Passports issued between 1920 and 1988 looked like this (that one is from 1924!) and since 1988 they have looked like this.
I wonder exactly when that 1924 example was actually issued, since the cover still states "United Kingdom of Great Britain and Ireland." Maybe it expired in 1924, or maybe it was issued in 1924 but they were using up old stocks?
That aside, I have one of the last generation of the old dark blue-black passports issued in 1988, and although a few internal details had changed over the years, the cover really isn't much different from that example shown - Just a very slightly different design of crest, the change of the official country name to "United Kingdom of Great Britain and Northern Ireland," and the name and passport number printed the opposite way around (name at the top, number at the bottom).
OK I think I found what you may have been referring to:
But I wouldn't think this would have anything to do with an agreement regarding driving licenses or lack thereof.
It hasn't stopped one or two states agreeing to swaps with some other countries anyway; I believe South Carolina will swap licenses with France, and vice versa. (Now there's a legal route to "test-less" driving indefinitely in Britain!)
It also doesn't stop some states from simply waiving part of the test procedures for foreign license holders on a discretionary basis, just as they do for out-of-state American license holders.