I understand that the Minister of National Defence may raise the above subject at an appropriate time during the current meetings of Cabinet and you may therefore find helpful the following brief background note.²⁶

For some time now the Turkish Government has been experiencing a good deal of difficulty in rounding up the necessary foreign exchange to meet shipping charges involved in the carriage of our mutual aid cargoes to Turkey. More recently it has become clear that the inability of the Turkish Government to pay the substantial amounts (some $750,000) already owing to shipping companies will mean that these companies will no longer be willing to take the additional financial risks involved in accepting further mutual aid cargoes for Turkey. Moreover, even should the shipping companies themselves be prepared to continue to accept cargoes there is evidence that the Turks will be loathe to add to their external indebtedness by bidding for substantial amounts of Canadian mutual aid equipment.

Early this month the Turkish Foreign Ministry sent a note? to our Embassy in Ankara outlining the difficulties which were being faced by the Turkish Government and requesting that arrangements be made for future mutual aid cargoes to be shipped from an east coast Canadian port in Turkish vessels engaged in a regular liner service between New York and Turkey. Officials are now generally agreed that meeting this specific Turkish request would involve the Canadian Government in fairly heavy inland transportation, storage and other costs as well as in substantial administrative problems. It would also constitute a departure from, and hence place in jeopardy, our present policy of shipping mutual aid cargoes in regular bona fide liner services operating between Canadian ports and recipient countries. Finally, it would provoke requests (which it would be difficult for us to reject) from other countries for similar treatment.

There would appear to be no easy solution to the Turkish problem but, on balance, officials have concluded that the most realistic way of meeting it would be for Canada to agree, as a temporary measure, to meet from funds appropriated for mutual aid the future ocean shipping cost arising from the carriage of mutual aid cargoes for Turkey.²⁷ While the payment of such charges for Turkey alone might result in requests from other NATO countries (and possibly Colombo Plan countries as well) for similar treatment, it was considered that in the case of Turkey unique considerations, particularly those relating to the present Turkish balance of payments position, apply. It was also agreed that, while a favourable decision with respect to the payment of shipping charges for Turkey might be considered as setting a precedent, it was not appropriate or necessary at this stage to define the conditions under which other countries receiving Canadian aid would be eligible for similar assistance.

Officials generally agreed that it was not appropriate for Canada to offer similar treatment to other NATO countries, many of whom could readily afford to meet their own shipping charges and many of whom were actually benefitting from the shipping arrangements which we make (which permit ships of other NATO countries, on a non-discriminatory basis, to participate in the carriage of mutual aid and other Canadian Government cargoes.) It will be appreciated however that our willingness to make special arrangements for Turkey might cause the Greeks some concern; nevertheless it is considered that unless there are strong political reasons for according the Greeks similar treatment we should refrain from action which would excite similar requests from Italy, Portugal and perhaps others as well.²⁸ A Greek request, when and if it is received, should probably be considered on its own merits. Mr. Campney will no doubt have these (and other) considerations in mind during his visit to Turkey and Greece.

Trade and Commerce officials did not disagree with this line; the question of arrears, I understand, is to be dealt with separately after Mr. Campney's return.²⁹

J. L[ÉGER]