185. Editorial Note
Pressures on the Canadian dollar in the international financial markets prompted the Canadian Government on February 29, 1968, to draw $425 million from the International Monetary Fund to strengthen the reserves of the Bank of Canada. One week later it announced the availability of $900 million in standby credits, $500 million of which came from the Export-Import Bank.
Moreover, on March 8 the Johnson administration announced that Secretary Fowler and Canadian Finance Minister Mitchell Sharp had agreed to an exemption for Canada from the U.S. balance-of-payments measures affecting capital flows administered by the Department of Commerce and the Federal Reserve. This would enable Canadians to borrow in U.S. capital markets in order to finance Canada’s current account deficit. In return, the Canadians promised to take steps to prevent Canada from becoming a “pass through” of U.S. funds elsewhere which would frustrate the U.S. balance-of-payments program. (Current Economic Developments, Issue No. 801, March 12, 1968, pages 4–6; Washington National Records Center, RG 59, E/CBA/REP Files: FRC 72 A 6248, Current Economic Developments)
In a March 12 letter to President Johnson, Canadian Prime Minister Lester Pearson expressed his pleasure at this arrangement. Referring to a March 1 discussion between Sharp and Fowler on the border tax problem, Pearson also wrote that he wanted to have “an international discussion of the issues involved and we have prepared some suggestions for an initiative on this subject.” He hoped the two countries could “pursue these ideas and together contribute to a resolution of the serious difficulties which have arisen.” (Department of State, Central Files, FN 12 US)
On March 27, President Johnson replied to Prime Minister Pearson that he shared his “view that the exemption, together with the measures Canada is taking, will benefit both our countries.” He added that the GATT Council was meeting the same week to consider the creation of a working party to study the question of GATT rules on border tax adjustments, and his administration wanted “to cooperate with Canada in seeking an equitable solution of this important issue.” (Ibid.)