Present
The Prime Minister (Mr. Diefenbaker) in the Chair,
The Minister of Public Works
and Secretary of State for External Affairs (Mr. Green),
The Minister of Finance (Mr. Fleming),
The Minister of Veterans Affairs (Mr. Brooks),
The Solicitor General (Mr. Balcer),
The Minister of National Defence (Mr. Pearkes),
The Minister of Justice (Mr. Fulton),
The Minister of National Revenue (Mr. Nowlan),
The Minister of Citizenship and Immigration (Mrs. Fairclough),
The Minister of Fisheries (M. MacLean),
The Minister of Labour (Mr. Starr),
The Postmaster General (Mr. William Hamilton),
The Minister without Portfolio (Mr. Macdonnell),
The Minister of Mines and Technical Surveys (Mr. Comtois),
The Minister of National Health and Welfare (Mr. Monteith),
The Minister of Defence Production (Mr. O'Hurley),
The Secretary of State (Mr. Courtemanche).
The Secretary to the Cabinet (Mr. Bryce),
The Assistant Secretary to the Cabinet (Mr. Martin).

. . .

CANADA-U.S.S.R. TRADE NEGOTIATIONS
(PREVIOUS REFERENCE FEBRUARY 3)

3. The Secretary of State for External Affairs, in the absence of the Minister of Trade and Commerce, reviewed the course of the negotiations authorized last year on the renewal of the 1956 Trade Agreement with Russia. These had been difficult, and little progress had been made until five Supreme Soviet deputies, including a former Minister of Foreign Trade, visited Ottawa in June. On that occasion, the latter left the impression with the Minister of Trade and Commerce that the U.S.S.R. would be prepared to buy Canadian goods, including wheat, barley and industrial equipment up to the amount of the wheat purchases under the old Agreement, and that the Soviet government would not insist on a reciprocal obligation by Canada to purchase a specified quantity of Soviet goods. The Russian visitors felt it would be necessary, however, for Canada to undertake to assist in developing Soviet exports to Canada.

On this basis and following further discussions, Canadian officials prepared a draft protocol to extend the Agreement for three years. The protocol included provisions to renew the Agreement without change for three years, an understanding that the letters attached to the Agreement concerning the fixing of values for duty would remain valid, an undertaking by the U.S.S.R. to purchase annually Canadian goods to the value of $20 to $25 million, an under-taking by Canada to assist Soviet trading organizations in developing markets in Canada and provision for consultation on all aspects of commercial relations between the two countries.

The Soviet response to this submission had been a formal invitation to Canadian negotiators to go at once to Moscow to negotiate and sign an extension of the Agreement. The Soviet representative in Ottawa felt these final negotiations should not prove too difficult and said that, in view of the invitation, he was no longer in a position to continue discussions here.

It seemed reasonable to conclude that the Canadian draft protocol would be adopted as a framework for the final negotiations. However, there were a number of points in it which first required consideration by Ministers. As regards the provision to assist Soviet trading organi-zations, the Soviet authorities should be informed at the outset that Canada could not undertake to buy specific quantities of goods or to assist in bringing Soviet sales to Canada to a particular level. It should also be made quite clear to them that the Canadian government could not undertake an obligation which went beyond the usual forms of assistance available to M.F.N. countries. They should understand that "assist" meant the extension of the usual good offices of the Department of Trade and Commerce and of other departments; for example, the sending of a Trade Commissioner to Moscow, the sending of a trade mission to Moscow and a public statement that the government welcomed the development of trade between the two countries. Soviet negotiators would probably attempt to water down the undertaking to purchase in Canada. They should understand, however, that an essential feature of any trade agreement was a firm commitment to purchase as a quid pro quo for the continued extension by Canada of M.F.N. treatment. If the question of renewal was raised, this should not be agreed unless it was clear beyond doubt that this would include a continuation of the annual Soviet purchase commitment. If Parliamentary approval was to be sought for the protocol, it could only enter into force provisionally on signature, and definitively following Parliamentary approval.

The Minister of Trade and Commerce had recommended, with the concurrence of the Minister of Finance and himself,

(a) that a delegation be authorized to proceed to Moscow to sign an agreement subject to prior approval by Ministers;

(b) that the Soviet authorities be advised in advance that the Canadian negotiators would have no authority to consider a Canadian obligation to purchase specific quantities of Canadian goods;

(c) that a prior condition for entering a new agreement should be Soviet fulfilment of its obligation to purchase wheat under the old Agreement.

The Minister added that the Cabinet's guidance would also be welcome on whether publicity should be given about the delegation and whether Parliamentary approval of the Protocol was required.

An explanatory memorandum had been circulated, (Memorandum, Minister of Trade and Commerce, July 15 - Cab. Doc. 211-59).?

4. During the discussion the following points emerged:

(a) It was not wise to send a delegation to Moscow. A delegation might have gone at the start of the renewal negotiations, or the Agreement might be signed in Moscow, but to send one at this stage in the middle of the negotiations meant either that the Russians thought they could gain advantages they would otherwise not obtain in Ottawa, or that they felt the discussions were going to break down and they wanted to create a favourable appearance from their own point of view. Sending a delegation would not be popular in Canada.

(b) As for the substances of the negotiations, any protocol should not contain a vague undertaking to assist. Instead, Canadian obligations such as the appointment of a Trade Commissioner, the sending of a trade mission and willingness to make a statement should be specifically stated.

(c) The old agreement was overwhelmingly in Canada's favour and the new one would appear to be so too. The government was committed to fostering useful trade with the U.S.S.R. In the circumstances, we should not quibble about details. The undertaking to assist was so hedged around with qualifications that there would be no danger in approving it in its present form. If the negotiations broke down it would be quite unfortunate.

5. The Cabinet noted the report on the negotiations for renewal of the 1958 Trade Agreement with Russia and,

(a) decided that a Canadian delegation should not go to Moscow to continue the negotiations but that these discussions should be resumed in Ottawa and that, should an agreement emerge, it might be signed in Moscow; and

(b) deferred decisions on the substance of the matters raised in the report and in the discussion until the Minister of Trade and Commerce was present.

. . .