Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 2

411.427/5–653: Despatch

No. 968
The Chargé in Canada (Bliss) to the Department of State¹

confidential
priority
No. 1136

Ottawa, May 6, 1953.

• Ref: Embassy Despatch 1111, May 1, 1953;² CERP Item D–5–c³

• Subject: Canadian Retaliation Against U.S. Import Restrictions

Summary: The Canadian Government has decided to retaliate vigorously if the Simpson Bill⁴ or other measures curtailing Canadian exports in violation of our trade agreement commitments becomes law. U.S. economic and strategic interests may be seriously affected.

Over a period of months the Embassy has reported a growing concern in Canada over U.S. commercial policies. Last week we warned that a stage had been reached where U.S. foreign policy planning should recognize at least the possibility of developments in trade relations that would seriously affect the excellent over-all relations between our countries.

The attitude of Canadian officials has further crystallized and hardened significantly. Probable trends in U.S. trade policies and the effects upon Canada have been reviewed carefully both at the official level and in the Cabinet. Official thinking has been focused and clarified to a point where Canadian reactions to certain types of action by the United States can be forecast with assurance.

Probably without exception all of the most influential officials dealing with economic policy have come to the conclusion that the time has come for Canada to take a strong stand if confronted with further violation of her trade agreements rights. We have been told categorically that the Prime Minister shares these views. C. D. Howe, number two man in the Cabinet and long an advocate of patience and tolerance in handling trade problems with the United States, has switched to the other camp. Finance Minister Abbott is known also to favor a firm stand. Chevrier, Minister of Transportation, who is usually very friendly to the United States and is seeking cooperation with respect to the St. Lawrence Seaway, none the less agrees with the view that a strong stand should be taken.

As of today it must be assumed that enactment of the Simpson Bill or other similar measures substantially injuring Canada’s trade would evoke prompt and vigorous retaliation. In money value the U.S. imports excluded by retaliatory action would be at least equal to the value of Canadian goods excluded from the United States. In addition, of course, there would be indirect effects disadvantageous to the United States.

It must not be thought that new restrictions against Canadian trade in violation of our trade agreement commitments can be satisfactorily offset by compensatory withdrawals of concessions by Canada and the issue isolated from other aspects of relations between the two countries. This is not the mood of the Canadians. They are now prepared for retaliation and all it implies, even though it would mean a burden on Canadian consumers.

The Canadians have come to this position after much soul-searching and with the utmost reluctance. To them it would signal the end of an era of trust and cooperation in the development of mutually advantageous trade. The influential economic policy experts feel that we may have reached a parting of the ways in trade relations between our two countries. They look upon retaliation as a step down the road to isolationism and economic conflict.

We wish to avoid being alarmist or exaggerating dangers. We of course realize that Canadian apprehensions are to a large extent based upon hypothetical fears of developments that may never occur. In our contacts with Canadian officials we do what we can to moderate their reactions. We believe it is our duty, however, to emphasize to the Department that a real threat to our over-all relations with Canada exists.

There is danger of underestimating the significance of Canadian concern over our trade policies. The essential conservatism and reticence of Canadians in expressing their feelings often misleads American observers, as does the fact that Canadian newspapers are less sensational than our own. By Canadian standards, the coverage by the press, the multiplicity of comments in Parliament and, even more, private conversations with influential Government officials, make it clear that beyond any doubt we are now confronted with an ominous groundswell of opinion that cannot safely be ignored. A deterioration in the harmonious over-all relations between the United States and Canada, so necessary for our economic and strategic interests, could come about much more quickly and gain momentum much more rapidly than most people realize.

Don C. Bliss

1. Drafted by Willoughby.
2. Despatch 1111 was a report by Willoughby on the manner in which increasing apprehension in Canada over U.S. import restrictions had resulted in a proposal before Parliament for drastic retaliation in the form of Canadian duties on exports of nickel and asbestos to the United States. (411.427/5–153)
3. A special or “alert” report, devoted to the subject of this memorandum, prepared in the Embassy in Ottawa as one of a series of economic reports sent to the Department of State from U.S. overseas missions under the Current Economic Reporting Program (CERP).
4. Representative Richard M. Simpson on Mar. 30 introduced a bill (H.R. 4294) to extend the Trade Agreements Act to June 12, 1954, with added restrictions. For an account of the opposition to this bill by the Secretaries of State and Commerce on May 4 and the subsequent passage of H. R. 5495 (Public Law 215) in August extending the Reciprocal Trade Agreements Act unchanged to June 12, 1954, see the Congressional Quarterly Almanac, vol. ix, 1953, pp. 210–217.