2. Prof. Erhard opened the discussion by saying that his Government was impressed by the great economic future which lay in store for Canada and would wish to collaborate in the development of Canadian resources. He had come primarily to explore the possibilities of expanding the volume of trade between the two countries. Inasmuch as his Government followed a liberal trading policy similar to that of the Canadian Government, his visit was not, he stressed, intended to lead to the negotiation of any bilateral arrangement but to assess Canadian export availabilities and to discuss ways and means in which German exporters could capture a larger share of the Canadian market. Although Germany was now a net creditor in the European Payments Union, she was still confronted and would for some foreseeable time continue to be confronted by a dollar shortage which made it necessary for her to increase her sales to the dollar area. Germany's particular interest in Canada has been reflected in the degree of German participation in the International Trade Fair which, the Minister added, had been a pronounced success insofar as his country was concerned.

3. In reply Mr. Sharp of the Department of Trade and Commerce assured Prof. Erhard that the Canadian Government would be pleased to see an increase in our trade with Germany. No obstacle was being placed in the way of German exports to this country and, while the Government could not direct Canadian importers in their purchases, it would do its best to encourage the efforts of German exporters to enter the Canadian market. Mr. Sharp then asked the Minister to raise any specific issues he had in mind. The ensuing discussion is summarized in the following paragraphs.

Pork

4. Domestic prices for pork were increasing in Germany and the German Government would be interested in importing substantial quantities, in forms other than canned, during the next three to four months. Although he was not in a position to enter into definite commitments, Prof. Erhard thought that German purchases would amount to something in the neighbourhood of $5,000,000, if the price were satisfactory. There was a strong possibility that Germany could become a permanent market for Canadian pork.

5. Prof. Erhard was told that the current Canadian surplus amounted to some 40 to 50 million pounds. The price for frozen carcasses would be roughly 30 to 32 cents per pound f.o.b. Montreal. On this basis, Germany might purchase approximately 15 million pounds. The Department of Agriculture would look into the price question in more detail and it was agreed that a memorandum outlining the Canadian position would be provided to Prof. Erhard by the Canadian Commercial Secretary as soon as possible after his return to Bonn.

Metals

6. Germany is interested in increasing her purchases of nickel, iron ore, copper and, to a lesser extent, aluminum in respect of which the supply situation was softening. Any increase in German purchases would, of course, have to depend on Canadian export availabilities.

7. Officials of the Departments of Trade and Commerce and Defence Production suggested that, while there were certainly export surpluses of these commodities, there were also export commitments. As Prof. Erhard was aware, the Canadian Government did not direct sales of raw materials. On the other hand, the impact of defence production on the availability of the raw materials the Germans had in mind was lessening and we could hold out definite hope for easier availability in the future.

8. Prof. Erhard added that the amounts of these raw materials which Germany could purchase were difficult to forecast at this stage and depended, to some extent, on German sales of machinery, machine tools and precision instruments to Canada. He thought, and the Canadian officials concerned agreed, that it might be desirable for a group of German industrialists to come to Canada and assess the potentialities of the Canadian market, with particular reference to the type of products normally imported by Canada from the United States.

Lumber

9. There was a definite and permanent interest in Canadian lumber in Germany. While Prof. Erhard was not in a position to give any figures of approximate import requirements, it was agreed that this question would be pursued by the Department of Trade and Commerce through their Commercial Secretary in Bonn.

Trade Fair

10. Germany had been pleased by the results of German participation in the 1952 Fair, and the Government had already decided that Germany would be represented again in 1953, probably on a more extensive scale.

Export Bonuses

11. In reply to a question, Prof. Erhard said that German exporters were permitted to retain part of their earnings from sales to the hard-currency countries. On the other hand, the German Government had conceded the "right of retention" to exporters only reluctantly and in self-defence against countries where this system had been introduced. The German Government shared the feeling of the International Monetary Fund that the export bonus system should be eliminated and would be prepared to do so as soon as other countries agreed to do likewise.

East-West Trade

12. Prof. Erhard suggested that the potentialities of German trade with Eastern Europe had been somewhat over-estimated. Even in normal pre-war times this trade had never accounted for more than 15% of Germany's total trade. Accordingly, while it could not be denied that the resumption of trade with the East would help, the present Western orientation of German trade was bound to be a permanent feature.

German Assets in Canada

13. A prolonged discussion developed on the question as to whether or not Germany could enter into bilateral discussions with Canada on this subject. Subject to clarification of the legal implications of the provisions of the Paris Agreements and the contractual arrangements which are shortly to be ratified, the Germans would like to discuss this matter with the Canadian Government. This would not necessarily mean "negotiation", and it would cover not only German assets but also the question of German trade marks and patents.

A.E. RITCHIE