Foreign Relations of the United States, 1955–1957, Western Europe and Canada, Volume XXVII

369. Telegram From the Embassy in Canada to the Department of State¹

Ottawa, June 11, 1957— 5 p.m.

639. Although premature predict full implications Canadian election results² for Canadian-US economic relationships, Embassy considers that irrespective political alignments there will be gradual veering away from traditional liberal trade policies and intensification of nationalistic feeling with following practical results:

1. Heightened protectionism both industrial and agricultural products manifested not by prompt drastic action but by increased sensitivity to domestic pressures and responsiveness to demands of vested interests. Cooling of attitude toward GATT might result.

2. Experimentation with tax and other policies to encourage increased processing in Canada of Canadian raw materials and increased Canadian participation in management and ownership of foreign-controlled enterprises in Canada.

3. Determined effort to develop closer UK and Commonwealth trade and financial ties in deliberate attempt reduce dependence on US particularly as source of imports as well as market for exports and as a source of investment capital.

4. Closer adherence to and support of UK policies re trade controls with Communist China and Soviet bloc.

5. Possible abandonment of traditional wheat export marketing practices which might involve establishment of two price system for wheat and more vigorous effort compete with US wheat exports on price basis, by extension long-term credits, by acceptance local currencies, barley, etc.

6. More nationalistic and less cooperative approach to problems involving boundary waters and export power.

7. In view uncertainties of situation there may be at least temporary slowing down of foreign capital movements into Canada and consequent lowering of premium on Canadian dollar.

8. Reasonable suppose months will elapse before new policies crystalized or old ones confirmed as administration undergoes progress of familiarization and education. Meantime delays in reaching decisions must be anticipated.

Merchant

1. Source: Department of State, Central Files, 742.00/6–1157. Confidential. Repeated to London.
2. In the general election held on June 10, the Progressive Conservative Party led by John Diefenbaker defeated the Liberals but failed to win a majority in the House of Commons.