The Chargé in Canada (Clark) to the Secretary of State

No. 4721

Sir: I have the honor to acknowledge the receipt of the Department’s memorandum instruction No. 1469 of July 1, 1943 with further reference to the London discussions on post-war commercial policy.

I had another discussion on this subject with Mr. Norman Robertson, Under-Secretary of State for External Affairs, on July 20. The Canadian representatives have now returned to Ottawa and Mr. Robertson informs me that they did in fact discuss the specific tariff items on which the British contemplate offering reductions to us in the forthcoming negotiations between the United States and the United Kingdom under Article VII of the Mutual Aid Agreement. Mr. Robertson said that, to put it generally, the British had invited representatives of the Commonwealth Nations to London for these discussions with an idea of looking into the condition of its Empire fences before opening discussions with us. He said that as the discussions were on the subject of the United Kingdom’s negotiations with the United States, the United Kingdom had expressed the desire that it be allowed to inform the United States of the results thereof. He understood that our Embassy in London had been informed by the British of the developments. He was, therefore, not in a position to give me the details of the discussions.

Mr. Robertson did, however, discuss with me quite fully the general question of post-war trade. He believes that bold, or even heroic, action is needed if Article VII of the Mutual Aid Agreement is to be effectively implemented. The old methods of trade negotiation, he feels, are too cumbersome and should be abandoned. He is convinced [Page 1105] that the best time to negotiate basic tariff reductions is during the depths of a depression when the inefficient industries have been driven to the wall and eliminated, or at a time, like the present, when because of the exigencies of war normal trade has been disrupted and directed into new channels which, under the control of governmental agencies, should be efficient channels. With vested interests for the time being in the background he feels that this is the time to take basic action toward reducing tariffs. If we do not strike now, he is afraid we will drift back into the old pre-war methods under which, he feels, it will be impossible to effect adequate reduction of tariff barriers.

I asked him what he envisaged by heroic action, and he suggested the possibility of concluding a broad multilateral agreement under which each nation would agree to a progressive reduction in all tariffs or in certain categories of tariffs to a maximum reduction of, say, 70%. Such a multilateral agreement could, he thought, be supplemented by bilateral agreements between countries, possibly worked out under some such system as our existing trade agreements program.

In this connection, he reiterated the opinion he had previously expressed to me that negotiation under our trade agreements program was too cumbersome and too limited in scope to make it interesting for Canada to enter upon further trade negotiations with us. An important third of Canada’s foreign trade was, he said, with the United States, another third with the Commonwealth and by far the least important third with the rest of the world. He had found in studying the Empire preferences in their relation to the United States tariff that, by and large, items forming the subject of Empire preferences were those which are covered by protective tariffs in the United States. He believes that the Empire preferences could be removed if a way were found to remove our protective tariff. He wondered whether it might not be possible to disregard the Trade Agreements Act in considering the United States–Canada situation and negotiate a commercial treaty providing either progressive or specific reductions in certain categories of the tariff affecting trade between the United States and Canada.

Mr. Robertson says that he is fundamentally in favor of liberal trade policies and low tariffs, and he is confident that he can negotiate on the bold lines he suggests. Much will depend, he admits, upon policies followed by the creditor nations after the war. If the United States, being the greatest of these, will realize that it must buy in order to sell, then Canada, being a creditor of less importance, can do likewise. He is considerably worried by this problem and believes that his suggested multilateral agreement providing a progressive reduction of tariffs might help the situation.

Respectfully yours,

Lewis Clark