As you know, the representatives of the countries [which are] members of COCOM (NATO countries excluding Iceland, but including Japan) have been meeting for some six months in Paris for the purpose of reviewing the multilateral control system applied to trade in strategic commodities with countries of the Communist bloc. Some progress has been made and agreement has been reached on a revision of the criteria on the basis of which the lists of commodities to be controlled are established. The difficulty, however, has been that there remains serious and rather extensive disagreement on the interpretation of the criteria and hence on the commodities which are to be maintained on the control lists; in particular the United States has not been willing to accept a substantial number of the proposals, including the Canadian proposals for deletions from the control lists.

The Consultative Group, which is the policy body of COCOM is, therefore, meeting later this week in Paris to try and resolve the difficulties. Mr. Wilgress will be heading the Canadian group.

I attach two memoranda prepared for the Minister of Trade and Commerce by his Department. The essence of these memoranda is, I think, summarized in what I have said above. I would draw your attention to page 6 of the first memorandum which summarizes the instructions to the Canadian Delegation. I would also call your attention to pages 2 to 4 of the second memorandum, which summarizes the state of the negotiations, at the conclusion of the review conducted by COCOM, on the basic metals and minerals which are our main concern and on which, as you will remember, you have received representations from Canadian producers.

I shall, of course, inform you of the results of the Consultative Group meeting, which is bound to be a rather difficult one. It is quite unlikely that final agreement will be reached in a two-day meeting and that the differences of view and attitude which separates, generally speaking, the United States from the rest of the COCOM membership, will not be easily resolved. For the moment it is difficult to see what kind of compromise might emerge in the end.

D.V. LeP[an]
for Under-Secretary of State
for External Affairs

[PIÈCE JOINTE 1/ENCLOSURE 1]

Note pour le ministre du Commerce

Memorandum to Minister of Trade and Commerce

Secret

[Ottawa], July 10, 1958

MEETING OF THE CONSULTATIVE GROUP IN PARIS, JULY 18TH AND 19TH

COCOM Review

Canada cooperates with her NATO partners (excluding Iceland) and with Japan in a multilateral control system applied to trade in strategic commodities with countries of the Communist bloc. The coordinating body for this system is the Consultative Group, which has a standing Coordinating Committee (COCOM) that meets continuously in Paris. The criteria on which the control system is based and the lists of items to which the various types of control are applied are reviewed periodically in accordance with the principles that potential aggressors should be denied assistance which would materially aid their military capabilities, that uniformity in export controls is desirable and should therefore be implemented on a multilateral basis, and that controls should be applied selectively. The last such general review was made in 1954.¹⁶There has since developed a feeling among participating countries that changed circumstances have made further revisions of these controls necessary. A general review was accordingly begun in COCOM on February 20th last. The discussions in COCOM have so far yielded a dishearteningly small measure of agreement, and, in the hope that the Consultative Group, the senior and guiding organization, might accelerate progress, the United Kingdom proposed an early meeting of the Group. The participating countries agreed to convene on July 18th and 19th.

NATURE OF DISAGREEMENT

Differences of opinion among participating countries on the scope of the control system have, on occasion in the past, led to acute and open disagreement. Last year, discussions of the "China differential" (the more extensive control system at that time applied to Communist China) broke down with some bitterness among delegations.¹⁷The outcome was the unilateral abandonment of the differential by the United Kingdom with most other participating countries including Canada but not the United States, following suit. Strong differences of opinion have been apparent in the current review. Most participating countries, including Canada, believe that the present embargo list can no longer be justified on purely strategic grounds and that the review should result in a substantial reduction in the list of controlled items. The United States, though less determined than formerly to see controls imposed which would be more restrictive than those presently in effect, has resisted the extensive revisions of the list sought by most other countries. Difficulties with an inflexible China trade policy of total embargo may be at the root of continuing United States opposition to relaxing controls.

AGENDA FOR CONSULTATIVE GROUP MEETING

The following agenda has been announced by the Chairman of the Consultative Group:

(1) Reports by the Chairman of COCOM on the work of the Committee.

(2) Reports by the Chairman of CHINCOM (the committee on trade with China).

(3) Report by the Chairman of COCOM on the revision of strategic controls.

(4) Date of entry into force of a new embargo list and a new munitions list.

(5) Consideration of a form of secondary control and whether such control is desired by participating countries.

(6) Annual revision of COCOM lists and procedures.

(7) Miscellaneous items.

AGREENENT IN COCOM ON REVISED CRITERIA

Unanimous agreement on the following revised criteria was reached in COCOM early in March:

(A) Materials and equipment (by types and grades) which are designed specially or in peacetime used principally for the development, production, or utilization of arms, ammunition or implements of war.

(B) Materials and equipment (by types and grades), incorporating unique technological know-how, the acquisition of which by the Sino-Soviet bloc may reasonably be expected to give significant direct assistance to the development and production in peacetime of modern arms, ammunition or implements of war, or their means of utilization or delivery, or of counter measures to them.

(C) Materials, of which the Sino-Soviet bloc has a deficiency which may reasonably be expected to be critical in relation to the production in peacetime of modern arms, ammunition or implements of war, of their means of utilization or delivery, or of counter measures to them and which it could not overcome within a reasonable period.

DIFFICULTIES IN INTERPRETING CRITERIA

The United States alone insisted on reservations on the interpretation of the criteria, specifically that criterion (B) should be understood as including significant "advanced" technological know-how even though it cannot be demonstrated to be "unique" in the sense of being absolutely unavailable to the Soviet bloc, that "modern arms" in criteria (A) and (B) should be understood as including all weapons except obsolete conventional arms, and that "materials" in criterion (C) should be understood as including equipment items which meet the critical deficiency standard set forth in that criterion. Regardless of the agreement reached on criteria, widespread differences remain as to their application to items under consideration for strategic control. Opinions differ, for example, on whether "used principally" in criterion (A) has reference to the pattern of consumption in Western countries or to that in the Sino-Soviet bloc. The United States considers only the pattern of consumption in the Communist bloc as relevant. Canada takes the view that under state control the distribution of any stocks for non-military consumption may indicate the prior satisfaction of military demand.

REVIEW OF LISTS

COCOM has spent approximately four months on its current review of the existing embargo list since revised criteria were agreed upon. Complete agreement has been reached on only one-half of the list of 181 items reviewed, 65 of which it was decided to retain and 26 to delete. The majority of the participating countries believe that a substantial reduction in the lists could be achieved without endangering security. Having regard for the adequate resources which the Communist bloc can devote to military uses, Canada regards the effect of controls as at best marginal and foresees a lessening prospect of inhibiting Sino-Soviet military production through the operation of an embargo. The United States nevertheless appears convinced that any restraint imposed on the development of the industrial capacity of the Communist bloc through the exercise of strategic controls will reduce the bloc's war-making potential.

SCOPE OF CONTROLS

In the view of the majority of participating countries, it is not within the terms of reference of COCOM to impose controls for the purpose of weakening Sino-Soviet efforts in the direction of economic expansion and industrial diversification. It has been felt, nevertheless, that the United States concept of controls has had a discernible bias in favour of economic warfare. To have persisted on a course towards such an objective would have been so opposed to the trend of thinking as to risk the break-up of the multilateral system which COCOM represents.

CANADIAN OBJECTIVES IN REVIEW OF LISTS

Canada considers it essential, in the present state of world markets, to aim at the removal of all unnecessary export control restrictions on trade. The Canadian Delegation at Paris will be prepared to support the early entry into force of a new embargo list provided that, as far as items of Canadian interest are concerned, it contains only those which are consonant with Canada's interpretation of the revised strategic criteria. Canada desires, in particular, the elimination from the control lists of such metals as nickel, copper, aluminum, and iron and steel scrap; certain chemical products; and commercial types of heavy automotive equipment.

SECONDARY CONTROL

While the United States has proposed an extensive area of secondary control in respect of items of less strategic importance than those retained under embargo, in Canadian opinion secondary control need be no more stringent than is presently exercised for List III items; that is, reporting shipments to COCOM. Canada should therefore oppose suggestions for pre-shipment licensing on the grounds that it constitutes unjustifiable red-tapism. Should a majority of the participating countries lend their support to the proposal for pre-shipment licensing, however, the Canadian position can be reconsidered, subject to assurance that "watch list" items are few in number. Canada would prefer to see the rejustification of items annually, and deletions or additions decided by a majority in COCOM.

EXCEPTIONS PROCEDURES

Experience has already shown that an extensive control list which contains items of questionable strategic significance provokes numerous requests for exceptions and may tend to frustrate the overall effectiveness of the control. Nevertheless, under prescribed conditions the export of embargoed items is justified. Substantial changes in the existing framework of exceptions procedures are not envisaged. A reduction in the list of items subject to control, retaining only those items which participating countries can wholly support, will likewise reduce the number of claims for exceptions.

ALTERNATIVE COURSE OF ACTION

If it should become evident to the Canadian Delegation that the necessary support is not forthcoming to bring about the deletion from the control list of those items of particular Canadian interest, either because of disagreement on the interpretation of criteria or in any examination in detail of items under review, the Delegation may propose that the Consultative Group consider (a) a primary scale of control for a situation such as now exists, when relaxation might tend to lessen causes of tension, and (b) a secondary scale of control, to go into effect in time of extreme tension or actual hostilities. Items on which there is disagreement would be assigned to the list subject to the secondary scale of control. This course of action is intended to alleviate United States' concern over the difficulty of reinstating items on a strategic list once control has been relinquished. It has significance also in offering the United States a proposal which perhaps it could regard as politically acceptable.

CANADIAN DELEGATION

Mr. L. Dana Wilgress has been named Canadian representative at the meeting of the Consultative Group. With Mr. Wilgress, Mr. Denis Harvey, Director, Commodities Branch, Department of Trade and Commerce, Mr. R. Campbell Smith, Commercial Counsellor, Paris, and Mr. J.H. Bailey, Canadian Representative on COCOM, will compose the Canadian Delegation. The Canadian Delegation should:

(1) Support the reaffirmation of the principles and purposes of the Consultative Group Coordinating Committee organization;

(2) Confirm acceptance of the new strategic criteria;

(3) Support the retention of an embargo list based upon a realistic interpretation of the new criteria;

(4) Support the earliest possible entry into force of the new embargo list, subject to Canadian acceptance of the content thereof;

(5) Support the elimination of the quantitative control list and the reporting list and agree to a minimum of secondary control.

[PEÈCE JOINTE 2/ENCLOSURE 2]

Projet de note pour le ministre du Commerce

Draft Memorandum to Minister of Trade and Commerce

Secret

[Ottawa], July 11, 1958

MEETING OF THE CONSULTATIVE GROUP IN PARIS, JULY 18 AND 19

Attached is a summary of the progress made in review of the Embargo List which has been continuing in COCOM. The items of special interest to Canada on which disagreement persists include nickel, cobalt, copper, aluminum, butyl rubber and automotive vehicles. The primary source of our difficulty is in every case the United States. It is understood nothing was said in the Ottawa meetings this week which has altered the Canadian stand on strategic controls. It might be useful to review here the pattern which the discussions are likely to take to forewarn you of the possible results.

There is little likelihood that the two day C.G. meetings will be able to re-examine in detail disagreed commodity items. Consequently, the United States may be expected to attempt to isolate the cases of those commodity listings which represent a special problem for them, by offering broad formulae enabling early implementation where there has been agreement. We seem to have been forewarned that they will also try to stand equally firm as we on nickel and perhaps one or two other commodities of special interest to us, e.g. butyl.

It seems that the type of manoeuver available to us lies principally in offering to maintain some form of control, short of embargo, for the disagreed items. The purpose would be to retain freedom to exercise discretion in approving export permit applications to satellite countries for example, which would for the present satisfy our interest in the case of nickel, we believe.

It is not known whether such a compromise would be acceptable to the United States but nevertheless this seems to be the limit to which we can offer to move to accommodate them, unless we are prepared to accept an indefinite extension of embargoed commitments on the commodities in question. In the event that no agreement can be reached on the basis of such a compromise, it will at least serve as an indication that we have not steadfastly maintained an inflexible position.

Judging from past experience, it is by no means sure that security arrangements in Paris will be adequate to keep word of such disagreement from the Press, although there has been insistence on special precautions for this purpose.

REVIEW OF EMBARGO LIST BY COCOM

After agreement had been reached in COCOM on criteria, each group of embargoed items was examined by a COCOM sub-committee after which the main committee reviewed the results and made a further attempt to resolve disagreed items. COCOM discussions ended on July 4th. Member countries had the opportunity of submitting changes in their positions to the Secretariat until July 15th. The disposition of embargoed items at the time of the completion of the COCOM review was:

Out of a total of 181 embargoed items agreement has been reached to retain or to delete only 91 items, representing 51 per cent of the existing List I. The number of items still subject to disagreement is substantial (55) and to this should be added the 11 items on which only partial agreement has been reached, making a total of 65 items for which the Consultative Group will attempt to devise a formula for resolving the differing points of view in the application of the agreed criteria.

The relatively inflexible attitude of the United States, although softening in some degree in the latter stages of the discussions, is mainly responsible for the lack of agreement on many of the disputed items. In a number of cases, the United States alone, or with only limited support from other members, has steadfastly opposed the majority view recommending deletion. United States tactics have not been without some measure of success. A comparison of the original proposals of member countries shows unanimity for the retention of 9 items and the deletion of 14 items. In subsequent discussions, retention of 65 items and complete deletion of only 26 items was agreed upon. Items on the "pending list" (24) might be added to the latter figure but the United States, in accepting deletion, attached the condition of transfer to a satisfactory form of secondary control. Without attempting to analyze the particular circumstances attached to disposition of individual items it appears that the trend of compromise, in general, points more in the direction of acceptance of retention under embargo than to deletion from control.

The 55 items still subject to disagreement represent the hard core of opposing views. For a number of items in the machinery, equipment, and instrument groups, disagreement results from differing views on re-definitions of items to be retained under embargo. The outlook for agreement on such items is more promising than for raw materials where interpretation of the criteria and not definition is the point of disagreement.

Canada's main concern is with this latter group, basic metals and minerals. The metals of principal interest are aluminum, copper, nickel, cobalt, and scrap iron and steel. The Canadian position favouring deletion of these metal items from control is covered in detail in the Canadian paper submitted to COCOM at the time the Metals Group was reviewed (Appendix?).

The standing of these metals at the completion of the COCOM review is summarized hereunder.

Scrap Iron and Steel - 1630

Deletion was agreed upon by all countries.

Aluminum - 1636

The Canadian recommendation for deletion was supported by Germany, France, the United Kingdom and most other participating countries. The United States based its argument for retention on the use of aluminum hard alloys for aircraft construction. The United Kingdom and Germany disagreed with the argument, referring to the high proportion of non-military consumption in their respective countries. The United States does not accept this argument, on the grounds that the pattern of use in the West is not relevant.

Cobalt - 1648

The United Kingdom and Canada are the only countries requesting deletion. France proposed retention under embargo but suggested further study of cobalt compounds with a view to specifying the percentage and nature of such compounds. Germany proposed that the item should read "Cobalt and cobalt alloys," that part (b) should read "Scrap" and that compounds should be narrowed and clarified as suggested by France. Most other countries, including the United States, are prepared to accept a selective definition along the lines proposed by Germany. The disposition of cobalt does not have primary importance to Canada in the same sense as aluminum, copper and nickel. Canada does not believe that retention is justified under the new criteria. However, a strong position was adopted in favour of deletion for tactical reasons in order not to leave the Untied Kingdom isolated on this item. Should the United Kingdom be prepared to modify its position, Canada could follow suit.

Copper - 1650

Canada and the United Kingdom recommended deletion. The United States and Turkey proposed retention and the extension of embargo to copper wire (Item 3652). France supported the retention of the embargo on item 1650 but not extension to include item 3652. Most other countries did not take a strong position on item 1650 but opposed embargo of copper wire. Belgium, the Netherlands, and Germany were closest to the Canadian and United Kingdom position. Italy, reflecting commercial aspirations, favoured deletion of semi-finished products and reserved its position on raw copper. Bilateral talks between Canada and the United States indicate some promise that the United States may be prepared to move closer to the Canadian position.

Nickel - 1661

Part (a) Ores, etc.[cad 211]All participating countries except the United States supported deletion.

Part (b) Alloys[cad 211]Canada recommended deletion. A majority of countries, not including the United States, favoured the United Kingdom redefinition - "Nickel-base alloys containing 45 per cent or more nickel and having 5 per cent or more of cobalt and 7 per cent or more of chromium." Canada could accept the United Kingdom redefinition provided agreement could be reached on this basis.

Part (c) Powder[cad 211]All countries except the United States supported deletion.

Part (d) Oxide and Scrap[cad 211]All countries except the United States supported deletion.

Part (e) Scrap and Spent Nickel Catalyst[cad 211]All countries except the United States supported deletion.

Other items of interest to Canada and remaining subject to disagreement are:

Automotive Vehicles - 1450

Canada recommended deletion. There was general support from most member countries. Italy proposed the redefinition, "automotive vehicles, lift trucks, tractors not possessing or built to current military specifications differing materially from their normal commercial specifications." All countries except the United States supported the Italian redefinition.

Butyl - 1801

The United States recommended retention and proposed that the item be redefined. All other countries were strongly in favour of deletion.

Polyethylene - 3750

It is understood that this item is to be recommended for embargo or for secondary control by the United States. Canada opposes control in either form. The position of other participating countries is not known at this stage but, in general, the upgrading to embargo of any List II or List III item is opposed by most participating countries.

¹⁶Voir volume 20, les documents 662 à 692./See Volume 20, Documents 662-692.

¹⁷Voir volume 23, les documents 735 à 745./See Volume 23, Documents 735-745.