Present:
The Prime Minister (Mr. Diefenbaker) in the Chair,
The Minister of Public Works
and Acting Minister of Defence Production (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 Trade and Commerce (Mr. Churchill),
The Secretary of State (Mrs. Fairclough),
The Minister of Labour (Mr. Starr),
The Postmaster General (Mr. William Hamilton),
The Minister without Portfolio (Mr. Macdonnell),
The Minister without Portfolio (Mr. Browne),
The Minister of National Health and Welfare (Mr. Monteith),
The Minister of Northern Affairs and National Resources (Mr. Alvin Hamilton),
The Secretary of State for External Affairs (Mr. Smith),
The Leader of the Government in the Senate (Senator Haig).
The Secretary to the Cabinet (Mr. Bryce),
The Assistant Secretaries to the Cabinet (Mr. Fournier), (Mr. Martin).

CANADA-U.S. DEFENCE; CONSTRUCTION OF AIRDROME RUNWAYS; U.S.A.F. REFUELLING FACILITIES IN CANADA

6. The Secretary of State for External Affairs reviewed briefly the situation regarding the proposed establishment of refuelling facilities to support the operations of the United States Strategic Air Command at nine bases in Canada. The previous government had decided to authorize construction of the facilities at Frobisher, Churchill, Cold Lake, and Namao, on the understanding that procurement and construction would be undertaken through Canadian government departments and that Canadian contractors would be employed.¹⁷⁴ It was intended that the terms and conditions under which these facilities would be established would be laid down in an exchange of notes which would constitute an agreement between the governments of Canada and the United States.

One of the most important provisions of the proposed agreement concerned construction and procurement of equipment. Up to a year ago, Canada U.S. defence agreements normally made provision for "equal consideration" to Canadian and U.S. contractors. The decision of the previous government with respect to the four bases mentioned involved a trend away from this formula to a firm requirement that construction be done by Canadian contractors. Since then, U.S. authorities on a number of occasions had expressed concern over this development. Some Canadian officials believed that a strong stand in principle on this matter might result in U.S. acceptance of the necessity of employing Canadian contractors on almost every project of importance, although there might be occasions when such a stand would run into firm U.S. resistance and thus have a bad effect on Canadian U.S. relations. Other officials felt that insistence on spelling out the principle in the proposed agreement would result in U.S. resistance now, and that it might not be desirable to press the U.S. too strongly, provided that the Canadian objective of having the work done by Canadian contractors, except in very special cases, was achieved.

The construction clause in the draft agreement submitted by the U.S. did not state specifically that Canadian contractors would be used. However, U.S.A.F. authorities would be asking the Department of National Defence to act as their agent and were aware that, in these circumstances, Canadian contractors would be employed. In the case of special equipment items, the government had in the past authorized their purchase in the U.S. where they were not readily available in Canada. In the event that these provisions were not accepted, the government might wish to insist that the agreement specify that the work be done by Canadian contractors, as the previous government had in principle decided.

An explanatory memorandum was circulated (Minister's memorandum, Jan. 16, 1958-Cab. Doc. 16-58)?

7. During the discussion the following points emerged:

1. If the intergovernmental agreement containing the usual "equal consideration" clause were accepted, construction financed by U.S. money would start very soon, and provide many Canadians with jobs. The U.S. had always been prepared to use Canadian contractors employing Canadian labour in the past on their defence projects here, and would do so in this case. On the leased bases and on the leased territory at Goose Bay, however, the situation was different.
2. The present problem arose because the Department of Defence Production had been made aware of instances where the U.S. authorities had not used Canadian contractors, or equipment procured in Canada, where this would have been quite possible. The previous government had then stated that construction of the facilities at the first four bases could proceed provided it was specified that Canadian contractors would be used. It would be most embarrassing for the present government to go back to the old position.
3. It would be equally, if not more embarrassing if the U.S. were to bring in many workers for these projects at a time when there was so much unemployment in Canada. Before considering the matter further, assurances should be sought from the U.S. that Canadian workers would be employed.

8. The Cabinet noted the report of the Secretary of State for External Affairs on arrangements under which refuelling facilities for the United States Strategic Air Command would be constructed at airfields in Canada, and deferred decision on the matter pending a further report by the Minister on the assurances the United States was prepared to give that it would employ Canadian contractors using Canadian workers on these projects.

¹⁷⁴Voir/See Volume 23, Document 107.