47. Current Economic Developments1
Joint US-Canadian Committee on Trade and Economic Affairs Meets
On September 26 the US-Canadian Committee on Trade and Economic Affairs held its second meeting in Ottawa.2 Discussions took place in a frank and friendly atmosphere and were considered most beneficial by both sides. They covered a whole range of matters concerning general commercial policies and prospects, trade and payments problems, and disposal of agricultural surpluses. The most significant development was agreement that there would be further and closer consultation between officials of the two governments on disposal of agricultural surpluses. A group of Canadian and American experts will meet shortly in Washington in accordance with this understanding.
Representing the US at the meeting were Secretary of State Dulles, Secretary of the Treasury Humphrey, Secretary of Agriculture Benson, and Secretary of Commerce Weeks. Canada was represented by Minister of Trade and Commerce and Defense Production Howe, Minister of Agriculture Gardiner, Secretary of State for External Affairs Pearson, and Minister of Finance Harris.
Background The Joint Committee was established by an exchange of notes November 12, 1953 following a Washington visit of the Canadian Prime Minister with President Eisenhower when they decided it would be advantageous to have a permanent mechanism to consider economic and trade problems which are so vital in the relations of the two countries. The Committee meets once a year, with the site alternating between Ottawa and Washington. The first meeting was held in Washington March 16, 1954. It was felt unwise to have the 1955 meeting before the US Congress had completed consideration of HR-1; then, owing to the heavy schedules of the Ministers involved, it was not possible to arrange the meeting until September.
Commercial Policy Discussions Secretary Dulles, in his initial presentation, said it was settled US policy to maintain a large market for imports and explained that certain “minor” actions which might cause concern abroad did not demonstrate a trend away from this policy. He suggested that these cases tended to attract disproportionate attention from the good record of the US in the commercial [Page 153] policy field. He added that it was not possible to have an economic policy completely immune from politics and that there would have to be a certain measure of protection of native industries against a large absorption of foreign products. He suggested that countries having obtained a certain portion of the US market should not press for its expansion to the point of forcing a political issue which might result in restrictions. In this connection he mentioned that the voluntary self-restraint of lead and zinc importers had allowed local US producers to recover, and that the problem seemed on the way to solution.
Secretary Humphrey pointed out that the world dollar shortage which was so evident two years ago has changed. Through trade, tourism, military and other aid programs, dollars have been redistributed, with foreign governments increasing their dollar holdings by slightly more than $11 billion and the US having $8.5 billion less. He suggested trade may have been somewhat overemphasized as a means of bringing about a balance as US aid declines and that a major part of the dollar flow should be through private investment. In this regard he reiterated the need to encourage other countries to make private investment attractive.
The Canadians, while agreeing to the importance of investment, emphasized the importance of trade. They said there were some uncertainties with regard to US commercial policy which caused Canadians concern. Delay in the implementation of customs simplification had not allowed forward planning for new or expanded markets. (US officials replied that they expected the customs simplification bill to be passed, with amendments, early in the next session.) The Canadians referred to the escape clause provisions of the Trade Agreements Act as another unsettling factor and noted that escape clause cases could be reopened year after year. They expressed hope that the escape clause action would be taken only when overall injury to an industry was proved. They also were concerned over the possible effects of the national security clause of the Trade Agreements Act, stressing the mutual security interests of the US and Canada. US officials replied that North America was considered as a strategic unit. They stressed that Canada need not fear that the President would look to the security clause to the exclusion of basic economic issues when passing judgment on escape clause applications.
Trade and Payments Problems The Committee shared the view that a growing volume of mutually beneficial trade between Canada and the US would develop most satisfactorily as part of a wide-spread system of freer trade and payments. In that regard they noted the high rates of employment and activity which had prevailed in most parts of the world and that the level of international trade had been [Page 154] generally well maintained during the past year. While some progress had been made in removing restrictions and reducing discrimination in many countries, there remained a need for further advances in this field.
There was some discussion of recent developments which indicated a slowing down in the progress toward convertibility. US officials reiterated US desire that the pound become convertible. We feel that this is a British responsibility and agree with them that it would be a mistake to adopt convertibility without first making sure that it could be maintained under most foreseeable circumstances.
Agricultural Surpluses The Canadians expressed strong concern with regard to US agricultural surplus disposal procedures. They pointed out that both countries have surpluses in wheat, oats and barley and that Canadians market their goods without subsidy. They have about 300 million bushels of wheat for export annually and have developed markets over the years to take care of this surplus. They said Canada has made an effort to maintain a stable price in line with the world price of wheat but that its exports have dropped during the last six months. They are now faced with a bumper crop which will mean a larger surplus this fall. During the last six months, the Canadians pointed out, the US has disposed of some 50 million bushels of wheat under PL 480, the mutual security program and on a bid basis for export, some of which went to markets which are traditionally Canadian. They said that sale of wheat for local currencies could not be considered as a normal commercial operation, and noted that the US is also bartering agricultural surpluses for strategic materials. They regarded as particularly serious the disposal of lots of grain on a bid basis.
These US programs, the Canadians said, were having the effect of displacing Canada in its traditional world markets. They felt that the US had not consulted them sufficiently and asked that US and Canadian experts consult on how this situation could be improved.
Secretary Benson said he appreciated that the US price support system has outlived its usefulness and has put an umbrella over world grain prices. The US has lost its old markets by holding the price too high, he said, pointing out that US cotton markets have dropped almost 50%. He emphasized that the US has tried to dispose of surpluses in an orderly fashion and to secure assurances from other countries that grain delivered under PL 480 will be in addition to usual grain requirements. PL 480, he said, is a new tool which is an alternative to Congressional proposals to effect sales at any price and resort to dumping. He emphasized that the US Government has a storage bill for grain of $1 million a day and that the pressures to move our surpluses are terrific. The US Government has tried to increase consumption and reduce acreage. Benson said [Page 155] that we had endeavored to establish a system of consultation with other exporting countries. He agreed, since the Canadians considered that system inadequate, to arrange for closer consultation.
In the course of discussion of surpluses the Canadians reported that their Government is highly in favor of renewal of the International Wheat Agreement, noting that this provides a good forum for consultation. US officials replied that the International Wheat Agreement problem was still under study in the US Government but that sentiment in the US seemed inclined toward renewal of the Agreement.
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