1. In his State of the Union address to Congress on January 7, 1954, President Eisenhower strongly supported the legislation now before the United States Congress to authorize U.S. participation in the construction of the St. Lawrence Seaway. There is every indication that this legislation has been given high priority by the Administration.

2. The principal bill before Congress is the Wiley bill which has now been reported to the Senate and placed on the Senate calendar for final reading in the amended form of bill No. S 2150. A similar bill in the House of Representatives, H.J. Res. 104 (the Dondero bill) has been considered by the House Committee on Public Works. Hearings have been held, but the Committee has not taken any decisive action.

3. On January 9, 1953, ¹²⁰ the United States Ambassador was informed in a memorandum by the Prime Minister that the Canadian Government was "most reluctant to engage in any discussion which might delay the progress . . . of the plan now underway for the development of power in the International Rapids Section" but that "if the United States Government wishes to put forward a specific proposal differing from that put forward by the Canadian Government, for the construction of the Seaway in the International Section . . . the Canadian Government will be prepared to discuss such a proposal", on the understanding that such a proposal would not delay the development of power under arrangements agreed upon in the Exchange of Notes of June 30, 1952, ¹²¹ and in the expectation that such discussion would not "cause any serious delay in the completion of the whole Seaway". Although no specific proposal has yet been made by the U.S. Government it can be assumed, in the light of the President's recent State of the Union message, that the Wiley bill, if and when it becomes law, will likely form the basis of any such proposal.

4. A vote on the Wiley bill is expected momentarily in the Senate but the Canadian Embassy at Washington reports that the Dondero bill is not likely to be passed by the House of Representatives during the present session of Congress. However, passage of the Wiley bill in the Senate by a fairly large majority and the strong support now given to this measure by the Administration might possibly provide the impetus required to enable the sponsors of the Dondero bill to get it through the House of Representatives. If this were to come about, it is clear that any representations the Canadian Government might wish to make would have to be made known, if they were to be effective, after passage of the Wiley bill in the Senate and before the Dondero bill gets through the House of Representatives. With this in mind, the Interdepartmental Committee on the St. Lawrence Project has examined the U.S. legislation to ascertain whether there were any points of substance on which the Canadian Government might usefully comment.

5. After examining the Canadian and the U.S. legislation, the Committee agreed that there was no serious conflict between the various provisions of the Wiley bill and of the St. Lawrence Seaway Authority Act and that the fundamentals of both were reconcilable. It should be noted that the Wiley bill does not envisage joint construction and operation of the St. Lawrence Seaway by Canada and the United States. Rather, the bill contemplates that each country will construct and operate its portion of the Seaway quite independently of one another, much in the same manner as the Welland Canal and the MacArthur Lock were constructed and are operated separately. The only really "joint" aspect of the resolution is the provision that tolls may be imposed jointly by agreement between the St. Lawrence Seaway Authority and the U.S. Corporation or unilaterally if agreement is not possible. There are a few minor points that might need to be ironed out, either in the American or in the Canadian Legislation, but these are not worrisome.

6. Because there are no practicable amendments that could be suggested to the Wiley bill and because, in any event, there appears to be nothing to prevent the United States or Canada from building the Seaway, or a portion thereof, entirely on their own and independently of one another, the Committee concluded that it would be inadvisable at this time for Canada to make any representations even though there are certain important ancillary matters which will have to be discussed if and when the Wiley bill becomes law. An additional consideration supporting this view is that comment by Canada at this time could scarcely be interpreted in the United States otherwise than as opposition by Canada to the proposal that the United States should build part of the Seaway. Such an interpretation might have undesirable results as regards litigation now before U.S. Courts on the St. Lawrence Power Development project. It is now expected that all litigation will have been disposed of finally before the U.S. Supreme Court adjourns for its summer recess on or about June 15th next. This might not happen, however, if the impression is created that Canada is attempting to obstruct U.S. construction of a portion of the Seaway and the U.S. Administration withdraws the vigorous support it has given to the New York State Power Authority and the Federal Power Commission before the Courts.

7. Notwithstanding that the various provisions of the Wiley bill and the Canadian Legislation are reconcilable in all important respects, there are several ancillary points of some considerable importance on which agreement will have to be reached if and when U.S. Legislation becomes a fait accompli. These are outlined hereunder:

(a) Both the Wiley bill and the St. Lawrence Seaway Authority Act envisage that tolls may be established internationally by some form of agreement, either between the two administering agencies or between the two governments, or unilaterally by each body. No matter which of these courses of action is eventually followed, serious problems are bound to arise because, if for no other reason, of the divergence of national interests in the various commodities that will be moving through the canals. Deadlocks may well arise if an attempt is made to establish tolls by international agreement. On the other hand, unilateral establishment of tolls on both sides of the border may result in substantially different Canadian and U.S. rates on the same commodities. If tolls are established internationally, presumably regard will also have to be had to the fact that Canada will have spent more on the Seaway between Lake Erie and Montreal than the United States. The most recent estimates on the cost of the all-Canadian Seaway, as furnished to the Committee by the Department of Transport on a confidential basis, are as follows:

If the United States undertakes construction of the Seaway in the International Rapids Section and the Thousand Islands section, they will have spent approximately $90 million (U.S. and Canadian estimates are very close), as opposed to an overall Canadian capital outlay of at least $175 million. It should be noted, in this connection, that the Wiley bill provides that the proposed U.S. Corporation may borrow up to, but not in excess of $105 million.

(b) In committing itself to ensure uninterrupted 27 foot navigation between Lake Erie and Montreal, provided an acceptable power development project was undertaken in the International Rapids Section, the Canadian Government, in a Note of June 30, 1952, agreed that the St. Lawrence Seaway Authority would contribute $15 million towards certain channel enlargements to be undertaken by the power developing entities and which would be of particular benefit to navigation. If the canal in the International Rapids Section is constructed by the United States rather than Canada, it could be argued, with some logic, that the United States should pay the $15 million since the additional channel enlargement in the power pool will be a natural adjunct of the canal in the International Rapids Section. There is no provision, of course, for such a payment in the Wiley and Dondero bills.

(c) In the same Note of June 30, 1952, the Canadian Government further agreed that the cost of continuing 14 foot navigation on the Canadian side, as contemplated in the 1941 Agreement, would be excluded from the total costs to be divided between New York and Ontario in consideration of the fact that the all-Canadian Seaway would, in any event, replace 14 foot navigation in the International Rapids Section. If the deep waterway in this area is now to be on the U.S. side of the border, the question arises as to what should be done about the 14 foot canal. On the one hand, it would appear inadvisable to spend something of the order of $15 million to perpetuate an obsolescent mode of water transportation. On the other hand, the 14 foot canals may continue to serve a useful purpose for some years to come and, in any event, certain industries, particularly in the Cornwall area, may to some extent be dependent on the existing canal system. This question will obviously have to be threshed out in detail if the U.S. Government presents the approved Wiley bill as a specific proposal for Canada's consideration. ¹²²

R.B. BRYCE