[Page 438]

115. Memorandum of Conversation1

SUBJECT

  • U.S.-Canadian Relations (Part 1 of 8)

PARTICIPANTS

  • U.S.
  • The Deputy Secretary
  • The Hon. W. C. Armstrong, Assistant Secretary for Economic and Business Affairs
  • The Hon. W. J. Stoessel, Jr., Assistant Secretary for European Affairs
  • The Hon. G. S. Springsteen, Deputy Assistant Secretary for European Affairs
  • The Hon. R. Z. Smith, Minister, U.S. Embassy, Ottawa
  • W. M. Johnson, Director, EUR/CAN
  • Canada
  • The Hon. A. E. Ritchie, Under-Secretary of State for External Affairs
  • The Hon. Marcel Cadieux, Ambassador to the U.S.
  • The Hon. J. R. McKinney, Minister, Canadian Embassy
  • The Hon. K. B. Williamson, Minister, Canadian Embassy
  • K. W. MacLellan, Head, U.S.A. Division, Department of External Affairs

The Deputy Secretary welcomed Under-Secretary Ritchie and his Canadian colleagues and said he looked forward to a meeting in which a free and frank exchange of views could take place. He stressed that the meeting was in no way a negotiating session. As an appropriate way to begin, he suggested that Mr. Ritchie might wish to discuss his views on the results of the recent Canadian election2 and also give an appreciation of the article, published in October, prepared by External Affairs Minister Sharp on U.S.-Canadian relations.3

Mr. Ritchie responded that he looked forward to the day’s talks and agreed that they should prove most valuable. He concurred that the session was not to be a negotiating one.

Article on U.S.-Canadian Relations

Addressing himself to the Sharp article, Mr. Ritchie said that the Government had decided that a more methodical approach to the con[Page 439]cept and conduct of U.S.-Canadian relations was needed. The papers issued in 1970 on A Foreign Policy for Canadians had not included a special section on relations with the U.S., and it had been recognized that there was a gap in the over-all view. The Sharp article was not a bureaucratic or academic production, but a Government paper which had been substantially reworked by Minister Sharp himself. The article’s third option of reducing Canada’s vulnerability to outside forces, particularly from the U.S., was an “eminently rational” approach which would be regarded as the minimum possible by any Canadian Government. The recent election did not invalidate or lessen the significance of the article, and it might be of even more value given a minority government in Ottawa. It might serve to restrain anti-American feeling. Mr. Ritchie hoped there would be serious discussion of it in Canadian circles.

Canadian Election

Mr. Ritchie suggested the following reasons for Prime Minister Trudeau’s set-back in the October 30 election: Trudeau’s reputation for arrogance, inadequate explanation to the country of the Liberal Party program, efficient organization by the opposition parties, the issues of inflation and unemployment, the immigration issue and recent influx of East Asians from Uganda, and various local issues. He noted that foreign policy itself was not an issue.4

Concerning effects of the election results on U.S.-Canadian relations, Mr. Ritchie surmised that our problems would be greater than in the past, since even more pressure could be expected from Canadians for resistance to the “continental pull” of the U.S. Continentalism, as in the energy field, would be viewed as more questionable. The hope of achieving an energy arrangement would be a degree more unrealistic than in the past. The Government was compelled to take action against unemployment, especially in Quebec and the Maritimes, and to focus more attention on resolving regional disparities. As an aspect of regional development, the Michelin situation could present any government with “extremely difficult problems.”

Mr. Ritchie saw as the most troublesome aspect of our relations the possibility that the U.S. would ask most of Canada when it could do [Page 440]least. There would be some differences between the parties which would be muted, but others would be sharpened. The New Democratic Party emphasized the problems of inflation and unemployment, but was not ideological. Mr. Ritchie said he hoped that Ottawa had the U.S. “ear” and its understanding. He ventured that perhaps U.S. global policy might have more bearing on Canadian problems and U.S.-Canadian relations. He concluded by saying “don’t forget us.”

U.S. Outlook

Mr. Irwin thanked Mr. Ritchie for his review and noted that many of Canada’s domestic problems had their counterparts in the U.S. The U.S. had had a serious problem of inflation and a balance of payments deficit, which the Administration had taken action to moderate. It had tried to carry forward its economic program, which it had done until August 15, 1971. The Administration had also been faced with non-relations with the PRC and relations with the USSR which were not good. Its objective had also been to moderate these situations. The Administration gave its firm support to NATO, though there were some voices which said that improvement of relations with the PRC and the USSR would mean less emphasis on Europe, Canada, and NATO. The Administration’s policy centered on the belief that the best foundation for a strong political and strategic position in the world lay in its relations with Europe.

The Administration was determined to be active and constructive in world affairs, and Mr. Irwin believed that there were few, including members of the Congress, who would challenge this precept. The U.S. had greater flexibility now that the relations had been begun with the PRC and were improving with the USSR. Relations with the PRC would help the U.S. in its relations with the USSR, though the U.S. did not seek to play off one against the other. SALT was of great significance in the broadest context of U.S.–USSR relations, as well as being of intrinsically great strategic importance. There is no denying Soviet expansionist policies, but the world is better off if one tries to work out better relations with the USSR. The CSCE carries the risk of creating euphoria about the possibilities of détente, but there will be no deviation from the U.S. regard of NATO’s defense structure as basic to Western security.

Mr. Irwin observed that while our military and defense interests are not less, economic and monetary problems have loomed as greater ones to preoccupy us in the months ahead. This concern is illustrated in the third option of the Sharp article. Mr. Irwin noted that we have strong and fundamental ties with Canada in economic, political and strategic terms. The U.S. placed a high value on Canada’s cooperation in NATO, the ICC in Indochina, and the field of environmental protection. But economic relations with Europe and Canada have developed [Page 441]a critical significance, and they could be troublesome as philosophical problems or, at worst, affect our fundamental relationship.

Mr. Irwin observed that in our handling of economic problems it was important to understand each other. It was recognized that the problems had political, nationalistic, and emotional overlays, but it was important to know what lay behind these feelings. A reading of the Sharp article, for example, gives us misgivings about the emphasis placed on Canadian economic independence in contrast with our hope for freer multilateral trade. To the extent that Canada develops a “new industrial strategy” and more artificial restraint of trade, the U.S. could face trade problems which might be worked out by bilateral consultation or might have to be resolved by unilateral action. The energy crisis faced in the U.S. is one problem for which we hope a mutually satisfactory solution can be found. The U.S. has a very real concern over the way Canada plans to pursue any policy of economic independence.

Mr. Ritchie responded that the article’s third option was not an isolationist one, but, rather, called for a more active development of foreign markets. Concerning the U.S. desire to improve relations with the PRC and the USSR, he said Canada could applaud and welcome such efforts. Canada hopes that Canada will not be forgotten. Referring again to the Sharp article, Mr. Ritchie said that it expresses the aim of increasing the efficiency of the Canadian economy, thus reducing Canada’s vulnerability to foreign impact. These two aims are the objectives in mind, and the measure of the policy’s success will be gauged against their achievement. Mr. Irwin added that we too shared the concern over unemployment and regional depression and that there was no intention of condemning the entire policy outright.

Mr. Armstrong stated that economic problems were in the forefront of our concern. Japan and Canada were first among our trading partners, and we would have to focus upon our trade relations with them in the next couple of years. Economic relations with the Communist countries were not very important and would not produce any solution of our balance of payments problem. Reflecting on Mr. Ritchie’s request that Canada not be forgotten, he said the chances were slim of Canada’s being overlooked.

Mr. Ritchie stated that Canada was involved in many multilateral economic discussions, and he believed our objectives were much the same. Mutual understanding was necessary to avoid conflict. Mr. Irwin agreed and said we must both exercise wisdom to avoid creating real problems. He urged the most serious efforts to avoid the kind of pitfalls which the democratic process can so often create.

Mr. Ritchie responded that in Canada there was a great tendency to indulge in scoring off the other, Canada versus the U.S. Canada could appreciate the U.S. balance of payments problem, but it felt [Page 442]strongly about its own problem of running a current account deficit of close to $1 billion. Canada had to do something about unemployment and regional disparities, but perhaps by discussion and consultation the two countries could get along.

Mr. Irwin cited the Michelin case as an example of how a trade problem was created by Canada for the U.S. The Michelin company was located in Canada with the purpose of exporting to the U.S., and it had received subsidies to start up operations. We could recognize the problem and sympathize with Canada’s concern, but a problem was created for us. We have to find an answer for such problems and perhaps work out standards for how to solve them in order to avoid conflict. The U.S. has been engaged in handling the problems of depressed areas in one way, and Canada might be able to handle the Michelin situation in some helpful way.

Mr. Ritchie said that an adverse decision in the Treasury Department’s consideration of countervailing duty action against Michelin could “tear things” and have the most serious effects in Canada given its present unstable political situation. The Canadian Government had to look across the board in making its decisions, not just at the Michelin case and the Automotive Products Agreement. Mr. Irwin replied that the third option had inherent problems for the U.S. and appeared to be much different from the first option in the Sharp article. Ambassador Cadieux interjected that the third option was not very different from the first; it is “still female but younger”. Mr. Ritchie added that when there was a choice of emphasis for the Government with no difference in cost, the obvious decision was to help export-oriented industries. He said he assumed that the Congress and the American public would be as interested as ever in the auto pact, but stressed that this matter, too, is a very sensitive issue in Canada.

Mr. Irwin stated that the OECD can be an efficient organization in international economic matters and can do some things which cannot be done under the IMF or GATT. He voiced the hope that Mr. Ritchie could attend the “new style” OECD meeting, but Mr. Ritchie replied that he had been unable to make this arrangement. Mr. Irwin stated it was his hope to increase communication with the EC, though dialogue was hard to get going. We did not wish to suggest any structured form of dialogue which could cause resistance, but we did want to achieve better communication with the EC as well as with Japan and Canada.

  1. Source: National Archives, RG 59, Central Files 1970–73, POL CAN–US. Confidential. Drafted by Johnson and cleared in U on January 5, 1973.
  2. In the October 30 elections for a Federal Parliament, Trudeau’s Liberals won 109 seats, losing their existing majority of 155; the Progressive Conservatives also took 109 seats, the New Democracy Party won 31, the Social Credit Party gained 15, and 2 independents were elected. Trudeau announced his intention to govern and reshuffled his Cabinet.
  3. See footnote 2, Document 114.
  4. In a telephone conversation with Kissinger on November 2 at 10:01 a.m., Ivan Head provided this post-mortem of the Canadian election: “the rather unofficial polls that have been taken since [the election] and these are more voluntary polls by persons of all persuasions who have been flooding us with correspondence and telegrams is to the effect that their desire was not to defeat the government and they haven’t quite done that but they sure came close, but rather to _________ us to clip the wings of the Prime Minister—to cut the government down to size a bit, they thought it was just being a bit too arrogant and what they wanted to do was build up the strength of the opposition but in a parlimentary system there is no real way of doing that without doing what they almost did.” (Library of Congress, Manuscript Division, Kissinger Papers, Box 374, Telephone Conversations, Chronological File) Blank underscore is an omission in the original.