2. The proposed agenda of the Conference comprises some twenty-five items of which the following are the ones of principal concern to Canada. The proposed agenda is attached to this Memorandum.^?

(i) Balance of Payments Import Restrictions

3. The Session will be called upon to review the restrictions which countries maintain for balance of payments reasons with special reference to their discriminatory impact. If the occasion arises the delegation might express general dissatisfaction with the widespread use of restrictions for balance of payments reasons.

4. With respect to the individual country consultations which take place, it is recommended that the delegation propose that these discriminatory restrictions be examined in accordance with the following criteria; that a real and concrete balance of payments problem exists, that the restrictions applied are not excessive in relation to the magnitude of the problem, and that they are, in fact, intended merely as temporary measures pending the initiative of adequate corrective action. This is the attitude which the Canadian executive director has generally adopted in the similar discussions in the International Monetary Fund.

5. Among the restrictions which will come before the Session will be recent intensifications by Ceylon and South Africa. However, the necessary material will not be available from the International Monetary Fund, Moreover, an examination of the restrictions maintained by these two countries would almost certainly lead to an examination of the wider Sterling Area arrangements. These will be under active examination at the Commonwealth Economic Conference and it would probably be inopportune to broach these issues in the GATT forum in advance of the Commonwealth discussions. In these circumstances it may be desirable that consultations in respect to these two countries be postponed until the next session. It is recommended that the Canadian delegation pursue this aim.

(ii) Schuman Plan: (European Coal and Steel Pool)

6. At the last session a working party was established to consider the terms of a possible waiver of the rule of non-discrimination with respect to trade in coal and steel by Schuman Plan countries. While in principle we oppose restrictive regional arrangements, it is recommended that our delegation might support such a waiver in view of the political implications of the Schuman Plan. Any waiver should be drafted in specific terms so that it could not serve as a precedent for other special regional plans or arrangements which did not have similar political justifications.

(iii) United States Import Restrictions on Dairy Products

7. It is expected that the United States will be strongly criticized by a large number of countries for its continued violation of the GATT. It is recommended that our delegation should associate Canada with such criticism but reserve Canada's freedom with respect to any retaliatory action.¹⁵

(iv) Belgian Import Restrictions

8. The International Monetary Fund, in its recent review of the Belgian exchange restrictions, concluded that some relaxation by Belgium of these restrictions was feasible under existing circumstances. It asked Belgium to reconsider the necessity for the present level of the restrictions affecting dollar imports. It is considered therefore that the Canadian and United States position on this question has been greatly strengthened. It is recommended that our delegation should continue to press for the relaxation of these restrictions.¹⁶

(v) Accession of Japan

9. The Japanese application for membership in the GATT will be considered at the Seventh Session. The central issue to be decided in the GATT is whether Japan is to be invited to negotiate with a view to accession. Instructions for the delegation on this subject might best be considered in the light of discussions which are expected to take place with Japanese representatives in Ottawa prior to the opening of the Session, or which may take place with any Japanese observers at the Session. Before that time, however, it may be necessary for the delegation to take a position in the GATT discussions since it appears that the U.S. will wish to have the matter discussed early in the session. In that event the Canadian delegation might indicate that, in principle, it is not opposed to Japan being invited by the Contracting Parties to negotiate with a view to accession, if the majority of Contracting Parties are interested in having their trading relations with Japan governed by GATT. The delegation might express uncertainty as to whether Canada will in fact participate in such negotiations. At the same time it might be made clear that Canada is interested in exploring the question of whether a basis can be found for application of the GATT to trading relations between Canada and Japan. The delegation might mention that bilateral discussions are expected to lake place on certain aspects of these trading relations and final Canadian attitude towards tariff negotiations with Japan and to the application of GATT to Canadian-Japanese trade can best be determined in the light of those discussions.

10. General. In view of the important matters affecting trade and commercial policy to be considered at the forthcoming GATT session it is recommended that our delegation should keep the Government informed of significant developments and should seek guidance with respect to any important issues not specifically covered in these instructions.

BROOKE CLAXTON