1. At its meeting on April 1, the Cabinet agreed that a comprehensive memorandum be prepared on the whole question of export of military equipment to foreign countries, other than members of NATO and the Commonwealth, Cabinet last reviewed the question of the export of military equipment in September, 1957, when it approved a new code of procedures to be followed interdepartmentally in dealing under the provisions of the Export and Import Permits Act of 1954 with applications for export permits to cover the shipment abroad of military equipment. A copy of the Cabinet directive, a Memorandum for the Cabinet, dated September 13, 1957, is attached.¹

2. When the Directive was approved by the Cabinet it was recognized that the powers provided by the Export and Import Permits Act should be used to control the export to all countries of military equipment of all types; that the export of such equipment to certain areas might disturb the strategic situation; and that even where the type or quantity of equipment involved was not of strategic significance such exports might have international political repercussions. Consequently, the Directive stated that although the authority to issue export permits is vested under the Act in the Minister of Trade and Commerce, the latter should be guided by the views of the Secretary of State for External Affairs and the Minister of National Defence.

3. The procedure adopted in 1957 reflected certain general policy considerations which were summarized as follows:

“The Canadian Government asserts the right to take such steps as are necessary, including the maintenance of an adequate military establishment, to ensure the defence of Canada, and recognizes that all other legitimate governments have the same right of self defence. Indeed this right is universally recognized, explicitly for example in the Charter of the United Nations. Nevertheless it may often be uneconomic, or even in the case of small or underdeveloped countries impossible, to maintain and supply an adequate defensive establishment equipped solely from domestic sources. The Canadian Government therefore recognizes that cases may arise from time to time where it will wish to obtain military supplies by purchase abroad rather than from domestic production, and that in appropriate cases it may similarly be prepared to approve the supply of military equipment from Canada to other governments. Such cases are particularly likely to arise for countries with which Canada has close political or military connections; indeed the Canadian programme of providing mutual aid to our NATO allies is a reflection of this attitude, and the supply of military equipment to other Commonwealth governments and its purchase from the United Kingdom in particular have been common, while the purchase of military supplies from the United States and their sale to that country constitute an important fraction of our defence procurement and defence production programmes. Less frequently, sales of military equipment to or purchases from other friendly governments have been recognized as mutually advantageous to Canada and to the other government concerned.”

4. It has been on these grounds that Canada has been prepared on appropriate occasions to approve the export of military equipment to other countries. The major criterion in determining whether a proposed arms export should be approved has, of necessity, been a judgement as to whether or not the political and strategic consequences would be consistent with Canada’s interests. It has been a general requirement that such export should be authorized only on a government to government basis, and that exports to private concerns in other countries should not be approved unless the recipient firm has been formally designated by the government concerned as a purchasing agent acting on its behalf. Furthermore, it was decided that particularly in the case of items of real military importance in the recipient area, approval of exports should require a determination that on balance the transaction would result in a substantial advantage to Canada.

5. The experience gained in over two and a half years of operations under the Directive has shown that the value of permits issued for exports of military equipment to countries other than NATO and “non-sensitive” Commonwealth countries has been in the neighbourhood of $16 million from October 1, 1957 to March 31, 1960. While of benefit to Canadian firms engaged in the arms traffic, this trade has been of no great value to Canada from an industrial or employment point of view. Many of the transactions which took place did not involve Canadian production. It is questionable whether all of the exports made have contributed to stability in the areas receiving the arms. In certain instances there has been a risk that through the export of arms Canada might become involved in dangerous political situations. The extent of our sales of military equipment may give the appearance of being inconsistent with our advocacy of progress towards disarmament in the Ten-Power Committee. Canadian spokesmen have also urged that all countries exercise restraint in the export of military equipment and bring into the open what they are doing in this field. Lastly, the present regulations conceivably allow the charge to be made that Canadian firms are permitted to engage as middlemen in international traffic in arms which are not of Canadian origin. On balance, therefore, it is considered desirable to reduce the export of military equipment to a minimum and to tighten the controls.

6. For the purpose of export control, arms and military equipment, unless otherwise speci­fied, are taken to mean those items in the Group entitled “Arms, Munitions, Military, Naval or Aircraft Stores” in the Export Control List as approved and amended from time to time by Order-in-Council under the Export and Import Permits Act. In this Group are included all the items listed in the International Munitions List agreed upon by Canada and Member Countries in the Co-ordinating Committee (COCOM, Paris). The items are interpreted in accordance with the Memorandum of Understanding relating to the International Munitions List, which furnishes guidance in dealing with, inter alia, sporting arms and munitions, explosives and propellants, vehicles and machinery used in the armaments industry.

7. In addition to the items in the Munitions Group there are also on the Export Control List various items of equipment designed and used for civilian purposes which are in ordinary usage by armed services of all countries in peacetime, for example, search and rescue as well as transport aircraft, commercial types of radar and radio navigational equipment, tankers and certain fishing vessels and automotive equipment. Production of such items together with their service and maintenance parts is in many instances of great importance to Canadian industry and employment. Export trade is essential to the economy of the producers and involves a large number and wide distribution of export transactions. Such export business deserves every assistance and encouragement. However, where the importer is identified as a military organization of a foreign government, outside of NATO and Commonwealth countries, or where supply of the equipment in the quantity or of the type involved might possibly represent a substantial or significant addition to resources available for military purposes, an export sale may become a matter of concern. Thus strict care should be observed to ensure that none of this type of equipment is exported in such a way as to be inconsistent with the general objectives of control as set out below.

8. The Minister of Trade and Commerce will consult the Minister of National Defence regarding shipments of equipment of the kind referred to in the preceding Paragraph 7:

(a) When the destination is a highly sensitive area, as defined by the Secretary of State for External Affairs, and the size of the order is significant.

(b) When the consignee is a military establishment or organization and the size of the order is significant.

If such shipments are deemed to be of military significance, they will be dealt with in accordance with the procedures set out in Paragraph 9 below.

Recommendations

9. With the foregoing considerations in mind, it is recommended that the issue of permits for the export of military equipment should be governed by the following considerations:

(a) Exports of military equipment (with the exceptions noted in sub-paragraph (f) below) will normally be limited to governments of NATO and of Commonwealth countries.

(b) Exports of military equipment will be permitted by the Minister of Trade and Commerce only when certified as below:

(i) Certification would be automatic in the case of exports to NATO countries where the NATO Government concerned accepts responsibility to use them only to strengthen the capacity of NATO to deter or resist aggression; where there is any doubt concerning such use the Minister of Trade and Commerce will consult the Secretary of State for External Affairs and the Minister of National Defence.

(iii) Certification in the case of exports to Commonwealth countries would be determined in each instance as follows:

(a) By Cabinet in respect of Commonwealth countries included in the list of sensitive countries to be established by Cabinet in accordance with subparagraph (c) of this paragraph.

(b) By the Secretary of State for External Affairs, with the advice of the Minister of National Defence, in respect of Commonwealth countries not included in that sensitive list.

(c) A list of sensitive countries within the Commonwealth will be approved by the Cabinet on the recommendation of the Secretary of State for External Affairs with the advice of the Minister of National Defence. These Ministers will be responsible for keeping this list up to date by recommending to Cabinet appropriate additions or deletions.

(d) The Secretary of State for External Affairs will also keep the Minister of Trade and Commerce informed of those areas which are to be regarded as “highly sensitive” when consideration is being given to the possible export of equipment of the type referred to in paragraphs 7 and 8 above.

(e) Certified shipments will be limited to military equipment produced in Canada either on licence or from Canadian design, the only exceptions being equipment bought abroad for the use of the Canadian armed forces and declared surplus.

(f) the only exceptions to (a) above would be:

(i) Spare parts for Canadian-made equipment or surplus equipment of the Canadian armed forces previously exported to the particular country; export of such parts would be permitted for the purpose of maintaining Canada’s good name as an exporter and would be limited to the period of normal life expectancy of the items originally exported; such shipments of spare parts may be certified by the Secretary of State for External Affairs, with the advice of the Minister of National Defence, when he is satisfied that the destination is not in a sensitive area but will require the approval of Cabinet if the destination is an area which either the Secretary of State for External Affairs or the Minister of National Defence considers to be sensitive.

(ii) Shipments which Cabinet may decide in individual cases and only in extraordinary circumstances are of exceptional importance to Canada.

10. It is further recommended that the procedures governing the issue of permits for the export of military equipment be altered to read as follows:

I. GENERAL

(a) All export permits shall be issued under authority of the Minister of Trade and Commerce in accordance with the provisions of the Export and Import Permits Act. In this connection the powers and responsibilities of the Minister relating to amendment, suspension, cancellation and reinstatement of permits shall be borne in mind;

(b) In dealing with exports of military equipment (defined in paragraphs 6 and 7) the Minister of Trade and Commerce shall seek approval of Cabinet or the required certification of the export from the Secretary of State for External Affairs as provided in paragraph 9(b) and (f) above. The Minister of Trade and Commerce will send copies of applications referred to the Secretary of State for External Affairs to the Minister of National Defence and the latter will convey his comments to the Secretary of State for External Affairs.

(c) The Minister of Trade and Commerce should submit periodical reports to Cabinet on the disposition of applications for permits to export military equipment.

(d) In view of the more restrictive policies and more rigorous procedures envisaged in this memorandum it is expected that the responsibility of individual Ministers as set out in this memorandum should, so far as possible, be discharged by the Ministers themselves.

II. CASES IN WHICH PERMITS WILL NOT BE ISSUED

(a) Permits will not be issued for shipments of military equipment to any country in respect of which the Security Council or the General Assembly of the United Nations may declare or recommend an embargo on arms shipments as long as the Government considers that embargo to be in force, and action will be taken within the powers available to the Government to prevent any such shipments for which export permits may exist from proceeding to that country while the embargo is considered by the Government to be in force.

(b) Permits will not be issued for shipments of military equipment to areas under the direct authority of a communist government except in the case of Yugoslavia and then only under the provisions of sub-paragraph 9(f)(ii) above. This ban applies specifically to Albania, Bulgaria, China (Communist held), Czechoslovakia, East Germany, Hungary, Outer Mongolia, North Korea, North Vietnam, Poland, Roumania and the U.S.S.R.

III. CASES IN WHICH PERMITS ARE NOT REQUIRED, OR IN WHICH THEY MAY BE ISSUED WITHOUT INTERDEPARTMENTAL CONSULTATION

(a) Permits are not required by the Regulations for shipments of military equipment of Canadian origin to the United States; any re-export from the United States is subject to the export control procedures of the United States. (The United States does not require export permits for similar shipments to Canada, and it is in our interest to safeguard our access to United States sources of supply through this special reciprocal arrangement).

(b) Permits for the export of military equipment may be issued by the Minister of Trade and Commerce without consulting the Secretary of State for External Affairs (although he may consult on any particular case where he considers it necessary) in those cases where certification is automatic as under paragraph 9(b)(i) above; i.e., in the case of NATO countries and NATO commands, and in the case of Canadian forces outside Canada.

IV. SENSITIVE AREAS WITHIN THE COMMONWEALTH

(a) On the recommendation of the Secretary of State for External Affairs, with the advice of the Minister of National Defence, the initial list of sensitive countries within the Commonwealth shall consist of the following:

(b) Applications for the export of military equipment received direct from colonies, pro­tectorates and territories for whose external relations and defence the United Kingdom or any other independent Commonwealth country remains responsible shall not be considered. However, it would be expected that as they become independent the following countries will be added to this list:

V. CONSULTATION WITH OTHER GOVERNMENTS

The Secretary of State for External Affairs may decide to consult with other Governments concerning proposed exports in cases where that appears desirable. Such consultations may be undertaken for various reasons, such as consideration of the responsibilities of other governments in particular areas.

VI. PERIOD OF VALIDITY OF EXPORT PERMITS FOR MILITARY EQUIPMENT

(a) Export permits for the shipment of military equipment shall be valid only for an appropriate period and to a specified date, normally from six months to one year from the date of issue. The Secretary of State for External Affairs may recommend an appropriate period to the Minister of Trade and Commerce and may, if he deems it desirable, recommend at any time that a permit already issued be suspended or cancelled. He will also, at his request, be provided with current reports by the Department of Trade and Commerce on the clearance through Customs or through Canadian ports of shipments under particular export permits.

(b) Applications for renewals of existing permits beyond the termination date recommended by the Secretary of State for External Affairs, or beyond one year where no lesser period was recommended, shall be subject to the same procedures as those provided in the preceding paragraphs for new applications.

H.C. Green

I concur:
George R. Pearkes
Gordon Churchill

¹Voir/See Volume 25, document 236.