You will recall that no one from the Department was present at the meeting held in your office on Wednesday, June 14, with Mr. Holland. Mr. A.D. McIntosh, Secretary of the New Zealand Department of External Affairs, who was present at the interview made available to us his own report, a copy of which I attach.⁴⁸

This document is, of course, written from the New Zealand standpoint. During your absence at the NATO Meeting, and the Meeting of Commonwealth Prime Ministers, it was given limited circulation within the Department and a number of Divisions have expressed the hope that it might be made available on a "Canadian Eyes Only" basis to certain of our missions abroad.

I should be grateful for your comments as to the accuracy of Mr. McIntosh's report of the interview, and also for your opinion as to whether it would be an appropriate document to circulate to our missions abroad on a "Canadian Eyes Only" basis, particularly to those missions concerned with the problem of the recognition of Communist China.

J. L[éger]

P.S. I should add that the document was circulated within the Department minus the first page.

[PIÈCE JOINTE/ENCLOSURE]

Rapport⁴⁹

Report⁴⁹

The Prime Minister, accompanied by the High Commissioner and Mr. McIntosh, called on Mr. Lester Pearson at 3 o'clock on Wednesday afternoon. The discussion began with a description by Mr. Pearson of the pipeline debate. The pipeline was designed to convey from Alberta to the Eastern provinces, and to the United States, some six hundred million cubic feet of gas per day. Canada was beginning to suffer from a shortage of electricity because the hydro electric facilities could not keep pace with the demand and the use of natural gas for cooking and heating would ease the load. About two-thirds of the gas would be used in Canada, especially North- Western Ontario, and the other two hundred million cubic feet per day would be sold in the United States in pipelines going down as far south as Chicago and Illinois. Canada was lacking in convenient coal supplies and drew much of its needs from the United States - the natural gas would save coal imports and as a result the coal lobby in Congress has been active and instrumental apparently in holding up the finance necessary for the United States company constructing the pipeline.

The matter had, perhaps, not been handled as tactfully in the House as it might have been, but there were special circumstances contributing to an increasingly difficult situation. First of all, the only company which could undertake the task was an American one which was unable to arrange for the immediate finance because, owing to the failure on the part of some Congressional operation to be concluded in time, it did not have a suitable licence. Unless the work was started before the middle of June it could not be completed in time (presumably before the freeze began) and the company therefore said that they could only make a start if the Canadian Government would put up the initial finances before 6 June. The company undertook to repay the advance within ten months; if they failed to do so, then they would forfeit their interest, which would revert to the Canadian Government. Within the prescribed period the money would be forthcoming from the United States to enable them to repay the Canadian loan.

The Opposition knew the deadline and, politics being what it is, they naturally intended to take full advantage of the fact in order to embarrass the Government by holding up the project. Mr. Howe, being anxious to push along with the job and not hold things up, decided that there was no point in running the risk of needless delay and he bluntly said, in introducing the matter, that it would be pushed through and closure would be applied in order to make this possible. The Opposition immediately seized upon and exploited this blunt tactic. This difficult situation was rendered more so by a faulty ruling on the part of the Speaker. He unwisely allowed a debate on breach of privilege on an editorial which criticised himself. Being naturally irritated by its terms he allowed his judgment to be coloured to the extent of allowing to go on all night a procedural discussion which should have been settled by a ruling without any debate at all. The Cabinet were in despair over this. If Opposition members could take one leading article on a breach of privilege issue, the pipeline debate could be protracted indefinitely. The Speaker himself realised his error overnight and next morning he reversed his ruling, stating that he had made a mistake, and that everything that had occurred since 5 o'clock the previous night was null and void and that the debate proper should proceed as from that time. The Government had taken no steps whatever to influence his decision, but no-one would believe that.

The discussion then shifted to the international situation. Mr. Holland began by referring to the Singapore situation, outlining his discussions with David Marshall, and his impressions as to his personality and outlook, and invited Mr. Pearson to give his views. Mr. Pearson did not dissent from Mr. Holland's doubts as to the appropriateness of the Colonial Office's handling of the Singapore negotiations. They were not so skilled at handling this type of explosive political situation in terms of present day nationalistic development. Their approach tended to follow traditional Colonial Office lines. Mr. Pearson felt that their attitude would have been coloured by the fact that the United Kingdom was being knocked around in various parts of the world in a manner which evoked our strongest sympathy. He considered that Singapore by itself was not an entity sufficiently strong or viable to stand on its own. Its future obviously lay with Malaya, since the Malayans could, if they wished, develop an alternative outlet at Port Swettenham. Because Malaya was more important to Singapore than Singapore to Malaya, they could greatly reduce the bases of its prosperity.

The discussion then turned to the role of the local Chinese and their influence. Mr. Pearson agreed that Singapore as a base could very well become of little value if the local population were hostile. He agreed with Mr. Holland that this was a factor which any country had to take into account, and especially when such a country, like New Zealand which had troops stationed in Malaya, had a vital interest in the security of the area and had stationed their troops there. He said that the public of any country were tending to look twice at the practice and necessity of placing their forces overseas in peace time. He said this whole question of security of bases was becoming a matter of increasing importance, especially to the Americans. Mr. Pearson said that that morning the Defence Committee of the Cabinet had been considering a new development in connection with defence facilities in the Canadian north. He asked that the matter be kept especially secret since there had not been time to consult the rest of Cabinet. The Americans had put it to the Canadians that they wished for a very considerable strengthening of the air forces stationed on the DEW line.⁵⁰ They had said that they would be very happy if the Canadians could undertake the work and the stationing of the necessary squadrons there themselves, but if for financial reasons Canada did not feel able to do it, then they themselves were quite prepared to undertake the work and move in and carry it out immediately. But this matter of the Americans moving in to a foreign country always tended to stir up the local population and, moreover, the public of Canada would be a little nonplussed by the fact that Canadians were maintaining some 120 planes of the type required in Western Europe and 180 were required for this new project. It would be difficult to explain the retention of the Canadian forces in Europe while the larger American force moved into the northwest Yukon.⁵¹ Moreover, the cost was very high; whereas Canada could afford 129 planes, costing [about $350,000]⁵² each, 180⁵³ was beyond their immediate resources. The essential need in stationing troops in foreign countries was, of course, to ensure that that country was stable and friendly, and that is why the Americans are tending to move nearer home. Reference was made to the Icelandic resolution and Mr. Holland commented that from what he had seen in Okinawa it could be taken as certain that the Americans would not get out of a place on which they had spent so much.

Mr. Pearson then turned to the value of Cyprus as a base. He shared the Prime Minister's doubts as to its usefulness in view of the hostility of the local population, and compared it with Singapore. He said that the Cyprus question was causing great concern among the Americans. Only last week Dulles had raised the matter with him and asked whether he could not do something with the United Kingdom Government to induce them to take a more reasonable line. Mr. Pearson had replied that it was very difficult for one of the Queen's Governments to advise another on a vital matter on which that Government felt so strongly. He said that he had found Sir Anthony Eden irrational and emotional on the issue of Cyprus. In his talks with the Russians, Eden had told them with great emphasis that Britain regarded Cyprus as a vital interest because of its connection with the Middle East and with oil, and that Britain would, if necessary, fight to maintain its position. Eden, in fact, is as emotional on the Cyprus issue as Nehru is on Kashmir. There seemed little possibility of getting him to discuss it dispassionately. He said he had been assured by the British that they expected to break the resistance in a few weeks, but he himself was doubtful whether this would be the case. He agreed with Mr. Holland that there might be some degree of British domestic politics in the handling of the affair. They had been determined to make a stand because they had been pushed around so badly in other places, especially in the Middle East. Mr. Pearson compared the attitude of the United Kingdom at the time of Munich. When they had failed to take a stand on Czechoslovakia there had been an immediate violent public reaction, and the British Government of the day had determined thereupon that they would make a firm stand on the next test issue, which was Poland. Without, therefore, considering the practicability of their guarantee and the implications, they had, in 1939, had to go to war on the issue of Poland.

Mr. Pearson then referred to his discussions at the last NATO meeting with the Greek Foreign Minister, a very good man who had had to resign in the past few days. The Greek had expressed to him his great and growing concern at the deterioration in their relations with the United Kingdom. This was all the more unfortunate because the Greeks had the greatest respect for the British, to whom they owed so much - their liberation last century and their liberation again after the German invasion. He said that the Greeks would be willing to do anything they could to give the British all the base facilities they required, not only in Cyprus after it became self-governing, but, if necessary, in the Greek mainland itself. They would, if it helped matters, make the base problem one for NATO, if it was not possible to deal with the United Kingdom alone. He said it was unwise for the United Kingdom to maintain the view that the Cyprus question was no direct concern to the Greek people; this was simply not the way the Greeks felt about it. Mr. Holland wondered if the matter would be discussed in any definitive way at the London meeting, and he felt with Mr. Pearson that it was probable that the United Kingdom would not wish to have the matter determined as a result of any Commonwealth discussion unless that discussion resulted in decisions in favour of the United Kingdom attitude. Mr. Holland observed that it did not seem to him much use having such a discussion on a contentious issue like Cyprus if the United Kingdom were not prepared to listen and take heed of what people said if that other opinion was a contrary one. Mr. Pearson commented that the attitude seemed to be that the United Kingdom would listen if people were prepared to agree with them, but not otherwise. Mr. Holland felt that in that event there seemed to be no point in having the matter discussed at all and the conference might as well turn to some other subject.

The Prime Minister then referred to Japan and described briefly his impressions of the talks he had had with Japanese leaders. He emphasised that his interpretation of the Japanese situation was that they were desperately anxious for recognition and friendship. They had particularly stressed their desire to get into the United Nations. Mr. Pearson observed that as a result of the recent negotiations with Japan and Russia this seemed to be a distinct possibility. If the Japanese would make limited arrangements, it looked as if the Russians in turn would not veto their admission. It was true, on the other hand, that the Japanese, through Shigemitsu, the other day had stated they would not have anything to do with an Adenauer formula. Mr. Pearson agreed with the Prime Minister as to the desirability for maintaining a friendly attitude to the Japanese. He said that as far as Canada was concerned, Japan was now Canada's third largest customer and they were doing what they could to strengthen ties between the two countries.

On recognition of Communist China, Mr. Pearson said that the attitude in Canada amongst the people appeared to have changed during the past twelve months. There was not the same interest, and not the same popular feeling in favour of recognition. The Canadian Cabinet had discussed the matter and despite quite strong divisions they had come to the conclusion that for the time being they would do nothing about recognition at all, and certainly nothing until after the end of the year and the American elections. He himself, he said, had been in favour of recognition earlier, but he had no desire to cause serious upset with the Americans, and especially on a matter on which the Canadian public were no longer so vitally concerned. He referred to his recent conversations with President Eisenhower,⁵⁴ who, normally the mildest of men, became as worked up and irrational over China as did Sir Anthony Eden over Cyprus or Nehru over Kashmir. The President used a phrase (normally favoured by Walter Robertson) "Chinese hands dripping with blood", and talked of what a terrible thing it would be if the Chinese were recognised and admitted to the United Nations.

Mr. Pearson referred to Mr. Eisenhower's recent statement on neutralism,⁵⁵ observing that it was a somewhat dangerous thing for the President to think aloud to a press conference. Mr. Eisenhower had been worried about the adverse attitude of Congress to appropriations for foreign aid, and particularly in relation to Yugoslavia. In order to try to get a modification of the Congressional attitude, he had tried to prepare the way for some revision of the mounting dislike for Tito on account of his Russian visit, and he had therefore suggested that neutralism was not necessarily a bad thing. This had resulted in a series of protests to Mr. Dulles from the diplomatic representatives of nations whom the United States had been courting and who had had great difficulty in persuading their own people to take the western line. Mr. Dulles, in order to try to correct the position, at Ames in Iowa over the last weekend, had made a statement in quite the opposite direction and had condemned neutralism as out of keeping with the times, and immoral.

In discussing the broadening of the basis of existing military pacts, Mr. Pearson said that he did not think that NATO was suitable for dealing with economic aid. Mr. Holland referred very briefly to the ideas he had been discussing with Mr. McIntosh on the general subject of economic aid, and a new approach to the problem of countering the new Communist tactics. It was emphasised that these views were only tentative, but New Zealand felt it appeared to be unsound now that the direct threat of military aggression had apparently receded, to maintain pacts like SEATO purely on military lines. Obviously military preparations were not sufficient to combat economic penetration and subversion. Mr. Pearson was fully in accord with this point of view. In the course of his comments he referred to the latest British proposals, which had followed their earlier suggestions for a secret meeting in Washington of the NATO powers plus Australia and New Zealand, to discuss meeting the new Soviet threat, especially in the Middle East. He said that Canada had put in a rather unsympathetic reply but that [a] new proposal had been made and it was possible that this new approach be linked up in some way with SUNFED. We explained that for our part we felt that the Colombo Plan fully extended our resources and we were reluctant to commit ourselves to further economic aid. During the course of a brief recital of the subjects which had to be studied for the Prime Ministers' meeting, Mr. Pearson said that his Prime Minister would probably be in favour of Commonwealth Prime Ministers' meetings being held in Commonwealth capitals other than London.

This is only a partial note. If time permits I shall dictate a further section and revise this draft before I leave Ottawa.⁵⁶