The communique issued on June 30, 1949, after the Paris meeting of the Council of Foreign Ministers, laid down the principles on which agreement on the Austrian Treaty was to be sought. The Foreign Ministers' Deputies who have been negotiating the Treaty since January, 1947, were instructed to report on September 1. When this deadline passed nine articles remained unagreed. The Foreign Ministers of the four negotiating Powers themselves met in New York on September 26, September 28, and October 6 to attempt to break the deadlock. The Deputies were instructed to continue their meetings and have since reduced the number of unagreed articles to seven. The principal obstacle for many months has been Article 35 (German Assets in Austria) which provides for the granting of oil concessions and the property of the Danube Shipping Company (D.D.S.G.) to the Soviet Union. Recent reports indicate that negotiations have reached a critical stage and that once the text of Article 35 is agreed the remaining six unagreed articles will present little difficulty. Substantial progress appears to have been recently made on Article 35.

2. In these circumstances, it is considered advisable to review existing Canadian policy on the Austrian Treaty to see to what extent our policy may still be applicable, what comments the Government might like to make on it before agreement is reached, and what attitude the Government might take in the event of an agreement.

3. Existing Canadian Policy-On February 25, 1947, the views of the Government were transmitted in a memorandum to the Special Deputies. The same day Mr. St. Laurent read a statement to the House of Commons (copy attached as annex B)† The statement applied to the Austrian settlement the same position as the Government has taken in connection with the German settlement i.e. that Canadian participation in the settlement should reflect the part Canada played in the defeat of naziism.

4. In the February statement the Government supported the declaration of the Moscow Conference of 1943 which expressed the intention of the four powers to see re-established a free and independent Austria. At the same time the Government referred to Mr. Mackenzie King's statement of January 30, 1946, in which he said that the Government "noted with satisfaction the steps which have been taken in Austria and which had resulted in the re-establishment of an autonomous Austrian state and of an independent Austrian government". These principles are reaffirmed in Article 1 of the draft Treaty as it has been agreed by the United Kingdom, United States, France and the U.S.S.R.

5. The memorandum suggested that the boundaries should be those existing before the Anschluss and this has been agreed in Article 5.

6. Our desire to see an early withdrawal of occupation forces after the ratification of the Treaty is met in Article 33 of the draft Treaty.

7. Our proposal that the powers of the Allied Commission should be handed over to the Austrian Government appears to be satisfied by Articles 1, 2 and 33 of the draft.

8. The prohibition against a new Anschluss, mentioned in our statement, is incorporated as Article 4 of the draft.

9. The declaration that the signatories will respect Austria's independence (Article 2) contains no guarantee for the security and future integrity of Austria which the Government, in its statement, considered to be a matter for the United Nations or the four great powers.

10. Section II (Articles 21-30) of the draft deals with the establishment and preservation of democratic institutions and human rights as well as with the suppression of German and nazi organizations about which the Government expressed concern.

11. There are, then, only two aspects of the Treaty in which the Government has shown interest that may not be adequately looked after by the draft. The first is the general desire that the settlement should be "of a nature to contribute to a set of circumstances mostly likely to ensure a permanent European peace". This requirement is further examined below. The second Canadian requirement so far unfulfilled is for an acceptable procedure for associating this country with the settlement. Events since February 25, 1947, will have to be taken into account and so this subject is discussed more fully below.

12. Present Canadian Interests-In a letter (to the Minister of Mines and Resources) dated January 22, 1948, on the subject of Austrians entering Canada, the Secretary of State for External Affairs said: "The position now is that Canada never recognized de jure German sovereignty over Austria, although de ,facto recognition of German sovereignty was accorded. Austria is now recognized as an autonomous state, liberated from German occupation. Canada was never at war with the political entity of Austria, nor with any Austrian predecessor to the present government".

13. The substance of this statement was communicated to the Austrian Minister in Washington in April, 1948, and on January 25, 1949, Cabinet agreed to accept an Austrian Consul-General in Ottawa.

14. The absence of a Treaty does not, therefore, greatly affect our political relations with Austria. It should be noted, however, that Article 14 provides that unless Canada accedes to the ratified Treaty, any bilateral treaties that were in existence between Canada.and Austria before 1948 would have to be renewed bilaterally, if we wish to have them continued in force. Should Canada accede to the Austrian Treaty, these treaties would continue in force, or lapse, at our option. (See Annex C for a list of Canadian-Austrian treaties).†

15. Trade-Canada, on September 7, 1949, extended Most-Favoured-Nation treatment to Austria. The following table indicates the value of our trade with Austria before the war and in recent years.

16. There would appear to be no difficulty in Canadian-Austrian trade relations arising out of the absence of an Austria Treaty.

17. General Interests-In its memorandum of January, 1947, the Government stated that it "wishes to see a satisfactory settlement concluded between Austria and all the Allies at the earliest possible date". This outcome is, perhaps, a matter of greater importance now than it was in 1947. The continued occupation can only favour the political extremists both in Austria and in Eastern Europe where the occupation of Austria affords the U.S.S.R. a reasonable excuse for maintaining armed forces. The Soviet pressure on Yugoslavia might be lessened if the occupation of Austria brought about a withdrawal of Soviet troops from the area.

18. Undoubtedly, the draft Treaty offers something short of the liberal arrangements that the Government might have supported to ensure a stable Austria, but increasing hostility to the occupation within Austria and the disadvantages of having Soviet lines of communication in Eastern Europe, suggest that any arrangements that do not prejudice the establishment of an independent and democratic Austria may have to be accepted.

19. Procedure-Article 59, as agreed in the draft text, provides that the treaty will become effective upon ratification by the U.S.S.R., the United Kingdom, the United States, France and Austria. There therefore need be no conference comparable to those held on the satellite treaties and consequently no formal opportunity for the Canadian Government to examine and comment upon the final text. Article 58, also agreed, provides for accession by states which were at war with Germany and which had the status of United Nations on May 8, 1945. Consequently, we shall be able to accede to the Treaty. In view of the considerations mentioned above, however, it would appear to be our over-riding interest to have an acceptable Treaty concluded even though Canada should have no adequate part in drafting it. Whether or not Canada should accede to such a Treaty is, of course, another question.

20. Conclusion-The complexity and long duration of the negotiations suggest that it would be generally undesirable, if not impossible, to attempt to alter any agreement already reached. Thus any representations the government may wish to make should be confined to the unagreed articles. Of these articles, No. 35, Disposal of German Assets, has been the source of the greatest disagreement. It has been thoroughly canvassed by the Deputies for more than two years and the differences of opinion are so sharply drawn and so detailed that it would be beyond our resources of information to offer any suggestions to break the deadlock. To attempt to interject any provision to further Canadian interests would almost certainly be regarded as an irresponsible act on our part.

21. Certain Canadian interests are involved in the other unagreed articles (Nos. 16, 26, 27, 43, 48 and 48 bis).⁶ If, upon enquiry, the existing proposals of the Western Powers are found to be unsatisfactory, it might be possible for the Canadian Government to make effective representations to the Governments of the United Kingdom, the United States and France. The advisability of making such representations would depend, in part, upon the magnitude of the Canadian interests involved.

22. It is suggested therefore, that other interested departments of the Canadian Government be consulted to ascertain their interest in, and opinions on the text of the unagreed articles of the Austrian Treaty. On the basis of the replies we receive we would be able to determine the nature of any representations we might offer. (Annex A indicates the interests of other Government departments in the Austrian Treaty.) †

23. It was suggested that the Canadian Government present a general statement concerning the Austrian Treaty to the Governments of the United Kingdom, the United States and France, on the basis of the existing agreements and proposals. But since the general views of the Canadian Government on the Austrian settlement were stated in February, 1947, and since the Canadian Government has taken no part in negotiating the Treaty, it was not considered advisable to make any general statement of this sort at the present time. Such a statement could only be regarded as an irresponsible criticism of the Western Powers for obtaining better terms for Austria from the Russians than they have been able to obtain, after almost three years of hard bargaining.

24. A further study should be made of the whole draft treaty, when and if one is agreed, in order to ascertain:

          (a) Whether it is necessary for us to accede in order to benefit under the treaty's provision and,

          (b) Whether the benefits would be of sufficient importance to warrant our accession although it may be politically undesirable to do so.

It is proposed that drafts of the agreed Treaty, when they become available, be circulated to interested Government departments in order to ascertain their views upon the accession to the Austrian Treaty by Canada.

25. The articles of the draft providing for accession (Articles 59) mention no date before which instruments of accession must be deposited. It is therefore possible for the Government to refrain from acceding until and unless it becomes apparent that Canada cannot avail itself of the Treaty procedures in advancing Canada's interests. Canada, by Mr. Mackenzie King's statement of January 30, 1946, mentioned in paragraph 4 above, has already recognized the re-established state of Austria as well as its Government. Any further requirements of this nature that might be considered necessary after the Treaty came into effect might be met by a unilateral declaration.

T.W.L. M[ACDERMOT]

⁶ Ces intérèts portaine sur les personnes déplacées et les réfugiés (16), la disposition du matériel de guerre émanant des Alliés et des Allemands (26), la prévention du réarmement des Allemands (27), la propriété des Nations Unies en Autriche (43), et la dette (48 et 48 bits).
These dealt with displaced persons and refugees (16), disposal of war material of Allied and German origin (26), prevention of German rearmament (27), United Nations property in Austria (43), and debts (48 and 48 bits).