Atomic Weapons
Policy Toward Soviet Union
Far East
Middle East
Europe
Atlantic Command
Economic Situation

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1. The Prime Minister welcomed Mr. Churchill and his Colleagues. The government of Canada felt that any matters that were of concern to the government of the United Kingdom were also of concern to them as the welfare of the people of the two countries was so intimately related. They were particularly pleased, therefore, to have this opportunity of exchanging views. The government of Canada had also been pleased that Mr. Churchill and his colleagues had been able to visit the United States at this time to strengthen the ties between that country and the United Kingdom which were of such fundamental importance for all the countries of the Commonwealth. The members of the Canadian Cabinet would be glad to hear any comments that Mr. Churchill might feel it proper to make relating to his discussions in the United States and concerning problems of common concern.

2. The Prime Minister of the United Kingdom referred to his visit to Ottawa ten years before. He was gratified to be able to meet again with the members of the Privy Council of Canada of which he had, since that time, been a member. He would be glad to discuss any matters they might wish to raise.

Atomic Weapons

3. Mr. Churchill stressed the importance of the development and improvement of atomic weapons during the period when the relative strength of western countries in conventional weapons would not be adequate to afford them protection. The Labour government in the United Kingdom had made progress in the development of an atomic bomb and the first one produced in the United Kingdom would be tested in Australia during the summer. If it was successful, production could proceed. Apart from its intrinsic importance a successful British bomb might have a substantial influence on the readiness of the United States to exchange information on atomic development. He was very anxious to see an equality of knowledge with the United States which would lead to a more ready exchange of technical information.

4. The Prime Minister suggested that detailed discussion on atomic energy questions might be left to Lord Cherwell and Mr. Howe.

5. Mr. Churchill said that the policy was to preserve peace or at least a modus vivendi with the U.S.S.R. of as long a duration as possible. This could only be secured from strength. Agreements with the U.S.S.R. could not be secured on any other basis. The strength of the West was being developed through the North Atlantic Treaty Organization. It was to be hoped that N.A.T.O. would not be limited solely to preparations for defence but that it might develop into a lasting grouping of powers which would produce a new effectiveness for the United Nations. The present did not appear to be a propitious time to enter into talks with the U.S.S.R. but the United Kingdom would be ready at any time to respond to any genuine advance from the Soviet side.

A deterrent factor in the present dangerous situation was that war would be extremely unpleasant for both sides. Both would suffer what they dreaded Most at the outset: Europe would be overrun and the U.S.S.R. would be blasted by atomic weapons in all its vital points. This gave some assurance that peace could be maintained. It seemed certain that at best there would have to be a prolonged period of cold war. That, however, was much better than catastrophe.

6. The Prime Minister enquired whether Mr. Churchill thought that the apparent concessions made by Mr. Vishinsky at the United Nations in relation to the banning of atomic weapons and the possibility of inspection gave indication of desire by the Soviet side to see some progress.

7. Mr. Churchill felt it would present a difficult problem if the Soviet Union were to offer to accept our conditions for the control of atomic weapons since the West was not sufficiently strong at present to do without the protection that their possession afforded. It was the vast superiority of the United States in atomic weapons and the technical improvements they had achieved, that provided a decisive deterrent at present. It was doubtful, however, that the U.S.S.R. would be prepared to allow bona fide and continuous inspection since it would too greatly lift the veil they kept over their affairs.

8. Mr. Eden said he thought the Vishinsky concessions did represent a positive move. The Western nations would have to expect more of these moves. They were indicative of a growing anxiety on the part of the Soviet Union.

9. Mr. Churchill said that there was, perhaps, some significance in the Soviet emphasis on the development of fighter planes rather than of bombers. It was a defensive emphasis which revealed anxiety and suggested that fear was an important factor in Soviet actions.

The Far East

10. The Minister of National Defence said he would be interested to hear the views of the United Kingdom ministers on the position in the Far East, particularly on the prospects in Korea. He felt that the six months of discussion on a ceasefire in Korea had left the United Nations in a much weaker position relatively than when the talks began. The U.S. commanders in Korea thought that the Chinese genuinely desired a ceasefire. On the other hand, the Prime Minister of Japan was of the opinion that the Communists would not accept one. He thought they would attempt to prolong the present discussions. Even if a ceasefire were achieved, it was not apparent how the United Nations were going to extricate themselves from Korea.

11. Mr. Eden expressed general agreement with Mr. Claxton's comments. He found it equally difficult to see how the Korean episode was to be resolved. He had felt some surprise in the discussions in Washington at the confidence of the U.S. authorities in their capacity to deal with any possible military developments in Korea next spring.

It was difficult to forecast developments in other parts of South East Asia. There was no reliable evidence that an extension of hostilities in Indo-China was imminent. There had been a number of reports of preparations by the Chinese but all had been contradicted by other sources. Some of the reports might be instigated by the Chinese Nationalists. He had been pleased that the President of the United States in his message on the State of the Union had explicitly warned China against the possible consequences of further aggression. He had tried to follow that up in his own speech in New York. The French felt that they could hold their position in Indo-China if there were no major aggression as in Korea. If there were any such move they would want the United Nations to take action.

12. The Secretary of State for External Affairs said that he was disturbed by Mr. Vishinsky's statement in Paris in which he claimed that the United States had moved Chinese Nationalist divisions to Burma and other South-east Asian countries. If any new communist move were being contemplated, this was the sort of propaganda preparation that might be expected.

13. Mr. Churchill pointed out that ten of the best U.N. divisions were tied up in Korea, and ten French divisions in Indo-China. The addition of that strength to western Europe could make a very substantial difference. At the present time, there was not one complete division in the United Kingdom. There were, however., some 250,000 troops in military schools and depots in the United Kingdom, and these were now being armed and trained so that they would have some combatant value in an emergency. He meant to secure that the United Kingdom looked more like the back of a hedgehog than the paunch of a rabbit. If the Chinese attacked Indo-China it would be necessary for the United Kingdom to reconsider its recognition of the Communist government of China.

14. Mr. Pearson asked what divergences there now were between the U.K. and the U.S. on policy in the Far East.

15. Mr. Eden said that there were now only two points of divergence viz., the U.K. recognition of the Chinese People's government and the proposed treaty between Japan and the Chinese Nationalists. The first was little more than a formal point and the U.S. government were not now seriously concerned about it. The second was more troublesome. The U.S. administration apparently felt very strongly that, in order to satisfy Congressional opinion, they must announce that as soon as the Japanese Peace Treaty was ratified Japan would conclude a treaty with the Chinese Nationalist government in respect of Formosa. The United Kingdom government agreed that, once she had achieved her independence, Japan would be free to do as she wished in this matter; but they would have preferred that no public announcement of her intentions should be made in advance. They would not, however, continue to press their objections upon the U.S. government.

16. Mr. Churchill said that, as regards Korea, he was glad that the U.S. government were now consulting more fully with other governments which were contributing to the U.N. Forces.

17. Mr. Pearson said that 17 countries had now accepted the draft of the warning declaration about the consequences of a major breach of the armistice terms in Korea.

18. Mr. St. Laurent pointed out that acceptance of the draft declaration would still leave unsettled a number of important questions on which decisions would have to be taken by the countries contributing to the U.N. Forces in Korea.

19. Mr. Churchill said that the U.K. government were anxious to avoid raising small points of disagreement with the United States on Far East questions, as they were conscious that the brunt of the military effort in that area was being borne by the United States. In the Middle East, where the United Kingdom were carrying the major part of the load, be hoped that the United States could be persuaded to give some support and assistance. Even token assistance would be valuable. The United Kingdom were carrying out an international responsibility in maintaining free right of passage through the Suez Canal.

Middle East

20. Mr. Eden said that in his discussions in Washington he had agreed with the U.S. Secretary of State that the Four Power proposals should be revised and made ready for presentation in a new form possibly including something about the Sudan. It could then be indicated to King Farouk,53 at the appropriate moment, that these proposals were available for presentation to a government likely to accord them a favourable reception.

21. Mr. Churchill said that insofar as the oil dispute in Persia was concerned, the policy of the U.K. government was to salvage what they could from the wreck. Britain could get her oil from elsewhere, but she needed the foreign exchange which she had earned from the Persian oil. Permanent loss of this source of revenue would mean a serious addition to the balance of payments difficulties of the United Kingdom.

22. Mr. Eden said the International Bank had put forward certain proposals which were acceptable to the United Kingdom but had not yet found favour with Dr. Mossadegh.54 There seemed to be some possibility, however, that Mossadegh might eventually agree to something along the lines of these latest proposals. In any event it seemed clear that they were the sort of proposals that would afford Mossadegh the best opportunity to reach a compromise with the United Kingdom without losing face provided, of course, he were disposed to do so. Throughout the protracted discussions and negotiations on this problem Mossadegh had shown himself to be an extremely shrewd bargainer. The United Kingdom government had to ensure that any treatment given Persia should not be generous to the point where it would prejudice the future of oil concessions held elsewhere by the United Kingdom and the United States. If a satisfactory price could be negotiated, the United Kingdom might be ready to forego any claim it might have for compensation. Dr. Mossadegh might, however, prefer to stress the compensation feature since it would then be easier for him to reduce or eliminate British control and influence.

Europe

23. Mr. Churchill said that General Eisenhower had made it abundantly clear that he did not expect U.K. military units to join the European army. He was quite content that the United Kingdom should make appropriate military contributions to the NATO forces of which the European army was part. Mr. Churchill thought it not only unnecessary but unworkable that U.K. forces should be merged in the European army. He did not see how any Prime Minister of the United Kingdom could contemplate sending six British divisions to the European army in the knowledge that none of these divisions would ever stand shoulder to shoulder in the line. There were the problems of language, customs, armaments and munitions which were very real difficulties. He fully appreciated that the doctrine of European federation appealed strongly to the sense of logic of the French. He himself felt that the United Kingdom should offer every encouragement to the concept of European federation without, however, losing sight of the fact that it was in the interests not only of the United Kingdom, but of international peace that the United Kingdom should maintain her strong Commonwealth ties rather than become an integral part of a European federation.

24. Mr. Eden pointed out that when the present U.K. government took office, the plans for a European army had already been under discussion for nine months. If the new U. K. government had joined in the discussions at that stage, every detail of the proposed arrangements would have been thrown open for renegotiation and this would have caused further substantial delays.

25. Mr. Churchill thought it unfortunate that the Labour government had decided not to participate in the conferences on the Schuman Plan and the European army.

As a general comment, he felt that the principle of the Grand Alliance had much to commend it, primarily because, as became evident during the second World War, it enabled several sovereign states to work in the closest harmony without any suggestion that one country might be the vassal of another.

Atlantic Command

26. Mr. Churchill said that, in his opinion, British shipping would face greater dangers in a future war than in the last. Enemy submarines would be much more numerous, faster, and armed with even more deadly weapons than before. Antisubmarine vessels would have to be much faster craft, which could not be improvised after war had broken out. Even greater than the submarine danger was probably the mine threat. There had been developed new types of suction mines which were impervious to magnetic minesweeping. These could be dropped rapidly in large numbers and it was difficult to see at this time what effective measures could be taken against them.

The United Kingdom's dangers were much greater than those of the United States or Canada. If the United Kingdom failed to keep its ports open, it could not survive. For North America the loss of the battle in the Atlantic would mean the loss of the campaign in Europe. For the United Kingdom it would mean extinction. It was for this reason that he had made every effort to impress on the Americans that it was a matter of practical necessity that the United Kingdom should retain complete naval control in the eastern Atlantic at the reception end. Executive control of the battle and the convoys should be exercised in the eastern half of the Atlantic by the First Sea Lord and in the western half by the United States Chief of Naval Operations. On almost every occasion they would work in complete harmony. If any differences should arise between them, these could be resolved by the Standing Group who could be advised on policy by an Admiral of the Atlantic. He was, however, most strongly opposed to the creation of a Supreme Allied Commander, Atlantic. He was gratified to hear that some members of the Canadian government shared his views on this question.

27. Mr. Churchill said that Canada was to be congratulated on the growth of its Navy. It was building up one of the leading navies in the free world. He hoped that Canada, with its expanding resources, would continue to cherish the naval tradition, as it had been cherished for so long in the United Kingdom. A strong Canadian Navy would be of great value, not only for purposes of local defence, but also as a link between North America and Europe.

28. Mr. Churchill thought that, while the Western countries were becoming stronger, they were not yet necessarily safer. The greatest danger would come in the period just before their strength became really effective. If the Russians made war, they were more likely to do so as the result of miscalculation than by reason of an "incident". In his view the odds were against a war this year, although no one could make an accurate forecast.

The Russians had greatly improved their position by bringing large portions of Europe and all of China under their control without loss to themselves. They might therefore think it best to continue as at present. Their leaders appeared to fear war and atomic bombing since these would undermine their control over their people. They seemed more interested in maintaining their power internally than anything else. If, at a later date, the West desired to intensify the "cold war" it might possibly do so by taking steps to make more information available to the Russian people. The West would be in increased danger if there were the slightest sign that the NATO countries were not pursuing their defence plans with determination.

29. Lord Cherwell55 said the Americans had been anxious to obtain additional supplies of aluminum. Canada's willingness that the United Kingdom should divert to the United States some of their Canadian supplies of aluminum had made it possible to persuade the United States to allocate to the United Kingdom considerable quantities of steel which would be of great value both for rearmament and for exports. It was vitally important to maintain United Kingdom exports. For the United Kingdom, gold and dollar reserves had fallen seriously in 1951 and it was going to be very difficult to stop them from continuing to decline in the next six months.

30. Mr. Churchill said that his government had been faced, with a grave financial situation on assuming office. The sterling area was running a large deficit with the dollar area, with Europe and with the rest of the world. The rearmament programme of £4.7 billion would now cost £5.2 billion owing to increased prices. His government was, however, not going to be afraid to take the unpopular steps that were necessary if national solvency were to be regained. He felt that, if the need for further stringencies were put squarely to the people of Great Britain, they would accept the measures required by the situation. He did not propose to ask for outside help for the purpose of enabling the people of the United Kingdom to avoid discomfort. Rearmament was, however, a different matter; for it was designed to serve the common cause. He was ready to seek external aid to help forward the United Kingdom defence programme. The assistance which the Americans were providing would be a great help to the rearmament effort and the export drive.

31. Lord Cherwell said that cuts could only be made in domestic consumption, the defence programme or in exports. Consumption had already been cut to the bone. Some of the rearmament programme would have to be postponed.

32. Mr. Churchill said that he now expected the United Kingdom rearmament programme to take four rather than three years to complete. In the circumstances, his government was concentrating its efforts on such essential elements of the programme as new types of aircraft and tanks.

33. Mr. St. Laurent enquired whether there was any likelihood of the United Kingdom being able to reduce its unrequited exports.

34. Mr. Churchill said that it was hoped to make some progress in this direction but that his government's hands were tied to some extent by arrangements made since the close of the war.

During the war, he had been of the opinion that the United Kingdom should hold itself free to put in a counter-claim against the sterling balances which had been accumulated by countries which had been preserved by British troops from being overrun by the enemy.

35. Mr. Howe said that the imbalance in Canadian-United Kingdom trade would have been less if Canada could have placed larger orders in the United Kingdom for heavy equipment which had been going to countries in the sterling area.

36. Mr. St. Laurent said that he and his colleagues had greatly appreciated Mr. Churchill's review of the world situation. The Canadian government realized that the greatest possible efforts must be made by the Western countries in order to achieve the results that were essential to all.

37. Mr. Churchill said that he was most grateful to Mr. St. Laurent and the other members of the Canadian government for their kindness. The meeting of the four members of his Cabinet with the Canadian Cabinet had been a memorable event.

38. It was agreed that a brief communique should be issued to the press at the conclusion of the meeting. This would indicate that the discussion had ranged over the world situation with particular emphasis on the North Atlantic alliance, and that the exchange of views had revealed a complete understanding between the representatives of the two countries.

N.A. RoBERTSON
Secretary to the Cabinet