Mr. Fleming welcomed the United States representatives and stated that he was deeply sorry for the absence of Mr. Dulles and Mr. Benson. One of the happiest features of relations between Canada and the United States is the removing of difficulties through the spirit of good-will, frankness and candor. Canadian representatives had no purpose in these meetings but to lay before United States representatives the views of the Canadian Government in a spirit of complete frankness. Perhaps it had been too long since the last meeting,⁵⁰² but the discussions with Mr. Dulles and the President had afforded an opportunity to deal with new problems.

2. Mr. Anderson said that the United States representatives valued the close and intimate character of these meetings. Many problems of increasing interdependence could be solved only by the private initiative of businessmen. Because of this, there was an increasing sense of responsibility. These meetings emphasized the importance placed by the United States on consultation and on the fact that the United States felt that it should go out of its way to consult with Canada whenever any action was being considered which might affect Canada. In his view, problems of interdependence were likely to become more complex. This places on government the obligation to create machinery for frankly and fully discussing emerging problems. The mechanism established in the United States-Canadian Committee was a step towards solving some of these problems.

. . .

Item 2.A

Convertibility, Discrimination against Dollar Goods and Economic Regionalism in Europe

26. Mr. Anderson stated that the United States welcomed the recent moves to non-resident convertibility in Europe which fulfilled one of the hopes of Bretton Woods. The United Kingdom and the European countries had taken courage from the proposals put forward at New Delhi.⁵⁰³ The United States also welcomed the reduction in tariff barriers implemented by countries of the European Common Market. The United States was hopeful that the Free Trade Area problem could be worked out without acrimony. In his view, the European economy was going to be more competitive with United States and Canadian economies and this would require some adjustment on our part. We can assume that more United States and Canadian firms will establish subsidiaries in Europe, particularly if fiscal policies in North America are inadequate. There will also be more competition in such areas as Latin America; North Americans must live up to this challenge.

27. It was important that Canada and the United States should stand together in their common concern to prevent discrimination against the dollar. The European developments were welcome, but Canada and the United States must insist that there is no dollar discrimination. Mr. Anderson recalled that 12 to 14 months ago sterling had been subject to great speculation; there was now great respect for the strength of sterling. In fact, in the United States there were people who were worried about the strength of the dollar in view of the outflow of $2 billion worth of gold. Such an outflow was acceptable if it was for the right purpose. In summary, our attitude to the European developments should be first of all to cheer and, secondly, to make it plain that we would not accept dollar discrimination.

28. Mr. Dillon expressed the strong support of the United States for the concept of the European Common Market, both for economic and political reasons. We should welcome this strong force in Europe as a counter to the Soviet threat. We should accept the fact that anything that strengthens Europe is to our long-range good. As he saw it, the European Common Market would mean short term disadvantages but long term advantages. The United States was distressed over the recent acrimony in Europe, but felt that Europeans should settle these problems themselves; in his view, convertibility justified the belief that these things could be solved within the European context. In fact, convertibility had helped to eliminate some of the Free Trade area difficulties. The problem of dollar discrimination, however, remained. Mr. Dillon briefly reviewed recent developments in GATT on this subject. Before the movement from E.P.U. to the European Monetary Agreement, the United States had had occasion to discuss these matters with the United Kingdom; they were aware that the United Kingdom hoped to go beyond what they had found it possible to do at Montreal. The United Kingdom had agreed to the reference to the removal of discrimination in Mr. Burgess' letter to the Secretary-General. In the United States view, the problem of German restrictions and German discrimination is the main problem; Germany is using dollar discrimination instead of tariffs for protective purposes. The United States is hopeful the Germans will come to accept the alternative objective set out in Mr. Burgess' letter. The United States hoped that the United Kingdom would take further action later this year; surely Canadian and United States objectives in these matters were the same.

29. Mr. Dillon stated that in connection with the broader picture of the economic problems of the under-developed countries and of Latin-America, the United States was proud of the fact that its imports in 1958 had held up pretty well. In fact they had fallen only 3% during the year. He felt that there were two main points which we should keep in mind. The first one was that the price declines in commodities were more than equal to all economic aid going to the under-developed countries. The Commonwealth countries had reached a similar conclusion at Montreal. The United States was prepared to study these commodity problems case by case and to contemplate taking the necessary steps; in the case of coffee, it was participating in the Study Group; and in the case of lead and zinc, it was prepared to work toward such an arrangement. The second point to bear in mind was the importance of the capital needs of the under-developed countries. The difficulties which some of them faced in maintaining the value of their currencies would be assisted by the arrangement to increase the International Monetary Fund. A portion of their development needs could be met by the World Bank. The United States was particularly gratified that other countries, such as Canada and Germany, were prepared to take a greater share of the burden. The United States side would wish to comment later on the proposed International Development Association.

However, at this point he wished to mention that in view of the fact that the European economy was stronger than it had been, we could reasonably expect Europe to carry a greater share of the burden of meeting the needs of the under-developed countries. This would be a major step in reducing the threat of Communism.

30. Mr. Fleming stated that he wished to comment first on the views developed at the Commonwealth Trade and Economic Conference on these matters. He wished to emphasize that the Conference had not been directed against any country. He emphasized that it had been important that the Conference had been attended, not only by the self-governing members of the Commonwealth, but also by those approaching self-government. It was also important to realize that there had been no suggestion of establishing a new system of Commonwealth preferences. No one had breathed such a suggestion. The Commonwealth countries had met and discussed their problems in a world context. The theme of the Conference had been "An expanding Commonwealth in an expanding world economy." Commonwealth countries were endeavouring to help themselves without hurting anyone; this would inevitably help other countries. In particular, the Conference helped to achieve a common front on the proposals to expand the International Monetary Fund and the International Bank for Reconstruction and Development. Another achievement of the Commonwealth Conference was the increased assistance to under-developed countries through the Colombo Plan, through the West Indies, in Africa, and through the proposed Commonwealth Scholarship Programme. These arrangements helped to knit the under-developed countries together and to foster the ideals of democracy which were basic to the Commonwealth concept.

31. The Conference in his view had been outstandingly successful and the proposals had all been outward looking. Canada had pressed for removal of discrimination against the dollar. The Canadian Government had been criticized for this, but on the following day, the President of the United Kingdom Board of Trade had announced United Kingdom decisions and its promises to move further in the removal of dollar discrimination. This, of course, benefitted both the United States and Canada. The recent convertibility of the pound had been hailed here with considerable joy. It may not mean much in trade terms, but it was an important step forward. In the Canadian view, this was no time to let up pressure for the removal of dollar discrimination. In the Canadian view, there was no justification for the maintenance of restrictions. The Canadian Government could see no financial basis for the European countries now preferring imports from non-dollar countries. He had noted with interest the remarks by the United States on the outflow of gold from the United States and wished to emphasize that the Canadian Government had been pleased by the terms of the United States letter to the Secretary-General concerning the European Monetary Agreement; he hoped that the United States would continue to stand firm; the United States should know that Canadians support them in the belief that the justification for dollar discrimination had now gone.

32. As for the difficulty which had developed over the Free Trade Area, Canada was in the same position as the United States. We were concerned over the difficulties between the United Kingdom and France and we wished that we could be more hopeful about the meeting on January 15. One difference between the Canadian and the United States positions that should be borne in mind was the importance to Canada of the United Kingdom market for agricultural products. Canada recognized the importance of European integration but must be concerned, as are Australia and New Zealand, that in the United Kingdom negotiations with Europe due regard should be had for our interests in the United Kingdom market. Canada has, of course, received strong assurances on this point. However, the French position makes it difficult for the United Kingdom to stand firm. In the Canadian view, it would be nothing short of a calamity if the removal of internal restrictions in Europe led to discrimination against the outside world.

33. Mr. Smith commented that the United Kingdom and other European countries had taken a most venturesome step. In his view, the elimination of discrimination should follow logically from these developments. He would ask the question whether this was the time to start scolding the United Kingdom and the Europeans for not moving more quickly.

34. Mr. Anderson referred to the United States views as set out in the E.M.A. letter and emphasized that the United Kingdom had agreed to the statement in that letter. In the United States view, pressure should now be concentrated on the Germans. However, if the United Kingdom did not take further action, perhaps within the next year, he would be inclined to again express United States concern to the United Kingdom, but for the time being, he would let it ride. The United States had also expressed views to the French before the recent moves and proposed to have further discussions with them. In those further discussions, the gratification of the United States at the recent developments would be expressed. They would not press the French again immediately, but would prefer to wait and see how the French economy and the French Government stood up to the problems of convertibility during the next month or so.

Item 2.B

Sino-Soviet Trade and Aid Policies

35. Mr. Dillon stated that he felt that in the last year the true face of Soviet economic warfare had been revealed a few times. There was nothing wrong with trade with the Soviets if it was mutually advantageous and if countries did not become too involved, because the Soviets could then apply pressure. The most obvious cases, of course, were Yugoslavia and Finland. He was particularly concerned about the dumping of Soviet goods in China and Southeast Asia. The Russian disposal of tin had been quite a significant operation. He recalled that in Bolivia the United States role in this operation had been given good publicity; the United States had succeeded in getting the picture across. He thought the United States role was also appreciated in Malaya and in Indonesia. Chinese exports of cotton goods had had an impact on United States sales of cotton to Japan; sales had been reduced to 1 million bales a year. Generally, we should approach these problems by handling each case on an ad hoc basis, in the full knowledge that the West cannot undersell China or the U.S.S.R. on every occasion. Generally, he would hope that the conclusion of any study of these matters would be that there was nothing wrong with trade with the Soviets as long as it was mutually advantageous, and the countries concerned did not get too involved and too committed in the process.

36. Mr. Fleming asked whether there was any change in the attitude of the United States towards international commodity problems and international commodity agreements or arrangements.

37. Mr. Anderson commented that there had been a change, but it was a change in the United States attitude to commodities, rather than to commodity arrangements. The United States had found it wise to be more forthcoming recently in its approach to the coffee problem. It had been willing to participate in a study of the difficulties facing producers. The United States view was that agreements should be avoided which stabilized prices at artificial levels, but that the U.S.A. should be willing to sit down and talk about these things and get clear just what the supply and demand situation for each product was. He had become particularly concerned about the importance for some commodities of European consumption taxes. Reductions in these taxes would help some of the under-developed countries. He would admit that it would be difficult, of course, for some of the countries concerned to change their tax structure.

38. Mr. Smith stated that in his view not all Russian aid should be discouraged. Judgment on these matters depended on the state of the involvement of the under-developed countries. For this part, he wondered whether it would be feasible or desirable to get the U.S.S.R. into some commodity agreements or arrangements.

39. Mr. Dillon commented that the U.S.S.R. had been asked to participate in the United Nations discussions on lead and zinc and in the Tin Council.

40. Mr. Anderson stated that he could not complain if the Russians wanted to buy coffee, but any economic arrangements with the U.S.S.R. worried him. For example, one of the problems in the proposed SUNFED⁵⁰⁵ was the advantage, from the U.S.S.R.'s point of view, of the inconvertibility of the ruble. This would lead to SUNFED becoming a party to "ruble bilateralism." Russian economic arrangements gave them great flexibility in barter deals. Generally, he was worried about possible United Nations developments relating to international capital aid funds. It was for that reason, he felt, some form of international development association which excluded the U.S.S.R. was needed.

41. Mr. Smith asked what was the United States' concept of the strategy which should be adopted to meet the Sino-Soviet economic offensive. Should there be an attempt to counter their efforts, to outbid them and to counter specific U.S.S.R. economic moves? Canada was concerned over the increasing pressure to put a NATO label on Western aid to under-developed countries, such as seemed to be implicit in the proposals put forward by both the Italians and the Germans in NATO.

42. Mr. Dillon commented that it should be borne in mind that the Soviet Union was mimicking the West. He doubted that there should be an effort to meet every Soviet offer or to counter them by moving into particular countries, but the West did need to give hope to countries which wished to remain free of Communist domination. India, he felt, was beginning to realize the dangers of Communism. The best the West could do was to give these countries hope. The United States agreed that the NATO label on aid would be dangerous. It was necessary to proceed on an ad hoc basis and to work with other countries bilaterally. This might eventually lead to some sort of international development association. The sort of programme now in hand should be continued because time was not necessarily against the West.

43. Mr. Anderson felt that the West did have certain advantages in this struggle. Other countries were becoming wary of Soviet entanglements and much preferred dollar loans and assistance, but it was important to bear in mind that the U.S.A. and other countries could not go on going to the United Nations and voting against SUNFED. There was a need to develop an alternative.

44. Mr. Strauss felt there was some virtue in letting the Soviets bleed themselves white in extending aid to the under-developed countries.

Item 3.A.1

Canadian Restrictions on the Import of Agricultural Products

45. Mr. McLain expressed the regrets of the United States representatives for Mr. Benson's absence.

46. Some Canadian actions in this field gave the United States serious concern. It should be noted that certain developments, such as the increase of United States imports of cattle from Canada "put some of us in the hot seat." He would first like to make the point that the abrupt character of Canadian action, for example, the application of restrictions on the import of fowl, was what created difficulties. The embargo on the import of fowl⁵⁰⁶ had caused abnormal retail mark-ups in Canada and completely disrupted normal trade. These had been followed by a complete lifting of the embargo. These abrupt movements caused a "rumpus" in the United States. As for frozen peas, there had been substantial imports from the United States, but Canadian action had been predicated on the sales, at admittedly very low prices, of a few companies in the Northwest. Such sales were not now taking place, but the restrictive action had not been rescinded although the problem was now over.

47. As for the restrictions on the import of turkeys,⁵⁰⁷ which had been first applied on June 17, 1957, the United States had protested this action and had set out its views in three separate Notes. The feeling in the United States Administration was that no entirely adequate reply had as yet been received. Mr. McLain noted that the restrictions were modified in 1958 and allowed for a quota of 300,000 pounds for the balance of the calendar year; however, this was less than 5% of the imports in 1956 for the same period. The United States now asked for a 7 million pound quota for 1959 - one half of this quota to be used in the fourth quarter. This quota would be 75% of average annual imports for the period 1954-56.

48. Mr. McLain wished to comment on the proposed tariff changes on fruits and vegetables⁵⁰⁸, now being negotiated under the provisions of Article XXVIII of the GATT. This was a serious matter for the United States as Canada was proposing increases on some $20 million of trade. He was concerned that the changes in the Customs Act which proposed that values be based on the average values of trade in a preceding period might have the effect of raising values for duty far above actual values. This was quite a change; this all seemed like reversing the trend toward reducing barriers to trade. He doubted that this was a good move, although he realized that these were not major trade items. However, they were of importance to some areas and some segments of the trade.

49. Mr. Harkness stated that, as for the changes in the Customs Act affecting the trade in fruits and vegetables, this should be considered an attempt to prevent dumping in Canada at the end of the United States growing season. Mr. Harkness reviewed the problems for Canadian producers caused by the much larger production of the United States producers and the differences in seasons. A good example was the effect of imports of apricots from the United States in 1957. The imports from the United States were at very low prices and had caused a drastic reduction in Canadian prices, although the United States imports had in fact been small. This had brought no important advantage to the United States, but a "terrible disad-vantage" to Canada.

50. As for the problem created by frozen peas, a review of the pattern of imports showed that the application of the special values in February, 1958, had not reduced imports so much as it had raised prices both to Canadian and American producers. The United States shippers got .5¢ a pound more than they were getting previously; this was not injury but help. As for consultation, it should be borne in mind that action had to be taken quickly; Canada had, of course, given prior notice - the United States Embassy in Ottawa had been informed.

51. As for the problem of fowl and turkey imports, it should be made clear that there never had been a complete embargo. Mr. McLain had mentioned the quota of 300,000 pounds for turkeys in 1958. The actual imports of turkey products in 1958 was about 1 million pounds, as shown by a review of the import permits issued. Mr. Harkness recalled that there had been a revolution in poultry production in both Canada and the United States since 1953; the ability of the industry to increase production rapidly meant that, if the Canadian Government had not taken action, the Canadian industry would have been destroyed. However, the gain to the United States would have been negligible. It should also be borne in mind that prior to 1953 there had been very few imports from the United States; it was after 1953 that a very rapid rise took place. Indeed, there were problems of over-production in both countries of broiler turkeys and of chickens. If Canada were to give a quota in 1959 of 7 million pounds, the price structure in Canada would collapse, and imports from the United States would be blamed. There would be a good deal of bad feeling about this. Surely it would be in the interests of both Canada and the United States to avoid such a development, particularly when Canadian prices were likely to fall anyway. The United States representatives should realize that the Canadian Government has been under very great pressure in this matter.

52. Mr. McLain stated that the United States side recognized the difficulties faced by the Canadians but were concerned that the steps taken were in the wrong direction, and were bad for both Canada and the United States; it put the United States authorities in a difficult position when cattle imports from Canada were increasing sharply. The United States authorities would hope that there could be continued study of these matters with Canadian officials.

53. Mr. Anderson commented that this kind of problem stemmed from the fact that it was impossible to anticipate which way a particular agricultural situation would develop. There should be more effort made to anticipate developments. There should be closer consultation and more effort made to help the public understand these problems. The United States would hope that one of the fruits of this meeting would be that by looking ahead the number of emergency actions could be reduced.

54. Mr. Harkness pointed out that Canada had taken very few such emergency actions. There were only four such provisions in force in Canada; the United States also has four. It was easily agreed that these should be kept to a minimum.

55. Mr. Fleming commented that the Canadian Government had been pressed to take action on many more agricultural products.

Item 3.A.2

Amendments to the Canadian Customs Act

56. Mr. Dillon referred first to the problem raised by the use of the "cost of production" formula. Article II of the GATT provided that value for duty should be based on actual value, not on arbitrary value; in the United States view, the use of the concept of "reasonable profit" could not be anything but arbitrary. Ten years ago, the Canadian Government had reviewed its valuation arrangements to bring them into conformity with the GATT. Just a year ago, the United States had simplified its customs arrangements. The two Governments now appeared to be moving in opposite directions.

57. As for the valuation provisions covering fruits and vegetables (Mr. McLain would speak later on this point) there seemed to be some possibility of arbitrary action, of basing valuation on a single shipment. The Canadian Government had not taken this sort of action in the past. He was concerned that the Canadian action might lead to a considerable disturbance in the trade between the two countries. The United States did not wish to raise this matter in the GATT; in the bilateral talks in Geneva during the 13th Session, he had asked that the Canadian Delegation should make a statement during the Session that these valuation provisions would not be used in a manner contrary to the General Agreement. The Canadian Delegation did not make such a statement, apparently because a reply was then being prepared to the United States Note.⁵⁰⁹ The Canadian Note states that the valuation procedures of the GATT apply only in the ordinary course of business.⁵¹⁰ The United States found it hard to agree to this view; if the Canadian interpretation were adopted, there would be difficulty caused in trade with many countries. The other major point made in the Canadian Note was that these provisions would not be applied in a discriminatory fashion; the United States appreciated this assurance, but this would not really help much if the wrong system of valuation were being used.

58. It is the arbitrary character of the valuation system which occasioned the United States concern; if this legislation were used extensively, it would undermine the basic principles of the General Agreement. Both Canada and the United States feel strongly that the GATT should be the basis of trading relations. The United States hoped, therefore, that these valuation provisions will be used sparingly; indeed, they had hoped that there would be changes in the legislation after the Bill was introduced. The United States hoped that there could, therefore, be close consultation in cases where the Canadian Government considered that the new provisions might apply, so that the United States would have a chance to provide the necessary information and to put forward its views. In this way, the United States could be sure that the provisions were being applied in conformity with the General Agreement.

59. The United States envisaged that the consultations under these new provisions between the two Governments might not be unlike the investigation carried out by the United States Treasury when it investigates a case of dumping. The United States Treasury in these situations carries out a very full investigation so as to find out all the relevant facts before applying the provisions of the law.

60. Mr. Dillon went on to state that the United States raised this matter not only because of its intrinsic importance, but also because of its relationship to other developments, to other action taken by the Canadian Government which might suggest that there was some change of direction in Canadian trade policy. The Canadian Government had taken certain actions under the General Agreement, but without prior notification and discussion with the United States, which was the sole supplier to the Canadian market of the goods concerned.

61. In the case of restrictions applied to the import of turkeys and of other products, there appeared to be no limits being contemplated to domestic production which might develop in the shelter of these restrictions; no case had been presented under Article XIX of the GATT. The United States, therefore, would like to have detailed consultations on these matters before the next session of the GATT. The fact that there had been no prior consultation between Canada and the United States in these matters gave the United States serious concern. Was this to be taken as evidence of a change in Canadian policy? These meetings provided an excellent opportunity to get Canadian views on these matters. In the United States view, that there should be full and prior consultation is basic to all these problems. Of course, once consultation had occurred, the United States realized that "you have to make up your mind." The United States, for its part, had tried to have full consultations when it has found it necessary to apply restrictions; it was hoped that in the future the Canadian Government will find it possible to carry out prior consultation.

62. Mr. Fleming expressed his appreciation of this full statement of United States views. There was no basic change in Canadian policy; the reply of the Canadian Government on these matters as set out in the Canadian Note was a correct statement of the Canadian view (the only change he would make in the Note would be to remove a split infinitive). We could, of course, understand the concern of the United States. It should be recalled that there was an almost acrimonious debate in the House of Commons on this question⁵¹¹ and this had perhaps preven-ted an understanding of the purpose and effect of the legislation. We believed that the Canadian legislation is in conformity with the GATT. We stand by the GATT and the new legislation involved no basic departure from its provisions. Mr. Fleming reminded the meeting of the precise wording of the Canadian Note on these points.

63. The Note had made clear that the "cost of production" provision in the new legislation was substantially different from that in effect prior to 1948. The legislation had indeed been drafted with very great care; as he pointed out in his Budget Speech, the legislation was intended to stop outright dumping, but it had been drafted to be fully in accord with the General Agreement. Mr. Fleming recalled that there had also been the special problem of end-of-season dumping, in such lines as women's dresses, which had been the subject of an amendment several years ago to the Customs Tariff. Mr. Fleming recalled that the legislation prior to 1948, as pointed out in the Note, had not provided a specific test for determining gross profit when the cost of production was being used for valuation. As the Note had pointed out, the new provision applied only where there is material injury to Canadian industry and the test of gross profit was directly related to the profit generally earned in the industry in the country of export. Again, as the Note stated, the legislation provided two safeguards - the Governor-in-Council could at any time revoke orders made under this provision, which in any event expired after one year, and every determination of value was subject to appeal.

64. Mr. Fleming recalled that the Japanese had raised some of these same matters with him when he visited Japan and he had told them what he was now prepared to tell the United States: there would be no discriminatory application of these provisions nor were they directed against any country. He could assure the United States Secretaries that, as long as the present administration was responsible for the application of these provisions, they would not be applied arbitrarily. It was quite true, of course, that the law provided that there were certain things that could be done on the order of the Minister of National Revenue, but from a practical point of view there was no other way in which such customs provisions could be administered. He would wish the United States representatives to bear in mind also that the Canadian Government hoped these provisions would be used very rarely; indeed, they had not yet been used but their existence had already had a salutary effect.

65. As for the provision covering fruits and vegetables (Section 40 A (7)), this had not yet been proclaimed because negotiations concerning the tariffs on fruits and vegetables, on the basis of the Tariff Board's Report, were still underway. It should be noted that the ability of the United States' producers to dispose of a portion of their production at the end of their growing season at very low prices had imposed a very heavy burden on Canadian fruits and vegetables producers. They were faced with competing with a flood of low-priced imports just as their crops were ready to market.

66. The United States Secretaries could be assured that the Canadian authorities are happy to discuss these GATT matters with the United States at any time. In Mr. Fleming's view, there were two kinds of consultations which could be envisaged. The first was an unhurried review on broad questions. The second was consultation in emergency situations such as the need to apply restrictions to the import of turkeys. As for discussions on the procedures to be applied in the implementation of the law and on broad GATT problems, the United States could be assured that Canadian representatives would be happy to discuss these matters.

67. Mr. Dillon stated that he was glad to hear there was no change in Canadian trade policy in a protectionist direction; the effectiveness of these legislative changes depended, of course, on how they were applied. If, in the case of the Customs Act, the United States could have full consultation at an early stage, it would be helpful.

68. Mr. Fleming interjected that he would say at once there would be no difficulty on this score.

69. Mr. Dillon went on the say that he could see the reasons for Canadian concern over values being set by a few special sales at low prices in the United States, but, on the other hand, when there were style changes, for example, so that goods were also being sold in the United States at lower prices, the United States would not feel that such sales were not in the ordinary course of business. Mr. Dillon recalled that these words in the provision in the GATT were related to transactions between parent companies and subsidiaries. One of the reasons for United States sensitivity in this matter was the pressure on Mr. Anderson's Department from Congress to tighten up United States anti-dumping provisions. This so far had been successfully resisted. If the emphasis could be placed on consultation, it would be possible to solve many of the problems. The United States, of course, recognized that particularly in the case of agricultural products, the time factor is quite important. The United States law recognized this point. It should be recalled that, in the case of the restrictions on the import of frozen peas, the door was locked after the damage had been done, and the restrictions applied therefore affected only normal trade; consultation between the two Governments would have brought this point out.

70. Later, during discussion of the Communiqué, Mr. Fleming commented that the wording in the draft Communiqué did not reflect accurately what had been said by the Canadian side on the possibility of consultation between Canada and the United States on the application of the provisions in the amendments to the Canadian Customs Act. The draft Communiqué stated that the Canadian Ministers assured the United States Secretaries "that it was not intended to apply the new provisions in the Act in either a discriminatory or arbitrary fashion; that consultations would be held in each case before applying the new provisions."

71. Mr. Fleming recalled that he had pointed out that there were really two kinds of consultations. First, there was the unhurried consultation on broad procedures and broad problems. The other was consultations that might be carried out before emergency action when particular restrictions were being contemplated. It was not practical to envisage consultations taking place about each instance in which the provisions might be applied, as the draft Communiqué seemed to imply. What was possible was to consult about the nature of the procedures to be followed in applying the new provisions.

72. Mr. Anderson commented that the United States understanding of this discussion was that, although it was certainly true that the nature of the trade in certain commodities meant that there was little possibility of consultation in advance, the United States representatives would like to ensure that there would be prior consultation whenever it was feasible and in as much detail as possible.

73. Mr. Fleming suggested some such phrase as "that consultation would be held wherever feasible before applying the new provisions" would reflect the sense of the meeting accurately. Mr. Dillon said that these words seemed satisfactory to him, but that he wanted to be sure that both sides understood what the words "wherever feasible" meant. In the United States view, "whenever [sic] feasible" meant that prior consultation would take place in virtually every case, and that departure from this general principle could only be justified on the grounds that any delay in introducing the measures contemplated would cause serious hardship. He added that the need for a frank and detailed consultation was the basic point and that the United States would hope that every effort would be made to consult fully in each general case where it was contemplated that the new valuation provisions might apply. (Mr. Fleming did not assent to Mr. Dillon's interpretation of the phrase "wherever feasible.")

74. Mr. Fulton intervened to say that it would be very difficult to apply the principle of prior consultation with respect to fresh fruits and vegetables. He explained that the new Section 40A (7)(b) was designed primarily to deal with emergency situations and that the nature of the trade for these perishable products meant that when a problem came up it was usually of a pressing nature requiring immediate measures. For these reasons, it would be unwise and unrealistic for Canada to give any undertaking on prior consultation in each specific case; all that Canada should be expected to undertake was to hold consultations as to the principles to be followed, on the sort of circumstances that should be present, in invoking Section 40A (7)(b). Once these circumstances arose, however, it would be impracticable to suggest that there be prior consultation before using the Section.

75. Mr. Dillon seemed to accept this point but remarked that in such cases he hoped that full consultations would take place as soon as it was practicable to do so. Some of the concern felt in the United States on this matter would be allayed if the Canadian authorities were to state publicly that the new provisions would be administered in conformity with GATT.

76. Mr. Fleming indicated that it was the Canadian view that such a statement was not called for; the changes in the Act were in conformity with the GATT and, therefore, there could be no question of administering them in any way not in conformity with the GATT.

. . .

Item 3.B

United States Restrictions on the Import of Oil

81. Mr. Strauss commented that the oil problem had developed with the defence and security findings in 1956. It was clear that the United States oil industry could produce more but that its health was imperilled by high imports from low cost producers. The voluntary import program-me had been arranged on an ad hoc basis to end at the end of 1958. It had been hoped that this would deal with the problem. There was now the legal question of whether or not the present programme raised anti-trust difficulties. The voluntary programme had therefore been extended for sixty days to the end of February, 1959.⁵¹² The Canadian interest in the flow of oil to the United States became important in 1951 and reached a peak in 1956-57, in which Canadian exports had been 180 thousand barrels per day.

82. The decline to 75 thousand barrels a day had coincided with the voluntary programme, but not caused by it. It was caused, he felt, by the reduction in the demand for petroleum products and the decline in tanker rates, which had brought about lower oil prices on the Pacific Coast. The reduction in the Canadian exports had therefore taken place in District V. The members of the United States Cabinet Committee were cognizant of the importance of this problem to both countries. There was a joint concern about the defence of North America. At this stage, no one knew what the recommendations to the President would be, but he could undertake that the Canadian authorities would be kept fully and currently informed.

83. Mr. Anderson suggested that Mr. Seaton should comment on this matter, as the administration of any system of restrictions would be under the Department of the Interior. The United States authorities were concerned to ensure continued exploration for oil in the United States. They were aware of the Canadian interest and the Canadian desire that the United States should keep Canada informed while measures were being explored. The low tanker rates seemed to be a very difficult problem. Last year, the United States had been perilously close to mandatory provisions limiting total imports. There had been intensive work to persuade the people concerned that this would be unwise. Once there was a mandatory system, retreat would be very difficult. However, the United States had had to take some action. Pressure could be expected early in 1959. There were many independent operators in the petroleum industry, more in number than there were big companies. He hoped that the Canadians realized that even if they do not like the measures adopted, the United States was faced with very difficult alternatives. The United States, of course, did not wish to offend its closest neighbour. It wished to deal in the proper manner with the countries involved and not to break international agreements. The United States was aware of the importance of oil to Canada.

84. Mr. Dillon commented that the oil situation was not just a United States problem. It was a world problem, because world supply had overtaken world demand. The United States had to take some action to maintain a healthy domestic industry. The present programme did allow for very substantial imports, for imports at a high level, and United States production had had to be cut back.

85. Mr. Seaton thought that there was a real threat of Congressional action leading to a further reduction in imports.

86. Mr. Churchill explained that the Canadian problem was the need to maintain a healthy industry, just as in the United States. During the last ten years, this industry had become important to Canada. United States action was seen in Canada as the cause of a recession in the Canadian oil industry and of a cut-back in Canadian oil exploration. This was extraordinarily serious and the question of United States restrictions on oil was the most important item on the agenda. The Canadian representatives accepted and agreed with the United States concern about the importance of oil to defence. Suez certainly showed that this was so. In his view, considerations of long-term Continental defence arrangements were the key to this problem. Canada and the United States were so closely linked on defence that oil should be considered from this point of view; it was to the advantage of the United States that there be a healthy oil industry in Canada and a healthy rate of exploration. The Canadian Government appreciated the problem faced by the United States in distinguishing between Canadian oil and oil from other friendly countries, but defence considerations clearly indicated there should be priority treatment for Canada. If Canada was treated on the same basis as other countries, it would be most awkward for Canada in the Pacific Northwest. There was important competition from seaborne oil from the Middle East; there had been a sharp cutback in oil exports through the Trans-Mountain Pipeline. It was his hope that during this meeting some understanding could be reached to put Canada in a special category. Perhaps the solution would be to treat oil coming by pipeline differently from seaborne oil and thus to maintain the rate of exploration.

87. It was important for the United States to realize that Canada has been seriously injured by the voluntary programme. The Canadian authorities understood that pressure had been applied to the United States authorities, but the Canadian authorities were also under pressure from Canadian oil producers. The Canadian authorities recognized that the United States faced an awkward short term problem, but hoped that the United States could see that their long term interest lay in the maintenance of a healthy Canadian industry.

88. Mr. Strauss commented that there was some pressure to have no restrictions at all, and that this pressure was gaining. The effect of having no restrictions would be a cutback of imports from Canada to a serious degree. The United States Administration was having to tread a narrow path to avoid either extreme of decision. The United States authorities were trying to find ways of meeting the Canadian plan and yet of not offending other friendly countries. The exchange of views here had been helpful. Indeed, it might be necessary to meet later on on this subject. He did not know what the answer would be, but the United States authorities were fully aware of the Canadian problem.

89. Mr. Dillon commented that there were two points in what Mr. Churchill had said in which the United States had different views. He felt that the cause of Canadian oil trouble was the world petroleum situation, not United States action. The problem was caused by Middle East prices and not by United States action. In effect, Canada recognized this when it asked for special treatment on a country basis. Second, he agreed with Mr. Churchill's assessment of the importance of Canadian oil for continental defence, but United States defence studies showed that Venezuelan oil was also vital. Admittedly, Venezuelan oil was not so secure as Canadian oil, but it was more secure than Middle East oil. Any action the United States took on a defen-ce basis must directly or indirectly recognize the importance of Venezuelan oil. The final solution must be one which disturbed that situation least. There should be some sort of understanding between Canada and the United States to keep Venezuela happy; this meant, of course, an understanding about the maintenance of their position in Montreal.

90. Mr. Smith referred to the paragraph from the recently published Hayes-Coffin Report, on United States oil restrictions. He would like to ask how long would the oil industry have to wait before the United States recognized the force of these arguments.

91. Mr. Seaton and Mr. Anderson both commented that a decision had to be taken before February 28.

92. Mr. Fleming commented that this was the most important item on the agenda. This was an extremely urgent matter. He would draw the attention of the United States representatives to the 1950 agreement on joint defence⁵¹³ which clearly distinguished Canada as a source of supply from other countries, including Venezuela. Their position was not the same as Canada, although of course the political difficulties facing the United States were clear.

93. Mr. Dillon commented that, of course, Venezuela was not the same as Canada and the treatment for Venezuela would not be more generous than for Canada, but some action would have to be taken to keep Venezuelan oil strategically available.

94. Mr. Fleming stated that the Canadian Government was not contemplating any steps which would affect the position of Venezuela in eastern Canada.

95. Mr. Anderson stated that in his view once the move was made from a company basis to a country basis, there would be problems relating to oil sources for the allies of the United States, who depended on quite different sources. We were not going to find ideal solutions to this problem. If there was no war, of course, the demand would grow all over the world. The short term problem had been created by the increase in reserves in the Middle East as compared with the Gulf and Texas areas. He would like to emphasize the point that great effort had gone into favouring Canada under the company arrangements.

96. Mr. Smith asked whether companies investing in the Canadian oil industry also invested in companies in the Middle East. If this were so, there was some danger that Canadian interests might be injured since companies might decide to keep Canadian oil in reserve, because Canada was secure.

97. Mr. Anderson thought that there were no such company tie-ins and that most oil importers in the United States would prefer Canadian oil to Middle East oil.

98. Mr. Strauss commented that the interests of the companies were not before us and did not weigh with the United States Administration.

99. Mr. Harkness commented that he thought careful consideration should be given to Mr. Churchill's suggestion that pipeline oil should be regarded as different from seaborne oil.

100. Mr. Anderson thought that this could be quite dangerous, and would be taken as differ-entiating between countries on a transport basis. Both countries had to be tolerant and to recognize the political difficulties faced by the other, and the political difficulties which would arise from having no restrictions or from having a mandatory system imposed by Congress.

101. Mr. Fleming commented that the decision to be taken by the United States was of great and far-reaching import.

Item 3.B.2

United States Restrictions on the Import of Lead and Zinc

102. Mr. Seaton recalled that with the upswing in demand following the outbreak of war in Korea increases in production had taken place, and largely outside the United States. In 1951 and 1952, there had been shortages, particularly in Europe. In 1952, prices began to fall off and in September, 1952, the previous Administration had asked the Tariff Commission to look into the problems created for United States producers. In May, 1954, the Tariff Commission had reported. It had recommended the maximum possible tariff increases. The President had rejec-ted this recommendation and the stockpiling programme had gone forward. There had been a general invitation to other countries to discuss some sort of international programme and the barter programme had been developed. There were, of course, objections to barter. The price had continued to decline and the United States had looked at every possible remedy; they had contemplated a sliding scale of rates.

103. It was important to bear in mind that throughout this period the United States could have used the escape clause. In 1957, the matter was referred again to the Tariff Commission and they had reported in April, 1958; there had been a unanimous finding of injury to the industry. As for the remedy, the Tariff Commission had split - three members had recommended the maximum duties and restrictive quotas. Two others had recommended the withdrawal of the negotiated duty reductions. At the same time, the Reciprocal Trade Agreements Extension Act was before Congress; lead and zinc was produced in 40 states and quite important in at least 20 states and it was, of course, important to preserve the integrity of the escape clause. The Administration had put forward a stabilization plan which had been defeated in the House of Representatives. They had taken part in an international conference but there had been no result. In December, the United States had been faced with a fact and not theory; 30% of the lead and zinc mines were unemployed.

104. The United States was willing to pursue the study of this problem and to consider any international solution. If a successful international solution were found, they would be prepared to set aside the import quotas. Their quotas, of course, had brought certain benefits. There had been increased prices for lead and zinc. Action by the United States Administration had headed off Congressional action. The United States was not embarking on a programme of restrictions, and was trying to avoid damage to Canada. It had only embarked on these measures after exhausting all other forms of relief. He would recall too that there had been benefits to Canada under the barter programme and that the stockpiling arrangements had kept prices up. The United States Administration was ready to discuss and explore any aspects of these problems, but he would wish to stress that United States action had prevented further declines of prices and production in the United States. There had been no increases of employment in the United States lead and zinc industry.

105. Mr. Fleming thought it would be useful to have a description of the source of pressure for restrictive quotas.

106. Mr. Seaton explained the importance of these in Congress. The Middle Western and South Western states were important producers and they were heavily represented in the opposition.

107. Mr. Dillon commented that Mr. Harkness' argument about frozen peas applied to this situation. He assumed that a permanent study group was being set up and thought the problem was to regulate supply and demand outside the United States. If this were done by a regulation of exports, this would be a great advance. The United States understood that other exporters were ready to agree to such a position, but the Canadian position was that this would merely shift the burden of adjustment from the United States to the exporters. The United States Administration felt that the U.S.A. had already borne its share of the adjustment.

108. Mr. Churchill commented that in his view the purpose of these meetings was to try to understand these views and to remove irritants. Canadians could understand the nature of the pressure on the United States Administration. However, one of the Canadian difficulties was Canada's greater dependence on exports. In the Canadian view, the United States action was in contravention of the General Agreement on Tariffs and Trade. It had negated the value of tariff concessions bound to Canada; the quotas therefore impaired the trade agreement benefits. The timing of the announcement of the imposition of quotas had been particularly unfortunate; it came on the eve of the Commonwealth Conference in Montreal. The Canadian authorities were prepared, of course, to discuss these problems at any time. He would reiterate the Canadian position that if there were to be a reduction of production, it should be allocated among all producers. He noted that in the United States reply to the Canadian Note,⁵¹⁴ it had been explained that the Tariff Commission was keeping these matters under review. The question arose, therefore, whether the recent price increase meant that the programme might now be reconsidered.

109. Mr. Dillon stated that as far as GATT was concerned the United States view was that their procedures were strictly in conformity with the Agreement. There had been proper notification and consultation under Article XIX. As soon as action was decided upon, other interested Governments had been advised. The United States was prepared to continue consultations and to consider compensation. He agreed that the timing of the announcement had been unfortunate. As for Mr. Churchill's question about the Tariff Commission, it was his view that if multilateral action had the effect of curtailing exports, the Tariff Commission might consider the matter again and might change its recommendation. The Tariff Commission reviewed these matters once a year anyway and could, of course, be asked by the Adminis-tration to make a study. In his view, the United States action had put a floor under the situation.

110. Mr. Seaton commented that the effect on world prices of the United States action was important. The United States would welcome multilateral agreement. This could be put before the Tariff Commission. As for the United States sharing the burden of adjustment, he would merely comment that, if other producers would cut their production 25% as had the United States, there would be an "over-cure." The United States Administration was still receiving cancellation of leases and he therefore expected no increase in lead and zinc production in the United States. If there was a multilateral agreement, there could be a real hope of slackening the import quotas.

111. Mr. Churchill thought that uneconomic producers in the United States would come back into business.

112. Mr. Seaton stated that he thought marginal mines were out of the picture - some had converted to Government-ownership, some had been flooded and the labour force had been depleted.

Item 4.A.

United States Tied-In Sales ("Usual Marketing") and Barter Programmes

113. Mr. McLain explained that the United States Administration had been trying for six years to bring production programmes under control, to reduce incentives to produce. He expected that there would be a special message and recommendation to Congress soon in this field. The P.L. 480 Programme could be expected to continue for another year.⁵¹⁵ P.L. 480 provided that in these disposal operations the United States must protect its own commercial sales and even more important, to pay attention to the interests of other countries. This the United States sincerely tried to do. Since the start in 1954 of the local currency sales under P.L. 480, very little wheat had been disposed of in the European area, where the normal Canadian markets were.

114. As for the changes in the barter programme, these had resulted from an awareness that the whole problem might be opened out again in Congress; Canada had fairly and reasonably raised some questions about these changes in this programme. A point to bear in mind was the reliance placed on normal trade arrangements under the "payment-in-kind" programme. The commodity being disposed of was being used as a subsidy; the big end of the deal was therefore a normal sale. There was very close consultation between Canada and the United States on these matters, in fact, almost daily consultation on wheat. The United States was trying to maintain the world market price. The real difficulty was not price, but the production programmes of the United States and other countries.

115. As for surplus disposal of grass seed, the United States was now out of the disposal business and the industry was fairly healthy. The surplus stocks of vegetable oils were now disposed of. As for dairy products, butter and cheese stocks were pretty well consumed. It was important to recall that some areas of the world could use these products and the United States did have P.L. 480. Canada did not have such a programme and the United States did not say that Canada should have one. But, it was the United States view that P.L. 480 got commodities into areas where goods would not otherwise be consumed. Canada, of course, had taken steps along these lines to use wheat. Close consultation was, of course, needed and it should be borne in mind that China or the U.S.S.R. might take over some of these markets unless there were such disposal arrangements. He would congratulate Canada on not having a price support programme for grain, but Canada should be concerned that it did not develop such a programme for some other products.

116. The United States recognized, of course, that quota arrangements under P.L. 480 can affect other countries. However, he would point out that United States wheat exports are down and Canada's are not.

117. Mr. Churchill stated that consultation had been very good during the past twelve months and this had eased the problem. There was much that was good in the United States pro-gramme. It was important to develop new markets for these products in Asia and Africa. This was of major importance to Canada, as well as to the United States. United States withdrawal from barter arrangements had helped Canadian sales. An assurance had been given in 1957 on these matters.⁵¹⁶ Could Canada now get a re-assurance? Canada could not complain as long as the United States did not interfere with Canadian commercial marketings. Canada had noted the statement that changes in the barter programme were deemed to be minor in character. As for flour, there was the problem of interference in Canadian markets by the United States flour subsidy. In fact, this was increasingly interfering with Canadian commercial sales. The problem the Canadian exporters faced in British Guiana was only one example. As for tied-in sales, it was to be hoped that the United States would avoid them altogether. However, he was not prepared to say whether or not they had damaged Canada's position.

118. Mr. Fleming asked if it would be possible to have a sentence in the communiqué re-affirming the 1957 position.

119. Mr. McLain stated that the United States authorities were going to have to operate a barter programme, but they were prepared to do it in such a way as to minimize the damage.

120. Mr. Harkness stated that there was considerable apprehension in Canada over the modified barter programme. Any assurances would be of great assistance. There were problems for instance of the country categories for dairy products. It appeared that every country except Mexico and including Canada have been placed in "C" category.

121. Mr. McLain commented that normal exports of dairy products from the United States were insignificant and that when the United States had had stocks, it had been very careful about disposal. Indeed, they had gone farther than they should have in holding off; they probably were in conflict with the statutory provisions. The United States would consult Canada if there was any likelihood of affecting Canada, but this seemed unlikely.

Item 5

Foreign Assets Control

122. Mr. Anderson indicated that the procedure developed in the discussion that took place when the President and Mr. Dulles visited Ottawa was still workable; that it was a useful procedure, bearing in mind that there was still an embargo in the United States on trade with China. He would like the Canadian representatives to understand that the United States would like to give the procedure a more automatic character, but this might create certain difficulties. It might have the effect of shifting United States orders to other countries (other than Canada, of course) where there was no embargo or system of controls. He did wish, however, to give the assurance that, if Canada raised questions of particular transactions with the United States, there would be no procrastination. He understood that Canadians were concerned that there might be some question of informal influence being applied to American parent firms by the Administration. This was not so. If the United States is told by Canada that the particular trans-action is important to the Canadian economy, the Administration will not try to influence American companies against such transactions. The United States believes this system to be workable.

123. Mr. Churchill recalled that when Mr. Dulles had discussed these matters, he had been most persuasive. The Canadian Government recognized the delicacy of the United States position. The Canadian authorities were in an awkward position, themselves, partly because of the existence of the sort of problem outlined by Mr. Fulton. We were not as sure of the practicability of the present arrangements as was the United States and we were particularly concerned about the possibilities of licences not being granted if the proposed transaction could be carried out by an independent Canadian company. This was not the way business was done. He was, however, glad to know that no discouragement was being offered at the official level by the United States authorities. In his view, the real problem was what happened before an actual application was made to the Treasury. The Canadian authorities were worried about what would happen if it got about that business could be done with China, but it was frustrated by American rules or by action of the United States Government. He could anticipate difficulties in answering questions on this subject in the House of Commons.

124. Mr. Churchill recalled that, in the example of the proposed sale of flour by the Robin Hood Company, it was difficult to understand how this business could have been transferred to an independent company. There had been other supposed orders from which business did not result, and there were other cases where the subsidiaries were told that they should not seek business from China. All this would be troublesome. If these difficulties got about, Canadian Ministers would find it difficult to explain the position. He wished to emphasize that Canada did not have the difficulties in trade with China that the United States seemed to have. Moreover, the question of recognition did not enter into this matter. It was the Canadian view that trade with China might well grow, particularly in such commodities as wheat and fertilizers. If we could be sure that there was no attempt to slow this development down at the official level, perhaps the best thing to do would be to wait, as it appeared that not enough time had elapsed since the procedures were set up last summer to make a judgment on how they were working out.

125. Mr. Anderson agreed with the Canadian view that not enough time had elapsed since the procedures were devised, but he wanted to make it clear that the United States was ready to process such applications as might come forward expeditiously. However, it seemed to him that there was no question of a conflict of law. Canadian law in this field was permissive. Canadian companies were not compelled to do business with China, they were merely permitted to do so. Therefore, there was no conflict between Canadian and American law. It was important in his view for the United States not to have to pre-judge these transactions or have to agree to them in advance. They would like to be in a position to deal with applications quickly.

126. Mr. Smith indicated the Canadian authorities would like to be in a position to point to one order that had been filled under these procedures.

127. Mr. Anderson recalled that the application in the Rayonnier case had been dealt with quickly, but that a firm order had not in fact been forthcoming. This was just what might have been expected. Once the Canadian firm was in a position to deliver the goods, it appeared that it had not been really a firm order. Perhaps this order had been merely a fiction.

128. Mr. Churchill stated that he believed that the order had in fact been filled by Sweden.

129. Mr. Dillon indicated that China had probably put in orders in seven different countries.

130. Mr. Churchill indicated that he thought his point that it was unrealistic to suggest that licences should not be issued if there was an independent Canadian company to do the business, would bear repetition.

131. Mr. Anderson thought that this would merely invite American firms to get into the China trade. The American point of view was that, if the Chinese refused to take goods when offered by independent Canadian firms, then we could be sure that these were not real orders but merely attempts to make trouble between the United States and Canada.

132. Mr. Smith stated that we, of course, accepted Mr. Anderson's assurance that no influ-ence was being applied by the United States Administration. However, we did feel that United States firms were afraid to contemplate having their subsidiaries do business with China.

133. Mr. Anderson said undoubtedly there was a problem of public relations and of having companies adequately informed, but that it was useful to bear in mind that in some areas of the United States opinion was quite strong against some companies might share these views. He was prepared to admit, however, although he did not know of any cases in which American companies had been discouraged by the United States in pursuing these matters, that in a Government the size of the United States, there might be some instances of influence being applied. All he could say was that he did not know of any.

. . .

Item 7

Communiqué

Agreed as released.⁵¹⁸

Item 8

International Development Association

135. Mr. Anderson indicated that, in the United States view, the proposed International Development Association⁵¹⁹ should be a sub-division or branch of the World Bank. It should have the same Board of Governors, and each member of the Bank should make a proportional contribution in the form of a stock purchase. Soft currencies could be contributed in some form, as determined by the Board of Governors. Soft currencies might be called in as required to meet particular demands. The main point to bear in mind, he felt, was that there was an inexhaustible demand for funds. It was necessary, therefore, to have some sort of arrangement whereby the borrowing countries' demands would be limited by the requirement to contribute a proportion of hard currencies; such contributions would be required to ensure further contribu-tions by those countries whose contributions would be completely in hard currency. He was conscious, however, that, if something of this sort was not organized, something which would make a call on all the free countries of the world, we would face a continuing demand in the United Nations and in NATO for some other less attractive instrument for this purpose. There would come a time when we would be unable to resist the pressure to set up an essentially political organization dominated by political motives and incorporating a political veto. In these circumstances, we had no choice but to press ahead with something along the lines of what he had just outlined.

136. Some private financial experts tended to think that the currencies of South America and Asiatic countries were of no real value. This was not borne out by experience. The United States had found that, when the use of soft currencies was properly coupled with certain amounts of hard currencies, worthwhile loans could be made. A recent example was the loan to build a flour mill in Greece in which mahogany from Honduras has been supplied, financed by soft currency. There were plenty of other examples of this sort. The United States had asked a number of countries whether, if such a scheme were set up, they would be prepared to contribute the local currencies generated by their sales of food provided under P.L. 480.

137. It was the hope of the United States that the Canadian Government could give the ideas about a development association careful consideration and in due course see their way to joining the United States in trying to build an international organization along these lines. This, of course, would not solve the problem of development nor would it obviate the need for the United States and Canada to continue their other programmes of aid and development.

138. Mr. Anderson went on to emphasize that, in his view, it was essential that every country had to make a proportion of its contribution in hard currency, just as was required in the World Bank. This would be a brake on the amounts Canada and the United States would be required to put up, as it would limit the demands of the borrowing countries. On the other hand, the provision of hard currency would make it possible to use a supply of soft currencies in careful combinations with appropriate amounts of hard currency. He felt that the main point that should be borne in mind was the need to do something of this sort to head off less attractive developments.

139. Mr. Fleming indicated that the Canadian Government would be glad to study this whole matter and to consider the United States' view. It appeared to him that Mr. Anderson's views were more precise than the United States had hitherto been able to put forward. He recognized that one of the crucial problems was the problem of maintaining adequate control in the hands of friendly countries. This was, of course, related to what international body the new institution might be associated with. Mr. Fleming recalled that, at the Commonwealth Conference in Montreal, and prior to that Conference, consideration had been given to Mr. Macmillan's proposal to establish a Commonwealth Bank. No action had been taken on this proposal because of a general concern that there might be some duplication of existing facilities to no particular advantage. The decision taken at Montreal was to put over further consideration of this proposal until after the New Delhi meetings of the Bank and Fund. The Canadian Government had no knowledge as to whether this proposal was to be revived. If it were, it would have some bearing on our views on the International Development Association. It was also important to bear in mind, he thought, that Canada is the largest single importer of capital and one of the largest contributors to the IMF and the IBRD.

140. Mr. Anderson thought that they would have a more detailed proposal ready shortly.

141. Mr. Smith asked what the United States attitude was to regional development funds, such as the Latin-American Fund.

142. Mr. Anderson indicated that the United States was committed to making a contribution to the Latin-American Fund. At present, they were concentrating their efforts on trying to tie the Fund to the World Bank. The United States still hoped that the role of these regional institutions could be minimized, as it seemed that they were more likely to divide than to unify.

143. Mr. Smith asked if the United States could envisage that contributions to the proposed international development association could be earmarked for certain countries; for example, countries of the Commonwealth.

144. Mr. Anderson indicated that, in the United States view, this might destroy the efficacy of the institution. He recalled that these general problems had been discussed with the Japanese. At the earlier stage of these discussions, Japan appeared to be interested only in an institution which would be a source of hard currency, but they were becoming increasingly aware of the need and the utility of organizing supplies of soft currencies and making more effective use of such funds by coupling them with appropriate amounts of hard currencies.

The Meeting ended at 6.30 p.m., January 6.

⁵⁰²Voir/See Volume 25, Document 138.

⁵⁰³La Grande-Bretagne et neuf autres pays européens avaient annoncé le 27 décembre 1958, à la réunion de la Banque mondiale à New Delhi, le relâchement des restrictions imposées sur la convertibilité de la monnaie.
On December 27, 1958, Britain and nine other European countries had announced the easing of currency convertibility restrictions at the World Bank meeting in New Delhi.

⁵⁰⁴Voir volume 24, les documents 362 à 386./See Volume 24, Documents 362-386.

⁵⁰⁵Voir volume 24, les documents 88 à 116./See Volume 24, Documents 88-116.

⁵⁰⁶Voir volume 25, les documents 193, 196 et 199./See Volume 25, Documents 193, 196 and 199.

⁵⁰⁷Voir volume 25, les documents 193 à 201./See Volume 25, Documents 193-201.

⁵⁰⁸Voir volume 25, les documents 182 à 192./See Volume 25, Documents 182-192.

⁵⁰⁹Voir/See Volume 25, Document 188.

⁵¹⁰Voir volume 25, les documents 189 à 191./See Volume 25, Documents 189-191. Voir Canada, Chambre des Communes, Débats 1959, volume I, pp. 47 à 48 et 59 à 60.
See Canada, House of Commons, Debates, 1959, Volume I, pp. 43-44 and p. 55.

⁵¹¹Voir volume 25, le document 158.

⁵¹²Voir volume 16, chapitre VIII, première partie, section B./See Volume 16, Chapter VIII, Part 1, Section b.

⁵¹³Voir volume 25, les documents 168 et 170./See Volume 25, Documents 168 and 170.

⁵¹⁴Voir volume 21, le document 366, note 91./See Volume 21, Document 366, footnote 91.

⁵¹⁵Allusion probable à la lettre adressée par Eisenhower à St. Laurent. Voir volume 23, le document 143.
Presumably a reference to Eisenhower's letter to St. Laurent. See Volume 23, Document 143.

⁵¹⁶Voir volume 25, le document 464, note 68./See Volume 25, Document 464, footnote 68.

⁵¹⁷Voir volume 25, le document 464, note 68./See Volume 25, Document 464, footnote 68.

⁵¹⁸Voir/See Department of State Bulletin, Vol. XL, No. 1022 (January 26, 1959), pp. 128-130.

⁵¹⁹Le président Eisenhower avait proposé la première fois en août 1958 la création d'une agence de développement internationale en complément des ressources de la Banque mondiale. Voir Department of State Bulletin, Vol. XXXIX, No 1003 (Septembre 15, 1958), pp. 412 à 415. In August 1958, President Eisenhower had first proposed an International Development Agency to supplement the resources of the World Bank. See Department of State Bulletin, Vol. XXXIX, No. 1003 (September 15, 1958), pp. 412-415.