811.114 Canada/50612/6

Memorandum by the Under Secretary of State (Phillips)

The Canadian Chargé d’Affaires reported to me this morning that he had received a reply to the representations which we had made to him yesterday afternoon. The substance of the two drafts I had handed to him he had telephoned to Dr. Skelton; Dr. Skelton had referred them to the legal authorities of the Department of External Affairs, and thereafter to the Prime Minister himself. The reply, therefore, represented the attitude of all three.

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In the first place, the Prime Minister held that the drafts while improving on the original Section 403, were highly unsatisfactory for the following reasons:

(1) The proposed legislation was still retroactive in effect; (2) in effect it was an attempt to assert jurisdiction against Canadian companies in Canada by indirect means; (3) it was discriminatory against Canadian companies; (4) the whole thing was an effort to drag up old claims, and it was certainly not in accordance with the present spirit of cooperative effort between the two countries; (5) we were reminded again that during the years 1930 to 1933, the Canadian Government had voluntarily abandoned about $20,000,000 worth of business owing to the ban which they had placed upon distilled liquors, merely at the request of the United States Government.

Mr. Hume Wrong said that the feeling of the entire cabinet is that this proposed legislation should be postponed until there could be fresh discussions between responsible representatives of the distillers and the American Treasury and Justice Departments. He reminded me that Seagram, Incorporated, had made various efforts to negotiate with the Treasury; that they were constantly put off by the Treasury officials until finally in October last they were told that they would be heard, but from then on there had been no developments and no suggestion for negotiations from the Treasury.

Mr. Wrong said that Mr. King could not differentiate between the two drafts, since both were unsatisfactory in a broad sense.

Mr. Wrong then made his own personal comment. He said that now that the matter had been publicized in Parliament the situation surrounding the entire trade agreement was involved. He regretted that this was so, but it must be recognized as a fact nevertheless. He said that later on in the afternoon he would have the text of his Government’s reply to our proposal, which had not yet been deciphered. The above representations were merely based on his telephonic communication from Ottawa.

William Phillips

Later 4 P.M. Mr. Wrong handed me a copy of his instructions just received from the Prime Minister.25

W. P.
  1. Not printed.