Canada and the World: A History

1945 - 1957: A Divided World

• Change at the Top
• Cold War
• Dollar Diplomacy
• An Evolving Commonwealth
• Canada Completed
• The Cold War Turns Hot
• Continental Defence
• Economics and Culture
• Hungary and Suez

Change at the Top

Prime Minister William Lyon Mackenzie King won yet another election -- his fifth -- in June 1945, ensuring that his Liberal government would guide Canadians into the uncertain postwar world. Seventy years old, King was slowing down, and in 1946 he laid down some of his administrative burden by appointing his trusted Quebec lieutenant, Louis St. Laurent, as secretary of state for external affairs. Lester Pearson became St. Laurent's deputy. Two years later, St. Laurent succeeded King as prime minister, and Pearson, abandoning the bureaucracy for politics, joined the government as external affairs minister.

From 1946 until 1957, no two men had a greater impact on Canadian foreign policy than St. Laurent and Pearson. St. Laurent trusted his diplomats and supported their keen desire to play an active role in the new world order, pursuing policies that King would never have accepted. That contrast in approaches was highlighted by St. Laurent's "Gray Lecture" at the University of Toronto in 1947. In setting out the parameters of Canadian foreign policy, the Minister made it clear that Canada would "fulfil the growing responsibilities in world affairs which we have accepted as a modern state," particularly through the United Nations. King would neither have put Canada's policy on the record so explicitly, nor warmly endorsed such an activist approach.

The active policies pursued by St. Laurent and Pearson were made possible by a new sense of national unity that followed the Second World War. Scarred by depression and war, Canadians were now united in their desire to have Canada play a responsible, influential and independent role in international political and economic affairs. Canadians were well aware that in an increasingly interdependent world their welfare at home depended on peace and prosperity abroad.

Under St. Laurent and Pearson, the Department of External Affairs expanded steadily during the 1940s and 1950s to take into account Canada's global interests. In multilateral organizations such as the United Nations (UN), the Commonwealth and the North Atlantic Treaty Organization (NATO), experienced Canadian diplomats emerged as mediators par excellence as Canada's middle-power status equipped her to play a constructive role in building bridges between and creating coalitions among the nations of the world.

This kind of role depended on having influence in the corridors of power -- in Paris, in London and especially in Washington -- and meant that Canada had to remain a loyal and reliable ally, avoiding public expressions of discontent. But as the "golden age" of Canadian diplomacy drew to an end in the late 1950s, it became harder and harder to practise this kind of "quiet diplomacy," when Canadians looked to Ottawa for a more independent and distinctively Canadian foreign policy.

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Cold War

Even before the Second World War ended, the Allies were beginning to drift apart. As the Soviet Union grew increasingly intransigent in dealing with Britain and the United States, it was clear that postwar relations were not going to be easy. The Canadian government was rudely introduced to the new reality in September 1945 when Igor Gouzenko, a cypher clerk at the Soviet embassy in Ottawa, defected with documents that proved the existence of a Soviet spy ring in Canada. Public servants and scientists were implicated, giving rise to serious concern in light of Canada's involvement in atomic research during the Second World War. The information provided by Gouzenko showed that British and American citizens were also guilty.

This bombshell was kept under wraps until it was leaked to the media early in 1946. It created a sensation, and helped turn Canadian public opinion strongly against the Soviet Union. With the delivery of Churchill's famous "Iron Curtain" speech shortly thereafter, the Cold War was on in earnest.

The Western powers feared what seemed to be a relentlessly expansionist Soviet Union. Communist satellites were created on its borders immediately after the war, and Greece and Iran were threatened. In 1948, a coup replaced the democratic government of Czechoslovakia with yet another Soviet puppet. That same year the Soviets blockaded the Allied sectors of Berlin, a divided city isolated deep within the Soviet zone of occupied Germany. In response the Western Allies, led by the United States, mounted a massive airlift of food and fuel for the beleaguered inhabitants.

With the United Nations incapable of responding to these developments because of the Soviet veto in the Security Council, it became evident that the Western powers would have to form a military alliance outside the confines of that body. This was not inconsistent with the UN charter, which allowed for the creation of regional organizations. In August 1947, Escott Reid, a senior Canadian diplomat, promoted this idea for the first time at a public policy conference in Ontario. Later that fall, at the UN General Assembly, St. Laurent strongly advocated a regional alliance, the first Western leader to do so.

The first concrete move came from Western Europe, where a number of nations, including Britain and France, created a defensive alliance under the Brussels Treaty in March 1948. Defence talks were held between Canada, Britain and the United States, then expanded to include the Brussels signatories. The goal was a North Atlantic treaty that would unite Western Europe and North America in the cause of common defence.

Canadian officials saw it as more than a mere military alliance, fighting hard to obtain a clause that would require the members to co-operate economically as well. They succeeded, despite the reluctance of the British and Americans, but the clause had little real effect. Over the years the North Atlantic Treaty Organization has been first and foremost a military alliance. Nevertheless, membership in NATO had definite benefits for Canada. As a member, Canada would have a say in alliance policy. Equally important, Canada was now able to deal with the United States in a multilateral context, thus lessening the disparity between the two countries that would always be present in strictly bilateral dealings. For Canada, NATO provided safety in numbers, both militarily, against the threat of Soviet aggression, and diplomatically, against the overwhelming might of the United States.

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Dollar Diplomacy

Although Canada came out of the war much stronger economically, it was not long before a balance of payments crisis with the United States arose. With the return of peace, pent-up consumer demand in Canada led to a dramatic rise in the volume of American goods flowing across the border. Combined with Canada's continuing inability to convert her holdings of British pounds into American dollars, Canada faced a serious financial crisis. By late 1947, the government had no choice but to restrict imports from the United States.

But just as Canada had been rescued by the Hyde Park Agreement from a similar crisis during the Second World War, now relief came through the European Recovery Program. The Marshall Plan, as it is better known, was a program advanced by U.S. Secretary of State George Marshall to revive Europe's devastated economy. Under its terms the recipients of American aid were permitted to make purchases outside the United States. With some prodding from Ottawa, Washington designated Canada one of the approved "off-shore" sources, and the resulting influx of American dollars quickly ended the crisis.

Both Canada and the United States were anxious to avoid such crises in the future. Canadian officials, particularly in the Department of Finance, wanted to seek a free trade deal with the United States. With King's approval, secret negotiations commenced in earnest, resulting in an agreement to remove all duties and create a modified form of customs union between the two countries. Before any announcement could be made, however, King got cold feet. The Prime Minister had long been accused by his enemies of selling Canada out to the United States. Now on the verge of retirement, and haunted by memories of Laurier's defeat in the 1911 general election, he refused to conclude a deal that would make him more vulnerable than ever to such a charge. He was also sceptical of American motives, and feared that the ultimate goal was the absorption of Canada. Although the deal was strongly backed by those Cabinet ministers and public servants "in the know," King dug in his heels. Free trade was dead, and would remain so for another 40 years.

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An Evolving Commonwealth

When British Prime Minister Winston Churchill, whose view of the Commonwealth was distinctly backward-looking, was defeated in 1945, many observers expected a fundamental change in British foreign policy. Surprisingly, the new Labour government of Clement Attlee proved as determined as its Tory predecessor to use the Commonwealth to shore up Britain's declining power. The British pushed particularly for closer Commonwealth defence co-operation, looking askance at Canada's growing defence ties with the United States.

Both Mackenzie King and his successor, Louis St. Laurent, bluntly refused to reverse, as King put it, "the tendencies of the last 20 years." In the face of the Russian menace, Canada was more prepared than ever before to enter a peacetime defensive alliance, but it would be done through NATO, not the Commonwealth. St. Laurent frankly stated Canada's position at the 1948 Commonwealth prime ministers' conference: "It would be quite unrealistic for Canada to agree to any arrangement which precluded her from concerting defence measures with the United States, and the same applied also in the economic sphere."

More important than British attempts to turn back the clock was the beginning of the transformation of the Commonwealth from an exclusive "white man's club" into a complex multiracial body. The Commonwealth faced a fundamental examination of its future direction with the independence of India and Pakistan in 1947, and India's subsequent decision to declare itself a republic. The concept of a republican member of a Commonwealth based on loyalty to the monarch seemed inconceivable. However, India's importance in Asia, and the need to maintain Western influence in the area, made it imperative to find some solution to this dilemma.

This was accomplished in 1949 when Pearson helped British officials craft a formula that defined the monarch as "the symbol of the free association of independent member nations [of the Commonwealth], and as such the Head of the Commonwealth." Thus, the Commonwealth proved a flexible institution, able to accommodate changing political realities and to take account of the lesser attachment of newly independent former colonies to the Crown.

The first three Commonwealth members with non-white governments -- India, Pakistan and Ceylon (later Sri Lanka) -- were all located in Asia, which was becoming a region of growing concern to the West, particularly following the takeover of China by the communist forces of Chairman Mao Tse Tung in 1949. This concern was demonstrated by the decision to hold a Commonwealth foreign ministers' conference in the capital of Ceylon, Colombo, in January 1950.

Here, Canada made its first foray into foreign aid by supporting the creation of the Colombo Plan, aimed at helping Asian countries to modernize in a democratic fashion. Pearson recommended strongly to Cabinet that Canada should contribute $25 million to the plan, stressing the need to counter the appeal of communism in the area, and pointing to the potential benefits for Canadian trade of an economically strong Asia. From the start, then, Canadian foreign aid represented both a humanitarian tool to meet the needs of impoverished people and an instrument to advance the political and economic interests of Canada and other Western nations.

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Canada Completed

In 1949, Canada completed her territorial expansion with the entry of Newfoundland into Confederation as the 10th province. Newfoundlanders brought with them their strong sense of identity, which had kept them independent of Canada for so many years. Unfortunately, economic difficulties exacerbated by the depression of the 1930s had reduced Newfoundland in 1934 from the status of a dominion to that of a colony ruled by a British-appointed governor and a six-man commission of advisers.

The onset of war in 1939 made Newfoundland of great strategic importance, and Canadian troops garrisoned the island in 1940. The government became perturbed by the strong American presence that also developed there as the Americans gained control of three bases under the "destroyers for bases" agreement reached with Britain. In 1941, Ottawa had sent a high commissioner to St. John's to look after Canada's bilateral interests and to ensure that the Canadian presence was not overwhelmed by the American one.

Once the war was over, the status of Newfoundland had to be determined. When Britain announced in 1945 that a national convention would be elected to propose constitutional options to be voted on in a referendum, the Canadian government appointed an interdepartmental committee under R.A. MacKay of the Department of External Affairs to deal with the issue. After lengthy discussions with Newfoundland officials and politicians, MacKay was largely responsible for drafting proposed terms of union, which were approved by Cabinet and presented to the National Convention in November 1947.

Although both Canada and Britain sought to avoid any impression of coercing Newfoundland, it was clear that the British considered union with Canada the best solution for Newfoundland's problems, releasing them from their responsibilities for the island while keeping it out of American hands. Thus, when in January 1948 the National Convention recommended that Newfoundlanders decide between the status quo and a return to dominion status, the British government intervened.

London insisted that the National Convention include the possibility of a union with Canada on the referendum ballot. With three available options, two separate votes were required before the pro-confederate forces led by Joseph Smallwood won a narrow victory in the run-off referendum in July 1948. Terms of union were agreed in December, and Newfoundland officially entered Canada on March 31, 1949.

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The Cold War Turns Hot

Asia was also the venue for the first large-scale military confrontation of the Cold War era. Although Western efforts had been directed largely toward the defence of Western Europe, and the need to stop the spread of communism there, it was in Korea that shooting broke out. After Japan's defeat in 1945, Korea had been divided into two parts; the United States occupied the south, while the Soviet Union dominated the north.

In 1947, St. Laurent, as external affairs minister, agreed to have Canada serve on a United Nations commission set up to supervise Korean elections. Mackenzie King, who had not been consulted, was furious. He feared that Canada was getting into situations she knew nothing about, that were strictly the concern of the great powers. The United Nations, he raged, was no better than the old League and would drag Canada into war.

It was a last outburst by a fading politician against the new internationalist orientation being pursued by Canada's diplomats. St. Laurent stood firm. With several colleagues, he even threatened to resign if his policy was repudiated. King could accept the new reality, or he could precipitate the breakup of the government. When the old man backed down, it was clearly the end of an era.

King had not lost his political astuteness, however. He was right about Canada being involved in a war over Korea. On June 25, 1950, North Korea invaded its southern neighbour. The United Nations was able to respond, thanks to a fortuitous boycott of the Security Council by the Soviet representative, who was not present to use his veto. When the Security Council asked UN members for help defending South Korea, Canada came under immense pressure to contribute to the U.S.-led UN coalition. In July 1950, three Canadian destroyers were placed under UN command. Worried that the communist attack in Korea might be a decoy for a much larger assault on Western Europe, Cabinet hesitated before agreeing in August to raise a brigade group for service in Korea.

At the UN, Canada was primarily concerned that the war be run as a UN police action and not turned into an anti-communist crusade that could precipitate a wider conflict. For that reason Canada, along with other allies, strove mightily throughout the Korean War to exert a restraining influence on the United States. During the initial phase of the war, Canada was particularly opposed to the American desire to take the war into North Korea, fearing both Chinese involvement and the effect this kind of aggression might have on opinion in Asia. The Americans ignored this advice, and in October 1950, UN forces drove forward into North Korea, almost reaching the border with China. In response, over 300 000 Chinese troops poured into North Korea and sent the UN forces reeling backwards.

Pearson now turned his energies toward arranging ceasefire negotiations and to opposing any American proposals to use atomic weapons against the Chinese. He also opposed the American wish to have the UN General Assembly condemn China as an aggressor, because doing so would only make peace efforts more difficult. When he was unsuccessful, he agreed to support the American resolution - he did not wish to anger the American government any more than he had already done for fear Canada would lose all influence in Washington; nor did he wish to split the Western alliance.

The Korean War clearly revealed the difficulties of a middle power attempting to forge an independent diplomatic path in a world divided into "us and them." The Americans resented what they saw as Canada's moralistic preaching: U.S. Secretary of State Dean Acheson would later sarcastically describe Canada as "the stern daughter of the voice of God." As Pearson ruefully admitted in 1951, the age of "easy and automatic relations" with the United States was over.

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Continental Defence

Canada had long considered herself virtually immune from overseas attack. In the new era of long-range aircraft and missiles, that comforting assumption was no longer valid. As well, the United States feared the possibility of a Soviet attack launched across the Arctic; the defence of northern Canada was deemed essential to American security. Canada was inextricably joined with the United States in the defence of the North American continent and had to take American views into account, even though Canadian officials were more sceptical about Soviet intentions and capabilities. The defence partnership created by the Ogdensburg Agreement in 1940 was renewed by a similarly informal agreement in 1947.

The world became an even more dangerous place once the Soviets successfully exploded a nuclear device in 1949. The ultimate weapon of mass destruction was no longer a Western monopoly, and the threat from the north was even more potent. The Americans reacted accordingly. In the 1950s, three radar lines were built across Canada to warn of a Soviet attack, each one pushing increasingly northward as U.S. concerns mounted. The final network, the Distant Early Warning (DEW) line, stretched across the high Arctic.

The bulk of the funding for these projects and much of the operational requirements were provided by the United States. St. Laurent's government, already stretched thin by defence commitments in Europe for NATO and in Korea, simply could not afford the kind of defence installations required to satisfy the Americans. As a result Canada, once reliant on Britain for her security, increasingly came under the protection of the American nuclear umbrella.

Measures for bilateral defence co-operation culminated in the creation of the North American Air Defence Command (NORAD), which integrated North American air defence under an American commander-in-chief and a Canadian deputy. Promoted vigorously by the two countries' respective air forces during the final days of the St. Laurent government, NORAD was approved by John Diefenbaker's new Conservative government in 1957.

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Economics and Culture

The 1950s saw the continuing increase of American economic and cultural influence in Canada. Despite the failure of the free trade agreement, trade between the two countries flourished. The United States continued to provide about 70 percent of Canada's imports, a figure first reached during the Second World War. By 1951, Canada's exports to the United States had more than doubled and represented 59 percent of total exports. By contrast, Britain now took only 16 percent. The increasing demands of the U.S. military machine fuelled a resource boom in Canada, with exports of uranium, aluminum, lead, zinc and other minerals rising exponentially.

American investment in Canada also continued to grow, representing by 1960 three quarters of all foreign investment in Canada -- British investment had plummeted to 15 percent. Most American investment was in manufacturing, oil, and mining and smelting. In no other country with Canada's level of industrialization was such a percentage of the economy controlled by foreign interests. The first warnings of a potential problem came in the interim report of the Royal Commission on Canada's Economic Prospects, issued in 1957 by its chairman, Walter Gordon. A Toronto accountant and future Liberal cabinet minister, Gordon was appalled by the American penetration of the economy. With the economy booming, however, most Canadians did not care.

American culture dominated in Canada. American magazines, which had been extremely popular since the 1920s, continued to dominate the Canadian marketplace. So too did American television, prompting the Canadian Broadcasting Corporation to expand its operations and launch its own television service. Hollywood, which had a virtual monopoly over movies, threw a crumb to Canadian sensibilities by slipping the odd reference to Canada into its films. The Canada Council, established in 1956 to fund the arts, laid the basis for the growth of Canadian cultural industries in the visual and performing arts, and especially Canadian literature. But it could not combat the predominant influence of American popular culture.

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Hungary and Suez

There was some hope in the West that the death of the Soviet dictator, Joseph Stalin, in 1953 would lead to a lessening of tensions. Certainly his successor, Nikita Khrushchev, seemed a less menacing figure. However, Pearson, who in 1955 became the first NATO foreign minister to visit the Soviet Union and hold extensive talks with the Russian leader, was not convinced that such would be the case. His fears were confirmed the next year, when Soviet tanks moved quickly to crush the outbreak of a democratic revolt in Hungary. No loosening of Russian control over its satellite states would be allowed.

Unfortunately, the Western alliance was not in a position to react decisively to developments in Hungary, because of the concurrent outbreak of the Suez crisis. In July 1956, President Nasser of Egypt suddenly nationalized the Suez Canal, which was run by British and French investors. In a last spasm of European imperial arrogance, Britain and France secretly conspired with Israel to attack Egypt and regain control of the canal. World revulsion at their actions put Hungary in the shade and let the Soviets off the hook.

Meanwhile, the Anglo-French-Israeli attack on Egypt was condemned by the United States and by the Asian members of the Commonwealth. Opinion in Canada was split between those who would once more rally to the mother country and those who could not support Britain's rash action. This left the government in an awkward position. St. Laurent publicly expressed "regret" at the attack, while raging privately that Britain had deliberately lied to Canada about its motives. Canada refused to support Britain.

Despite their anger, Canadian officials sought to find a way of rescuing their British and French allies from the consequences of their folly. In a move that would forever identify Canada with UN peacekeeping activities, Pearson suggested the creation of a United Nations force that would enter the area to separate the combatants while peace terms were negotiated. The Canadian plan was overwhelmingly adopted by the UN General Assembly in November 1956. For his efforts, Pearson was rewarded by the Nobel Peace Prize in 1957.

While Pearson brought Canada a great international triumph, the government paid a political price at home. The Conservative opposition accused the Liberal government of stabbing Britain, the mother country, in the back. They were particularly incensed by St. Laurent's description of Britain and France as "supermen of Europe whose days are about over," and Pearson's comment that Canada would not act as Britain's "colonial chore-boy." While the government's defeat in the 1957 election cannot be attributed solely to the Suez crisis, its opposition to Britain's actions certainly hurt.