At its meeting on December 29 ³⁶ Cabinet agreed that Canada should accede to the request of the Government of Czechoslovakia to hold consultations in accordance with Article XXII of the GATT on special valuation procedures employed by Canada in respect to certain imports from Czechoslovakia and that once arrangements for such consultations had been made further consideration would be given by Cabinet to the course to be pursued. Ministers also decided that it should be understood that Canada's willingness to consult in no way altered the obligation of Czechoslovakia under the post-war credit agreement. It was suggested in the Memorandum to the Cabinet that both subjects might be discussed during any consultations.

Agreement has now been reached with the Czech authorities to hold talks in Ottawa around the middle of May. The Czech delegation will be authorized "to discuss certain questions of trade policy and questions arising from the Financial Agreement of 1945 and supplements". ³⁷ It is envisaged that the consultations will involve consideration of:

(a) the present practice with respect to revising the valuation of certain Czech exports for customs purposes;

(b) Czech obligations under the post-war loan;

(c) the prospects for trade between Canada and Czechoslovakia.

Since it would appear desirable to avoid any impression that the settlement of the loan can be made dependent on the outcome of the discussions on valuation procedures it is assumed that these three subjects should be dealt with separately in the consultations with the Czech delegation. Inasmuch as the present practice of increasing the declared values of various imports from Czechoslovakia by something like 50% for duty purposes gives rise to administrative problems, there would seem to be merit in working out with Czechoslovakia more normal arrangements for verifying values consistent with the requirements of Canadian law in those particular cases where problems may exist.

In these circumstances, with the concurrence of the Minister of Finance, the Minister of Trade and Commerce and the Minister of National Revenue, I recommend that:

(a) as suggested in the note to the Czech authorities the consultations should take place with as little publicity as possible;

(b) the consultations with Czechoslovakia be conducted by representatives from the Departments of External Affairs, Finance, Trade and Commerce and National Revenue;

(c) on the matter of valuing Czech goods for duty purposes the Canadian negotiators should seek the cooperation of the Government of Czechoslovakia in carrying out the intention of Canadian Customs laws and, in particular, seek their agreement to admit a Canadian Customs official to the country in those cases where specific complaints are received and give him the minimum information and facilities considered essential by the Minister of National Revenue;

(d) on the question of the loan, the Canadian negotiators will endeavour to obtain the most favourable terms possible from a Canadian point of view. Should this involve any departure from the present legal obligations of Czechoslovakia, the prior concurrence of the Minister of Finance should be obtained;

(e) concerning general trade the Canadian negotiators should indicate that the Canadian authorities welcome trade between Canada and Czechoslovakia in goods which are not subject to restrictions on security grounds;

(f) any conclusion reached on each of these points during the consultations would be subject to approval by Cabinet and would be provisional until Cabinet has had an opportunity to consider them as a whole. ³⁸

BROOKE CLAXTON
Concurred in:
C.D. HOWE
Minister of Trade and Commerce
D.C. ABBOTT
Minister of Finance
J.J. MCCANN
Minister of National Revenue