Britain Makes Trouble for EFTA

After weeks of trouble and turmoil, Britain's besieged economy last week got some good news. The Board of Trade announced that Britain's trade gap narrowed by nearly half in December, to $171 million, as exports rose to a record and imports dipped. Any worsening of those figures would almost certainly have meant another strong attack on the pound and further weakening of confidence in the British economy.

But the improvement was costly: it was due in part to a controversial 15% import tax that has angered Britain's trading partners and seriously threatened the future of the European Free Trade Association, the seven-nation, non-Common Market trading group that Britain dominates.

The three-month-old surcharge, imposed in one of the first moves made by the Labor government, barely had time to take effect in December, but it is Britain's chief hope for further trade improvement in the months to come. Whatever gains it may bring, the surcharge has already dimmed Britain's honor and prestige because it violates the country's trading treaties. Stunned by the tariff, which cuts their exports to Britain, officials of the six other EFTA nations revived the bitter chant: "Bri tannia waives the rules." Admits a British foreign officer: "We probably violated at least 18 international agreements with the surcharge."

Belated & Defensive. Formed in Stockholm in 1959, EFTA is something of a fraternity of outsiders--a belated, defensive and admittedly temporary customs union of seven nations that could not or would not get into the Common Market. Britain, which saw EFTA as a second-best alignment until it could ally with the Common Market, has twice the wealth, trade and population of the other six combined. Those far-flung nations range from socialist Norway, Sweden and Denmark through dictatorial Portugal to neutralist Austria and Switzerland. Unlike the Common Market nations, they have no hopes for ultimate political union, no plans to reduce farm tariffs, no intention of establishing a common external tariff.

Within its limited aims, EFTA has been good for the nations involved. The per-capita income of its 97 million inhabitants is slightly higher than the Common Market's. Not counting the British surcharge, the EFTA partners have cut their industrial tariffs by 70% in the past five years, including a 10% reduction this month, and the official aim is to bring them down to zero within two years. They have increased their trade with one another by 50% . Though that is not quite as high as their increase in dealings with the Common Market, it is far greater than their rise in business with the rest of the world.

Removed or Reduced. The British surcharge threatens not only to impede that progress but to wreck EFTA. Britain's EFTA partners have threatened to retaliate unless the surcharge is removed or reduced; Sweden's Volvo automaker has already warned that it will stop buying British auto parts (total: $36 million a year). The pressure on Britain to drop the tax will build up strongly at this week's Geneva meeting of EFTA's consultative committee and at next month's meeting of EFTA's ministerial council. Largely because Britain has been shocked into realizing that EFTA's death would badly damage its own trade drive, the British are expected to at least trim the surcharge within the next few months.

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