1. The Chairman reported that consideration had been given in the Departments of Finance and Trade and Commerce to the despatch of. letters to those countries with unexpended balances of Canadian credits still available, informing them that Canada's present foreign exchange position would require that in future certain goods be sold only for U.S. dollars or their equivalent. These goods would include the main primary export commodities, wheat and grains, flour, copper, lead, zinc and items containing a substantial amount of steel.

In effect this limitation would result in a virtual freezing of the outstanding credits. Countries involved were Belgium, China, Czechoslovakia, Netherlands (including Netherlands East Indies) and Norway. Since certain restrictions on expenditures by China already existed and the amount outstanding for Czechoslovakia was relatively small, only Belgium, Norway and the Netherlands would be substantially affected.

Commodities such as wheat, other grains and flour would not be available in any quantity before the next crop year and control of articles with steel content could be maintained through export permits. It might therefore be desirable to seek the objective of restricting the use of the credits without the despatch of formal letters which might have an unfortunate effect upon the U.S. congressional discussions of the European Recovery Programme, as well as giving the impression of revocation or cancellation of credits.

An explanatory note on the external credits has been circulated.

(Secretary's Note, March 1st and attached memorandum, Department of Finance, February 28, 1948, CCETP Document No. 1).†

2. The Assistant Deputy Minister of Finance explained that a formal letter had been contemplated because Norway and Belgium were accustomed to buy directly in Canada through private channels, and not through any Canadian government agency. II might be possible to arrange informally with those countries for consultation with appropriate governmental representatives before placing orders in Canada.

3. The Deputy Minister of Trade and Commerce inquired whether cash purchases made by the countries concerned as a result of the proposed limitation on the use of credit should be credited towards the proportion of cash purchases which the countries concerned had undertaken to make in relation to the use of the credit.

4. The Minister of Finance raised the question of the attitude to be taken towards further use of the credit extended to Czechoslovakia in view of recent developments in that country.

(Memorandum, Assistant Deputy Minister of Finance to Minister of Finance, February 25, 1948).†

5. Mr. Bryce reported that a special proposal had been received from the Netherlands Government which was anxious to be permitted to make use of the balance of its credit, some $20 millions (excluding Netherlands East Indies), before expiry of the loan.

Netherlands representatives had suggested that if permitted to draw on the balance of the loan they would be prepared to meet their parallel commitments to make a given percentage of cash purchases through the purchase of Canadian dollars with U.S. dollars.

6. The Committee, after considerable further discussion agreed:

(a) that it would not be desirable to proceed with the despatch of a formal letter to representatives of countries with outstanding credits in Canada restricting the use of those credits, but that the Deputy Minister of Trade and Commerce and the Assistant Deputy Minister of Finance should seek to achieve this end through informal conversations with representatives of the countries concerned, particularly Belgium, Norway and the Netherlands, and should suggest that those countries consult the appropriate governmental representatives in Ottawa regarding the placing [f] orders in Canada;

(b) that no special restriction be placed upon the use of the outstanding credit to Czechoslovakia apart from the general restriction applying to all countries contemplated in (a) above; and

(c) that while it did not appear desirable to make special arrangements to facilitate use of the credit to the Netherlands, the Minister of Finance should discuss the matter further with Netherlands representatives and report.