202 Brophy to Wilson

Memorandum CANBERRA, 22 June 1944

CANADIAN MUTUAL AID

I understand that the Acting Prime Minister has referred to a statement which appeared in the daily press of 15th June concerning the operation of Canadian Mutual Aid, and has suggested that a press statement might be prepared presenting the story of Mutual Aid from Australia's viewpoint.

2. The press reports resulted from a press release by the Canadian High Commissioner's Office covering the report of the Canadian Mutual Aid Board on the operation of Mutual Aid to 31st March, 1944. The statement is factual in nature and the figures contained therein are regarded as not unreasonable, although the Treasury is not in a position to comment on their accuracy.

3. Canadian Mutual Aid arose due to the sterling area's Canadian dollar deficiency. Before Mutual Aid, Canadian funds had been provided by the United Kingdom realizing many of her Canadian assets, and later by the Canadian Government making a gift of a billion dollars to the sterling area. When funds from these sources were exhausted, Canada passed the Mutual Aid Bill, which was designed to avert the consequences of the huge inter-Allied debts of the last war, and concluded Mutual Aid Agreements with Australia [1] and other Governments. Theoretically, as regards the sterling area, Canada desires to supply as Mutual Aid all goods and services necessary for the war effort which cannot be paid for from current accruals of Canadian dollars. in practice, however, this principle is limited by political considerations. Discussions are at present proceeding regarding the application of the principle as far as Australia is concerned.

4. The term 'Mutual Aid' is in fact somewhat misleading, for it is not envisaged that sterling area Governments should make available supplies to Canada on a non-payment basis. Such supplies are very few in relation to Canadian exports. As 'token' reciprocal aid for political purposes, however, Australia meets port charges in respect of out-ward cargo to Canada. The amount involved is estimated to be at the most 130,000 per annum, and is insignificant compared with the aid which Canada makes available to us.

5. As regards Australia, therefore, Canadian Mutual Aid is very onesided in operation, and it is not considered appropriate to issue a press statement outlining the story of Mutual Aid from Australia's, as apart from Canada's, viewpoint.

J. BROPHY

1 Document 68.

[AA:A5954, BOX 708]