DEPARTMENT OF STATE Memorandum of Conversation
Date: February 13, 1949
Subject:
Participants: The President Prime Minister of Canada, Mr. Louis St. Laurent Secretary Acheson
After Luncheon at the Blair House on Saturday, February 12, the President and the Prime Minister retired for a general discussion. Secretary Acheson was present.
The Prime Minister reviewed briefly the situation confronting his Administration. He said that in the economic field Canada's former position, of selling largely in Europe and buying largely in the United States, probably could not be recovered.
The Prime Minister said Canada must hope to balance its payments with the United States by producing more of the goods which it could sell to us. If Canada would, as seemed hopeful, develop petroleum resources and its own coal supplies, he thought it would relieve a burden on U.S. resources and free dollars for other purchases. He said Canada hoped for closer trade relations with the United States.
On the political side, the Prime Minister stated that his Administration faced a general election within eighteen months and he expected that the election would not be postponed to the end of his Parliament's life.
The Prime Minister made specific suggestions on U.S. orders for some military items in Canada. He stressed the importance of furthering adoption of common equipment by the two forces. This meant, he said, the purchase of many items by Canada in the United States with the help of our forces-but this took dollars badly needed. He said Canada herself could concentrate on a few items which it could produce economically if orders were in volume. He asked if the United States would be willing to place orders for such items in Canada, thus utilizing natural and manufacturing resources and providing dollars to balance military payments.
The President said that the Prime Minister's suggestion deserved most careful examination and directed Secretary Acheson to institute a study. (Secretary believes this should not be through NSC.)
The Prime Minister said he was greatly disturbed over the possibility that ECA might end the financing of British wheat purchases in Canada. He said this would have a disastrous effect on the Western provinces and on the whole Canadian-British and Canadian-U.S. trade. It was explained to the Prime Minister that the problem centered on whether the present law was continued which made financing impossible of wheat declared surplus in the United States and on whether wheat became surplus here. It was also pointed out that the wheat agreement had a direct bearing and that Canada could be very helpful by assisting in getting British cooperation for an agreement. If no agreement occurred and the world prices fell, the United States Government would be in a difficult position in acquiring wheat under price support procedures and still financing sales in Canada instead of supplying its own wheat. The Prime Minister said he understood and would try to be helpful. (Labouisse, Nitze and Thorp should note this.)
The St. Lawrence project was briefly mentioned and the Prime Minister stressed Canada's great interest in it. The President assured the Prime Minister that his demonstrated desire for the project continued.
The Prime Minister said he recognized the legal commitments in the Newfoundland base agreements and did not propose to change them. He suggested the possibility of an exchange of notes by which the parties might express the intention, for the present, to exercise undoubted legal rights in certain ways which would not push the rights to the limit. He referred to some management of imports for the post exchange, duty free, which would control bootlegging. He also mentioned some treatment of military personnel who violated the law when not discharging duties compatible with regard to Canadian sovereignty. The President expressed a desire to facilitate examination of this proposal in a sympathetic way and directed Secretary Acheson to see that discussions were had.
In response to a general suggestion for reduction of trade barriers, it was agreed that we had to proceed slowly to avoid raising fears on both sides of the border. We should always be glad to discuss any points raised.
The meeting ended with mutual expressions of esteem
DA