I should like to suggest that, when Cabinet reverts to the consideration of this matter, you take the position that a decision on the 1958-59 Colombo Plan programme for India be taken independently of whatever decision may be taken on the proposals which have now been put to the Cabinet by Mr. Churchill. ³¹³

In taking this line you might wish to remind your colleagues of the following considerations which, I feel, argue strongly in favour of our meeting the priority requests which the Indian Government has put before us:

(a) Within the last eighteen months or so India has taken $48 million of Canadian wheat.

(b) Apart from a small quantity of flour taken by Ceylon under the $35 million loan, India has in fact taken up the bulk of that loan ($24.2 million and $8.8 million, or an aggregate of $33 million); this means that she will in due course be paying Canadian dollars for this wheat and in the meantime is paying interest at a rate of 4 1/4%, or about $1.3 million a year.

(c) The proposed Indian programme already contains a $5 million allocation for wheat which at our urging was shipped to India in the previous fiscal year.

(d) It was agreed at the time of the Montreal Conference that the only further wheat which India might be asked to take up before the end of the current fiscal year would be the $8.8 million then still available from the $35 million loan fund; the correspondence embodying this understanding (which carried the concurrence of Mr. Churchill and Mr. Fleming) was sent to you under my memorandum of January 27.? Our loan agreement with India provided that this wheat would have to be shipped before the close of the 1958 St. Lawrence shipping season and all the wheat was, in fact, shipped before the freeze-up of the St. Lawrence.

(e) It has been the consistent view of this Department (which you conveyed to Mr. Churchill in your letter of September 15)³¹⁴ that it would be against our interests to ask the Indians, at a time when they were in severe balance of payments difficulties and in need of industrial commodities vital to their development programme, to use for purchases of wheat any of the $17 million which Cabinet had allocated to them under the Colombo Plan in the current fiscal year.

Furthermore, we virtually undertook, in the context of the meetings held last August under the auspices of the International Bank, to do what we could, and as quickly as we could, to meet the priority import requirements of the Indian Government under our current Colombo Plan programme.

The proposals put to Cabinet by Mr. Churchill raise a number of substantive issues of which Cabinet will wish to be aware before reaching a final decision. I am, of course, primarily concerned about the proposal that $25 million, or fully one-half of the Colombo Plan appropriation available in the next fiscal year, should be set aside for gifts in the form of wheat. A decision in this sense would, in my view, affect the basic premises on which Canada's Colombo Plan operations have been conducted. It would also, of course, have a bearing on the interests of traditional suppliers of wheat and flour to the Colombo Plan area, particularly the interests of Australia which Ministers undertook at Montreal to take fully into account in any disposal programme involving Canadian wheat and flour.

For these reasons you may wish to suggest that an interdepartmental committee of senior officials, which might be headed by the Secretary to the Cabinet, be directed to consider Mr. Churchill's proposals and report back to Cabinet as a matter of urgency.

If this procedural proposal does not commend itself to your colleagues, you will wish to bear in mind that much of the goodwill which Canada has earned in Asia, and particularly from our Commonwealth partners, has been due to the fact that in allocating funds under our Colombo Plan programme we have taken into account the economic priorities set by the recipient countries themselves. In this way we have endeavoured to contribute to what we take to be the long-term objective of any economic aid programme, namely to help the economies of the under-developed countries to become self-sustaining. I do not think that we could claim to continue to be operating within this basic framework if as much as $25 million of our Colombo Plan funds were to be devoted to the disposal of surplus Canadian wheat. However, in the light of the discussions which the Prime Minister had in the course of his recent Commonwealth tour, it would, I think, be possible for officials to ensure that $10 million is taken up by the Colombo Plan countries in the form of wheat in the coming fiscal year and that this wheat is shipped before the end of the crop year.

I understand that the views set out in the foregoing paragraph are shared by the Department of Finance and that Mr. Fleming is being briefed in this sense.

D.V. LEP[AN]
for Under-Secretary of State
for External Affairs

³¹³Note marginale :/Marginal note:
Allocation of $17 m approved by Cab. 30/1/59 R. C[ampbell] O/SSEA

³¹⁴Voir/See Volume 24, Document 424.