Foreign Relations of the United States, 1958–1960, Western European Integration and Security, Canada, Volume VII, Part 1

309. U.S. Delegation Record⁰

Undated.

JOINT UNITED STATES-CANADIAN COMMITTEE ON TRADE AND ECONOMIC AFFAIRS

WASHINGTON, FEBRUARY 16–17, 1960

Agenda

February 16—Afternoon (2:30 p.m.–6:00 p.m.)

I. Economic Outlook for Canada and the United States

II. International Economic Policies and Prospects

a) Follow-up Paris Economic Meetings, January 12–14

1) Consultation Among Capital Exporters

b) Progress in Removal of Discriminatory Restrictions

c) Problems of Low-Cost Imports

III. Canada–United States Trade

February 17—Morning (9:00 a.m.–12:30 noon)

II. International Economic Policies and Prospects (Continued)

a) Follow-up Paris Economic Meetings, January 12–14

2) Trade Problems

3) Reconstitution of OEEC

III. Canada–United States Trade (Continued)

a) Subjects to be raised by Canada

b) Subjects to be raised by the United States

February 17—Afternoon (2:45 p.m. –3:30 p.m.)

IV. Communiqué

V. Other Business

[Here follows a list of U.S. and Canadian participants.]

Meeting of February 16, 1960

Secretary Herter called the meeting to order at 2:30 p.m. February 16th. After welcoming the Canadian members of the Committee, the Secretary suggested that there be no press stories until the communiqué. This was agreed.

Economic Outlook for Canada and the United States [Agenda Item I]¹

Secretary Anderson described U.S. economic conditions in 1959 and the outlook for 1960:

Despite the steel strike, business in the United States continued to advance during 1959, establishing new record levels for production, employment and income. 1960 also promises to be one of record growth. Gross national production in fiscal year 1961 is expected to be $510 billion.

The government’s fiscal position has shown a notable improvement. The budget for the present fiscal year is expected to show a small surplus of $200 million in contrast to the large deficit of $12.4 billion in the preceding recession year. For the fiscal year 1961, a surplus of $4.2 billion is expected.

Overall, prices have been stable over the past year. The United States Government believes that inflation can and must be kept under control. That the public understands this is shown by the recent fall in stock market prices, which seems to be directly related to the announcement of a budget surplus. There is no longer a general belief that inflation is inevitable.

The Federal Reserve credit policy kept pressure on the banks so that the rise in the supply of money was limited to $1/2 billion or 1/2 of one percent. This occurred at a time when total loans of all commercial banks rose by $12 billion and the total volume of credit expanded by $60 billion.

Secretary Mueller supported Secretary Anderson’s presentation of domestic economic developments, adding details on the growth of output in specific lines during 1959. He pointed out that 1960 would be a record year with the annual rate of $500 billion GNP reached by early fall.

United States Balance of Payments

Secretary Anderson described the U.S. balance-of-payments developments in 1958 and 1959. He noted that in 1960 the U.S. balance-of-payments position is expected to improve substantially, though, in part, this will be due to certain temporary favorable factors affecting exports. One new factor is the speed with which new technology spreads. It used to take ten years for foreign countries to imitate U.S. technological developments. The time has been considerably cut, in large part, through U.S. foreign subsidiaries and licensing arrangements. In 1959, royalties from abroad earned $300 million for the U.S.

There has been an increase in international confidence—in confidence that the U.S. balance-of-payments problem is manageable and that the U.S. Government is taking the necessary measures to avoid inflation and thereby reduce our international deficit.

The United States does not take a pessimistic view of its current international economic position. We are, however, aware that we have a serious problem. We are taking steps to meet it, through the control of inflation at home and through measures to increase, and not restrict, multilateral trade.

Canadian Economic Trends and Outlook

The Minister of Finance, Mr. Fleming, explained that the Secretary of State for External Affairs was sorry that he was unable to be present but that he had to participate in a debate on foreign affairs in Parliament. Mr. Fleming described Canadian economic developments: The United States has tremendous influence on the Canadian economy. As a result, there is a great similarity in the trends in both economies.

In 1959, all Canadian economic indicators established records— employment, production, income, consumption, savings and exports hit all-time highs. GNP advanced 7 percent over 1958 in money terms and 5 percent in real terms.

While unemployment has been reduced in Canada, it is still a cause for concern. It has risen in the winter months, normally a seasonal high, to 5 percent of the labor force. The U.S. steel strike was serious for Canada as it caused some shut-down in Canadian factories.

Like the United States, Canadian policy has been directed towards fighting inflation. It has been successful. The price level in 1959 rose 1–1/2 percent while wholesale prices were unchanged over the year, partly as a result of the decline in food prices.

The rapid rate of economic expansion in the eighteen months to 1959 caused serious financial strains through increasing the demand for capital and for short-term credit. Commercial loans increased by 25 percent last year. Interest rates continue high.

The Federal Government would like to withdraw from borrowing on the capital markets, leaving this field to local and provincial governments and business. The large sales of Federal Government bonds in 1959 were pleasing evidence of confidence in the government’s economic policies.

Canada has a substantial trade deficit in 1959 with all countries in general and with the United States in particular. The press was concerned about the size of the deficit with the United States, especially in the third quarter, but the increase in exports in the fourth quarter reduced press concern.

In spite of the large trade deficit, the Canadian dollar is at an embarrassingly high premium over the U.S. dollar. This premium (4–3/4 percent) removes a substantial proportion of the protection provided to Canadian industry by its tariff. The strong position of the Canadian dollar is attributable to the high rate of foreign investment. The Minister noted that, in spite of all the Canadians have said on the subject, they welcome foreign capital. In fact, the Government would continue to improve the climate for foreign investment in Canada.

Mr. Fleming praised Mr. Dillon’s recent initiative in the field of trade in Western Europe² and emphasized that the present strength and unity of the free world economy resulted in large part from U.S. leadership and, more specifically, the Marshall Plan.

Secretary Anderson raised the question as to how the increase in the Canadian labor force was divided between a natural increase and immigration.

Mr. Fleming noted that the sharpest increase in the labor force took place in the recession year of 1957 with 250,000 immigrants—largely from Britain after the Suez episode. In 1959 immigration was only 100,000, having been cut back deliberately.

The Minister of Trade and Commerce, Mr. Churchill,³ supplemented Mr. Fleming’s comments on foreign trade. In particular, he mentioned that Canada was not worried about a deficit as long as U.S. capital financed it.

[Here follow sections on the Communist economic offensive, consultation among capital exporters, progress in removal of discriminatory restrictions, problems of low-cost imports, economic meetings in Paris, and reconstruction of the OEEC]

Canada-United States Trade [Agenda Item III]

Welland Canal [Agenda Item III (b)]

Mr. Dillon opened the discussion of this Agenda Item with a brief introductory statement in which he expressed gratitude for such action as the removal of the magazine tax in 1958, and stressed the United States’ concern with the problem posed to St. Lawrence Seaway traffic by the inadequate size of the Welland Canal. During the 1959 shipping season, there was evidence of congestion, and, within the next five years, seaway traffic is expected to swell to a volume exceeding the Welland’s maximum capacity. The United States is interested in plans the Canadian Government may have for doubling the present Canal’s single locks, and any other plans they may have for expanding the Canal’s capacity on a realistic basis.

Mr. Fleming replied that the Canadian Government has a wholesome appreciation of the importance of the traffic which the Canal serves. He recalled that this is an old matter, half of the Canal having been constructed in the previous century and half in the present century. The Canadians recognize that last year, the first year of its operation as a part of the St. Lawrence Seaway, bottlenecks developed. However, to double the facilities would be an expensive task. He remarked that Canada has borne the entire cost of building this canal. The Government has undertaken some steps to improve the situation and will spend about 7–1/ 2 million dollars this winter to create by-pass areas to expedite the movement of ships between locks. He stated that they hope to complete these improvements this year and that the operation of the Canal will be watched closely. He also noted the pressure to make the canal toll free, an impossibility once it was considered part of the St. Lawrence Seaway, a joint project.

Agricultural Items [Agenda Item III (a) and (b)]

Mr. Dillon noted that the first item to be taken up in bilateral trade matters concerned agriculture and invited the Canadians to open the discussion.

Mr. Harkness⁴ began his remarks by taking note of the improvement that has taken place in agricultural matters between the two countries during the past year. Many problems had been resolved, he said, and he wished to raise only a few matters. He recalled that there had been some discussion at the last meeting⁵ about an amendment of the Canadian Customs Act relating to the value for duty purposes of fresh fruits and vegetables⁶ which he said permits increased protection for Canadian fruits and vegetables when, at the end of the season, the price of such items in the country of export (the United States) has declined. He pointed out that a real problem exists for Canada, since the Canadian harvest is just starting when the U.S. harvest is at its peak or has just passed. Therefore, the U.S. prices are low and cut into the earnings of the Canadian growers, who must reduce their prices to meet this competition. To alleviate this situation, a formula has been devised which, Mr. Harkness said, is not as restrictive or rigid as the provision previously in the Act.

As the Americans are aware, Mr. Harkness said, the Government has not proclaimed this section of the Act although it was passed over a year ago. The Government is under pressure to proclaim it, and wishes to do so, but first wanted to consult with the United States and, if possible, obtain agreement on this matter. He pointed out that proclamation would merely put the existing section into effect, but that this action would not of itself change existing customs treatment of fruits and vegetables. It would only be used if a situation arose which made it necessary to do so, in which case they would consult with the United States, keeping in mind the emergency situation which might arise in marketing of perishables. He said that their fruit and vegetable trade people have been in touch with their U.S. counterparts in industry and have received support for this proclaiming action. He added that the provision is not designed to prevent entry of the U.S. product, but rather to raise the price level of the product to Canada, and that the U.S. growers were not necessarily opposed to this feature. He did not think this would affect exports to Canada.

Taking up other agricultural matters, Mr. Harkness observed that in view of world price developments, the Canadians hoped the United States could relax some of its restrictions (1) under the GATT Waiver and (2) on flax and linseed oil. He added that there are sales of flax and linseed oil at prices above the support price; still the United States imposes an import fee of 50% in addition to the basic duty, and this fee acts as an embargo.

Mr. Harkness also stated that Canada would like a larger quota on cheddar cheese. When the United States set its quota on this product at 50 percent of previous imports from all countries, this resulted in cutting down imports from Canada, as an individual supplier, by more than 50 percent. Canada would like consideration for an increase in its quota.

The next item mentioned by Mr. Harkness concerned a tax provision which requires U.S. race tracks to withhold 30 percent of the purse in cases involving countries which do not have a tax agreement with the United States, but only 15 percent of the purse with countries that do have a tax agreement. There is a Canada-United States tax agreement, but some tracks have been improperly withholding 30 percent.

Mr. Dillon observed that Secretary Benson, who would normally speak on agricultural problems, was unable to attend the day’s meeting because of illness but that Mr. Miller, Assistant Secretary of Agriculture,⁷ would speak for the U.S. side. In passing, Mr. Dillon said he wished to express appreciation for the fact that no action had been taken under the amended fresh fruit and vegetable provision. He recalled that our GATT experts felt that application of this provision would be inconsistent with Article VII of the GATT, and he deemed it important that the United States and Canada who placed great store in the GATT stick to it. He agreed that the way this provision affected us depended not on the proclamation, but on its use on individual items and emphasized the importance of advance consultation.

Mr. Miller emphasized USDA’s interest in the fruit and vegetable problem and stressed the desirability of prior consultation.

Regarding flax, he said our situation has improved in 1959 and we may be able to consider adjustment of the restriction, but first want to see what the planting intentions for the coming season are.

With respect to cheese, we have recommended to the Tariff Commission that restrictions on several types of Italian and Dutch cheeses be relaxed. While cheddar cheese competes more closely with the U.S. product, it does not at present create a problem, since we are utilizing about all we take in. When the situation warrants, we may be able to suggest similar action on cheddar to that which we have taken on Italian and Dutch cheeses.

Mr. Dillon suggested that Mr. Scribner,⁸ Under Secretary of the Treasury, answer on the race track problem. Mr. Scribner undertook to have the Treasury Department look into it. Mr. Harkness suggested more explicit directions to race tracks.

With regard to the general agricultural situation, Mr. Miller read a prepared statement of Secretary Benson at this point. (See JEA D–l/2)⁹

Mr. Harkness thanked Mr. Miller for the broad outline of U.S. agricultural prospects and noted that the United States has the question of revising flax seed quotas under consideration. He expressed appreciation for Agriculture’s efforts in limiting state embargoes on imports of sheep.

With regard to the Canadian turkey quota mentioned in Secretary Benson’s statement, he stated that Canada still has a support price and, while the market price has swung in the reverse direction from that prior to November 1959, Canadians are aware that the United States is estimating production of 6 percent more turkeys in the coming year. In view of these prospects and the Canadian price support, they are loathe to remove the import control, but are prepared to give full consideration to this matter.

Equalization Payment on Exported Cotton Products [Agenda Item III (a)]

Mr. Fleming took note of the U.S. view that the equalization payments are made to introduce balance into the subsidy on raw cotton, but stated this gives cold comfort to Canadian textile manufacturers affected by these payments. The Canadian position was set forth in the Aide-Mémoire dated October, 1959¹⁰ and this has been followed by meetings of industrial representatives from both countries. The Canadian industry reports that its views “are unanswerable,” and that is where the matter stands. The Government is under pressure since most sectors of the textile industry have had difficulties. It is Canada’s feeling that U.S. exporters are strongly taking advantage of the equalization payments. The question has arisen about application of countervailing duties to eliminate the U.S. exporters’ advantage, but he declared that the Canadian Government is not actively considering imposition of such duties. Such action would be considered only if the Canadians were driven to it.

Nevertheless, this continues to be a matter of concern, particularly in view of the declared policy of the United States to undertake an export drive. He pointed out that Canada already sustains a huge deficit in trade with the United States, and if the cotton equalization payments are taken advantage of to stimulate exports, the pressure upon the Canadian Government would be very great. He mentioned that Canadian firms feel that American parent corporations, as a result of the payments, take business that belongs to Canadian suppliers.

In sum, Mr. Fleming said, the Canadian textile situation has not worsened; the Government is not actively considering resort to countervailing duties. Mr. Fleming took the occasion to express the hope that any new U.S. export trade drive would not be directed at Canada.

Secretary Mueller set forth the U.S. position as follows: As a result of the domestic agricultural policy on raw cotton, our domestic mills have to pay a higher price for raw cotton than do foreign mills which buy U.S. cotton at the world market price. This differential amounts to 8–9 cents more per pound for the U.S. mill, which must compete in the world textile market against foreign mills that have purchased this cotton at the cheaper price. The United States simply pays the differential on the cotton content of the finished product so that the U.S. mill will not be at a disadvantage. Secretary Mueller emphasized that he did not see where the Canadians had cause for complaint since the equalization payment merely puts our mills on an equal footing with foreign mills.

Mr. Fleming said the Canadians were concerned with the fact that even if the U.S. mill sells at fair market value, it gets a larger return from the Canadian sale than on a domestic sale, and this induces exportation to Canada. Secretary Mueller replied that from that point of view he was not sure what the mills do, but if they sell at a low price (i.e., pass on the equalization payment) they are faced with a dumping charge. He then explained that as far as the U.S. export drive is concerned we are going to be vigorous, but our efforts are going to be aimed primarily at new items; we are going to seek out products and producers not presently interested in exports. We do not want to disturb our Canadian relations by such means as utilizing the equalization payments for increasing exports.

Minister Fleming said that Canada could live with the U.S. cotton product export program in good times but not in bad times, since experience showed that U.S. exporters drive harder for the export market during recessions. If times changed, pressures would increase to do something about the U.S. program. Mr. Paarlberg¹¹ pointed out that we have legislation on the books which will diminish the differential between the world market and U.S. price for raw cotton, and that the aggravation caused by this differential should gradually diminish.

Mr. Miller endorsed Secretary Mueller’s comments about the program and emphasized that the United States does not intend to use the payments in its drive for exports.

Special Problems

Mr. Churchill prefaced his introduction of special problems with remarks about the primary purpose of these meetings, which is to discuss trade relations between the United States and Canada. The value of these meetings, he said, is in essence that we have reached a situation where disruption of trade is less likely to happen. In Canada there is still a latent fear, based on past experience, of an abrupt termination of trade in some areas with the United States. The present meetings provide a safeguard against this sort of thing. He added that Canada must still look widely abroad for markets and is much concerned about protectionism in the Six. Regarding U.S.-Canadian trade, the items he wished to raise were non-controversial.

Surplus Disposal [Agenda Item II (a)]

Mr. Churchill observed that the question of wheat was pretty well covered in Secretary Benson’s statement, but added that Canada is grateful for the U.S. efforts to curtail barter, particularly with Canada’s customers in Europe. If the United States continues this policy they have no reason for complaint.

He declared that the Canadian surplus problem is roughly equal to that of the United States, considering the sizes of the two countries. The Canadians have a surplus equivalent to one year’s exports plus consumption.

He commended the work of the Wheat Utilization Committee and said he believes the meetings between officials are excellent.¹² He also commended the U.S. efforts to get non-wheat-eating countries to consume wheat and expressed the hope that as new markets reach the commercial market stage, the Canadians will not be left out.

Mr. Miller, for the United States, agreed with Mr. Churchill’s statements concerning the wheat program. He added that we have been able to increase consumption of wheat and, as these countries’ ability to buy improves, we expect to phase out the surplus disposal programs since we do not want to take over commercial markets. The United States is pleased with the barter program at the present time and has been able to withstand pressures for establishing a high dollar goal for barter disposals. We also think the Wheat Utilization Committee has served well.

Oil and Gas [Agenda Item III (a)]

Mr. Churchill’s comments on U.S. action under the petroleum import program were laudatory. He expressed the hope that we would be able to maintain the present position of permitting imports to District V. He observed that the Canadian petroleum industry is largely financed by U.S. capital and can now supply almost all of Canadian demand as well as substantial portions of U.S. demand, and called attention to the importance of petroleum resources to the common defense.

Turning to the situation in natural gas, Mr. Churchill said Canada has set up a National Energy Board (NEB) whose primary current concern is control over exportation of natural gas to the United States. He noted that the Board maintains close liaison with the Federal Power Commission (FPC). In this area, problems peculiar to a product like gas could arise in the future. For example, a cut-off in supply would cause serious disruptions. With this in mind, he recommended: more complete information on both sides including such features as length of contracts, price levels, areas to be served, etc. He suggested, as a means of avoiding trouble, that when decisions are made regarding exports, this should be reported through diplomatic channels so that the governments are informed. This intergovernmental exchange would be in addition to liaison between the NEB and the FPC.

Secretary Seaton agreed that it would be useful for the United States and Canada to have frequent meetings in this field. The Federal Power Commission is our primary agency concerned, but the Interior Department is willing and eager to be of assistance, he said. There are a number of cases pending on imports of gas from Canada. Mr. Dillon also referred to the pending cases, and observed that our FPC cannot make a valid decision without knowing of the decisions made by the NEB and vice versa. He concurred with Secretary Seaton’s and Minister Churchill’s statements regarding the desirability of exchanging information to a maximum degree. Secretary Seaton added that a prompt exchange is necessary in view of the fear which other fuel interests, such as the coal and railroad people, have of gas imports. Secretary Mueller observed that natural gas displaces six million barrels of petroleum a day, and imported gas displaces 400,000 barrels daily.

Magnesium and Uranium [Agenda Item III (a)]

Mr. Churchill started off this discussion by making a passing reference to magnesium, which he said Canada would like to discuss with the United States in the near future. This was essentially a customs tariff problem and he hoped officials might examine the difficulties later.

Regarding uranium, he said he would like to know whether the U.S. position remains the same as indicated in the exchange of notes.¹³ He then referred to the large crash program which the Canadian industry had undertaken based on five-year contracts, and mentioned that the options held by the United States could still be taken up. (The United States has released options to purchase additional Canadian uranium when present contracts expire.) The five-year contracts are running out and there is concern in Canada for the future. The stretch-out of existing contracts negotiated last year is helpful, but the industry faces contraction, and the Canadians wish to know whether there is any change in the forecast.

Secretary Seaton indicated that there has been no significant change in the outlook for uranium. He asked whether the producers had managed to amortize their investment. As far as the uranium situation is concerned, it is equally bad on both sides of the border. Our producers, especially out West, are touchy about imports. Speaking on behalf of the Atomic Energy Commission, he declared that should the regulations change, we would not, of course, forget the Canadian situation. Minister Fleming alluded to the fact that the opposition in Canada has used the declining position of the uranium mines as a political football, and Mr. Churchill concluded by saying that U.S. action on the stretch-out program has been helpful.

Lead and Zinc [Agenda Item III (a)]

Mr. Churchill said that he simply wished to restate the Canadian position of a year ago when Canada raised objections to the U.S. restrictions on imports of lead and zinc. Canadian producers tell him that the United States pressures them for production and then cuts down as soon as surpluses appear. He mentioned that the Canadians were quite satisfied with the UN Committee’s work.¹⁴ Their information indicates an improvement in the zinc situation and he wondered whether the United States could see its way clear to lift the restrictions on imports. Canada does not accept the arguments for a quota under Article XIX of the GATT, he continued, and a permanent quota would have a bad effect. (When these notes were reviewed with the Canadian Embassy, Michel Dupuy suggested the deletion of this sentence in view of comments from Ottawa.)

Mr. Seaton, in reply, said that the United States shared the satisfaction of the Canadian authorities on the steps which had been taken in the United Nations on lead and zinc. He felt that the production understandings in that group had helped the world zinc situation but that lead was still in difficulties. He said that he was not going to reiterate the historical basis for the present quotas, but he wished to draw attention to the fact that these quotas had been introduced after two Tariff Commission recommendations. At the moment, the Administration was in the position of fighting a rearguard action, with another Tariff Commission investigation requested by the Senate expected to be completed by the end of March. Mr. Seaton mentioned the heavy pressure being put on the United States Government by the domestic mining industry requesting tariff increases to bring the tariff on metal to 4 cents a pound, and on ores and concentrates to 2.8 cents per pound. The Administration was not supporting this demand.

As far as the United States was concerned, lead production had increased by 5 percent since the quotas were introduced and the price had risen by 1 cent. Zinc production had not gone up but this would not have been the case if the industry had not had labor difficulties during 1959.

Mr. Seaton said that the United States did not consider the present quotas to be permanent, but he could not hold out any substantial hope that they could be rescinded in 1960. The Administration was in the position of having to restrain the legislative branch from setting up further barriers to the import of these metals.

Mr. Seaton said that the United States felt that Canadian lead and zinc exporters had not done too badly under the present arrangements. In lead, Canadian exports of both metal and ores and concentrates to the United States were the highest since 1954. Zinc shipments in 1959 were at their highest level since 1956. He concluded by saying that with firming prices and continuing efforts by the United Nations Committee, some relaxation, if not revocation, of the quotas could be considered. However, he warned that nothing was likely to happen at least until early 1961.

Regarding the oil question, Secretary Seaton said that he thinks Canada can look forward to continued free entry into District 5.

Charges for Overflights [Agenda Item III (b)]

Mr. Dillon began by saying that the United States was raising two items of a technical nature, both of which have been the subjects of notes to the Canadian Government. The U.S. side did not expect to go into detail, but wished to emphasize their importance.

The United States, Mr. Dillon said, is especially concerned over the recent imposition of a charge of $64 on international flights over Canadian territory (for navigation facilities). This charge is in addition to a previous $20 fee imposed for the use of Canadian telecommunications. While we do not contest the legal right to impose these charges, this has caused complaints and leads to confusion in international air transport. We consider the heavy overflight charge a bad precedent for other countries.

Mr. Fleming replied that he is sorry this presents a problem and, as he understands it, there are three elements in the U.S. view. These are that the user charge sets a bad example, that this can turn an operating profit for U.S. airlines into a deficit, and that the U.S. Treasury is interested because it has opposed imposition of civil air charges of a similar nature by the United States. Mr. Fleming explained the Canadian action along the following lines: the cost of supplying air services has increased, the extended range of modern aircraft makes for fewer landings in Canada; therefore, the landing charges do not compensate for the supplies and services that are furnished to aircraft which overfly Canada. The Canadians are faced with hard realities and draw attention to the fact that other countries make charges similar in principle. Canada, therefore, feels they have every reason to do so. He noted that the legality of this charge was not questioned. Canada has received no complaints from other countries.

Secretary Mueller asked whether the charges apply to the West Coast, and Mr. Fleming said they are only on overflights along the Atlantic Coast. Mr. Dillon closed the discussion by declaring that the United States can see the Canadian arguments on this question, but the issue is of some moment to the United States and he called attention once more to the note we have presented to the Canadian Government on this matter.¹⁵

Restrictions on U.S. Trucking [Agenda Item III (b)]

Mr. Dillon raised the subject of the recent change in Canadian customs regulations governing the movement of American trucks making deliveries across the border. He noted that this was a rather technical question, but that there are no similar restrictions on Canadian trucking in the United States, and that the United States hopes something can be done to alleviate the situation.

In reply, Mr. Fleming said that the change in the customs regulations to which Mr. Dillon referred was made in March 1959, and it was aimed at controlling more carefully U.S. carriers delivering goods in Canada with vehicles which have entered Canada on a non-duty-paid basis. Canada had received a U.S. note on this subject on February 5¹⁶ and he was hopeful that a formal reply would be available soon. He explained that difficulties had arisen in this connection because of the impossibility of keeping a close check on individual trucks from the U.S. entering Canada to deliver goods at a number of points. It had been found that some trucking lines, in addition to delivering U.S. goods to Canadian points, were also picking up Canadian goods at one Canadian point and delivering them to another destination in Canada. This meant that some American trucking companies operating non-duty-paid vehicles were competing directly with Canadian carriers and the regulations issued in March 1959 were designed to prevent this practice. The new regulations restrict the unloading of goods carried by U.S. trucks and cleared at the border to one further point in Canada. Because there had been some difficulties in the operation of this regulation, some minor changes were made on January 1, 1960. Mr. Fleming assured the U.S. representatives that the Canadian authorities had had discussions with U.S. and Canadian trucking organizations before setting out this new Canadian customs regulation.

Telegraphs Act [Agenda Item III (a)]

Mr. Fleming said that he wished to take advantage of the meeting to provide advance notice to the United States of the intention of the Canadian Government to proclaim Part 4 of the Telegraphs Act. This would likely take place on February 24th, with Part 4 of the Act to become effective March 1st, 1960.

He explained the background and meaning of this action as follows: there is a Commonwealth Communications System to which Canada is a partner. The system cannot sustain itself unless the lucrative portions of the system support the non-profitable portions. The United Kingdom has agreed to help the system by including its UK-US revenues from the new cable to the United States in calculations of Commonwealth system revenues. For its part, the Canadian Government has decided that some regulations of foreign-owned companies which provide international overseas communications in Canada is necessary if Canada is to remain a part of the Commonwealth system. The Canadian Government therefore proposes to adopt the following policy under the authority of the Telegraphs Act:

1) All international communications companies operating in Canada would be required to use direct overseas circuits to and from Canada rather than indirect routings via the United States unless special Ministerial authority is given to the contrary.

2) Subject to this principle, existing foreign-owned companies would be permitted to carry on their present activities in the field of international overseas message telegraph traffic freely; also, subject to Ministerial approval, to carry other classes of telegraphy communication to and from places which cannot be adequately served by the Commonwealth system.

Mr. Fleming pointed out that, even with these restrictions, United States companies operating in Canada will have advantages not given to Canadian companies in the United States. He also referred to negotiations which are currently progressing regarding submarine cable landing rights in Hawaii.

Communiqué [Agenda Item IV]¹⁷

Agreed as released.

Other Business [Agenda Item V]

Mr. Fleming expressed the satisfaction of the Canadian Ministers at the outcome of the meeting. It had been constructive and agreeable with discussions being carried out in a most relaxed atmosphere. Mr. Fleming thanked the Chairman and his associates and assured them the Canadian Ministers looked forward to greeting them all at the next meeting of the Committee in Ottawa.

Mr. Dillon replied that U.S. representatives regarded the meetings of the Committee as unique in many ways. He also expressed appreciation of the atmosphere that had prevailed throughout and the U.S. representatives’ pleasure in returning the hospitality they had enjoyed during the previous meeting of the Committee in Ottawa.

0. Source: Department of State, Conference Files: Lot 64 D 559, CF 1595. Confidential. This 38–page record of the fifth meeting of the joint committee was prepared in the Department of State and circulated as JEA Memo 7, May 12.
1. All brackets noting agenda item numbers are in the source text.
2. For text of Dillon’s statement to the Paris Special Economic Committee, proposing reorganization of the OEEC, January 14, see American Foreign Policy: Current Documents, 1960, pp. 319–326.
3. Gordon Churchill.
4. Douglas S. Harkness, Canadian Minister of Agriculture.
5. See Document 294.
6. Section 40(a)(7)(b). [Footnote in the source text.]
7. Clarence L. Miller, Assistant Secretary, Department of Agriculture.
8. Fred C. Scribner.
9. A copy of Benson’s five-page statement is in Department of State, Conference Files: Lot 64 D 559, CF 1594.
10. A copy of this aide-mémoire was transmitted as an enclosure to a despatch from Ottawa dated October 2, 1959. (Ibid., Central Files, 442.116/10–259)
11. Don S. Paarlberg, Special Assistant to President Eisenhower.
12. The Wheat Utilization Committee was established by the “Food for Peace” Conference of the major wheat-exporting countries at their May 4–6, 1959, meeting in Washington.
13. Not further identified.
14. Reference is to the U.N. Lead and Zinc Study Group Report, Document #7, which was published on February 19, 1960.
15. A copy of this note, dated February 11, was transmitted as an enclosure to despatch 735 from Ottawa, February 11. (Department of State, Central Files, 942.7200/2–1160)
16. A copy of this note was transmitted as an enclosure to despatch 712 from Ottawa, February 8. (Ibid., 442.002/2–860)
17. For text of the final communiqué, see American Foreign Policy: Current Documents, 1960, pp. 305–308.