Recent amendments passed by Parliament, when they have received Royal assent will allow a considerable extension of export controls. These at present are limited to specific commodities on a basis of supply, but under the new statute the Governor in Council may authorize the Minister to exercise control by destination, i.e. once a country is designated, the export control authorities will exercise control over all goods exported to that country.

The U.S. government is giving consideration to extension of its own export control system, -partly as a method of seeing that the movement of essentials to ERP recipient countries is maintained and the movement of non-essentials limited, but in large measure as well, based upon strategic and political considerations, to prevent the leakage of vital materials to "satellite" countries either by direct trade or by trans-shipment. This involves the elaboration of a rather complicated policy which has not yet been finally determined. It will, however, be in Canada's interest to integrate its own policy in this respect with U.S. policy and informal assurances have been given that this course will be followed.

Meanwhile, the Department of Trade and Commerce has been pursuing a policy of limited control and no direct efforts have been made to sever trade relations or restrict substantially trade with satellite countries and particularly with Czechoslovakia. Proposed exports of arms or munitions are of course reviewed in each case by the government. Apart from this, normal commercial transactions are allowed to go forward although in specific instances where it is clear that the United States might not grant an export permit in similar instances or where a case is obviously open to some doubt, a permit may be refused or an exporter told there would be little point in applying for a permit. This has happened recently in the case of a proposed order of machine tools for the U.S.S.R.

On the other hand, while an informal arrangement has been worked out by which base metal interests in Canada consult the government before accepting any commitments to, for example, Czechoslovakia, nevertheless there are a substantial number of small orders being placed, particularly by Czechoslovakia for a variety of goods which are being permitted to move forward, - wireless sets, temperature controls and similar technical material as well as certain metals.

One type of case may be fairly easy to deal with, that of the Canadian Council of South Slays, an organization sympathetic to Yugoslavia which has been collecting funds in Canada and using those funds for purchase of goods in Canada from steam shovels to soldering irons for export to Yugoslavia. Since these exports do not produce foreign exchange and are really purchased with funds supplied by Canadians they could be held up for the present under Foreign Exchange Control Board regulations and in future under the general control of destination of exports.

It will in due course be necessary to consider the extent to which the present measures of control over goods other than direct munitions and arms should be extended to place more limitations upon exports. It should be remembered in this connection that it is exceedingly difficult, outside the direct field of arms and munitions, to determine what is vitally strategic material and what is not. Foodstuffs have now become virtually weapons of war and many other types of goods, both manufactured and unprocessed, can be used for either civil or military purposes. It should also be kept in mind that E.R.P. recipient countries in preparing their programmes, with the knowledge and consent of the U.S. government, based their estimates upon maintenance of a steady flow of trade with the Eastern European satellite countries."

" Le Comité du Cabinet sur la politique du commerce extérieur a indiqué son accord avec le contenu de cette note à sa réunion du 7 mai.

The Cabinet Committee on External Trade Policy noted the memorandum with approval at its meeting on May 7.