime Minister Boris Johnson gestures as he addresses the nation at 10 Downing Street on November 6, 2019 in London, England.

Photo: Alberto Pezzali/NurPhoto/AFP

“It is possible that if we in New Zealand has said, no, we don't approve what was going on, that would have stopped that,” said Easton.

And there were many in New Zealand who secretly hoped Britain would fail to get into Europe. MacMillan’s appeal to join was rejected by French President Charles de Gaulle in 1963 and 1967 because he saw Britain and the British as a Trojan horse for the United States. He was bitter that America refused to support the French and British during the Suez crisis of 1956 and its failure to help France in Vietnam in 1954.

Many here were cheering on De Gaulle under their breath.

Easton recalls that hope as a feature of the annual conferences of the New Zealand Association of Economists (NZAE).

“They saw General de Gaulle's no as a saviour of the New Zealand economy, given the threat that it was at that time. And so they drank a toast to him. And that continued until the 1970s. The toast was to the Generale,” he said.

Britain needed us

Apart from the public relations, there was another reason why Britain needed us, and it’s one most people haven’t thought of.

Britain also sold us lots of products and services. At times, there was even a trade deficit with Britain. All those Morris Minors and David Brown tractors and the profits going to Lloyds bank and Lloyds of London insurance premiums.

“If you factored in such services activity as insurance and transport and investment. In fact, the balance lay in Britain's favour. So an aspect of our negotiating approach was always to keep reminding British officials, ministers, British and the private sector that they had a serious interest in helping to keep the New Zealand economy afloat,” said Lynch.

‘Don’t come crawling back to us?’

But that’s all different now. New Zealanders can all lean back and watch Britain’s writhings over leaving Europe as a bit of a spectator. Britain is only our seventh largest buyer of exports, and only a third of our exports to Europe now go to the ‘mother’ country.

The question now is which of Britain and Europe we might pick as free trade deal partners.

Publicly, we are saying we’d like trade deals with both, but if push came to shove we would now pick Europe?

The diplomats and economists who steered away from emotional decisions in the 1960s say we should take the same high road again.

It's not an either-or situation. The way things are trending, I could see that a trade agreement with continental Europe on one hand, and another quite separate agreement with the UK on the other,” said Lynch.

Maybe it forced us into a better place

But Europe is where we’re more likely to lean now, albeit from a very different place. We’re now a much more multi-cultural place. You could even argue we’re now more Asian than we are British.

Jim Bolger was the first to say that.

“The decision of Britain to move into Europe on its third attempt certainly made New Zealand face the real world. And that was we had to move our marketing to much different areas. And that was really into Asia. And I did make that statement to a conference of economists in Singapore,” said Bolger.

“We were now much closer to our market, which was Asia. And I said: ‘yes, we now see ourselves as part of Asia.”

Serena Kelly is a post-doctoral fellow at Canterbury University’s National Centre for Research on Europe believes ‘Brentry’ played a major role in our societal changes in the last 50 years.

Dr. Serena Kelly, National Centre for Research on Europe.

Dr. Serena Kelly, National Centre for Research on Europe. Photo: Steve Deane

“We can in some ways thank the United Kingdom for joining what was then the European Economic Community for how New Zealand is as today's society,” Kelly said.

“It forced us to readdress our partners, our global outlook, and we had to find new trading partners, although we still have that close cultural connection to the UK today,” Kelly said.

She also thinks choosing Europe over Britain in any trade deal in some sort of fit of pique would be pointless and unlikely.

“I don't think that's New Zealand style. And I don't think either the United Kingdom or the EU will say it's one or the other,” she said.

“New Zealand knows not to put all its eggs in just one basket. We need a number of trading partners because that's apparently what we did in the 50s and 60s. We've put everything into the United Kingdom, and that's why we were forced to adapt so quickly and it was painful.”

But did it matter in the end?

Over the broad sweep of history, 'Brentry' may not have mattered at all. 

Former Reserve Bank economist Michael Reddell is now New Zealand’s most active public economic commentator through his Croaking Cassandra blog and believes relative under-performance since ‘Brentry’ has more to do with our own choices than Britain’s.

Britain now has productivity levels, GDP per hour worked, that are probably about a third higher than New Zealand's. 40 years ago we were as productive, as wealthy as them. We've continued to fall a long way further behind,” said Reddell.

Economist Michael Reddell.

Economist Michael Reddell. Photo: Supplied

“In some ways, that's probably the sort of outcome that people were fearing 40 or 50 years ago. And it's not that we're here because of Britain entering the EU, but because of other policy mistakes that we've made that have meant that the gaps between us and the rest of the world that started opening up probably as early as about World War Two widened quite a bit in the 50s and 60s have only continued to get wider.”

“So the last decade we've had probably the lowest rates of productivity growth anywhere in the OECD. Our economy is a nice lifestyle for middle-class people in New Zealand, but there's a lot of people in this country who do it really hard. And this lot would probably be a lot better if we'd fixed up the economy and found the answers to those productivity problems,” he said.

Reddell believes our very high migration rates of the last 20 years have been a factor in that slow productivity growth.

“In an economy that still relies almost entirely on natural resources, whether it's agricultural tourism or gas or fishing or whatever when you're not getting any more natural resources, what you're doing is simply spreading nature's bounty more thinly,” he said.

“So my argument is that what we should have done in response to declining opportunities for New Zealand is to make sure that we looked after our own and didn't invite more people into spread what there is here more thinly.”

Reddell has a point on limited natural resources.

To the eventual surprise of many, dairying went on to expand dramatically after the turn of this century as demand from Asia for our milk powder surged. But that has stretched our environment.

The family farm I grew up on in the 1960s and 1970s is now massively more productive than when I was a boy because of irrigation and higher stocking rates. It is 20 times more valuable than when my father sold it. We needn’t have worried so much about ‘Brentry’ killing off the future of our dairy farm.

But there has been a cost. The Galatea valley is now an intensely farmed dairy complex with high levels of nitrogen and phosphorus leaching into the Rangitikei River that runs through it on and down two the Lake Aniwhenua and Lake Matahina created downstream for hydro-election power stations.

Hill country cropping on the banks of the Rangitikei River, the light brown patches are where the hills have been sprayed with herbicide.

Hill country cropping on the banks of the Rangitikei River; the light brown patches are where the hills have been sprayed with herbicide. Photo: Brian Megaw

“These lakes often have unsightly scums of algae and floating plants on the water surface, which can lead to decreased animal and plant diversity, and affect recreation,” the Bay of Plenty Regional Council recently wrote in a report on water quality.

We can’t blame Britain for that.