Because of the disturbances caused to the quarterly figures by the dock strike last year and the Ford and postal strikes earlier this year, a more reliable picture of the underlying movement of the various items of expenditure is given by a comparison of the half-yearly totals. This applies especially to stockbuilding which, on this occasion, contains particularly large quarterly movements in the discrepancy between the expenditure estimate of gross domestic product and our own ‘compromise’ estimate. Within the half years, however, these movements probably largely cancel out.

A major feature of the world economy in the first half of the year was the recovery of output in the United States from the depressed level to which it had been reduced in the latter part of 1970 by the strike at General Motors as well as by the underlying recession. As a result, the rate of economic growth in the industrial countries was faster than it had been in either half of last year; but it was probably still well below the normal rate of increase in their productive capacity, and unemployment was tending to rise in the great majority of cases. However, we expect the rate of growth to accelerate further in the next twelve months or so, giving an aggregate increase in real output in OECD countries of 3½-4 per cent in 1971 and perhaps 5½-6 per cent in 1972. This implies that pressure on resources will be increasing again, particularly as the recent rate of investment in industrial equipment (as well as in stocks) appears to have been low and may not improve much until there has been a recovery in profits.

This chapter surveys some of the main economic issues involved in the decision whether or not the United Kingdom should join the EEC on the terms set out in the recent White Paper [69]. Specifically, it covers those issues traditionally comprised under the headings of ‘static’ and ‘dynamic’ effects, with additional consideration being given to problems affecting exchange rate, monetary and regional policies. It is not a main purpose of this note to introduce much substantive new material; the aim, rather, is to survey the arguments and to draw attention to the relevant numerical magnitudes where estimates exist. In this spirit a select bibliography is also attached.

This article contains a number of comments on the one which appeared under the same title in the May 1971 issue of the National Institute Economic Review, which was prepared by J. D. Whitley and G. D. N. Worswick. It will be obvious to readers that some of the comments made in that article and in this reply are of the detailed kind which might with advantage have been cleared up by correspondence before publication. In fact, such an exchange of papers between the National Institute and the Department of Applied Economics was begun last year. However, the halving of SET announced in the budget obliged the National Institute to take a view on its probable effect, and they felt that this entailed explaining to their readers why they had not been wholly convinced by the analysis of the Reddaway Report. This left no time for any further attempts to reconcile, where possible, the differentpoints of view.

The purpose of this paper is to bring together in comparable form some published and unpublished estimates of the effects on the United Kingdom balance of payments of entry into the EEC, and the resource costs associated with them. The effects referred to are the ‘static’ effects measured at the end of the transition period, no account being taken of any ‘dynamic’ effects, nor of the transitional arrangements.