I am attaching a copy of a note which I dictated yesterday on the conversations with M. Pleven which took place in your office last Saturday morning.

It is, I realize, incomplete but I hope it is not inaccurate.

A.D.P. H[EENEY]

[PIÈCE JOINTE/ENCLOSURE]

Rapport des conversations avec Monsieur Pleven

Record of Conversations with Monsieur Pleven

SECRET

On Saturday morning, February 3, the Prime Minister received M. Pleven. Mr. St. Laurent had with him Mr. Howe, Mr. Claxton and Mr. Pearson (who was accompanied by the Under-Secretary). M. Pleven was accompanied by the French Secretary-General and the French Ambassador.

2. The conversation which ensued was informal and exceedingly friendly. After expressing once more his pleasure at being in Ottawa and remarking, as he had done the previous evening at the Government dinner, upon the remarkable extent to which French and Canadian views coincided on the most important world problems, the French Premier raised the following particular subjects:

The Threat of Inflation

3. In M. Pleven's opinion, the greatest single danger presently threatening Europe was that of rising prices. This was a threat at least comparable to that represented by Soviet military forces in the East; indeed it was part of the communist danger, perhaps the "secret weapon" which we had most to fear and which communist machinations would do their utmost to exploit.

4. France, after an exceedingly difficult post-war period and, with the help of the Marshall Plan, had, before Korea, succeeded in creating a situation of stability.

Prices and wages had been settled into a reasonably satisfactory relationship and at a tolerable level. The same had been true of Western Europe generally. They had regained their feet and, had it not been for the events of the past few months, recov­ery was well on its way to being accomplished.

5. With the United Nations defeat in Korea and the consequent acceleration of defence preparations of all kinds, the recovery of the civilian economy was threatened by a situation in which essential raw materials were in short supply; prices were skyrocketing as a result and, unless drastic action were taken (and such action could only be by international means, i.e. by international allocations) the rearmament programme itself would fail of accomplishment and the communist parties within Western Europe would be presented with opportunities for subver­sion and dislocation which might well result in the frustration of North Atlantic plans for the defence of the West.

6. M. Pleven gave the greatest emphasis to his observations on this question and argued that, for suppliers as well as consumers, international control and allocation of the essential raw materials in short supply was the only possible solution. He urged the Canadian Ministers to support this point of view in international discussions.

7. Mr. Howe expressed general agreement with the necessity for establishing international allocations for essential materials. There were obviously, however, serious difficulties in the way of a workable system. The Prime Minister remarked that, domestically, we were hoping to avoid the imposition of wide-spread controls over the economy, at least until we had seen how the United States fared in their efforts. We were naturally affected directly by what was done in that country.

North Atlantic Treaty Organization

8. Mr. Claxton enquired of M. Pleven what the French attitude was toward the relations of Spain, Greece and Turkey with NATO.

9. In reply, M. Pleven said that so far as Greece and Turkey were concerned, the present association of these countries with NATO in military planning seemed to be satisfactory; French military authorities felt that there was no need to improve upon them for the present; joint planning at the military level was going forward quite adequately.

10. With respect to Spain, M. Pleven hoped that France would not be faced in the near future by an open proposal for that country's inclusion in the alliance. Such a proposition at this time would cause serious division within France because of the extreme views held by the enemies and friends of Franco. If the move to include Spain were deferred until after the French general election, and if it were preceded by proper diplomatic preparation, the situation would be different. But to introduce the subject openly and at once (as the U.S. proposals for West German rearmament had been introduced in September) would cause most serious division within France and would present the French communists with a powerful weapon which they could use effectively and would use ruthlessly against French association with NATO itself.

11. Mr. St. Laurent remarked that apart from a few extremists on both sides, the subject of Spain's relationship with NATO was not of serious political importance in Canada. If given time it was likely that the Canadian people would accept Span­ish adherence to the alliance without very much serious criticism.

12. M. Pleven added that in present circumstances Spanish divisions in any event would be a somewhat doubtful asset; in due course, no doubt, but not now.

13. M. Pleven was asked what he thought of the suggestion that NATO headquar­ters should be concentrated in Paris, and in particular whether he felt that the Coun­cil of Deputies and the new Defence Production Board should be moved from London; was this of importance from the French point of view? M. Pleven replied that the French Government, while not pressing for these moves, did feel that it would be advantageous, politically and practically, to have NATO concentrated on the continent of Europe, i.e. in Paris. What was the Canadian attitude?

14. Mr. Pearson and Mr. Heeney replied that, while the Government had not yet reached any firm decision, we were impressed by the political advantage of a French headquarters and a concentration of all NATO activities (other than those of the Standing Group and the Military Representatives Committee which had to be in Washington).

15. M. Pleven and M. Parodi both said that they would be able to provide the physical facilities if it were decided to locate the Deputies and the Defence Produc­tion Board in Paris. They added that it would be an advantage, they thought, for these bodies to be near SHAPE.

French Electoral Reform

16. M. Pleven said that as soon as he got back to Paris he would be engaged in a political struggle which might mean the fall of his Government. The subject was that of electoral reform. He was determined to fight this issue through before the general election, and through to a conclusion. The present system presented the communists with great advantages and inevitably led to the dividing of the anti­communist vote. For this reason he would brook no delay in dealing with the issue; it would have to be settled before an appeal to the people.

Other Matters

17. A number of other subjects were touched upon including Korea and the United Nations, the situation in the Far East, specifically Indo-China, and the pros­pects for increased Franco-Canadian trade. In reference to the last, M. Pleven enquired about a meeting of the Franco-Canadian Committee. Mr. St. Laurent said that he understood that a meeting had been fixed for May.

18. On these subjects nothing much, however, was added to what we already knew of the French attitude. M. Pleven's account of his conversations with Presi­dent Truman tallied with that which we had had from our Embassy in Washington but without as much detail.

19. M. Pleven realized that the cost of maintaining North American forces in Europe was greater than the cost of maintaining troops from Western European countries. Nevertheless, he was glad to know from the Prime Minister and Mr. Claxton that the Canadian Government expected to have Canadian forces serve with the NATO integrated forces in Europe. He was glad to know too that Canada would be represented by an observer at the meeting to be held in Paris on February 15 to work out arrangements for a European army. To this meeting the French Government attached great importance.