The Ambassador in Canada (Woodward) to the Secretary of State
[Received October 9—2:23 p. m.1]
57. From Willoughby. Embtel 53, Sept 28. Canadians agree generally with substance Deptel Gatt 33 Sept 22. US position, however, apparently based on assumption Belg restrictions not yet in effect. Canadians now certain licenses being refused imports from Canada.
Canadian Govt, therefore, instructing its del GATT today to take immediate steps to seek removal existing restrictions. First Canadian approach will be informal through Isbister2 to head Belg del Geneva. If ineffective, formal complaint to CPs planned.
Belg case will set important precedent. While full info re activities EPU and OEEC not available here, vigorous action objecting restrictions appears imperative. Sterling area countries cld reasonably contend their monetary arrangements analogous to EPU. If US acquiesces discriminatory import restrictions under good current condition Belg reserves and balance payments, we will have undermined basis for insisting elimination discriminatory restrictions by sterling area countries as the balance payments improve.
From standpoint Canada as well as other countries Belg precedent dangerous. Canada has over-all current account deficit resulting chiefly from heavy trade deficit with US. Serious balance payments difficulties [Page 1487]not impending but situation cld change rapidly. A large reduction in capital imports which now offset current account deficit wld immed confront Canada with problem of reducing trade deficit and strong pressure for discriminatory restrictions against US trade wld develop.
Dept pass Geneva, Paris. Sent Dept priority 57, rptd priority Geneva (for USDel GATT) unn, Paris (for OSR) unn. [Willoughby.]