367. Telegram From the Embassy in Canada to the Department of State 1

527. For State and Agriculture. Since my return from Washington where I learned of developing plans for providing Poland with substantial wheat stockpile, I have together with my staff been giving thought to form and content of presentation to Canadians which would maximize chance of Canadian acceptance and participation. Such chance I consider exceedingly slim and I remainly firmly of opinion that if we later decide to proceed with operation now contemplated notwithstanding violent Canadian reaction we will risk grave consequences in our total relations with Canada. Bitterness over Norman affair and coming two months of heated election campaign provide unhappy background for any large scale US entrance into Polish [Page 890] wheat market. In this connection see Embtel 5212 and earlier related telegrams.

In this message I am making certain suggestions as to possible revision of proposal and form of consultation which, in combination, might give project best chances of success.

I took opportunity in informal discussion April 14 with Pearson to attempt to lay ground work for more open-minded consideration by Canadian Government of project than can be expected from Howe and other officials predominantly concerned with disposal of Canadian wheat surplus.

In accordance with assurances given me by Dillon April 12 I told Pearson that no final decision had been reached on project in US Government and that before such was done there would be full scale and thorough consultation with Canadian Government. I then went on to explain that our motivation was almost exclusively political and that disposal of wheat only incidental. I described rare opportunity we saw not only to give needed support to Gomulka in his edging toward greater independence but also radical result which would be achieved by substantial conversion Communist collective organization of agriculture to free market in important satellite with infectious effect this could be expected to have on other satellites and even within Russia itself. I said we were genuinely anxious to have substantial Canadian participation in operation and I added that personally I believed its effectiveness would be enhanced by economic coloration which Canada’s participation would give. I emphasized stockpile aspect and apparent depletion Polish dollar resources for further cash or short-term credit purchases of wheat.

I concluded by saying that Washington was thinking of extremely easy financial terms which no doubt Canada would regard as shockingly unorthodox but that I earnestly hoped, in discussions of matter with Canadian Government, Pearson himself would reflect on this unique and fleeting opportunity in the political cold war. I urged that Canadian Government consider it in no sense American give away surplus operation in what has hitherto been Canadian wheat market in Poland.

Pearson listened attentively and said he was by no means unaware of political aspects of wheat deals with Poland. It had been for this reason that he had supported unprecedented easy credit terms to Poland in Canadian wheat deal recently concluded. We must appreciate, he said, that wheat is far more significant to Canadian economy than it is to us. He said he would however, give matter careful thought but his immediate reaction was that our surplus disposal policies were pressing on extremely sensitive Canadian nerve and pain would be [Page 891] accentuated during what he expected to be heated political campaign before elections June 10. He also said that great difficulty existed for Canada in considering extremely easy credit terms [and] vulnerability to demands by established friendly customers such as Pakistan for at least as good terms as Canada was willing to give Soviet satellite.

There was no opportunity to pursue the subject further on that occasion but I think small seed has been planted.

Turning now to question of how to maximize remote possibility of Canadian acceptance, I consider that regardless of persuasiveness with which US political objectives may be explained or levels on which presented, bitter Canadian resentment to proposed US Polish wheat stockpiling agreement cannot be overcome surely [simply?] by arguing importance political factors. Canadian acceptance will depend more on sound economic inducement and one on which Canadian Government could capitalize in election campaign than on understanding and agreement with our political objectives.

Embassy has not discussed possible solution with Canadians but considers economic inducement might include: (1) concurrent but separate Polish commitment to purchase for dollars substantial additional quantity (possible doubling of 150,000 tons already contracted for) Canadian wheat for delivery during 1957–58 marketing year; (2) determined and imaginative effort jointly to explore basis for significant Canadian participation in supplying wheat for Polish stockpiling. This will not be easy as it will require formula in not too serious collision with orthodox Canadian wheat disposal and export financing practices; and (3) obtaining from Poland assurance that stockpiled wheat will not be released except in emergency and then only after reaching agreement for such release with US and also Canada if latter participates in stockpiling.

In my opinion, importance Canadian concurrence and participation cannot be over stressed. I recommend US political objectives and desire for Canadian participation be presented in informal, unpublicized talks between Under Secretary Herter, Dillon and Butz on one side and Howe and Pearson on other. I believe that no time is to be lost and that it is important that talks be held in Ottawa. I think we can work out scenario which will avoid disclosure subject and purpose of visit. If this recommendation is acceptable I would appreciate suggestion possible dates. Election campaign poses problem for Pearson and Howe but I think timing can be worked out.

Meanwhile every effort must be made prevent leak Polish proposal to press as it is essential Canadian resentment not be further exacerbated pending further US-Canadian discussions.

  1. Source: Department of State, Central Files, 442.4841/4–1557. Confidential; Priority.
  2. Supra.