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The High Commissioner proceeded to outline the attitude of the Canadian Government towards the forthcoming discussions in Washington, The Canadian Administration were better informed about the economic situation than the Canadian public, and in consequence were more sympathetic towards the difficulties of the United Kingdom. They realised that the current dollar problem could not be solved by one Government alone, but only by the three Governments in consultation. But, even so, the Canadian Government - and still more the Canadian public approached this problem on the basis that, of the three parties to the discussions, it was the United Kingdom Government (on behalf of the sterling Commonwealth) that was in immediate difficulties. They and the Americans therefore felt entitled to expect that the United Kingdom Government would open the discussions by indicating what measures they were prepared to take to help themselves out of those difficulties. If we could show that we had a plan for helping ourselves, this would elicit a favourable response from the Canadians and Americans, who would be anxious to find a means by which they could contribute. In this atmosphere it should be possible, not only to find some way out of the immediate difficulties, but also to approach the long-term problems. If, on the other hand, we opened the Washington talks by asking what the other Governments were prepared to do to help us their response would be unfavourable and it was unlikely that the discussions would lead to any useful practical results.

THE PRIME MINISTER asked what kind of proposals the Canadians expected us to put forward.

THE HIGH COMMISSIONER explained that, in the view of the Canadian Government, our dollar difficulties were leading to loss of confidence in Britain's capacity to pay her way. Hitherto there had been a widespread belief in the Western Hemisphere that the United Kingdom would overcome her economic difficulties. Doubts had now set in. Were we tackling the task of economic recovery in the right way? Certainly we had made great progress in increasing our production and our exports; but had this been achieved at the expense of building up a high- cost structure which was now making it difficult for us to sell our exports in a buyer's market? Public opinion in Canada and the United States believed that this was so, and therefore expected us now to be applying corrective measures, including measures to curb public expenditure and to reduce production costs.

If we showed that we were willing to apply such measures, both Canada and the United States would be anxious to give us all the help they could. If, on the other hand, we declared that there was nothing wrong with our economy, or that there was nothing that we could do to make our products more competitive and that it was rather for others to help us, Canada and the United States would be reluctant to offer further help. The Candians would not of course presume to suggest what remedies might be applied to adjust our internal economy. But they did expect that we should take the initiative, in the Washington discussions, in announcing what measures we proposed to apply for this purpose.

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