The Commonwealth Supply Ministers' Conference, which was first suggested by Mr. Gordon-Walker at the Commonwealth Prime Ministers' Meeting last Janu­ary, was held in London from September 19 to 27. Officials who assisted Mr. Howe were: Mr. T.N. Beaupre, Mr. R.P. Bower, and at times Mr. F. Hewett and Mr. A.E. Ritchie.

The agenda consisted of the following items:

(1) General raw materials position - review of prospects for production, con­sumption and prices of raw materials in relation to world economic trends and the effects of a shortage of raw materials on supplies of manufactured goods.

(2) Consideration of the position reached in the International Materials Conference.

(3) Consideration of individual raw materials, including: copper, cotton, lead, manganese, nickel, rubber, sulphur and pyrites, tin, tungsten and molybdenum, wool and zinc. The addition of newsprint to the agenda was defeated in the first meeting.

(4) Consideration of manufactured and semi-manufactured goods.

You will recall that when the question of Canadian participation arose, we could foresee little real usefulness in such a meeting, but agreed to attend, as one official put it, in order that Canada would not appear in a "one against the world" position more often than is necessary.

Generally speaking, the Conference served a very useful purpose in disseminat­ing information on supply problems which, while available to the U.K. and Canada because of their prominent positions in IMC and the North Atlantic community, was not known in as great detail by the other governments represented. Also, for the first time the various colonies had a voice in the discussions. As seen from a purely Canadian point of view, the success of the Conference was mainly negative, as follows:

(1) The Conference was content to merely underline the long-term supply diffi­culties which faced the Commonwealth without making plans for entering into any general agreement on policy or entering into any commitments.

(2) The proposal that a rigid price stabilization structure should be set up within IMC was dropped. IMC is commencing to discuss the regulation of prices of raw materials, but only in certain commodities, such as tungsten, where regulation appears to serve a useful purpose at this stage.

(3) No agreement was reached on establishing a system of agreed principles of priority for the allocation by the U.K. of steel and other goods under short supply, but the problem was referred to the Commonwealth High Commissioners. It is extremely doubtful whether they will be able to discover a solution to so complex a problem.

The Conference revealed that Canada was incomparably better off than any other Commonwealth country in virtually all the fields covered, including the sup­plies of steel and semi-manufactured and finished goods which we have been get­ting from the U.K. In the past we have done better at obtaining these supplies than other Commonwealth countries for two reasons - first, the need of the U.K. to earn dollars, and second, our direct lines to the Board of Trade and the Ministry of Supply. This preferred position may be a little more difficult to maintain in future. Certain Commonwealth countries have built up formidable sterling balances and are pressing for the conversion of these into either goods or dollars, and it is proba­bly that the U.K. will have to yield somewhat to this pressure, but not to an extent which would be harmful to our position. Cuts in our allocation of steel are already forecast by the Commercial Counsellor for the last quarter of 1951 and for 1952.

The work of each of the IMC committees was reviewed at length. Mr. Howe declared that he was not convinced that the IMC should be expected, as some dele­gates suggested, to develop long-term detailed and overall allocations, since such planning must not only cut across normal commercial practices and have a degree of artificiality which is not realistic in international trade, but furthermore imposes a rigidity in trade which we should not welcome.

Discussion on this subject revealed the underlying cleavage of interest which exists between the under-developed countries and the others. The former, who are not very well acquainted with the work of IMC, were sceptical of the effort to introduce price stabilization into that organization, since they were averse to seeing the price of raw materials stabilized by an organization which has no control over stabilization of the price of capital equipment. They also claimed that higher living standards in backward areas were a more positive anti-Communist contribution than a re-armament drive in the industrialized countries and more deserving of a large share in the supply of scarce materials, particularly capital equipment. In this connection it was pointed out that if steel were diverted from Canada to, say, Malaya, in the form of capital equipment which could increase the output of rub­ber, this increased yield would bring into the sterling area far more dollars than the steel which was diverted.

Reverting to raw materials, Mr. Howe mentioned that countries which seemed most interested in obtaining our supplies are still maintaining import controls against them, and the presence of such controls, while not impeding seriously the movement of our strategic raw materials today, serves to remind our producers that if there is any easing of the supply position the machinery for discrimination against our exports is readily available. Plans for further investment for expansion of production must take cognizance of these restrictions.

It is expected that the United Kingdom Government will raise the question of a scheme for the allocation of U.K. steel, etc. with our High Commissioner some time in the near future, at which time we will ascertain the extent to which the modification of the U.K. export policy to dollar areas will be detrimental to Canada.

A.D.P. H[EENEY]