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HIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT)

SECRET

C. P. (49) 169

27TH JULY, 1949

CABINET

31

COPY NO.

TRADE RELATIONS WITH CANADA

Memorandum by the President of the Board of Trade

I was invited (C. M. (49) 48th Conclusions, Minute 2) to circulate a paper on the question of Canada's future trade relations with the sterling area.

2.

I accordingly attach a memorandum by the Treasury which examines the 1949/50 situation with special reference to the proposal that Canada should accept sterling for that part of her exports to the sterling area not covered by current earnings or by existing forms of financial assistance. My own view is that this is a question the Canadians will have to face up to sooner or later. The conditions under which we were able to finance their United States dollar expenditure through the dollars obtained by sterling area sales to the United States and by other means no longer exist, nor are they likely to exist. The Canadians therefore cannot expect us indefinitely to be responsible for financing their (largely uncontrolled) United States dollar expenditure. Sooner or

later they must be confronted with this situation, and certainly as part of any "general settlement" this question must be tackled.

At the same time we are faced with a difficult

problem of timing.

3.-

The problem before us is, I suggest, to ensure that Canadian Ministers come to the discussions in Washington in a mood to assist us and not to side with the Americans. On the one hand it would produce the worst possible effect if we were to come out with these proposals in the middle of the Washington

On discussions without any preliminary warning to Mr. Abbott. the other hand, to put them crudely to him forthwith would, I suggest, create an equally bad impression. No mention was made of them during the recent London discussions, except by Mr. Nash, who merely elicited a most unfavourable reaction from Mr. Abbott.

4.

I conclude, therefore, that towards the end of August we should take the most convenient opportunity of having our thoughts conveyed to the Canadian Government, either by the High Commissioner or, as I would prefer, and I think could arrange, by such unobtrusive and high level official meeting as can be arranged without giving the appearance of ganging-up against the Americans.

pard of Tage 294.öf 662

27TH JULY, 1949.

H.W.

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