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