Present

The Minister of Finance, (Mr.Fleming),

The Minister of Trade and Commerce, (Mr.Churchill).

The Secretary to the Cabinet, (Mr.Bryce),

The Deputy Minister of Finance, (Mr.Taylor),

The Under-Secretary of State for External Affairs, (Mr.Léger),

The Deputy Minister of Trade and Commerce, (Mr.Sharp),

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

Mr. S.S. Reisman, (Department of Trade and Commerce),

Mr. J.F. Grandy, (Department of External Affairs),

The Assistant Secretary to the Cabinet, (Mr.Martin).

Also Present

The Canadian Ambassador to the United States (Mr.Robertson).

1. The Minister of Finance noted the passage in the communiqué issued at the conclusion of the recent meeting of Commonwealth Prime Ministers in which it was indicated that the Prime Minister of Canada had extended an invitation to Commonwealth Finance Ministers to meet in Ottawa this year, following the annual meeting of the International Monetary Fund and the International Bank for Reconstruction and Development to be held in Washington in September. Mr.Fleming said he would be sending a formal invitation to Finance Ministers in a few days' time. Meanwhile, preparations for the September meeting should be initiated. Such a conference would be for the purpose of arranging a full-scale trade and economic conference in 1958, to be held preferably in Ottawa.
   
   The Prime Minister of Australia would be in Ottawa for three or four days commencing July 21st,²¹ and the Minister of Finance had been asked to discuss matters of mutual interest with Mr.Menzies with a view to facilitating the success of the September meeting of Finance Ministers, and of any conference which might subsequently be held.
   
   For the September meeting the question of physical arrangements should be considered dates, accommodation and so forth. Apart from that, the problem of holding the conference itself bristled with difficulties, including diversity of interests, different degrees of development within the Commonwealth, meetings of minds, and others. Nevertheless, it was to be hoped that something more positive than merely agreeing that no harm would come from holding a conference would be achieved. The principal purpose of the conference would relate to trade, but it should not exclude other economic questions. The agenda of the meeting should be wide enough to make it attractive to as many members of the association as possible, particularly the more newly independent nations. On the other hand, it would be the hope of the government that something useful in Canada's trade interests would emerge from the talks. The government had expressed concern about the extent of Canada's trade in only one channel. The U.S. was a good neighbor and antipathy towards her was not the reason for prompting the government to seek a wider diversification of markets. What was sought was a strengthening of Commonwealth ties through an increase in Commonwealth trade.

2. During the discussion the following points emerged:

   1. As a rule, the meeting of Commonwealth Finance Ministers involved an exposition by the U.K. Chancellor of the Exchequer of the sterling area exchange position, followed by presentations of various domestic economic situations. Last year the meeting also included an exposition by the U.K. of its proposals with regard to the European Free Trade Area. This kind of session might be held on the first day of the meeting in Ottawa, followed by one or two days of the more general discussions which the Canadian government had in mind. The conference might start here on Saturday, September 28 , with a break on the Sunday and then get into the other matters on Monday and Tuesday. The most satisfactory place to hold the discussions appeared to be the Seigniory Club. The Canadian government, as host, should transport the delegates from Washington to Ottawa in government aircraft.

   2. The subjects which the government might wish to have considered at the meeting were related to what the U.K. Chancellor of the Exchequer might normally present to this annual gathering. For example, a discussion of the facts of the existing sterling area exchange position would lead into trade and the financing of development. From the Canadian point of view, this latter item might not be one which it would be desirable to have on the agenda. Most of the Commonwealth was in a deficit position and Canada itself was a net importer of capital. Even so, if the agenda included an item on the financing of development, practically everyone at the meeting would look in Canada's direction. This should be considered in relation to the form of the invitation to Finance Ministers. It was said, on the other hand, that it was nothing new for Commonwealth Finance Ministers to discuss financing of development at these annual meetings. What would be new would be for Canada to introduce the subject, and if this happened we would be regarded as forthcoming in the matter. However, it would be worth risking discursiveness in discussion, brought about albeit by the form of the invitation, if this succeeded in appropriate first-class representation at the meeting.

   3. The field of communications between members of the Commonwealth might be an item for consideration. A new direct cable from Canada to the U.K. had been approved in principle and this had emphasized the inadequacy of other links in Commonwealth communications. Improvements in this field might facilitate increased trade and at the same time would involve no tariff problems. Canada might even consider a larger share in the cost of any new facilities than might otherwise be the case. This kind of an approach was related to a community of interest amongst members of the Commonwealth as against divisions in other fields. The project was a large one, involving approximately $200million, with the work taking perhaps as long as ten years. It was pointed out that pursuing this suggestion would involve a departure in policy because when the facilities had been split up some years ago, Canada had tended to go her own way.

   4. There were probably a number of things which the Canadian government might do by itself which would promote greater trade. However, it was a different matter to set up an agenda and hold discussions about items in which all members of the Commonwealth might take a similar interest. It was of the essence to find items where there was such a common interest. On preferences, there would be differences. Canada desired to increase her trade with other members of the Commonwealth, whereas other Commonwealth countries wished to increase their trade with the U.S. It seemed, therefore, that it would be necessary to look outside what could be considered the normal trade field for agenda items. It was said, on the other hand, that while it would be desirable to have a number of strings to our bow in organizing and preparing for a meeting, it would be undesirable to be distracted from the main objectives of trying to increase trade and of trying to get away from having such a high proportion of our trade concentrated in one area. As regards our trade relations, they should be examined not only with our Commonwealth partners, but also with other countries. For example, it would probably be necessary to hold discussions with the Common Market countries, if only to protect future wheat sales.

   5. There was some doubt as to whether, in the invitation for the September meetings, it should be stated that the purpose was to discuss the plans for a larger trade and economic conference, or whether the letter should speak only in more general terms on Commonwealth trade and economic relationships. Direction on this point was required.

   6. If Ministers, other than Finance Ministers, and their officials were desired at the September meeting, the letter of invitation should be drafted in such a way that it would make this possible. Otherwise, it could be expected that only Finance Ministers would attend.

   7. It would be desirable to have background material available for the use of the Minister of Finance and the Prime Minister in their discussions with the Prime Minister of Australia in about two weeks' time. Australia now appeared to be on the road to giving up her preferences in the U.K. in exchange for concessions elsewhere and would likely be accepting more European imports and imports from Japan. Australia had not had much trade with Canada which would make the discussions with Mr.Menzies not too easy. Another factor to be kept in mind was that Australia, and NewZealand also, by and large discriminated against Canada and we had been urging the Australians to refrain from these practices. Mr.Menzies might feel that Canada would be revising its past attitude if we were to suggest that the important thing was to maintain Commonwealth trade.

   8. In the material for use in the talks with the Australian Prime Minister, the sentimental approach, that anything which would strengthen the Commonwealth as a force for good was desirable, should be noted. The opportunities for improving Australian trade with Canada and for improving trade among other Commonwealth countries should be explored. The fact that notice had been given to the Australians that Canada wanted to renegotiate some tariff schedules should not be overlooked.

   9. Given the existing framework of current conditions, which included the fact that no new preferences could be expected, the need for capital particularly by the under-developed members, etc., it seemed that any proposed Commonwealth discussions would lead into consideration of the dollar-sterling area position and the prospects of sterling convertibility. This, in turn, would lead again to talk of the collective approach.

   10. There would be major G.A.T.T. discussions later this year, including G.A.T.T. consideration of the Free Trade Area and the Common Market. As far as Canada was concerned, we might have important tariff items to renegotiate, such as steel and pipes and tubes, and these negotiations would in the main be with the U.S. as our principal supplier of these items. These factors would circumscribe any Commonwealth discussions at a major Commonwealth trade and economic conference in 1958. In addition, the U.S. Trade Agreements Act would be up for renewal in 1958 which would further complicate Commonwealth discussions.

   11. Officials should prepare information on what a 15 per cent diversion of imports from the U.S. to the U.K. would involve.²² It was also necessary to have considered the implications of accepting sterling for some of our exports. In connection with the first of these two points, it was to be noted that in times of prosperity imports from the U.S. rose in relation to imports from other countries; the reverse was true in depression years.

   12. Serious thought should be given to the possibility of reaching an agreement with the U.S. on disposals of wheat and other agricultural products. The matter was urgent in that U.S. congressional steps in this connection for the next fiscal year were now almost completed. One possibility would be for Canada to transfer a significant quantity of wheat to the deficiency areas of the Commonwealth, to be done in concert with the U.S. What should be aimed at was the preservation of commercial markets of both countries and an agreement as to areas where each might give away surpluses.
       
       If it were considered desirable to pursue this question in Commonwealth talks, it should first be initiated with the U.S. and done so reasonably soon. In thinking about such an approach, the Australian position should not be forgotten as she was a fairly large supplier of wheat for some of the Asian members of the Commonwealth. It should be remembered too that the cost of giving wheat away was very heavy. Including freight, transferring a bushel of wheat to India amounted to $2. Exploring such possibilities might soon become public knowledge and would lead to the danger of losing cash sales.

   13. India's continued membership in the Commonwealth was uncertain and she might well decide to leave. If this occurred, Pakistan and Ceylon would probably follow. It was important, therefore, in considering the future of the Commonwealth, to strengthen relations with India as much as possible.

3. Conclusions
   1. Meeting of Commonwealth Ministers in September in Ottawa.

      1. Letter of Invitation. The letter to be sent to Commonwealth countries, presumably by the Minister of Finance, should be addressed to those who were represented at the recent Prime Ministers' Meeting. However, it should be kept in mind that Malaya will gain her independence on August 31st, and should in due course be included. The invitation should go to Finance Ministers but should be framed in such a way that it would be open to them to bring other Ministers or officials as they may choose. The drafting of the invitation would require more explicit instructions from the Prime Minister as to whether the proposed September meeting was for the purpose of discussing plans for a conference in 1958, or whether it should speak only in more general terms with reference to trade and economic matters.

      2. Agenda. This to be the subject of an exchange of views between now and September. Officials were instructed to prepare immediately a memorandum on what the nature of a general conference in 1958 might be, and to include therein items for discussion at such a meeting, to be available for Ministers by the end of the week for their consideration and revision.

      3. Physical Arrangements. Discussions to be held at the Seigniory Club if possible, the Government Hospitality Committee to look into accommodation problems. As host, Canada would arrange to bring delegates from Washington to Ottawa following the Bank and Fund meetings. If possible, the conference to start on Saturday, September 28th, and continue through the following Monday and Tuesday.

      4. Course of Discussions. Saturday, September 28th, would be devoted to the normal post-Bank and Fund discussions usually held by Commonwealth Ministers, including a review of the sterling area position and presumably a further report on the European Free Trade Area. Sunday would be free. Monday and Tuesday would be devoted to consideration of the wider trade and economic questions and to preparations for the holding, in Ottawa if possible, of a 1958 conference.

   2. Discussions with the Prime Minister of Australia. A brief to be prepared to include a review of the opportunities for improving trade with Australia and of the opportunities for improving trade relations among Commonwealth countries; it being kept in mind that Canada had given notice to Australia that she wished to renegotiate certain tariff schedules; the memorandum for the September meeting would be helpful in this connection.

   3. Diversion of Imports from the U.S. to the U.K. and Commonwealth Countries. A memorandum to be prepared on what the suggestion of a 15 per cent diversion would involve.²³

   4. Acceptance of Sterling for Canadian Exports. A memorandum to be prepared by the Bank of Canada on the implications of such a step.

W.R. MARTIN

²¹ Voir/See Document 341, note 13.

²² Le 6 juillet 1957, de retour à Ottawa après la Conférence des premiers ministres à Londres, le premier ministre Diefenbaker a annoncé qu'il chercherait à dévier 15% des importations canadiennes en provenance des États-Unis vers des importations en provenance du Royaume-Uni.
On July 6, 1957, after returning to Ottawa from the Prime Ministers' Conference in London, Prime Minister Diefenbaker announced that he would seek to divert 15% of Canada's imports from the United States to imports from the United Kingdom.

²³ Voir/See Document 345.