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a form acceptable to the supplier. It is clear, moreover, that, if we cancelled contracts, we should have no hope of continuing to draw on the Canadian Credit and we should not the assistance of the Canadian Government in our export drive. It is very doubtful indeed whether we should actually save dollars by this process. Indeed, we should probably lose dollars as well as creating a complete breach between ourselves and the Canadians.
12.
On the other hand, the Canadiens would certainly have great difficulty in disposing of their exports for dollars elsewhere. The United States has a substantial wheat surplus and other countries would much sooner buy United States wheat on E. R. P. terms than buy Canadian wheat for free dollars. The other Canadian agricultural products have no overseas market except the United Kingdom. In timber and pulp, similar considerations apply. The Canadians will be much less able to sell their non-ferrous metals in the United States than they would have been some months ago. The Canadians' difficulties in these conditions would certainly be very great.
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It is impossible to predict the outcome of a tug-of- war of this kind in which we were announcing our determination to repudiate contracts and to cut ourselves off from Canada if the Canadians refused to accept payment in sterling. We consider it unlikely, however, that the Canadians would be prepared to yield to our point of view. Admittedly, their own difficulties would be considerable if we cut off supplies from Canada. But it is most unlikely that they would be so great as to force the Canadian Government to make this further contribution to the solution of current difficulties, partic- ularly
ly in the intensely hostile atmosphere which will exist if we were cancelling contracts to which His Majesty's Government have repeatedly announced their intentions to adhere. The Canadian Government would, of course, have to go to its Parliament for the funds, either for a further direct credit or for dollars to pay the Canadian exporters. There has already been sufficient bad blood about the Canadian wheat contract and our successive cuts in imports to make it highly doubtful that the Canadian Parliament would agree to action. to help us in these circumstances.
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The se
If the Canadian Government reacted violently against our attitude they might, with the support of the Canadian Parliament, demand that we liquidated investments in Canada in order to enable us to continue to meet our contracts. investments are still large and total about $900 millions - their liquidation would be more than enough to look after this
The Canadian particular situation in the next year or two. Government and the Bank of Canada have been extremely unwilling to have us liquidate our investments and we have had no pressure at all from them to do this. But in the sort of circumstances which we are here considering, their attitude might well change.
15.
In that event. at the end of the day we might find that we had cut ourselves off from supplies which are essential to us and which would cost us the equivalent of dollars elsewhere. We should probably find we were still paying the Canadians some dollars. We should have lost access to the Canadian Credit. We might well find ourselves making forced sales of our investments in Canada. To precipitate any of these, possible dangers would produce an effect upon the discussions
col in Septease 30afc6would be catastrophic Page300f662c0.1 consequences would be incalculable.
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