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in conjunction with

Meanwhile, this preparatory work,

the continuing dollar drain outlined in paragraph I above, has

demonstrated that quite apart from the fundamental question of

the level of trade which can in the long run be sustained between

the dollar and the sterling areas, the ineligibility for

E.R.. finance of certain major United Kingdom purchases from

Canada presents a major obstacle to the maintenance of current

United Kingdom/Canadian trade at a reasonable level, and is of

crucial importance to the whole complex of United Kingdom/

Canada trade relations.

4.

Last March, on the urgent advice of the Economic Co-opera

tion Administration (E.C..), the United Kingdom withdrew its

roquest for the further use of E.R.P. funds for Canadian wheat.

Had this step not been taken we were advised that the United

States Secretary for Agriculture would have formally declared

wheat a surplus commodity ineligible for off-shore purchases

under E.R.. It was then hoped that it would be possible for

the United Kingdom to re-arrange its purchasing programme so

that E.R.P. dollars could be expended on other essential

commodities, while wheat could be bought from the free dollars

thus released.

5.

Since April E.C.A. have also refused to finance the

United Kingdom/Canadian cheese contract and as from October

there is a strong probability that Canadian bacon will be

inoligible. In addition E.C.A. have felt unable to finance existing contracts for pulp, paper and timber, unless they have

been thrown open to competition with U.S.A. producers.

the last quarter of this year there may also be difficulty in financing off-shore purchases of non-ferrous metals.

6.

During

In all, this means that some $500 millions may be

ineligible for E.C.A. financing, of which Canadian purchases

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