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D.

COPY OF TELEGRAM (NO. 1256 FRAME) OF 3RD MARCH, 1949

FROM WASHINGTON TO FOREIGN OFFICE

E. C. A. financing of Canadian Wheat and Flour.

Bissell and Fitzgerald informed Caine and Christelow late this afternoon that they expected formally to have to return to us early next week certain requests for procurement authorisations covering wheat from Canada. The Secretary of Agriculture had informed E. C. A. that he would have no difficulty in supplying the quantities of wheat indicated from the United States. There had been some discussion of this action, but Bissell's view was that E.C.A. would have no alternative but to accept the determination of the Secretary of Agriculture.

2. We asked whether this determination would continue to hold good in the event of the present Conference reaching accord on a wheat Agreement. Bissell replied that even if there was an agreement duly ratified by the Senate, he did not believe that E. C. A. would again be able to finance our requirements of Canadian wheat (so long as the present supply situation lasts) without a change in the existing E.C.A. Legislation. He thought it might be possible to amend section 112 of the Economic Co-operation Act so that E.C.A. would not be precluded from financing off-shore purchases of commodities which were surplus to domestic requirements in the United States in cases where such commodities had been the subject of International agreement duly ratified by the Senate. He would discuss this question further with the E.C.A. General Council.

3. We have informed Anderson. We shall be considering further (as no doubt will you) the implications of this news, and we shall send you later our more considered views. At the moment, it appears to us that if we do decide to enter into a Wheat Agreement, we should do so only on the understanding (ratified by an exchange of letters or some other appropriate method) that the United States will seek amending Legislation along the lines suggested above, and that the Wheat Agreement shall have no force if the United States does not succeed in securing such legislation. Even if such an amendment to the Economic Co-operation Act was secured, we might, of course, run the risk of continuing to have our Canadian purchases ineligible for reimbursement until such time as the Wheat Agreement was ratified by the Senate.

4. We are checking the arithmetic. It looks as though initially for this quarter we may lose as much as $14 million for wheat.. We shall additionally lose a further amount for flour if the Secretary of agriculture makes a similar determination in the case of that commodity.

5.

Please pass copy urgently to Ministry of Food and

Treasury.

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