346. Letter From Prime Minister Pearson to President Johnson1

My dear President:

As Mr. Sharp indicated in his letter of January 2,2 it was very useful to have advance information on the important new programme you announced on January 1.3 We attach importance to continuing consultation with you on the implementation and effect of the specific measures which are of direct concern to us.

The strength of the United States economy and the stability of its currency are of fundamental importance to us in Canada as indeed to the whole world. We have regarded participation with you and others in international efforts to assure a healthy framework for the world economy as one of the most constructive endeavours of the past few years. As you know, our bilateral trade and payment relationship has been a net source of strength to you. We have also tried to pursue policies contributing to easing current problems, for example, by the gold sales we have made to you over the past couple of years.

For our part, I would like to express my appreciation of the very evident efforts which have been made in your new programme to take account of the special position of Canada. Your programme will of course have to be carefully examined, as it evolves, before a full assessment of its implications for Canada can be made. Some direct limitation on the freedom of action of Canadian companies appears inevitable and this is bound to cause great concern. The Minister of Finance is in touch with Secretary Fowler on some of the more immediate problems. In this letter, I limit my comments to a rather different issue of great international importance, the question of border taxes. Should the United States feel it must take action to establish a system of import taxes and export rebates, or similar measures of a kind which I understand you may be considering, Canada would be obliged to take parallel measures in order to leave our competitive position in world trade unchanged. In the face of some public uneasiness here this has been publicly stated by members of the Canadian government and our position is understood by your officials; just as we understand yours.

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It seems to me, however, that it would be preferable to submit this general subject for international consideration and, in particular, that some re-examination of the international rules would be timely and would avoid the danger of misunderstanding leading to competitive action. I know that you now have this matter under consideration and I hope that, if you determine that some action by the United States is required, you will place proposals before the appropriate international bodies for consideration before taking such action. I believe that in this way we can avoid a cumulative process of action and counter-action whose consequences would be very damaging not only to the gains achieved through the Kennedy Round but also to the whole system of international trade and payments created under United States leadership since the war.

I know that the close and continuing consultation and cooperation in respect of the matters referred to in this letter, and which has characterized in a special way the relations between our Governments, will continue. This is the kind of relationship which, I am sure, we both desire to maintain and deepen.

With kindest personal regards,4

Yours sincerely,

L.B. Pearson
  1. Source: Johnson Library, National Security File, Memos to the President, Walt Rostow, Vol. 59. Secret. The salutation is handwritten.
  2. Not found.
  3. For text of President Johnson’s statement announcing the response to the balance-of-payments problem, see Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1968-69, Book I, pp. 8-13.
  4. In his February 5 reply, President Johnson assured Pearson of continued close cooperation on trade issues and pledged to seek the cooperation of international trade bodies as appropriate. (Johnson Library, National Security File, Memos to the President, Walt Rostow, Vol. 59)