A meeting of the Interdepartmental Committee on External Trade Policy was held in Room 123, East Block, at 3:00 p.m., Tuesday, November 18th, 1947.

Present

From External Affairs. Mr. H.O. Moran (Acting Chairman)
From Agriculture, Dr. G.S.H. Barton
From Bank of Canada, Mr. Graham Towers
From Finance, Dr. W.C. Clark
From National Revenue, Mr. D. Sim
From Trade and Commerce, Mr. M.W. Mackenzie From Privy Council Office, Mr. A.D.P. Heeney
From Privy Council Office, Mr. S.P. Wheelock (Secretary)

Also present

From Reconstruction and Supply, Mr. W.E. Uren

U.K.-CANADA FINANCIAL AND ECONOMIC DISCUSSIONS

1. The Chairman referred to a message which had been received from the Commonwealth Relations Office on October 22nd suggesting that the United Kingdom send a Mission to Canada to reconsider long-term food contracts and provide for "full and frank exchange of information". It had now been arranged that the delegation headed by Sir Percivale Liesching, Permanent Secretary of the Ministry of Food, accompanied by representatives of the Treasury, the Board of Trade and the Bank of England would arrive in Ottawa on November 25th or 26th.

The Mission would be prepared to discuss the U.K.-Canada long-term food contracts, the stepping up of United Kingdom exports to Canada and the balance of payments position generally.

The Cabinet had directed that discussions with the Mission be conducted under the auspices of the Cabinet Committee on External Trade Policy with the addition of the Minister of Reconstruction and Supply. It might be worth while to suggest to the Cabinet Committee a procedure to be followed while the U.K. Mission was here; also a note might he prepared pointing out certain problems which the British would likely wish to discuss, as well as the implications of the problems.

2. The Secretary to the Cabinet pointed out that due to the opening of Parliament on December 5th it was likely that Ministers would be very busy during the time when the Mission was in Ottawa.

3. The Deputy Minister of Agriculture observed that it would be desirable to have some idea of the present position as early as possible, in view of meetings with the Canadian Federation of Agriculture which had been arranged for the first few days in December.

4. The Governor of the Bank of Canada suggested that after the Mission had had an opportunity to explain the British background fully to the Cabinet Committee, it was likely that they would wish to have financial discussions first, as more specific discussions relating to the long-term contracts would to a large degree he dependent upon any financial agreements which it might be possible to reach.

5. The Deputy Minister of Finance called attention to a sentence in the speech of the Minister the previous evening in which he had referred to unexpended portions of Canadian government credits to Europe and remarked that these would he continued "if at all possible". The need for diverting Canadian surplus products to dollar markets was urgent and inescapable.

6. Dr. Barton said that the four principal contracts which would probably be under discussion were the bacon contract, egg contract, the beef contract and the cheese contract. These amounted altogether to approximately $150 million annually. The bacon contract was probably the one which it was most important to defend. There was no certain market for bacon elsewhere although at the moment live hogs could probably be sold in the United States. Moreover, the British market was one which had been built up over a period of years and was of great value in inducing confidence within the industry. With regard to beef and cheese, some diversions of beef in the form of live cattle and possibly of cheddar cheese were possible to the U.S. market.

7. The Deputy Minister of Trade and Commerce suggested that it might he possible to divert (by way of postponing deliveries until August 1948) 20 million bushels of wheat from the U.K. contract to dollar markets. If the Mission were to suggest contract revisions which would involve us in immediate losses, it might he appropriate for us to suggest revisions which would tend to recoup these losses. A wheat diversion of this magnitude might provide a net increase of 60 million American dollars in the immediate future.

8. Mr. Uren referring to lumber contracts pointed out that the East coast contracts ran out at the end of this year. Arrangements had already been made to issue licenses for the export of East coast lumber to United States markets. With regard to the West coast contracts it might be advisable to leave the amounts unchanged but lengthen the time for deliveries. There was an immediate market at high prices in the United States at the present time for all the lumber that could be produced.

9. The Committee, after discussion, agreed:

(1) to recommend to the Cabinet Committee on External Trade Policy that they should meet with the British Mission on its arrival and request the Mission to expound its position and suggest specific topics for discussion;

(2) to suggest that if the Cabinet Committee wished, the Interdepartmental Committee would continue discussions with the Mission, if necessary dividing into subcommittees which would report back to the Interdepartmental Committee; it would in turn report back to the Cabinet Committee; and

(3) to report the conclusions of this meeting to the Chairman of the Cabinet Committee.

S.P. WHEELOCK