6. The Prime Minister, referring to discussion at the meeting of June 13th, 1950, said he had been informed by Canadian Pacific Steamships that the Company were considering an offer recently made by a Greek shipping company to purchase the steamship Aorangi now used on the Canada-Australia-New Zealand route.

It would be recalled that the Company had requested a three-way Canadian, Australian and New Zealand annual subsidy of $400,000 to continue the ship in operation. Under subsidy arrangements in effect prior to World War 11, Canada had provided 2/3 and Australia and New Zealand jointly 1/3 of the subsidy then granted. It was to be noted in this connection that this ship could not make more than five or six round trips per annum and her life expectancy did not exceed seven or eight years. Passenger traffic represented 90 per cent and freight only 10 per cent of total revenues. The Company were not anxious to continue the service and wished to accept the offer of the Greek shipping company provided the federal government did not object.

During his recent visit to Ottawa, the Premier of New Zealand had made strong representations for the continuation of the service provided by the Aorangi.

7. The Minister of Transport pointed out that, although the pre-war subsidy arrangements were on a 2/3 Canadian and 1/3 Australia-New Zealand participation, the recent proposals would imply annual payments of $59,000 by Australia, $29,000 by New Zealand and the residual $331,000 by Canada. This would represent a much larger proportionate Canadian payment than those previously in effect.

It was further to be noted that the subsidy requested was based on an estimate of the income required to permit stockholders in the company to receive 5 1/2 percent returns on their investment.

8. The Minister of Fisheries pointed out that the Aorangi had been operating in recent months at full passenger capacity in both directions. As he had mentioned when the subject was discussed previously, this was the only passenger shipping link between Canada, Australia and New Zealand. If the service were to be discon­tinued, a major proportion of the traffic normally moving over this line would be diverted to the United States with consequent loss not only to Canadian ships, but also to Canadian railways.

9. The Secretary of State for External Affairs suggested, in view of the fact that New Zealand had shown the greatest interest in maintaining this service, that Mr. Holland might be asked to approach the Australian government with a view to reaching agreement between them to provide 1/3 of the annual subsidy required. If this were done, Canada might consider providing the remaining 2/3 of the subsidy.

10. Mr. St-Laurent felt that from the purely practical point of view continuation of this service did not appear to be sound business. However, there were other important considerations to be kept in mind such as the maintenance and strength­ening of links between the free nations of the world, possible changes in the direc­tion of world trade, and so on.

In communicating with New Zealand authorities in this matter, the Secretary of State for External Affairs should probably make it clear that if Australia and New Zealand agreed to assume responsibility for 1/3 of the subsidy, Canada would attempt to negotiate a new agreement for one year at an annual subsidy not in excess and if possible below $400,000.

11. The Cabinet, after considerable further discussion, agreed that:

(a) the Secretary of State for External Affairs communicate immediately with New Zealand authorities with a view to ascertaining whether Australia and New Zealand jointly would be prepared to assume responsibility for 1/3 of the annual subsidy required to continue the steamship Aorangi in service;

(b) if and when Australia and New Zealand agreed to such an arrangement Can­ada would attempt to prevail upon Canadian Pacific Steamships to continue operat­ing the Aorangi for another year at a subsidy not in excess of and preferably below $400,000; and,

(c) pending conclusion of an agreement along these lines, Canadian Pacific Steamships be requested to postpone the contemplated sale of the steamship.