193 Stirling to Department of External Affairs

Cablegram 291 OTTAWA, 16 August 1945, 4.47 p.m.

IMMEDIATE SECRET

Canadian Mutual Aid My 280. [1]

(1) I have to-day received from the Secretary of State for External Affairs a note of which the following are the main terms:-

(a) The transfer of supplies to all countries under Mutual Aid Agreements will be terminated on Wednesday, 15th August at 0001 hours Canadian Eastern Daylight Time.

(b) The Mutual Aid Administration is communicating with Australian War Supplies Procurement regarding those Australian requisitions and contracts thereunder which it is assumed Australia will wish to be cancelled and those on which it is expected that Australia will wish deliveries continued for Australian account.

(c) It is assumed that deliveries on requisitions already placed will be covered by the understanding under which the Government of Australia agreed to assume financial responsibility for orders placed by the Mutual Aid Board on behalf of Australia, but for which Mutual Aid Funds are not available.

(d) It will be necessary to discuss a number of problems arising from Article VIII of the Mutual Aid Agreement. [2] The note requests that we 'take all feasible steps to obtain the necessary information for a consideration of the application of this Article including specifically the application of the provision under which supplies in ocean transit revert to Canadian ownership'.

(2) The reference in paragraph (c) is to Colonel Hodgson's letter of the second February, 1945, to the Director of Administration of Mutual Aid [3] on authority of your telegram 30 of 24th January.

[4] If there was any indication that the Canadian Government intended to use that undertaking to extract payment for goods which we no longer required we could argue that the undertaking was directed solely to the possibility of the Canadian Government failing to pass an appropriation for the financial year 1945/46 during the continuance of hostilities and that it does not apply to the present situation. However, from conversations to-day and paragraph (b) above it appears that the Canadians regard the undertaking as a convenient arrangement under which they can authorise a continued flow of essential supplies and that they will take a reasonable view of any cancellations we promptly request. I, therefore, suggest that we do not take any action for the moment, either to confirm or to question the Canadian interpretation.

(3) I understand that the Canadians do not contemplate that we should take over existing contracts, but that these should remain in force between the Canadian Government and the suppliers pending an inter-Governmental Agreement on the Financial settlement.

(4) The immediate problem is to decide what goods we still require and how we propose to pay for them. I understand that the Division of Import Procurement and Australian War Supplies Procurement are urgently reviewing all requisitions and I assume action will be taken to segregate accounts for goods arriving in Australia after the cut-off-date. Meanwhile, I should be grateful for your views on the financial aspects.

1 Dispatched 11 August. On file AA : A1066, A45/1/1/2.

2 Article VIII provided for reversion to Canadian ownership of supplies still in Canada or in transit upon cessation of hostilities. See Documents on Australian Foreign Policy 1937-49, vol. VII, Document 68.

3 Karl Fraser. Hodgson's letter has not been located.

4 In AA : A3196, 1945, Folder, Outwards Most Secret, 0.2169.

[AA : A5954, BOX 708]