Memorandum by Mr. C. Tyler Wood, Deputy to the Assistant Secretary of State for Economic Affairs, to the Under Secretary of State (Lovett)

Subject: Canadian Dollar Problem

The present status of the Canadian dollar problem may be summarized as follows:

Import restrictions will be imposed by the Canadian Government next Tuesday, November 18. The restrictions will be aimed chiefly against consumer goods and luxury items, many of which will be prohibited entirely. Capital goods will in general be subject to quotas of 200% to 300% of pre-war levels. There will be no legal or outright discrimination against the United States although by selection the restrictions will hit chiefly goods from the United States. The restrictions are intended to save a net of $175 million per annum. Details are being closely guarded by the Canadians although they have told us about the general range and scope of the restrictions.

Loan from the Export-Import Bank to the Canadian Government in the amount of $300 million has been agreed to,1 subject to certain conditions including the provision that Canada will borrow (perhaps $200 million) in the private market. (Copies of letters exchanged between the Canadians and the Bank are attached as tab A.2)

Exchange of notes will be completed tomorrow, November 15, we hope by you and Ambassador Wrong. (Attached as tab B is a suggested informal statement which you might wish to make to Ambassador Wrong at the time.2) The exchange is required chiefly because the U.S. has to agree not to invoke the 1938 Trade Agreement against the Canadian import restrictions, which would be a violation of the Agreement. (Copies of the proposed notes, the text of which has been widely cleared in the Department and by the Departments of the [Page 131]Treasury, Commerce, and Agriculture, and by the Canadians at Ottawa, are attached as tab C.3)

Announcements relating to the Canadian import restrictions will be made at Ottawa and Washington on the evening of Monday, November 17, simultaneously with the announcement concerning the Geneva Agreement. Prime Minister King, who is in London for the Royal wedding, will broadcast concerning the achievements at Geneva and will be followed immediately on the air by Finance Minister Abbott at Ottawa, who will tell about the import restrictions. Needless to say, both sides have had the gravest misgivings about the timing but the Canadian decision has been taken and there is no help for it. (A copy of the announcement to be made by the Department is attached hereto as tab D.4) This announcement has been widely cleared in the Department, in the Departments of the Treasury, Agriculture, Commerce, and by the Canadians. It takes the line that we understand the difficulties of the Canadian situation and appreciate the necessity for the imposition of Canadian import controls; it expresses the hope that the controls will be lifted as soon as possible and touches upon our agreement not to invoke the 1938 Trade Agreement.

C. Tyler Wood
  1. Mr. A. B. Foster, Assistant Chief of the Division of British Commonwealth Affairs, added the following marginal notation: “Mr. Ness of OFD states that the loan of $300 million was specifically approved by the NAC on November 8, 1947.”
  2. Not found in Department of State files.
  3. Not found in Department of State files.
  4. Not found in Department of State files; presumably reference is to the aide-mémoire included in the Department’s press release of November 17 and printed infra.
  5. Not found in Department of State files. Presumably this announcement is the statement published in the Department’s press release of November 17, the first paragraph of which is printed infra.