394.31/3–2151
Memorandum by the Assistant Secretary of State for Economic Affairs ( Thorp ) to the Secretary of State
Subject: Recommendations to the President on additional Offers to be made by the United States to Canada at the Torquay Tariff Negotiations
Discussion:
The Trade Agreements Committee has developed a package deal for an agreement with Canada at Torquay. If the deal is approved the [Page 1293] two countries would have a substantial agreement in reasonable balance. Canada’s part of the package would include (1) all the offers Canada has made to us at Torquay up-to-date, (2) her agreement to release all preferences that Canada accords or enjoys in which we are interested, and (3) certain additional offers of value to us. The United States part of the package would include (1) all the offers we have made to Canada up-to-date and (2) certain additional offers which the Committee recommends be authorized.
An agreement on the basis of these offers would cover a wide range of products on both sides. Imports into Canada from the United States in 1949 of items covered by the Canadian offers were valued at $284 million, or 14.5 percent of total imports into Canada from the United States in that year. Imports into the United States from Canada in 1949 of items covered by the proposed United States offers were valued at $131 million, or 8.5 percent of total United States imports from Canada in that year.
Without exception the members of the Committee at Torquay (the Labor Department representative was absent) voted in favor of the proposed package deal with Canada. However the package contained for certain members one or more products on which they had instructions to oppose or dissent: Defense, aluminum; Treasury, aluminum; ECA, instructed to abstain on aluminum; Commerce, plywood; Interior, canned salmon and aluminum; Agriculture, Cheddar cheese. Therefore, where such action was necessary, the final decision on the votes cast was referred to the respective Departments in Washington, with recommendations in favor of approving the package deal. The votes in favor were cast on the basis that as a package the motion was acceptable but not voting specific concessions on individual items from the key list in isolation. Several representatives on the Committee stated that the President should approve the recommendation on all of the five key items or on none, and that no condition should be placed on the granting of any single item that did not apply to all five items. For example, the authorization for the concession on Cheddar cheese should not be tied to obtaining a concession from Canada on raisins.
At the time when the Acting Chairman of the United States Delegation was forced, because of the trend of the negotiations with Canada, to step into the negotiations, the Canadians, rightly or wrongly, were prepared to accept no agreement with the United States or at most a limited agreement containing only non-controversial items on each side. Such a limited agreement would have no economic significance and its possible political significance might boomerang because of its evident insignificance from an economic viewpoint. The Canadians, however, left themselves no path of retreat in the event that the United States accepted their proposal for a limited agreement.
[Page 1294]Our action regarding an agreement with Canada will have an important effect on the success or failure of our negotiations with the other British Commonwealth countries, especially as regards the preference issue. In the case of the concessions which we seek to obtain from the United Kingdom, this issue involves important agricultural products and in the case of concessions from Australia it involves non-agricultural products. The conclusion of a substantial agreement with Canada, and Canada’s commitment not to stand in the way of reductions by other Commonwealth countries of preferences Canada enjoys in those markets, would, it is believed, provide an important incentive for other Commonwealth countries also to conclude substantial agreements with the United States.
With one exception the Departments in Washington represented on the Committee have approved the recommendations of the Committee, although the Department of Commerce has requested that it be recorded as voting against, but not dissenting from, the recommendations on plywood.
The Department of Agriculture is the only Department dissenting from the recommendations of the Committee. It has dissented because of the offer on Cheddar cheese, which is an essential part of the package deal. The views of the majority of the Committee and the dissenting statement of the Department of Agriculture on this item are contained in Annex B to the Memorandum to the President. The Department of Agriculture has also dissented from the majority recommendation on onion sets, and its statement is contained in Annex C.1
At this stage in the negotiations we are confronted with three possible alternatives: (1) Complete collapse of our negotiations with Canada and other British Commonwealth countries, which would have grave political and economic repercussions; (2) limited agreements of no economic significance, which would be recognized here and abroad as tantamount to failure; and (3) a substantial agreement with Canada, which would mean that, with the help of Canada, we might possibly obtain satisfactory agreements with the United Kingdom, Australia and the other Commonwealth countries.
Collapse of our negotiations with Canada might have seriously adverse effects on Canada’s enthusiasm for cooperation with the United States in the joint defense program for integration of the economic resources of North America under the principles of the Hyde Park Agreement as reaffirmed last October.
[Page 1295]Recommendation:
It is recommended that you sign the underlying memorandum transmitting the recommendations of the majority of the Committee to the President and supporting the Committee’s requests for approval.2
Concurrences:
L/E, H, EUR/BNA.
- The TAC memorandum to President Truman, dated March 23, is not printed, nor are any of its annexes (394.31/3–2351).↩
- In a strong supporting memorandum also dated March 23 the Secretary of State forwarded to President Truman the TAC memorandum of March 23 with its annexes. Secretary Acheson cited to the President “broad policy considerations” as favoring approval of the TAC position on the Canadian negotiation: “the proposed concessions would enable us to make a very substantial agreement with Canada and, in addition would secure the valuable support of Canada in the difficult negotiations with the other Commonwealth countries regarding preferences. . . . Also, a highly significant break in the British Commonwealth preferential system would be made by Canadian reduction of preferences extended to other Commonwealth countries.” (394.31/3–2351)↩