Reference: Our despatch No. 1915 of November 9, 1954.?

1. The purpose of this message is to propose that a meeting of the Joint Committee should be held in early June. As you know from previous messages, very strong opposition has developed to the President's modest programme for liberalizing United States foreign economic policy. In our opinion an early meeting of the Committee might do something to stiffen the Administration's resistance to protectionist pressures and to prevent the worst of the possibilities latent in the present situation from being realized.

2. Moreover, we believe it is in Canada's interest that the Joint Committee should be kept alive; and we are afraid if too long a gap is left between meetings we may find it withering. The last meeting of the Committee was held on March 16, 1954 - more than a year ago.¹¹⁸ Admittedly there was a meeting last January between Canadian and United States Ministers which was somewhat similar, both in composition and in intent, to a meeting of the Joint Committee.¹¹⁹ But the meeting here on January 6th, by deliberate decision was not billed as a meeting of the Committee and was not regarded as a substitute for it by the United States authorities. Already the Joint Industrial Mobilization Committee is at least moribund, if not dead; and, in our opinion, the Joint Committee on trade and economic affairs may go the same way unless action is taken on the Canadian side before the summer to arrange another meeting.

3. In our judgment, a meeting early in June would come at a very appropriate time. According to present forecasts, Congress will not adjourn until about August 15. As a result, the fate of many of the economic measures in which we are most interested will, in all probability, still be undecided by early June. On the other hand, the situation here should have clarified enough by then so that the risks and possibilities will be readily discernible. We have no doubt that there will be as much for Canadian Ministers to worry about in six weeks time as there is at present. And their representations would come at a salutary moment.

4. We do not mean that Ministers would be meeting in an atmosphere of crisis. Nor would we look for any spectacular agreement or any very marked change in United States foreign economic policy as a consequence of the meeting. But preventing undesirable developments can be as important as promoting some advance. As we have previously reported, protectionist pressures here have shown themselves to be surprisingly strong. If we are not to be too much hurt by them, the application of some contrary pressure on a continuing basis is necessary. A meeting of the Joint Committee, in our opinion, is best considered as a part of that continuing process. It seems to us that, even if it led to no very concrete results, it would serve a very useful purpose in reminding United States Ministers of how Canada is affected by United States foreign economic policy and by suggesting to them that what might seem like the easy way out of their domestic difficulties might not be so easy after all if the international repercussions were taken into account.

5. We realize that, in considering this proposal, you will require some indication of how we think matters are likely to stand here early in June. In the rest of this telegram we will synopsize our present forecasts in the various fields that might be the subject of discussion at a meeting of the Joint Committee.

6. Trade Agreements Act. We would imagine that by early June Congress will have extended the Trade Agreements Act in some form, or at the very least, be on the point of doing so. As we have indicated in previous messages, we doubt whether the various amendments to give additional protection to particular commodities will be successful. On the other hand, we expect that some amendment to limit the President's discretionary power under the escape-clause procedure will be approved. It hardly needs to be emphasized that such an amendment could be of major concern to us. The possibility must also be borne in mind that, as part of another general surrender, the Administration might agree to an extension of the act for only one year; but we think there is only an outside chance of that being the final outcome.

7. GATT. By early in June we would not expect the new GATT agreements to have reached the floor of either House Consideration of them, however, in the House Ways and Means Committee may well have progressed some distance. On the present showing, it seems almost as likely as not that Congress will not act on the agreement to establish an organization for trade co-operation until next year.

8. Customs simplification. The new bill on customs simplification which has been prepared by the Treasury, we think you will agree, is a very satisfactory measure. However, it has not yet been introduced into Congress, although we have been assured that that will happen within the next few days. By early in June we would expect its fate to be still undecided. So far it has not been the target for protectionist attacks. That may be due either to the fact that it has hardly yet been brought into the open, or to failure on the part of the protectionist forces to realize that its effect would be to facilitate foreign imports. Its great strength at the moment is that it has a convinced champion in the person of the Secretary of the Treasury. But we find it difficult to believe that the bill will not attract strong opposition once its terms become known.

9. Particular protectionist measures.¹²⁰ Even if the various amendments to HR 1 to raise protective barriers against imports of textiles, lead and zinc, crude oil and residual fuel oil, are all defeated, efforts must be anticipated to accomplish the purpose of these amendments by special legislation. In addition, the Administration's policy of restricting oil imports by voluntary restraint on the part of United States importers must cause us concern. There is also a measure before Congress to limit imports of fluorspar which we cannot overlook.

10. Agriculture. When George McIvor, of the Canadian Wheat Board, was here earlier this month and saw many officials in the Department of Agriculture with the Agricultural Counsellor, he came to the conclusion that continuing and perhaps increasing difficulty for Canada's grain trade must be expected from the disposals policy of the United States. The Department of Agriculture, he observed, was under pressure from Congress to get rid of surpluses at a more rapid rate. He told us that he doubted whether Canada could do much to restrain the United States authorities. But some timely words from you and your colleagues might again have the effect of putting a brake on precipitate and damaging disposals, as they have done in the past.

11. Convertibility. It is widely assumed here, as elsewhere, that the Government of the United Kingdom will go to the country late in May, will be returned, and that further moves towards convertibility will probably follow shortly thereafter. On that assumption, it might well be that a discussion between Canadian and United States Ministers of some of the collateral problems would be useful at a meeting of the Joint Committee, if it could be arranged for early June. We will try to send you before long a separate message? on the present United States views on convertibility.

12. Defence Production. As we have already mentioned, the Joint Industrial Mobilization Committee now hardly exists. Only last week, for example, the Washington Office of the Department of Defence Production was informed by the Office of Defence Mobilization here that raw materials questions, on which a direct approach could have been made under the JIMC arrangements, were now to be referred to the State Department. Moreover, as we reported in our telegram WA-13 of January 5,? the United States authorities are likely to propose that the JIMC should be merged with the Joint Committee on trade and economic affairs. It seems to us that there are a number of defence questions which might well be considered at a meeting of the Joint Committee in June. In spite of Chappell's very vigorous and skillful activity, he has the impression that we are not now getting the kind of close cooperation in defence production matters that we had only a year or so ago. As one illustration he would cite the diffidence that has been noticeable here about letting contracts to the Canadian electronic industry to supply equipment for the distant early warning line. Another illustration would be the confusion there has been about the status of the waiver of the "buy-American" legislation granted by the United States Air Force to Canadian suppliers ever since the Department of Defence began to implement the President's executive order on the "buy-American" legislation of last December. Failure of cooperation in the defence production field might create serious difficulties for the Canadian defence programme; for example, the plans to build forty CF-105's will clearly require considerable cooperation from the United States services. At a meeting of the Joint Committee in June, therefore, it might be well to try to repair and improve cooperation in the defence production field.

13. If you agree with the proposal for a meeting of the Committee in early June, no doubt you would want us to invite United States Ministers to visit Ottawa. However, in view of the recent visit of the Secretary of State, we should perhaps be prepared to accept a meeting in Washington if a meeting in Ottawa were to prove inconvenient for Ministers here.

14. This telegram has been approved by the economic officers of the Embassy in synod assembled. Its contents had been thoroughly discussed with the Ambassador before he was called to Ottawa and we know that he is in complete agreement with it.¹²¹