We were visited today by Mr. Davis, who was anxious to find out whether we were familiar with the details of German military aircraft procurement plans and whether any policy decision had been taken regarding Canadian mutual aid to Germany now that she has entered NATO.

2. On the first point, we told Mr. Davis that we in this delegation had not been closely concerned and it was most unlikely that we would be in future as all major decisions were a German national responsibility and would accordingly be taken in Bonn (Mr. Davis voiced his appreciation of informal assistance given by the Bonn Embassy in placing him in touch with influential Germans in Blank's office). We had, as yet, only very general preliminary contacts with the German delegation which had not been finally constituted. In particular, no German defence production adviser had been appointed to date and, even after his nomination, it was improbable that he would be directly involved in the detail of German procurement planning. His task would presumably be participation in the discussion of certain broader issues affecting all NATO partners within the Defence Production Committee. If, however, we did pick up any information which might properly and usefully be passed on to Mr. Davis, we would be glad to do so.

3. On the second point, we reminded Davis of our method of allocating mutual aid and, as a matter of principle, we did not believe that there could be any such thing as "a direct Canadian mutual aid contribution to Germany". We stated that we considered mutual aid to be generally on the decline, that emphasis was switching increasingly to North American defence and we, therefore, thought it unlikely that the Canadian Government would be prepared to enter into further long term mutual aid commitments such as the supply of Sabre VS or VIS which might, on standing group recommendation, be allocated to Germany. In spite of the foregoing, Davis asserted that Notman intended to visit Mr. Howe in the near future to see whether the latter would use his influence to press for a further Sabre mutual aid contribution on the grounds that it would assist very materially in maintaining in essential element of Canada's defence production base.

4. There remained the question of sales. Davis evidently hopes that the Canadian Government will use its good offices to influence the Germans to purchase defence equipment from Canada and that official pressure will also be exerted on the United States, either directly or through the Germans, to take active account of Canadian facilities in any United States MDAP programmes for Germany. The underlying motive would be to secure the equipment of German air units in the fourth ATAF with Canadair Orenda-equipped Sabres rather than with new North American J-47-equipped aircraft. Davis thought that the Germans themselves would be reluctant to accept used Sabre IIS under any re-transfer arrangement.

5. Davis admitted that he had come to "cry on our shoulder". Canadair's employment level had dropped to 7,000 and would be further reduced unless additional orders could be found in the immediate future. No stone could be left unturned in the search for orders. Canadair had, in recent months, lost a large proportion of highly skilled labour which would almost certainly be needed later on the Bristol 175 project. It would be most difficult to re-assemble this skilled labour force as many workers in it had gone to the United States. He thought that Canada's attitude regarding influencing the pattern of German defence procurement had been too gentlemanly. Neither the United Kingdom nor the United States had observed the rule during the last six months that the promotion of commercial interests should not be allowed to interfere with the ratification of the Paris agreements. This Canadian argument was in any case no longer valid, and, even if much time had been lost, he thought that the Germans would prefer to do business with Canada rather than with the United States. The latter had overplayed their hand. However, the Germans would shortly be taking firm decisions and further delay was most undesirable.

6. We gather from Davis that a visit to Canadair and to AV Roe was made recently by a Dr. Schellenberg and a Mr. Lengerke, who claimed to be undertaking a survey for the German administration of types, price and availability of aircraft in which the German air force might be interested. They are said to have quoted a requirement for 600 sabres. Davis, pending a further investigation of his own, has some doubts regarding the credentials of these two individuals and the German authority for their visit. He also mentioned in strict confidence that General Dynamics Corporation were actively considering the establishment of an aircraft plant in Germany which would be largely "germanized" in respect of both capital and personnel. Its object would be to cater for replacement equipment when either obsolescence or attrition demanded a changeover from initial aircraft to be obtained from abroad. He did not think that there would be any serious competition from pre-war German aircraft manufacturers.

7. Canadair may well try to pursue their enquiries and trade promotion efforts through us and it is possible that similar pressures may arise from other Canadian producers of defence equipment. We should accordingly be grateful for your guidance on the line which we should take on matters of this kind. We are sending by bag a copy of this telegram to Bonn and you may think it advisable to inform Washington.

L.D. WILGRESS