Present

Mr. R.B. Bryce, (Secretary to the Cabinet).

General Charles Foulkes, (Chairman, Chiefs of Staff).

Mr. F.R. Miller, (Deputy Minister of National Defence).

Mr. D.A. Golden, (Deputy Minister of Defence Production).

Dr. A.H. Zimmerman, (Chairman, Defence Research Board).

Mr. L. Rasminsky, (Deputy Governor of the Bank of Canada).

Mr. D.V. LePan, (Assistant Under-Secretary of State for External Affairs).

Mr. A.F.W. Plumptre, (Assistant Deputy Minister of Finance).

Mr. W.R. Martin, Mr.D.B. Dewar, (Privy Council Office).

Also Present

Mr. F.G. Hooton, Mr.R. Grey, (Department of External Affairs).

Mr. F.A. Milligan (Department of Defence Production).

Mr. R.G. MacNeill, Mr.C.L. Read, Mr.E. Gallant, (Department of Finance).

2. REDUCTION OF U.K. FORCES IN GERMANY; SUPPORT COSTS

(Documents ED 7-58 and ED 8-58 had been circulated.)

3. General Foulkes said that before the Panel went on to consider this question, members might want to know that, according to information available to the Delegation in Paris, the United Kingdom authorities were considering postponing the submission of their proposal to reduce their forces in Europe to five brigades, at least until after a Summit Conference.

4. Mr. LePan referred to the points one to four in the last paragraph of Document ED 7-58, and said that they were suggestions for a tentative position to be taken at present by the NATO Delegation, and were not intended to preclude the consideration of any proposals which Canada might make later. There were a number of uncertainties which made it difficult for this country to take a stronger or more definite position at this time. We were not sure, for instance, what would be the results of the reconsideration of strategic thinking that seemed to be underway at the present time, and what the implications would be for the size and nature of our forces and for our defence expenditures.

5. As far as the proposed reductions in U.K. forces in Europe was concerned, we might take a position of clear-cut opposition, which would not be inconsistent with the stand we had taken in the past. On the other hand, it was possible that changes in strategic thinking had undermined the basis for such opposition, and furthermore we might wish to prepare the ground for similar withdrawals of Canadian forces in the future. If this was the case, we should perhaps condone or even welcome the proposed U.K. reductions.

6. It was difficult to assess the real reasons for the strain which had developed between the U.K. and Continental countries on the question of reductions. The Continental countries seemed to be disposed to think that the U.K. was trying to withdraw from military responsibilities in Europe, and the U.K. was in a mood to believe that she was being forced out of Europe. Difficulties over German import restrictions and in the negotiation of a Free Trade Area and, above all, the recent meeting between France, Germany and Italy on co-ordination of defence production might have contributed to this attitude in the U.K. There was a real danger that old suspicions among the European NATO countries were re-emerging, and Canada should pay some attention to the means of avoiding the development of an ugly situation there.

7. Mr. Plumptre suggested that for the purpose of briefing Ministers prior to the Defence Conference, Document ED 7-58 should be expanded along the lines of the statement Mr.LePan had given. It should be indicated to Ministers that, although the financial implications of the U.K. proposal were not great, the broad problems involved were very important. It should be recalled that Canada had relinquished its claims for support costs in Germany, and that if a similar action were taken by the United States, there would be plenty of money made available to meet the U.K. proposal. If, nevertheless, some financial assistance from Canada would help the problem, such assistance should be seriously considered. This would not mean that we would favour common financing as a means of assisting the U.K., for that would probably be an inappropriate method.

8. General Foulkes expressed concern about the position of some other member countries, for instance Greece and Turkey, who were in a worse financial position than the U.K., and for whose forces a given amount of financial assistance would go further.

9. Mr. Miller said that since the forces in Western Europe were not an effective shield now, the proposed U.K. reduction could not be objected to on military grounds as destroying the shield concept. Furthermore, the amount of money involved in the U.K. proposal was not large. It seemed, therefore, that a great storm was being created by a problem that was rather small in both military and financial terms.

10. Mr. LePan said the U.K. might have decided that because of their unfavourable currency reserves situation, they must draw a firm line on expenditures, and stick to it. They might regard their support costs proposal as representing their maximum possible contribution. However, it was hard to determine what weight should be assigned to the financial considerations entering into the U.K. decision on this matter.

11. Mr. Rasminsky doubted that the savings to the U.K. that their proposal would provide was the determining consideration. The U.K. had made considerable additions to their exchange reserves recently. Was it not possible that the U.K. were using their proposal as a lever with which they hoped to obtain better terms in the European economic arrangements that were being negotiated?

12. Mr. Plumptre said that if the proposal were meant as a bargaining counter, it would have been much more effective to have asked for more support for seven brigades rather than less support for five. The U.K. government was probably concerned about meeting their obligation to end conscription.

13. Mr. Bryce said that the immediate problem was to provide the Delegation with guidance for the preliminary discussions of the U.K. proposal. No firm instructions could be provided without consulting Ministers, and it was not possible to propose a course of action to Ministers until we had a better appreciation of the German reaction to any Canadian offer to share in the provision of assistance. Was the immediate guidance suggested in the last paragraph of Document ED 7-58 satisfactory to the Panel?

14. Mr. Plumptre suggested that point 3 of the suggested guidance might be revised. We should indicate that we regarded a solution as important for the Alliance, and that at the official level we would not shy away from a solution involving financial implications. Multilateral financing would not, however, be an appropriate means of providing assistance, particularly because of the difficulties it would entail for Canada, after having waived support costs for our own forces.

15. Mr. LePan said that our Delegation had been asked by the U.K. not to say anything in the preliminary stages of discussion that would prejudice the possibility of a U.K.-German agreement on the U.K. proposal. Therefore, if the Panel agreed to the four points in Document ED 7-58, with the amendment to point 3 that had been suggested, this should be sufficient guidance for the Delegation at present.

16. The Panel:

    1. approved for the guidance of the NATO Delegation the four points in the last paragraph of Document ED 7-58, as amended during the discussion;

    2. agreed to give further consideration at a subsequent meeting to the Canadian position on the U.K. support costs proposal.⁵⁸

W.R. MARTIN
Secretary
D.B. DEWAR
Assistant Secretary

⁵⁸ Cette question a été réglée avant la rencontre du Comité, qui a suivi et s'est tenue le 27juin 1958.
This issue was resolved before the next meeting of the Panel occurred on June 27, 1958.