1. URANIUM SUPPLY AND MARKETS
   
   Under existing contracts it is estimated that Canada will produce 81,303 tons of uranium in the period from July 1, 1955 to March 31, 1963. This production will have a gross value of approximately $1,662,000,000. It is expected that production by mid-1958 will be at the annual rate of 15,700 tons with a gross value of some $325,000,000. Under existing arrangements this production will be sold, apart from Canada's small domestic requirements, to the United States and the United Kingdom under contracts extending in some cases to 1962 and in others to 1963. Of the total production scheduled some 85% is for the United States and 13% for the United Kingdom.
   
   At least the great bulk of the United States requirement is for the atomic weapons programme, and it must be recognized that this requirement may not continue at the present level after the completion of existing contracts. Military requirements might decrease as a result of an international agreement to limit or cease the production of atomic weapons, or merely because the quantities of fissionable material stockpiled by 1962 might appear sufficient to meet any expected need. Preliminary estimates indicate that uranium production in western countries will be more than sufficient to meet the requirements for uranium for civil purposes during the mid-1960's, and that civil use of atomic energy will not reach a level sufficient to take up the available supply until a date in the neighbourhood of 1970. Accordingly there may be keen competition for markets among uranium producing countries and difficulty in disposing of our full uranium output in the years following 1962.
   
   At present there is no problem, as the existing contracts cover our entire output and in addition a number of other friendly countries are seeking uranium from Canada for peaceful use. The present requirements of these countries are small, as their programmes are just beginning, but at least some of them (such as Germany and Japan) will want significant quantities by the mid-1960's. In order to protect our access to those markets in a period when we may be very glad to have them, it appears desirable to do what we can to meet their present needs. In addition, of course, this is desirable on general political grounds.
   
   The United States has agreed to permit the diversion of up to 200 tons per year from deliveries scheduled under the present contracts to meet requirements of other countries. On the basis of present information, moreover, it is probable that certain of the mines under contract will be able to produce at rates higher than those specified in their contracts. The United States Atomic Energy Commission and the United Kingdom Atomic Energy Authority have indicated no interest in accepting deliveries at an accelerated rate. Accordingly any production in excess of the amounts scheduled would be available for sale to other countries and would produce an increase in the figure of 200 tons per year now available for such sales. It is anticipated that this excess would begin to be available in the period after July1, 1959.
   
   It was with these considerations in mind that the Government announced in the House on February 18, 1957,¹ that it was prepared to negotiate bilateral agreements with friendly governments covering cooperation in the peaceful uses of atomic energy and, in particular, the supply of natural uranium for such uses. While the amounts of uranium which could be made available under such agreements at present were not large because of existing contractual commitments, the view was expressed that these quantities would be sufficient to meet the current requirements of those governments which had indicated an interest in obtaining uranium from Canada.
   
   It has become a matter of some urgency to determine the detailed position to be taken in negotiation of such bilateral agreements, as there are six governments now awaiting our proposals in order to enter into negotiations. These six are Germany, India, Japan, Pakistan, Sweden and Switzerland; at one time France also was interested, but this interest has fallen off partly because of improvement in the prospects for French domestic production of uranium and partly for a reason to be mentioned below.

2. THE PROBLEMS OF CONTROLS
   
   It has for some years been an objective which Canada has shared with the United Kingdom and the United States that the production of atomic weapons by fourth powers (i.e. countries other than the U.K., the U.S.A. and the U.S.S.R. which are already producing them) should be discouraged.² It has been considered that such fourth power production would involve grave risks to peace and security, in particular by increasing the possibility of irresponsible use of atomic weapons. The problem of fourth power production is complicated, having implications for our policies on disarmament and on NATO's defence programme, but for purposes of this paper it is sufficient to recognize a particular consequence of this general policy, upon which the three governments have been similarly in agreement, namely that uranium and other items essential to an atomic programme should be supplied to other countries only for civil use, and under conditions ensuring that they will not be used to assist the production of atomic weapons.
   
   At least in the case of some prospective recipient countries such conditions would require the application of actual physical controls against diversion to military use; assurances alone might be sufficient in the case of some countries, but not of all. It can be demonstrated that adequate controls against diversion of any uranium supplied by Canada would in practice be sufficient for the foreseeable future to guard against the possibility that a country might employ Canadian uranium for peaceful purposes while using uranium available from domestic or other foreign sources for a military programme. It is assumed that, in accord with the general policy referred to above, Canada would be unwilling to provide uranium to a country conducting an atomic weapons programme even if that programme were not directly dependent on the Canadian supply. Fortunately, therefore, this situation can be prevented without resorting to the politically difficult course of imposing conditions upon the use which a recipient country might make of uranium from a source other than Canada, merely by requiring adequate controls against diversion of uranium of Canadian origin.
   
   These various points lead to the conclusion that uranium should be supplied from Canada to countries other than the United States and the United Kingdom only under intergovernmental agreements containing provision for adequate controls (which might be applied either by Canada or by a suitable international authority; the International Atomic Energy Agency is the most obvious but not the only possible agent) to ensure that none of the uranium supplied is diverted to any military use. It was in accordance with these considerations that the announcement of February 18, 1957, specified that our bilateral agreements would contain control provisions similar to those in the Statute of the International Atomic Energy Agency. Some countries have indicated a wish to negotiate with us on this basis, others have indicated a greater or lesser reluctance to agree to controls. France, in particular, which is seeking to produce atomic weapons, is unwilling to accept such controls; this is the second reason (referred to above) for the decline in France's interest in obtaining uranium from Canada.
   
   There is attached as Appendix A a draft bilateral agreement designed to serve as a basis of negotiation with interested governments. This agreement provides a permissive umbrella, under which various forms of cooperation on a mutual basis may be arranged and which in particular envisages the conclusion of contracts for the supply of uranium and other materials and equipment from one party to the other on a commercial basis. The control provisions, modelled on those in the Statute of the International Atomic Energy Agency, include inspection and other appropriate forms of control at all relevant stages. In negotiation we should adhere firmly to these provisions so that the necessary legal powers may be fully established in our bilateral agreements; the rigour with which these powers will be exercised in particular cases could be determined on a practical basis in the light of the individual circumstances. There is not yet sufficient experience to determine, for example, the circumstances in which resident inspectors would be required and when periodic visits by inspectors might be sufficient, but such questions are being examined both by our own officials concerned and by those who are planning the safeguards system to be operated by the International Atomic Energy Agency. The draft agreement spells out all the powers which it might be necessary in extreme cases to invoke, but specifies that they may be exercised only to ensure that the items subject to control are not diverted to military use.
   
   It should be recognized that our requirement for controls will remain tenable only if other major uranium producing countries follow a similar policy, and if through their failure to do so we appear likely to lose markets for uranium to them it might in the future become expedient to relax our conditions. For the present, however, virtually no free supplies are available from other sources and it would seem very much in our interest, as the world's largest supplier, to get the highest practicable standards of behaviour established from the outset among user countries. To this end we should take a firm line ourselves, and seek to enlist the support of other potential suppliers, particularly Australia, South Africa and Belgium; none of these has yet made known its policy on this question, but there is reason to hope that all might follow a vigorous lead by Canada to require adequate controls on exports of natural uranium.

3. CONCLUSIONS
   
   In summary, therefore, we must recognize that while there are satisfactory markets for our uranium at present there may be difficulty in disposing of our full output in the mid-1960's. A number of countries, however, now want from us small quantities of uranium which we could supply and the provision of which would help us to sell larger quantities in that later period. For these reasons, and for political reasons also, it is in our interest to meet these requests.
   
   Because we oppose the production of atomic weapons by fourth powers, however, we would wish to ensure that uranium which we supply will not be diverted from peaceful uses. To achieve this purpose we should be prepared to supply uranium for peaceful use (i.e. to countries other than the U.K. and the U.S., whose atomic weapons programmes we support) only under intergovernmental agreements similar to the attached draft and in particular containing provisions for adequate controls. We know that the United States and the United Kingdom will support us in this policy, and from its behaviour in discussions relating to disarmament and to the International Atomic Energy Agency there is reason to hope that the U.S.S.R., at least tacitly, may follow a similar line.
   
   With the concurrence of the Minister of Trade and Commerce, Irecommend that:

   1. The export of uranium from Canada for civil use (elsewhere than in the U.K. and the U.S.) be arranged under intergovernmental agreements providing for adequate controls against military use of the uranium so supplied;

   2. We now make available to interested governments (and at this time these include the governments of Germany, India, Japan, Pakistan, Sweden and Switzerland) the draft bilateral agreement attached;

   3. Officials negotiate with representatives of those governments on the basis of the attached draft with a view to the conclusion of bilateral agreements conforming as closely as possible to that pattern;

   4. We be prepared to consider approving such agreements individually as they are negotiated.

   5. We seek the early establishment by the International Atomic Energy Agency of the control machinery envisaged in its Statute, in order to provide an alternative to the application of controls by Canada.

JOHN G. DIEFENBAKER

Concurred in:
GORDON CHURCHILL
Minister of Trade and Commerce

[PIÈCE JOINTE/ENCLOSURE]

Appendice A / Appendix A

CONFIDENTIAL [Ottawa], April 12, 1957

BILATERAL AGREEMENT TO PROVIDE FOR COOPERATION IN THE PEACEFUL USES OF ATOMIC ENERGY

Contents

LePanARTICLE I Scope of the Agreement
LePanARTICLE II Participants
LePanARTICLE III Conditions of Supply
LePanARTICLE IV Safeguards
LePanARTICLE V Exceptions
LePanARTICLE VI Definitions
LePanARTICLE VII Commencement and Termination

Testimonium

PREAMBLE

The Government of Canada and the Government of, ____________ Conscious of the many benefits, including the increase of energy supplies, the raising of agricultural and industrial production, the wider availability of knowledge and means to combat disease, and the assistance of research directed to wholesome and fruitful purposes, which the application of atomic energy to peaceful uses may be expected to provide, Desiring to accelerate and enlarge the contribution which the development of atomic energy can make to the welfare and prosperity of their peoples, Recognizing the advantages to them both of effective cooperation in the promotion and development of the peaceful uses of atomic energy, Intending, therefore, to cooperate with one another to these ends,

Have agreed as follows:

ARTICLE I

SCOPE OF THE AGREEMENT

1. The cooperation intended by this Agreement may include
   1. the supply of information relating to peaceful uses of atomic energy and, in particular, to

      1. research and development,

      2. problems of health and safety,

      3. equipment and facilities (including the supply of designs, drawings and specifications), and

      4. uses of equipment, facilities, materials, source material, special nuclear material and fuel;

   2. the supply of equipment, facilities, materials, source material, special nuclear material and fuel;

   3. transfer of patent rights;

   4. access to and use of equipment and facilities.

2. The cooperation provided for in this Article shall be effected on terms and conditions to be agreed.

ARTICLE II

PARTICIPANTS

1. Governmental enterprises of either Contracting Party may

   1. deal directly with or perform services for the other Contracting Party, governmental enterprises of the other Contracting Party or authorized persons under the jurisdiction of the other Contracting Party in matters within the scope of this Agreement;

   2. acquire from the said Contracting Party information, equipment, facilities and materials obtained pursuant to this Agreement, and identified material.

2. Persons under the jurisdiction of either Contracting Party may,

   1. with the general or specific authorization of their Government, deal directly with or perform services for persons under the jurisdiction of the other Contracting Party as authorized by the latter, or the other Contracting Party or governmental enterprises of the latter, in matters within the scope of this Agreement;

   2. unless otherwise specified by the other Contracting Party at or before the time of transmission, acquire from their Government information, equipment, facilities and materials obtained pursuant to this Agreement, and identified material.

3. Either Contracting Party may transfer to international organizations, or to third Governments, or to enterprises or individuals under the jurisdiction of third Governments,

   1. information, equipment (other than nuclear reactors), facilities and materials obtained pursuant to this Agreement, unless otherwise specified by the other Contracting Party;

   2. identified material after irradiation, for chemical processing or storage, subject however to the terms of a written authorization of the supplying Contracting Party.

4. Each Contracting Party shall be responsible towards the other for ensuring that the provisions of this Agreement are accepted and complied with by all of its governmental enterprises, and by all persons under its jurisdiction, to which authorization has been granted by or pursuant to this Agreement.

ARTICLE III

CONDITIONS OF SUPPLY

Any supply pursuant to this Agreement shall be subject to the provisions of this Agreement and, in particular, to the following conditions:

1. Information, equipment, facilities and materials obtained pursuant to this Agreement, and identified material, shall not be transferred unless such transfer is authorized by or pursuant to the provisions of Article II of this Agreement;

2. Source material, special nuclear material and fuel shall not be supplied in quantities exceeding those actually needed for research and development purposes or for the efficient and continuous operation of specified nuclear reactors;

3. source material, special nuclear material or fuel shall be supplied subject to the granting of an option to the supplying Contracting Party to acquire any quantity of special nuclear material derived from the use of identified material as may be in excess of the quantities needed by the recipient Contracting Party for its own use and by persons under its jurisdiction for their own use;

4. source material, special nuclear material and fuel obtained pursuant to this Agreement shall not be processed or altered in form or content after irradiation except as authorized in writing by the supplying Contracting Party, and processing and alteration so authorized shall be effected in facilities approved by the supplying Contracting Party;

5. identified material shall be secured with precautions acceptable to the supplying Contracting Party.

ARTICLE IV

SAFEGUARDS

1. Each supplying Contracting Party shall be permitted to assure itself that the provisions of this Agreement are complied with and, in particular, that identified material is being used for peaceful purposes only, and to that end the supplying Contracting Party shall have the right

   1. to examine the design of equipment (including nuclear reactors) or facilities in which identified material is to be used or stored, with a view to ensuring that such identified material will not further any military purpose and that effective application of the safeguards provided for in this Agreement shall be feasible;

   2. to require the maintenance and production of adequate records to assist in ensuring accountability for identified material;

   3. to call for and receive progress reports;

   4. to approve the means to be used for the chemical processing of identified material after irradiation, with a view to ensuring that such processing will not lend itself to diversion of identified material to military use;

   5. to send representatives, designated by it after consultation with the other Contracting Party, into the territory of the latter, which representatives shall have access at all times to all places, equipment and facilities where identified material is used, stored or located, to all data relating to such identified material, and to all persons who by reason of their occupation deal with such identified material or such data, as may be necessary to account for all identified material and to determine whether such identified material is being used for peaceful purposes only. Such representatives, provided they shall not thereby be delayed or otherwise impeded in the exercise of their functions, shall be accompanied by representatives of the other Contracting Party if the latter so requests.

2. At or after the time the International Atomic Energy Agency is in a position to carry out the safeguards functions provided for in its Statute, the Contracting Parties will consult together to determine whether and to what extent they may wish to modify the safeguards provisions set out in this Agreement so that they may conform more closely with those of the said Statute, and to have the application of safeguards carried out by the said Agency.

3. Each Contracting Party, if it has determined that identified material is furthering a military purpose, shall have the right to suspend or cancel scheduled delivery of source material, special nuclear material, and fuel, and to require the return of all identified material under the control of the other Contracting Party.

ARTICLE V

EXCEPTIONS

1. There shall be excluded from the scope of this Agreement:

   1. the supply of information, equipment, facilities or materials, and access to equipment or facilities considered by a Contracting Party as primarily of military significance, and the employment for any military purpose of information, equipment, facilities or materials obtained pursuant to this Agreement or identified material;

   2. the supply of information and the transfer of proprietary patent rights received from another government under terms preventing such supply or transfer;

   3. the supply of information developed or owned by, and the transfer of proprietary or patent rights owned by, persons under the jurisdiction of the supplying Contracting Party unless with the consent of and under terms to be specified by such persons;

   4. the supply of information regarded by a supplying Contracting Party as being of commercial value unless under terms specified by the said Contracting Party.

2. This Agreement shall have effect subject to the laws, regulations and licensing requirements of each Contracting Party.

3. Unless otherwise specified at the time of transmission nothing in this Agreement shall be interpreted as imposing any responsibility with regard to the accuracy of any information supplied pursuant to this Agreement, or with regard to the suitability for any particular use or to the accuracy of specifications of equipment, facilities, materials, source material, special nuclear material or fuel supplied pursuant to this Agreement.

ARTICLE VI

DEFINITIONS

For the purpose of this Agreement, except as otherwise specified therein,

1. Equipment means any apparatus, device, or machine of particular utility in research, development, use, processing, or storage relating to atomic energy activities;

2. Facilities means all plants, buildings or structures containing or incorporating equipment as defined in Paragraph (a) of this Paragraph, or otherwise particularly suited or used for atomic energy activities;

3. Materials means all radioactive substances, all other substances of special applicability to or importance in atomic energy activities (such as heavy water and zirconium), and such other substances as may be agreed between the Contracting Parties; but materials shall not include identified material as defined in Paragraph (g) of this Article;

4. Source material means uranium containing the mixture of isotopes occurring in nature; uranium depleted in the isotope 235; thorium; any of the foregoing in the form of metal, alloy, chemical compound, or concentrate; any other material containing one or more of the foregoing in such concentration as may be agreed between the Contracting Parties; and such other material as may be agreed between the Contracting Parties;

5. Special nuclear material means plutonium; uranium-233; uranium-235; uranium enriched in the isotopes 233 or 235; any material containing one or more of the foregoing; and such other material as may be agreed between the Contracting Parties; but the term special nuclear material shall not include source material;

6. Fuel means source material or special nuclear material or both when intended or suitable in form and quantity for introduction into a nuclear reactor to assist in producing or maintaining a nuclear chain reaction;

7. Identified material means source material, special nuclear material or fuel obtained pursuant to this Agreement, or special nuclear material derived from the use of source material, special nuclear material or fuel obtained pursuant to this Agreement or produced in a nuclear reactor obtained pursuant to this Agreement;

8. Governmental enterprises means Atomic Energy of Canada Limited and Eldorado Mining and Refining Limited as for the Government of Canada, ____________ as for the Government of ____________, and such other enterprises as may be agreed between the Contracting Parties.

9. Persons means individuals, firms, corporations, companies, partnerships, associations and other entities private or governmental, and their respective agents and local representatives; but the term persons shall not include governmental enterprises as defined in paragraph (h) of this Article.

ARTICLE VII

COMMENCEMENT AND TERMINATION

1. The present Agreement shall be ratified and the exchange of the instruments of ratification shall be held at ___________ as soon as possible.

2. The present Agreement shall come into force upon the date of the exchange of the instruments of ratification.

3. It shall remain in force for a minimum period of ten years, and thereafter until six months after notice of termination has been given by either Contracting Party to the other, unless such notice has been given six months prior to the expiry of the said period of ten years.

In witness whereof the undersigned, duly authorized for this purpose by their respective governments, have signed the present Agreement and have affixed thereto their seals.

Done at ___________ this ___________ day of ___________ in the English [and ___________] language[s, both texts being equally authentic].

¹ Voir Canada, Chambre des Communes, Débats, 1957, volumeII, pp.1425 à 1426.
See Canada, House of Commons, Debates, 1957, VolumeII, pp.1365-1366.

² Pour un compte rendu de la question du quatrième pouvoir avant l'élection du gouvernement Diefenbaker en 1957, voir volume23, chapitre7, document806.
For an account of the Fourth Power issue prior to the election of the Diefenbaker government in 1957, see Volume23 Chapter7, Document806.