79. Memorandum by Steven H. Rogers of the Trade Agreements and Treaties Division, Bureau of Economic Affairs1
SUBJECT
- Canadian Reaction to U.S. Foreign Economic Policy
There has recently been a resurgence of Canadian criticism, expressed both by government officials and in the press, of United States foreign economic policies which, the Canadians believe, have damaged markets for Canadian exports. Criticism has centered on the U.S. surplus disposal program, and especially during the past few weeks on the feature of tied sales. The Export-Import Bank and other programs which aid customers for American goods have also been mentioned as disrupting Canadian export trade.
It has been suggested that U.S. import barriers are unreasonably restrictive when compared with the liberal trade policy followed by Canada, which is both our best customer and our biggest supplier. Some Canadians think that the United States has not paid sufficient attention to Canadian interests in formulating its foreign economic policies, considering the degree of economic interdependence between the two countries. The situation has been aggravated by the traditional Canadian deficit in trade with the United States, which may reach one billion dollars this year, and by the small degree to which Canadians participate in ownership and management of Canadian corporations controlled by United States citizens.
In general, the reaction of Canadians to United States foreign economic policies which they believe have hurt them seems to be that Canada cannot possibly compete with the United States by establishing her own export-promotion programs, and that a complete withdrawal from a liberal trade policy would be unwise. However, there have been suggestions that pressures be brought to bear on the United States to change her policies, by cutting purchases of farm machinery and other United States products, by discussing the matters in international forums such as the meetings of the Contracting Parties to the GATT and the FAO, and in general by making their views and fears known to this country. A less cooperative attitude on the part of the Canadian Government toward American interests may already have been felt, and could be very [Page 218] unfortunate in connection with American economic, political and military relations with Canada.
The remainder of this paper consists of examples of the Canadian attitude toward United States foreign economic policies as shown in diplomatic notes, public speeches and newspaper commentaries.
Canadian Government Reaction
The Canadian Minister of Trade and Commerce, C.D. Howe, told Parliament on August 9 that United States procedures for disposal of surplus farm products had been very harmful. After the public had become aware of the tied-sales clause in some P.L. 480 agreements, he said in a speech on October 9, according to the Montreal Star, that the United States is attempting to tie up markets for a long period of time.
Speaking in Milwaukee, Howe said on October 16:
There is, in the Canadian view, nothing to be gained by one country attempting to dump its surplus problems on to the other. This can only have the effect of making the whole problem worse. I believe that we in Canada have practiced what we preach. Our wheat has all been sold for Canadian currency, which, as you know, is as hard as the United States dollar, at steady prices and there has been no subsidization of production or export sales.
A Canadian note delivered to the Department of State on September 4 included the following:
The Canadian Ambassador is …2 under instruction to express, as has been done on several previous occasions, the serious concern of the Canadian Government about the effects of the surplus disposal activities of the United States upon commercial markets for wheat, and particularly upon markets which under ordinary competitive conditions would be supplied by Canada. Notwithstanding these representations, the United States has increased the pace of its wheat disposal activities with the effects upon commercial markets that the Canadian Government had forecast.
… The evidence suggests to the Canadian Government that the main result of the various surplus disposal programmes has been to reduce ordinary commercial markets and to cause serious damage to the interests of friendly countries, such as Canada, which, unlike the United States, depend so largely upon the export of wheat.
In discussing the tied-sales feature of the agreement with Brazil, the note referred to “discriminatory practices, so clearly at variance with the professed objective of the United States Government in matters of trade.” The note concluded with the statement that the Canadian Government is “much perturbed by the use of economic [Page 219] aid as a device to prevent Brazil from exercising a free choice in spending dollars to buy wheat.”
At the Eleventh Session of the Contracting Parties to the General Agreement on Tariffs and Trade, Mr. Isbister3 of the Canadian delegation discussed the surplus disposal problem at a plenary meeting with special reference to the United States.
… His Government had made clear to the United States Government its concern about the increasing number of countries whose markets were being affected by surplus disposals. With respect to wheat, of direct concern to Canada, he recognized the willingness of the United States to consult at all times, but his Government had noted with regret that its representations were having less effect upon the actual transactions in this field. In the view of his delegation, damage to normal trade was particularly likely to arise when the United States required a country purchasing a surplus on concessional terms to commit itself to purchase an additional quantity from the United States for dollars. This was a discriminatory practice preventing other exporters from competing and this question should be further studied by the United States delegation and Government.
… To the extent that the exports of other countries were adversely affected, their ability to maintain a high level of imports was impaired.
—Taken from Summary Record
[Here follow critical Canadian press reactions to the United States surplus disposal program as well as official Canadian criticisms of other United States policies.]
- Source: Department of State, Central Files, 411.0041/1–1157. Official Use Only. Drafted by Steven H. Rogers. Forwarded January 11, 1957, by Frank to Edward C. Galbreath who requested it for CFEP Chairman Randall.↩
- All ellipses are in the source text.↩
- C.M. Isbister, Director of the International Trade Relations Branch, Canadian Department of Trade and Commerce.↩