Memorandum by the Director of the Office of British Commonwealth and Northern European Affairs (Labouisse) to the Assistant Secretary of State for European Affairs (Perkins)1


In Ambassador Steinhardt’s telegram No. 169, of October 26th,2 seven pending U.S.-Canadian issues are cited as causing irritation to the Canadians because of the failure so far to reach solutions agreeable to Canada. These issues will be discussed below and a statement made as to the status of each.

1. Inaction with regard to the St Lawrence Seaway and Power Project The U.S. Government signed a treaty with Canada in 1932 concerning this project but was unable to obtain Senate approval. Consequently, [Page 403] an Executive Agreement was negotiated and signed in 1941 requiring the majority approval of both houses of Congress rather than two-thirds approval of the Senate. Since 1941 this Department has tried repeatedly to obtain Congressional approval for the Agreement. The opposition, to the Seaway in particular, is strong and fairly well organized, based upon railroad interests and those of the large seaports along the eastern seaboard.

It was finally decided by the White House in April 1949 to place the main responsibility for obtaining favorable legislative action upon the Secretary of Commerce. Since then, the only major development has been the appointment of a 5-man subcommittee by the Senate Committee on Foreign Relations. There have been subcommittees before which have always reported favorably on the 1941 Agreement to the full committee of the Senate. This last group, however, is made up of one proponent and four Senators understood to be hostile to the Project.

Canada’s attitude is that if the dual project is not approved by Congress during the next session, the need for power is such in southern Ontario that the Canadian Government will have to press for separate development of the power. The Seaway would then have to stand on its own feet. The Secretary of Commerce, with the President’s support, may find some way of reversing the current trend and of obtaining passage of the necessary legislation. This Department is cooperating with Commerce to the fullest extent but it must be said that at the present writing, the prospects appear none too favorable.

2. Delay in Implementing the Civil Air Agreement of June 4, 1949.3 Due to what the Ambassador calls the “intransigence” of Colonial Air Lines, which has had a 20-year monopoly of the New York–Montreal route, the United States has not been able to move forward in implementing the agreement as the Canadians have. Considerable feeling has been generated as a result. The whole question of the Executive Establishment’s authority to negotiate such an agreement with a foreign country in its present form, rather than as a treaty, is being attacked by Colonial through the courts with the prospect that the case will have to go as far as the Supreme Court before it is settled.

We are in the position, meanwhile, of asking the Canadians to allow our lines to continue their traffic as well as transit privileges at Gander Airport, while the Canadian Government line (T.C.A.) is unable to operate the Montreal-New York route granted to it by the agreement. There is no remedy other than to await the outcome of the courts, which may be a matter of months yet. The situation is quite awkward and Canadian irritation is not hard to understand although the Executive branch of this Government has done everything it possibly could to bring matters to a conclusion.

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3. Inability of Canadians to effect Military Procurement in the U.S. Since the passage of the Mutual Defense Assistance Act of 1949, there has been legal authority for Canada, among other countries, to make cash purchases of military equipment from and through the U.S. Military Establishment. The Canadians are not satisfied on this score, however, because the wording of the Act calls for cash in advance, because the method of computing sales values on existing stocks leaves depreciation out of account, and because the administrative machinery being set up under the Act has not yet begun to function or to give a clear explanation of its policies and procedures in regard to Canada.

Enclosure No. 14 is a paper prepared by BNA on October 4, 1949 for presentation at the regular meeting of the Permanent Joint Board on Defense on October 11–12, 1949. This paper was not only presented to the Canadian Section at the Board’s meeting but a copy was handed to the two counselors of the Canadian Embassy prior to the aforesaid meeting. It gives as full an explanation of the situation as was possible at that time and conditions have changed very little since then.

The Defense Board itself, acting on the contents of this paper and of the ensuing discussion, approved a formal recommendation on the subject of procurement which is attached as enclosure No. 2.4 This recommendation is first for approval by the Secretaries of the three Military Services and/or the Secretary of Defense. Following that, it will be submitted to the Secretary of State. If his approval is given, a submission is then made to the President. The Canadians know this. They also know from repeated conversations with Department officials that the Mutual Defense Assistance Act in regard to cash purchases was a distinct disappointment to the Executive branch of this Government and that the only remedy is for some revision at the next session of Congress, except for the administrative plan suggested by Dr. Berkner. This plan would require that equipment being produced in the U.S. be earmarked for Canadian order and the Canadians were required to sign the contracts and deposit the money only when the earmarking had been done and the delivery dates were well within sight. Mr. Willard Galbraith of Mr. Brace’s office5 has been designated to go into this possibility and he is doing so now.

4. Failure of U.S. to effect Military Procurement in Canada. The “buy-American” Act virtually prevents this legally and U.S. procurement policy has hitherto been conditioned largely by it, but even if the Act were repealed, it might not be possible to rearrange our policy within a short time to satisfy the Canadians. The reasons for this are fairly clear even though there are good long-term arguments in favor of spreading our military industrial pattern, of getting more dollars [Page 405] to the Canadians in this way and of helping the Canadians to maintain an appropriate military industry. Mr. Bruce’s organization has also had this problem under its scrutiny. There would appear to be nothing further that could profitably be done on this subject until the Atlantic Pact mechanism has developed something tangible in terms of mutual aid.

5. The “Buy-American” Act. The Ambassador has cited this separately but it is really a part of his Point No. 4 discussed above. It may be said that any modification of that Act would presumably affect other countries as well as Canada. It might for that reason be more difficult to get through Congress.

6. Recent immigration and customs incidents. On October 31, 1949, External Affairs gave to our Embassy at Ottawa a memorandum6 raising this issue and listing certain recent cases which have been especially puzzling or irritating to Canadians. We received the advance copy of the transmitting airgram6 from Ottawa on November 4. The Canadians are asking that an early meeting of appropriate officials of the two Governments be arranged in order to explore the possibility of reaching an agreement which would “avoid regrettable border crossing incidents and unfavorable public comment in the future”. We favor arranging for such a conference, even though the problems to be dealt with are at least as much matters of legislation as of administration. When one considers that U.S.-Canadian border crossings both ways have been estimated at thirty million per year, not counting entries at New York and other seaports of Canadian citizens, it will, we think, be realized that the number of troublesome cases is rather small. We are quite prepared, however, to make every effort to reduce them still further if it is possible and will be so informing the Canadians.

7. The Newfoundland Bases. This issue was the principal subject of the Ambassador’s telegram. It can be said that the U.S. Military Services are moving on this project in what appears to be a healthy direction. A paper is going up to the Joint Chiefs of Staff today or tomorrow embodying recommendations on jurisdiction and requesting the approval and guidance of the JCS for the three military members of the U.S. Section of the Board. Progress is also being made on the questions of tax exemptions, customs exemptions and military post offices. The Canadians are being kept informed by both the Department and the Ottawa Embassy of the progress being made and their best course now would be to let us work matters out here further for the next two weeks or so. There is a good prospect that we will be able to meet with them toward the end of November or early in December on the subject of the bases.

  1. Memorandum initialed by William P. Snow, officer in charge of Dominion affairs in the Office of British Commonwealth and Northern European Affairs, and Secretary of the U.S. Section of the Permanent Joint Board on Defense.
  2. Not printed.
  3. For further documentation on this subject, see pp. 406 ff.
  4. Not printed.
  5. Not printed.
  6. Office of the Director of the Mutual Defense Assistance Program, James Bruce.
  7. Not printed.
  8. Not printed.