[Page 415]

107. Memorandum of Conversation1

SUBJECT

  • Consultation on Multilateral and Bilateral Issues

PARTICIPANTS

  • Hon. Mitchell Sharp, Canadian Minister for External Affairs
  • Hon. Marcel Cadieux, Ambassador of Canada
  • Mr. J. H. Taylor, Office of Minister Sharp
  • The Secretary of State
  • Assistant Secretary Martin J. Hillenbrand, EUR
  • Acting Assistant Secretary Julius L. Katz, E
  • Mr. W. M. Johnson, Director, EUR/CAN

(The Secretary and Minister Sharp were alone for fifteen minutes before the other participants joined them.)2

In addressing himself to a long list of agenda items, Sharp began by stating that his Government had decided not to sell the Vancouver-made submarine, or deep submersible vessel (DSV), to the Soviet Union. He said his Government would take the line, presentationally, that it had cancelled the sale and that the U.S. position, conveyed earlier in the Secretary’s letter of November 4,3 only confirmed it. It was agreed that the DSV in Soviet hands could be a mischief-maker. The plan adopted was that the Government would buy the DSV and offer it, with a Canadian crew, on a charter basis to the Soviet Union for oceanographic purposes. He thought there was little possibility the Soviets would be interested. Prime Minister Trudeau had given Premier Kosygin, at the time of his visit to Ottawa, a hint of this decision, to which Kosygin replied that he did not believe it would have much effect on Soviet war capability.

Sharp then raised the question of our agreement for SAC overflights over Canada and said his Government had approved an agreement specifying a two-year duration at a time.

Regarding the Great Lakes Water Quality Agreement, Sharp said there was very great political pressure in Canada to complete this agreement very quickly. He outlined Canada’s steps in trying to eliminate phosphates as an effluent both by banning it from detergents and [Page 416]by improving treatment plant removal of it. Johnson said that we had decided to continue the use of phosphates, at least for the time being, since we had not found an acceptable substitute and that we were therefore dependent on sewage treatment only for removal of this pollutant. We were presently computing what target levels for phosphates we could achieve on the basis of financial resources available, but it was certain that we would only be able to agree to lower standards than perhaps hoped and as recommended by the International Joint Commission. Sharp said he hoped that, concerning a timetable for completion of the Agreement, it could be readied for signing before or during the President’s visit to Canada.4 He said it was not of crucial importance who signed the Agreement. The Secretary suggested that the President’s visit represent the outside limit for conclusion of the Agreement.

In response to Sharp’s query, the Secretary said he assumed the President’s visit remained as previously indicated and that the timing of the next Joint Cabinet Committee meeting might well follow settlement of the current monetary and trade problems which would otherwise represent something overhanging the meeting. Sharp said he had been thinking of a Joint Cabinet Committee meeting in January or February, but acquiesced in waiting to see how things worked out.

Sharp then turned to the most important aspect of the consultation, which he defined as Canada’s concern over the import surcharge and the direction of future U.S. policies. He said the President’s announcement of August 15 created a shockwave in Canada, though Canadians generally held an attitude of sympathy for the American position and how help could be given to the U.S. to reduce its difficulties. But Canada remained disturbed over the effect of the surcharge on its exports, particularly the nationalists who favored reducing Canada’s dependence upon the United States as soon as possible. He mentioned the bilateral talks going on and the discussions of the three points which seem to be of most interest to the United States: the Auto Pact,5 Defense Production Sharing, and tourist arrangements.

On tourist allowances, Sharp said he believed they would be increased, though he did not know by how much.

Regarding the Defense Production Sharing arrangement, Sharp thought our purchases of arms in the other country were about in balance or at the most $4 million out in 1970. There had been U.S. suggestions that the Canadians buy an American aircraft as a follow-on for the [Page 417]Canadian Argus patrol craft, but he said his Government would have to choose this replacement aircraft on the basis of what was needed, not on the grounds of a balance of payments contribution.

On the third issue, the Auto Pact, Sharp said this was a highly sensitive subject in Canada. At the Secretary’s suggestion, Acting Assistant Secretary Katz described the Agreement, its origin, its transitional safeguards, particularly the importance of the third safeguard, and its current results. He said that trade in the amount of $800 million in 1965 had reached $6 billion today in the transborder industry. He added that while there was a $500 million advantage accruing to the U.S. at the outset, we were now running a $100 million deficit. Sharp responded that Canadians feared removal of the third safeguard most, that which applies to duties on non-manufacturer automobiles. He said the underpinnings to industry which his Government had required at the beginning had already been removed. The Auto Pact had become sacrosanct, and even labor felt this way. Consumers, who might be expected to oppose the safeguards, were not organized and had not voiced much opposition. He thought leaks about changes by Canada served some purpose in preparing the public for adjustments. But he said it was imperative that his Government not act hastily. Katz said the official working group was progressing toward some solution.

Sharp then asked the Secretary about the aspect of the future direction of U.S. policy. The Secretary sought to assure Sharp that the President’s new policy was not designed to change the U.S. direction. The U.S. had had a serious problem in convertibility and drastic action was needed. Previous efforts and consultations had been tried but were not producing adequate action. The President’s action dramatized the problem and forced others to focus on a solution. The Rome meeting6 foreshadowed what will happen, first a realignment of exchange rates and then removal of the surcharge and a working out of trade “irritants.” The President was holding “summit consultations” to iron out the difficulties confronting us.

Sharp said Canada wanted to help, but there was a limit to how long it could keep its self-interest in check. He was worried about the implications of DISC in particular. The effect of DISC in third-country markets would produce the most serious problem for Canadian exporters. He said he had already been approached by consulting engineers who were worried about the implications of DISC for their business. Following a discussion of DISC by Katz, the Secretary said it was designed to put us on a more even footing with others, though perhaps it [Page 418]did mean an uneven one with Canada. This possibility would have to be watched; but the U.S. wanted to get back to parity with its partners and desired no change in its previous trade policies.

Sharp voiced his belief that the U.S. as a great power had to act magnanimously, if only to remain as a great power, and said such action also redounded to that great power’s own self-interest. The Secretary said he agreed that there was a price for leadership but thought others should not always take for granted what a great power might contribute in aid and financial support.

On NATO matters, the Secretary said he had the impression that the Soviet Union was much less interested in MBFR than in CESC and that it might be looking to the former to spur action on the latter. He said he thought bilateral relations with the Soviet Union were proceeding well enough and that one might safely look to 1973 as a possible CESC date. Sharp responded that both Kosygin and Tito had pressed hard on CESC. Both had admitted their preference for Brandt in office. Canada’s policy was that both Germanies come in together to the UN.

In reply to Sharp’s query about whether there was any hope of a settlement in the Middle East, the Secretary said that Sadat seemed to be getting close to painting himself into a corner. Gromyko had expressed this same concern to him. He thought it important to give Sadat some alternative; to supply more Phantoms7 to Israel at this time would make the situation critical for Sadat. He thought Sadat believed we were in the best position to do something, though he did not think us impartial and he overrated our influence with Israel. Sharp said he did not really see how the Canadians could be of special help, and the Secretary said he hoped that negotiations could be spurred on, by anyone, after the present UNGA session. The OAU8 recommended that negotiations be resumed under Ambassador Jarring’s auspices, in effect handing Israel a little help. If one could build on this possibility, all well and good, though Jarring’s negotiating tactics were not particularly encouraging. The Secretary said he believed it might be possible to work out an interim arrangement if one approached the problem with some very practical arrangement.

Sharp said he believed that one of the Secretary’s greatest achievements in office had been his work in bringing about a cease-fire in the Arab-Israeli dispute and in preventing further hostilities.

Sharp informed the Secretary that his Government had requested the Soviet Union to intervene with India to withdraw troops from the Pakistan border area. He did not know what the result would be.

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At the conclusion of the talk, Sharp mentioned the minor problem of the cessation of pre-clearance flight checks of passengers boarding Air Canada 747s at Canadian terminals. The Secretary replied we would look into the matter.

  1. Source: National Archives, RG 59, Central Files 1970–73, POL CAN–US. Confidential; Exdis. Drafted by W.M. Johnson. Approved in S “as amended” on December 4.
  2. No record of their conversation was found.
  3. Not printed.
  4. April 13–15, 1972. Nixon and Trudeau signed the Agreement on April 15.
  5. For text of the agreement, signed in Johnson City, Texas, January 16, 1965, see 17 UST 1372. Documentation on the accord is in Foreign Relations, 1964–1968, volume XII, Western Europe, Documents 316, 318, 323, 324, and 326.
  6. The G–10 Ministerial meeting in Rome November 30–December 1. The Group of Ten, or G–10, was created in 1962 to provide financial support to the International Monetary Fund. It consisted of the 10 wealthiest industrial states.
  7. Reference to the U.S. F–4 fighter aircraft.
  8. Organization for African Unity.