Mr. St. Laurent asked Baldwin to give me a report for you on the discussion at Council yesterday (when you were not present) at which the hope was expressed that you would say a few words about the oleomargarine question.

Baldwin prepared a note which is attached. I gather two things were suggested.

(1) An explanation of why the government had agreed at Geneva to the removal of the ban

(2) An appeal to supporters of the government not to make public statements taking any irrevocable stand until they had considered all sides of the question.

I thought it might be helpful to have a short memorandum on the reasons for the action taken at Geneva. I am accordingly attaching a note which Mr. Deutsch has prepared.

J.W. P[ICKERSGILL]

[PIÈCE JOINTE 1/ENCLOSURE 1]

Note du secrétaire adjoint du Cabinet

pour l'adjoint exécutif du premier ministre

Memorandum from Assistant Secretary to Cabinet

to Executive Assistant to Prime Minister

SECRET

Ottawa, February 3, 1948

RE OLEOMARGARINE

The discussion in Cabinet as to the statement that might be made in caucus ran along the following lines:

The general agreement on trade and tariffs concluded at Geneva represented an agreement among the major trading countries of the world, i.e. the countries who account for 80% of the world's foreign trade.

In the course of the negotiations our own representatives made vigorous attempts to have removed from the provisions of the agreement the general clause which would prevent nations from imposing import bans of the type contained in our legislation preventing the importation of oleomargarine. These attempts, however, were unsuccessful and the general agreement as it now stands requires that Canada if she adheres to the agreement, get rid of the present legislation banning the importation of oleomargarine. In a sense this may be considered as the price which we paid for the numerous tariff concessions we obtained from other countries, particularly in respect of agricultural products.

The government has accepted the general agreement and therefore must remove the present oleomargarine legislation. The alternative would be rejection of the general agreement which would, in effect, be rejection of a major government measure and therefore equivalent to the defeat of the government. No real possibility exists of making any change in the present general agreement.

In the circumstances, the adoption of any hard and fast or final attitude in this matter on the part of members might have serious consequences; rather the objective should be a free and open discussion of what the government should do now that it is placed in a position where it must make some change in the existing legislation.

The points to be considered in this connection would be:

(a) Whether it would be feasible since the government must remove the ban on importation, to continue to maintain the ban on domestic manufacture; and

(b) what arrangements with regard to tariff or excise tax treatment might be substituted for the present legislation?

J.R. BALDWIN

[PIÈCE JOINTE 2/ENCLOSURE 2]

Note du directeur de la Direction des relations économiques

du ministère des Finances

Memorandum by Director, Economic Relations Division,

Department of Finance

[Ottawa], February 3, 1948

GENEVA TRADE AGREEMENTS AND THE PROHIBITION OF THE IMPORTATION OF OLEOMARGARINE

The removal of quantitative restrictions on international trade is one of the basic provisions in the Geneva Trade Agreements. Great importance was placed upon this provision by all the chief trading nations at Geneva because, in the past, quantitative restrictions have been more ruinous to international trade than any other protective device, such as tariffs and subsidies. Consequently, signatory countries agreed to refrain from the use of such quantitative restrictions apart from specifically defined exceptions. The exceptions relate to measures necessary to safeguard the balance of payments, the protection of essential security interests, protection of public health, etc. A number of other closely controlled exceptions are allowed to meet certain temporary and special circumstances.

The Canadian Delegation at Geneva endeavoured to obtain an exception from the rule against quantitative restrictions which would have permitted the continuation of the present prohibition against the importation of oleomargarine. The Canadian Delegation argued that such a prohibition should be permitted in cases where the domestic manufacture of the product concerned is prohibited. In spite of repeated efforts to secure the adoption of this proposal, the Canadian Delegation was unable to obtain the support of any other delegation represented at Geneva. Canada was a minority of one in this matter. Delegations of other countries argued that if an exception, such as Canada proposed, were adopted, it would be impossible in logic and equity to refuse numerous other exceptions which would completely destroy the basic provision.

In the tariff negotiations, however, the Canadian Delegation refused to bind the Canadian tariff on oleomargarine. Therefore, when the Geneva Agreements are ratified, the Canadian Parliament will remain completely free to place whatever tariff it wishes upon the importation of oleomargarine into Canada. Canada could impose any restrictive tariff it wishes, either now or in the future, upon oleomargarine without contravening any obligation in the Geneva Agreements.

[J.J. DEUTSCH]