Reference: Your WA-1894 of August 4, 1953 and Our Despatch No. X-497 of March 10, 1952.

Thank you for your telegram forewarning that the State Department may find it necessary to take immediate action pursuant to the House Foreign Affairs Committee's request concerning the Exchange of Notes in 1940 on the above-mentioned subject.

2. For your background information, it has always been our position that the Exchange of Notes in 1940 authorized the use in Canada at Niagara Falls of a specific amount of water for power purposes and that this authorization was later confirmed in the Niagara Treaty of 1950. The notes did not purport to authorize the diversions themselves as such diversions -- from a watershed wholly within one country -- can be made by one country on its own authority.

3. The authorization of the use of a specific amount of water for power purposes by Canada at Niagara Falls is limited in the Exchange of Notes of 1940 and (by reference to the notes) by the Niagara Treaty of 1950 only by the phrase "pending the conclusion of a final Great Lakes-St. Lawrence Basin Agreement". At the time, this was intended to be the Great Lakes-St. Lawrence Basin Agreement of 1941 (which met its end in our election-day note last year). If we now maintain our position rigidly, the State Department might suggest opening up the larger issue of a final Great Lakes-St. Lawrence Basin Agreement. Our preliminary view is that we would not welcome the opening up of this issue although we may have to come to it by gradual steps. We would certainly not welcome it at this time or at least until the question of possible United States participation in the Seaway can be dealt with as a tangible factor.

4. On the other hand, the matter of these diversions, insofar as it concerns the level of Lake Ontario, is before the IJC for study and recommendation. You should, therefore, advise the State Department informally that we consider it would be better to take the position that the matter is before the IJC, as it were sub judice, and that action should await the result of the Commission's investigation. It might be added that the diversions have been reduced on occasion as a gesture of goodwill when some benefit would result and that the general situation with regard to Great Lakes levels is gradually improving. If any different action is contemplated by the State Department, we would hope to be consulted informally in advance.