1. The Prime Minister, referring to the discussion of June 16th† read a top secret and personal message which he had received from the U.K. Prime Minister on June 18th&dager; In view of the urgent character of the message, it had been discussed with the Minister of Finance on June 19th† and a reply had been sent that night to Mr. Attlee.

Mr. Attlee's message stated that, in the last six weeks, the dollar deficit of the sterling area had been increasing to an extent which was causing grave concern. U.K. reserves were falling rapidly and the seriousness of the situation would be revealed with the publication of figures at the beginning of July. These developments were attributed to the impact, directly and indirectly, of the trade recession in the United States. As an interim step, all new commitments for dollar expenditure had been stopped and the U.K. government proposed a meeting of Commonwealth Finance Ministers in London early in July. The comments of the Canadian government were sought on this proposal.

In the reply which had been sent it was explained to Mr. Attlee that no immediate indication of the views of the Canadian government could be given. In the absence of most members of the Cabinet, it was at present impossible to have the full consultation which was necessary. In the circumstances, it was urged that no announcements be made at present.

2. Mr. St. Laurent stated that, to explain the Canadian viewpoint, and to represent the views of the Prime Minister, and the Minister of Finance, the Secretary to the Cabinet was proceeding to London immediately. Mr. Robertson would, of course, make no commitments involving the Canadian government. He would, however, urge the undesirability of the U.K. government or Commonwealth governments taking any step which might have an adverse effect on U.S. public opinion, particularly in relation to current consideration by Congress of measures of European assistance.

3. Mr. St. Laurent also read a message which had been sent to the Secretary of State for Commonwealth Relations in reply to his message of May 27th concerning relaxations on imports from soft currency areas.

The message explained that the Canadian government fully understood the U.K. desire to exempt from quantitative restrictions imports from O.E.E.C. countries with which the United Kingdom enjoyed a favourable balance of trade; similar treatment for dependent overseas territories could be accepted. Canada would, however, be seriously worried about extension of relaxations to all soft currency areas or even to other overseas members of the sterling area. It was urged that the United Kingdom endeavour to separate the two aspects of their proposals. In any event, it was hoped that any public announcement could be deferred until there had been an opportunity for full Cabinet consultation.

(Top Secret and Personal message for Mr. St. Laurent from Mr. Attlee, June 17 and reply, June 19, 1949; Telegram No. 33, External Affairs to Secretary of State for Commonwealth Relations, June 19, 1949)²⁹

4. The Cabinet, after considerable discussion:

(a) noted with approval the report of the Prime Minister concerning the reply sent to the mesage from Mr. Attlee concerning possible Commonwealth consultation on trade and financial problems; and

(c) noted with approval the reply sent to the message from the Secretary of State for Commonwealth Relations concerning proposed relaxation of U.K. import restrictions and the Canadian attitude thereto and agreed that the Canadian Ambas- sador in Washington be directed to acquaint U.S. authorities informally and confidentially of the nature of the Canadian reply.

²⁹Documents 618-620.