Mr. CAHAN:

Not an untrue statement.

Mr. MACKENZIE KING:

Officials in the departments of the government are worrying themselves over the question of how at the last moment they are going to get data which they ought to have been asked to prepare not one or two months ago, but a year ago. If such is not the case, why did not the government make a statement about this matter before?

Mr. CAHAN:

The officials have not taken that view.

Mr. MACKENZIE KING:

My information is that the matter has been left pretty largely in the hands of the Canadian Manufacturers' Association. I have been told that a committee of that association has been meeting with committees from Great Britain, and, between them, they are trying to see how they can divide up the trade in manufactured articles between Great Britain and: this country. I say to hon. gentlemen opposite that the people of Canada are not going to be satisfied with a mere division of interests, so far as the manufacturers are* concerned, between Great Britain and Canada, as a solution -of the trade question as it concerns those parts of the empire. I challenge hon. gentlemen opposite to deny that that is the kind of investigation being held at the present time by officials or agents of the manufacturers' association.

Mr. CAHAN:

I know what the manufacturer's association is, but I know the statement as applied to them is untrue.

Mr. MACKENZIE KING:

May I repeat

that, if this conference is the important matter which we know it to be, then the House of Commons should have had at the very beginning some intimation from the government as to what its policies were going to be, and that there should have been long before this an opportunity for discussion of the matters relating to the conference. We were told by the Prime Minister that we would have an opportunity bo discuss matters pertaining to the conference when the house in committee was considering the vote for S250,000 to meet the expenses of the conference. One moment is to be left for the discussion of matters relating to the conference, and yet these matters cover the great questions of tariff, trade and migration. We have thus far had no chance whatever to.

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discuss them, nor have we had the slightest intimation from the Prime Minister as to what the policy of the government will be when the time comes.

In support of what I said a moment ago in connection with the artificial division between Great Britain and Canada of the trade in manufactured articles, I contend that this is no new idea, nor is it one devoid of grave objections. I suppose as strong an advocate of British preference as there has been at any time was the late Lord Milner. Speaking in Montreal before the board of trade as long ago as 1908 Lord Milner said:

And as regards the position between Canadian and British manufacturers let me say just this: A good deal of harm was done at one time by the idea that the policy of preference aimed at an artificial division of industries between Canada and the United Kingdom, certain kinds of manufactures being, so to speak, appropriated to Canada, and the United Kingdom being left undisturbed in the exercise of others. I do not believe in such an artificial limitation, but I do believe that, with reasonable tariffs and mutual preference, there will be something like a natural adjustment.

The artificial arrangement which we hear of as being contemplated is something along those lines. In textiles for example, there are certain grades of very high quality which we do not manufacture in this country. Great care may be taken at the conference to see that these are left with British manufacturers. They will be allowed to come in at low rates of duty, and the well-to-do benefited thereby. On the other hand, there are coarser grades which affect the great body of the people, and great care may be taken to see that these are protected from anything in the nature of competition from Great Britain. Other things might be mentioned as well. But this is the kind of thing which is being currently rumoured, and perhaps the Prime Minister will tell us when he speaks, whether or not the rumours are true. I repeat that the people of Canada are not going to be satisfied with any artificial division between this country and Great Britain. What will be expected from the conference will be a greater opportunity to trade with Great Britain in a perfectly free and natural way.

If the conference is to be a success, there are some things that are fairly self evident. There will have to be a change in the way of doing things from the way in which many things were done at the time of the last conference. In the first place, there will have to be a 'better atmosphere created than was created prior to the conference in Great Britain. We all recall, and recall with a great deal of chagrin, the atmosphere which was created prior to the economic conference in

1930, and as a consequence of which the conference, in the words of another former prime minister of a British dominion, was a complete tragedy. That is the way it was described by a representative of another part of the empire; the conference of 1930, viewed from the economic side, was considered to be a tragedy. If that tragedy is not to be repeated, we must not have a repetition of the circumstances which led up to it

First of all there was the raising of the tariff immediately in advance of the conference. Let me say again that I cannot understand the point of view of hon. gentlemen opposite when, just on the eve of the meeting of this conference, on top of all they have already done in the way of raising the tariff, they add a two per cent tax against all goods coming into Canada from Great Britain, and this at the very moment when Great Britain, in imposing her tariff against foreign countries, takes care not to put a single cent of new duty against goods from Canada. When the British House of Commons was discussing the question of tariffs, an hon. member moved that there should be a certain tax levied against the dominions, as well as against other parts of the world. I suppose he had in view somewhat the same idea as our Prime Minister prior to the last conference-that there would be a certain bargaining value in such a step. What did Mr. Thomas, the Secretary of State for the Dominions, say? He rose in his place and stated that such action would be an insult to the dominions. That shows how the British people must feel in regard to the action of hon. gentlemen opposite. They feel that the putting of a tax against goods from other parts of the empire, immediately prior to the conference, is an insulting thing. I do not think the term is too strong to use at a moment when members of the same family are about to meet together to consider how they may best further each others' interests.

In addition to the necessity of a change of atmosphere, there will have to be a very distinct change in the method of approach. We remember the Prime Minister of Canada going to the last conference, and, before any discussion had taken place, stating to all and sundry the basis upon which alone Canada would be prepared to negotiate. I hope the Prime Minister of Canada will remember that this time Canada is the host and that his attitude, whatever it may have been while he was in Great Britain, will be a little different towards those who come to Ottawa from other parts of the empire as guests of the Dominion of Canada. What did the Prime

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Minister say before the proceedings had started at the last Imperial conference? First of all, he said that he was the leader of the Conservative party in Canada; that the Conservative party stood for protection; that any policy he was prepared to consider must be based on protectionist principles; that the policy of his government was known as "Canada first"; that "Canada first" meant no goods would be permitted to come into Canada from abroad, which could be produced or manufactured in this country; and that the only basis upon which he was prepared to consider any question of trade was that of what he called empire reciprocal tariffs. ;He gave his own definition of reciprocal 'preference, or " empire preference " to give ithe exact term he used. What was this empire preference"? It was a preference to be created, not by reducing in any particular the existing rates of duty, but by adding to them to the extent of a ten per cent increase. He went a step further: He said he would not agree to discuss the matter with any part of the empire until all had adopted the principle of protectionist tariffs which would enable them to bring into being a reciprocal, empire tariff along the lines which he had indicated. Only on those lines could there be any discussion or consideration of the question. He went even further and said: We will

not consider any alternative; no alternative that can be suggested will be satisfactory to us as compared with what we have proposed. What he had proposed was, in effect-this was exactly the way in which it was received by the British government-that Great Britain must change her fiscal policy, in consideration of which her people would be allowed to send to Canada such goods as could come in over a tariff wall which would keep out anything produced or manufactured in this country. That was what Mr. Thomas designated as "humbug." There must be no more "humbug", so far as the Imperial conference is concerned. If it is to be a success, all such methods of procedure will have very speedily to be dropped. My right hon. friend will not be able to get anywhere with his "Canada first" policy as a basis of negotiation within the empire. The people of Britain have already said, members of parliament of the mother country have already stated very emphatically, that they are not going to be satisfied with any trade agreement that will exclude from Canada all goods which can be produced or manufactured in this country.

I have not time to go into the matter fully, or to make clear the British attitude in that regard. I could quote at considerable length

from statements that have already been given to the public. In this connection however I point out how different the attitude of Britain is from that of Canada. All the public men of the different political parties in Britain who have spoken have stated with one voice that so far as the conference in Canada is concerned, their representatives should come here, not riveted to any particular formula or policy, nor with the desire to get what they wish particularly for themselves, but rather with an open mind to try to discover what may be for the common good. Speaking in the British House of Commons on January 27, Mr. Thomas said:

"We shall go there, not riveted to any creed or dogma but with a single-minded desire to effect a real settlement and I am sure the dominions will not only realize-as they do realize-the advantages of their association in the British Commonwealth, but if they reciprocate in the spirit with which we intend to go there, there ought to be no doubt of the success of the conference. _

"While it is quite clear," Mr. Thomas said, "you have what is called a conflict of particular interests, frankly I see no reason whatever why this conflict cannot be merged into a common recognition that the interests of all are more important than those of any section.

"In that connection the British government will go to Ottawa quite prepared to depart from certain well known principles that have hitherto existed in this country. In fact there will be no embargo, so far as the British government is concerned, to the points of policy they will be prepared to discuss.

"But having said that from our point of view it is equally necessary to keep clearly in mind that we have a very distinct point of view and interest in the policy of the dominions themselves. No conference will be successful, lasting or beneficial if it is assumed that all the concessions will be on one side."

Later, on February 22, he said:

Don't let us go to Ottawa in a haggling spirit, but let us go and see what we can throw in the common pool for the benefit of all.

I might quote similarly from Mr. Neville Chamberlain, Sir Austen Chamberlain, the Right Hon. Stanley Baldwin and numerous other speakers, including some of the premiers of the other dominions. Let me take, by way of example, Mr. Forbes of New Zealand who, in an interview given to the press on February 25, said:

In accordance with her traditional practice in empire affairs New Zealand will not go to Ottawa with any desire to bargain unduly with Great Britain. Any bickerings over tariff questions will be avoided at all costs.

And so, with respect to every voice that has come from across the water to this side, there has been the note that those who attend the conference are coming not wedded to any

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particular policy, but with an open mind to see how they can further to the greatest degree possible the well-being of all.

Before this debate is concluded, the Prime Minister should give us the assurance that Canada's attitude will be of like character, that she will enter this conference with a perfectly open mind, and will not hold to the theory that the only goods to be admitted to this country from Great Britain will be those which will come in over a tariff high enough to keep out those things which are produced or manufactured within our own borders.

If this conference is to be a success, the Prime Minister will also have to give up the idea of seeking to make his adjustments with Great Britain on a bargaining basis. I should like to have said a good deal about this idea of bargaining as a means of negotiation between countries. Whatever may be said about bargaining between Canada and foreign countries, the same arguments do not apply to an attempt to bring about agreements between this country and the other British dominions, and, in particular, they do not apply to an attempt to bring about an agreement between the mother country and Canada. An attitude very different from that of bargaining as commonly understood will have to be taken in connection with Great Britain at this Imperial conference if the conference is going to be a success. I hope the Prime Minister, when he speaks, will give to the Canadian people an assurance that, in seeking to arrive at an agreement with Great Britain, he will proceed, not on a bargaining basis, but more in accord with the attitude taken in this country during the last thirty-three years in negotiations with Britain with respect to tariff preferences.

There are two methods of tariff preferences: one, the granting of preferences by voluntary act; the other, a reciprocal preference arrived at as a result of joint agreement. A reciprocal preference leads to what is known as a locked agreement, one which sets out in specific terms the basis of trading, necessarily restricting the matter of trading as regards both time and the number of commodities, and also limiting, to some extent, the freedom of the nations concerned to trade with the other countries of the world. Such agreements will not help to strengthen the ties of the British Empire and they will not help to improve trade relations between this and the mother country. For thirty-three years Canada has granted to Great Britain a voluntary preference. Now that the British government have changed their fiscal policy, they, too, are in a position to grant a voluntary preference to this coun-

*.Mr. Mackenzie King.]

try; and they have done so. That is their attitude as indicated at the present time. I submit that, at the conference, Canada's interests will be more substantially furthered if the results attained are brought about by voluntary concession through concurrent legislation than by means of locked agreements between Great Britain and this country. I believe that is the view held by the Canadian people generally.

The bargaining method is based on the theory that trade is in the nature of war, rather than of exchange. The Minister of Railways and Canals (Mr. Manion), who I see smiling at what I say, just about two years ago remarked that trade was war. I corrected him at the time by pointing out that trade was in the nature of exchange.

Mr. MANION:

The people corrected my right hon. friend.

Mr. MACKENZIE KING:

He should

change his theory in that regard. Especially so far as the mother country is concerned, let us seek to negotiate on a basis which will have regard for trade as in the nature of exchange which is mutually beneficial and which were it otherwise would not be engaged in. Similarly may I ask: Why need we seek to further trade by means of limited agreements, these locked agreements that I have indicated, restricting negotiations in other directions, when to the degree to which the countries interested consider such action advisable it is possible to have that free flow of trade which comes from the removal of tariff barriers?

If bargaining is to be the basis of negotiations between Canada and Great Britain, then I ask on which basis is the bargaining to take place? Is it to take place on the Canadian basis, which has been described by the Prime Minister as the protectionist basis? The Prime Minister says: We will consider no bargain

that is not based on the policy of " Canada first." If we are to negotiate on that basis, it means that Great Britain will have to put up her tariffs against Canada to a point equivalent to that at which Canada has put up her tariffs against Great Britain. That will prove to be a very serious thing for this country. What benefit shall we derive in Canada from an arrangement which will not permit any increase of trade worth having, and which, moreover, will threaten the very important position which we now hold in the British market.

I suppose hon. gentlemen opposite are familiar with the fact, that, while Great Britain has a twenty per cent tariff as against foreign nations, there is a provision that that tariff does not come into effect, so far as

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the dominions are concerned, until the fifteenth of November next. But on the fifteenth of November, unless in the meantime an arrangement has been made which is satisfactory to Great Britain, that twenty per cent tariff as matters now stand will apply against Canada as well as against foreign countries. In what position will we then be in regard to our markets in Great Britain? Great Britain has kept her bargaining power very much in reserve but it is none the less very real. She has said that nothing will take place, so far as the dominions are concerned, until the fifteenth of November, but, as I understand the provisions of the British import duties, this twenty per cent tariff will then become applicable against Canada and the other dominions, subject to any special arrangements or modifications that may be made at the Imperial conference. That is a very serious thing. Nothing could be more so.

I ask then, if you are not going to negotiate on the protectionist basis which is Canada's present basis are you going to negotiate on the free trade basis which is the basis that Britain by her present attitude is evidently prepared to adopt? The Prime Minister of Canada has already said that he will not consider the free trade basis at all. As a matter of fact, the basis Great Britain has before her at the present moment is the free trade basis, with no duties at all against goods coming in from the dominions. But the Prime Minister at the Imperial conference said: No, we do not want any free

trade within the empire; that will defeat the very object we have in view. Well, if he is not going to negotiate on a protectionist basis, or on a free trade basis, he will have to negotiate on a basis which is somewhere in between the two; I wonder where the Prime Minister is going to get in the period of time that the conference will sit trying to negotia-tate on some basis somewhere in between the two?

The Prime Minister and the government would be well advised to drop altogether this idea of seeking to bargain with the old country in any arrangements that they make at the conference. They would be well advised to take a generous attitude in the matter of trade which will enable British commodities subject to the provisions of a revenue tariff, to come into this country and be of service to our consumers and to those engaged in the great basic industries, and thus in turn enable our commodities to find a place in the markets of Great Britain and elsewhere throughout the world.

Another thing my right hop. friend will have to forego is this attitude of his that there can be no alternative proposition. The last time Great Britain hinted at a quota as a possibility, Britain was told the proposition could not be entertained. The Prime Minister will have to examine the quota question very carefully, and my advice is that he examine quotas very, very carefully to make perfectly sure that the quota, after all, is going to serve Canada to the extent to which the Prime Minister when he returned from England at the close of last year said that it would.

A further matter my right hon. friend will have to change is legislation with respect to the tariff by order in council. I think he has already received' word from the British government that it is impossible to make any trade arrangements if the government is going to retain in its own hands the right of fixing Specific duties and putting on commodities valuations of its own for duty purposes; in other words, if the government is going to retain in its own hands the power to change the tariff from day to day. That is something the Prime Minister will have to change if any successful arrangement is to be made at the conference.

My right hon. friend will also have to change 'his theory of making Canada a national economic unit-this idea that Canada should be made a self-sufficing unit, producing within its own borders everything that it needs. That conception comes from the time of the ancient Greeks and the Greek city-state, when the state and the city were one and the same. The city-state of the day had to be self-sufficing because of the political and social organization of the age. But in our time the countries of the world are all interdependent, and the economics that are going to suit the present day are those which relate to the interdependence of nations, rather than to the idea of single states as national economic units. But what is the idea back of this theory of Canada as an economic unit? It is entirely a protectionist device to enable the government to keep out as much in the way of trade as it is possible to keep out of this country.

The economic unit idea, so far as Canada is concerned, is linked up with another economic unit idea which the Prime Minister might just as well dismiss as a subject of discussion at the conference, and that is the conception of the creation of an imperial economic unit. That is another theory which imperialists have held for a great many years-the idea of

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making out of the British Empire some kind of imperial economic unit.

The Prime Minister, when he came back from England last December, talked about an end to the idea of the empire being a political unit. He said we must now seek to make of the empire an economic union; the term "economic union" and "economic unit" are interchangeable. The mere fact that the Prime Minister made that statement, and emphasized so strongly that the empire was no longer a political unit but must now become an economic unit, made me think at the time that, like the lady in Hamlet, he "doth protest too much."

I think what the Prime Minister has in mind is this very conception of the empire as an imperial economic unit. That is the significance, I believe, of the three per cent excise tax imposed by the combined impositions of the last and the present budget. I think what the Prime Minister is aiming at is to bring into being when the conference meets here, with the aid of others with whom no doubt he has already conferred, some kind of an imperial Zpllverein whereby there will be imposed so far as all the dominions and Great Britain are concerned, an innocent looking little tax like this three per cent excise tax in order to unite them all in a manner which will also serve to separate them all from the rest of the world. The effort will be to have a similar tax imposed by Australia, New Zealand, South Africa, Newfoundland, the Irish Free State and Britain, to apply against goods coming in -from foreign countries; so far as trade within the British Empire is concerned the effort will be to have it agreed that this tax will be wiped out ,by each -part against the others. Or as an alternative means to the same end, a corresponding reduction made by each in its existing schedules. The country will then be told that within the empire tariffs have been lowered. If that is his abjective, may I say that that will raise a very, very large question, one of the most serious questions ever raised in this country, because along with that idea is associated the conception of some form of fund-to be jointly and centrally administered; at one time the effort has been to create such a fund for the purpose of imperial defence, at another for the purpose of imperial 'organization, at another for the purpose of imperial marketing; it will be said to be, at this conference, for the purpose of imperial development. Always there has been some little fund to be devoted to imperial purposes. This nme it will be to carry out this idea of making the empire a self sufficing unit. The proceeds of the 3 per cent excise will be the

(Mr. Mackenzie King.]

contribution to be made to the common fund. Once an economic unit is thus established, it is evident that to carry its policies into effect there will have to be something in the nature of a -central organization at headquarters to administer the affairs of an economic empire; and the moment centralized policies are discussed there is an immediate return to the political empire which the Prime Minister says we have now got away from. Well, if we have got away from the political empire, do not let us attempt at the conference, or at any other time to'-bring about an empire that is to be centralized -for economic purposes, because that will work just as much injury to the interests of the empire as the other kind of centralization -will. So far as the empire's interests are concerned they will best be served by allowing each part of the empire to continue to enjoy complete freedom of fiscal control, a fiscal freedom just as complete as each part enjoys at the present time.

May I conclude by stating the positive course which I think ought to be taken by the government at the conference? That course, adopted in Canada thirty-three years ago, of giving a voluntary preference to Great Britain, was introduced in the year 1897 by Sir Wilfrid Laurier and- Mr. Fielding. A preference of 12J per cent was then given to Great Britain. The next year it became 25 per cent, and shortly afterwards 33^ per cent. When the late Liberal government was in office that preference was increased still further by a ten per cent discount on commodities, under the British preference coming into Canada through Canadian ports.

Hon. gentlemen opposite have sought to convey the impression that that preference was something given to Great Britain without benefiting Canada. That, however, is not the case. The preference was given in the form in which it was -because Canada felt she would gain in- trade, that trade itself was in the nature of valuable exchange, and would not exist unless it were beneficial to both parties. Through that arrangement Canada was giving a distinct advantage to her consumers in the cost of living and a distinct advantage to her basic industries in the matter of costs of production. Moreover, Canada was doing something to hold a good customer, a customer who was taking five times as much from her as she was getting from Canada.

As Sir Josiah Stamp said in his address, let us not seek to estimate the value of relations within the British Empire on any purely mercenary basis, but let us look ahead for generations, and realize that the attitude taken to-day may have repercussions in the years

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to come which may be very serious indeed.

I should like to have called the attitude of voluntary concession, all interests considered, the Canadian attitude. The statement of Sir Josiah Stamp describes the Liberal attitude in the matter of voluntary concession. I think at least I am justified in calling it the Liberal attitude in connection with the British preference, because the Liberal government initiated that policy, and the only increases given under the British preference in Canada have been given by Liberal administrations. I am prepared to concede, and am glad to recognize the fact, that every Conservative government since that measure was introduced, with the sole exception of the present administration, kept the British preference where it was. There was a decrease in the preference on one or two commodities for a short time during the period of the war. The fact remains, however, that the governments of the Right Hon. Sir Robert Borden and of the Right Hon. Arthur Meighen alike recognized that the policy of British preference was one to which in the circumstances as they existed no exception could well be taken, and one which was of great advantage to Canada. They maintained the preference and the method of its application had passed from the realm of partisan discussion and had become what many of us had hoped was a national attitude. I trust on mature consideration the government will feel that that is still the best attitude to take. I am sure, if they treat Great Britain in that spirit, they will get from Great Britain, so far as consideration for Canada is concerned, a much better arrangement and a much better bargain than they will get by sitting down and discussing particular items and restricting trade in one way or another through locked agreements reached as a result of bickering as well as bargaining.

So far as the Liberal party is concerned, we will cordially welcome whatever extension of trade between Great Britain and Canada the government may find it possible to effect. They may go into the conference with the feeling that so far as the opposition is concerned, we believe they will protect Canada's trade to the extent of seeing that no interests which should be carefully considered will be jeopardized, and that they may go as far as they like in the matter of the furtherance of trade among the different portions of the British empire. If they adopt an attitude of the kind I have described they may expect the support of hon. gentlemen on this side of the house. We will not, however, support any narrow, circumscribed view of the question of trade between Great Britain and this country. Our attitude has been made clear, and was made clear in

the last budget of the Liberal party presented preparatory to the conference of 1930. Our attitude to-day remains what it was in 1930. That budget denoted a further lowering of the duties against Great Britain, with a view to increasing the preference and transferring to Great Britain trade which formerly had taken place between Canada and other nations. That change did not affect adversely a single interest in this country, and it would have helped very materially trade among the different parts of the empire.

There is one thing to which we will take exception,

and to which exception should be taken not only in Canada but in every dominion and in Great Britain herself-we will take exception to any tariff arrangement which will shackle the freedom of any selfgoverning dominion, or of Great Britain herself, in the matter of any trade arrangements which we or she or they may wish to make with countries outside of the empire. We will oppose any measure which may shackle and bind subsequent parliaments. No one has been more eloquent than has my right hon. friend in his statements that no one parliament should bind a subsequent one. He should, before the conference, make it clear to the people of Canada that he will see to it that, whatever arrangements are made, subsequent parliaments will not be bound so far as their fiscal freedom is concerned. Short of binding subsequent .parliaments, of restricting or limiting freedom to trade with other parts of the world, of not failing to allow freedom of trade with the world in general to the extent to which we may wish to carry it on, the government may rest assured that it will have the support of the opposition in the furtherance of the largest possible measure of trade between the different parts of the empire that it can bring about.

At this point I should like to answer one representation my right hon. friend has made in other discussions. He said that the Right Hon. Sir Wilfrid Laurier had adopted a bargaining method similar to his own when he was in England in 1902, and the right hon. gentleman referred to a resolution then passed as evidence of the truth of his assertion, Sir Wilfrid Laurier did nothing of the kind. The situation in 1902 was this: Great Britain had placed a duty on foodstuffs coming from all parts of the world in order to raise revenue needed as a consequence of expenditures made during the South African war. It was a temporary measure for revenue purposes only. What Sir Wilfrid Laurier said was that Canada would expect Great Britain to remove the tax, so far as Canada was concerned, because we had given Great Britain a preference in our

2388 COMMONS

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markets. He urged that, at a time when Great Britain was imposing a tax, she should give us a preference in return for the preference we had given her. That attitude was vastly different from the one taken by my right hon. friend at the last Imperial economic conference, when he urged that Britain must change her fiscal -policy and impose taxes before we would cooperate with her. Sir Wilfrid Laurier always said he felt perfectly sure that any time Great Britain changed her fiscal policy and as a consequence imposed customs duties, she might be depended upon to give Canada a voluntary preference, just as Canada had given her a preference. So I believe she will act, and so I am sure the people of Canada generally believe she will act. If in- that spirit we enter into negotiations with the mother country, I think we may expect of the coming conference a large measure of increase in trade within the empire, together with a strengthening of inter-imperial cooperation and inter-imperial good-will.

So far as the Liberal party is concerned, that is the objective we hope may be realized as a consequence of the forthcoming conference. We trust the conference will serve as an important factor in the increase of trade between different parts of the empire, and particularly between Great Britain and Canada. Along with that we trust it will mark the beginning of a closer cooperation in many directions among all parts of the empire, and will point the way, let us hope, to a reduction in tariffs by the other countries of the world, and to a beginning as well, so far as Canada is concerned, of more in the way of trade with all other nations.

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Right Hon. R. B. BENNETT (Prime Minister) :

Mr. Speaker, much of the debate to

which we have listened, including the speech this afternoon, would seem to indicate that there is no appreciation by the opposition of the fact that we are in the midst of a world crisis. After listening to the address this afternoon one would think that we were in the ordinary, humdrum existence of fairly good times and that the old story, revamped, was being told again; that Industry and Humanity was once more to be quoted and the four points therein enunciated made known to the public again; that these tales which the people have grown weary of hearing were to be revamped and retold as if we were in the midst of ordinary circumstances,

and that conditions in this world had not changed from those normal conditions under which parliament meets.

Well, sir, we are in the midst of the greatest crisis the world has ever seen. Most of us have done some reading with respect to these matters, and we have formed definite understandings and convictions as to the situation. I suppose some books make a greater impression upon our minds than others, depending to a large extent upon our appreciation of the opportunity the author may have had to study the problems at first hand and indicate as soundly as might be possible a general summary of conditions. The gentleman who for ten years was economic adviser of the League of Nations, and whose name is known to all within sound of my voice, expressed himself a few months ago with respect to existing conditions, in these words:

_ Then came the depression. In intensity and in range beyond all previous experience, with a duration and with subversive consequences which none can yet with confidence forecast.

Proceeding further, he uses these words:

The first thing that is overwhelmingly clear is that this is a world depression in the fullest sense. It is world wide in the range of its effects; its causes, however originated, are clearly related to defects in the world system; and there is the strongest presumption that such remedial measures as may be possible will require the concerted action of many countries.

That is the firm and considered conviction of one who, having had perhaps greater opportunities than any other through being in the very centre of the world movement, is able to express an opinion of value. But I submit that any stranger coming to this house and sitting in the gallery for the last few weeks, or hearing the address this afternoon, would be wholly unconscious of the fact that the great currents that move the world are out of course, that conditions have changed and we are face to face with the greatest crisis of which there is any record whatever.

To-night I venture to direct attention to the fact that we are dealing with realities and not with theories, and that those who have been charged with responsibility for the administration of government during the last few months have had placed upon them a responsibility greater than has fallen on most governments in this country. I go further and say this, that it is quite apparent that this fact is being understood more and more by the people of this country. When the right hon. gentleman proceeds to give advice in that ponderous fashion which is his own, and when he undertakes to tell us how we should conduct the business of this country, I can

The Budget-Mr. Bennett

only say to him that most people who have business to transact, most people who have a stake in Canada, and most people who are concerned about its future are thankful for the fact that he is not charged with responsibility at this time. More, I tell him that leading supporters of the Liberal party of years gone by gladden my heart from day to day with communications expressing gratitude that we are transacting the affairs of the country.

Mr. MACKENZIE KING:

Could my right hon. friend tell us who they are? Perhaps among them are the Minister of Justice (Mr. Guthrie) and the Minister of Railways (Mr. Manion).

Mr. BENNETT:

No, neither. Not a day

goes by without a letter coming to me from some part of this country, gratefully acknowledging the service being rendered to Canada by this government. What is more, very seldom do I see men of the Liberal faith who do not express grateful thanks for the fact that the task of administration is not in the hands of the right hon. gentleman opposite. In fact, there are those who sit behind him now who have told me the same thing.

Let us look for a moment at world conditions in the light of the events of the period from 1914 to 1918. In 1919 there met in Paris representatives of most of the nations of the world, among them representatives of this dominion. They made their voices heard, indicating their views as to the effect of existing conditions upon this country. What were those conditions? First of all there were food shortages on a scale never before known. Raw materials were scarce and unavailable for manufacturing. Communication by sea and land had been disturbed. Shipping was no longer available in the ordinary commercial sense. The transport of the world had broken down because of the dislocation brought about by the war. In addition, all the organization of finance and industry was disturbed. There were staggering debts such as mankind never before had contemplated. There was a change of mental attitude and habits on the part of the people of the world. In some countries there were revolutions, in others real starvation, in others great impoverishment; in others passions were aroused by the results of the war, and national prejudices had been stimulated. Worst of all, the world had lost millions of its very best and finest men.

That was the condition in 1919. I could amplify it, but I think that would be unnecessary. It is within the memory of most members of this house what those conditions were, and yet so courageous are men that

there was shown a grim determination to reform, to reorganize, to readjust and to march forward. It is one of the striking things in history that of all the matters of which we have record to-day there is nothing that equals the recovery of the world in the years from 1919 to 1925. It is one of the most amazing and astounding matters of which we have any record. In the meantime there were the conferences at Locarno and at Genoa; the rehabilitation of Austria, Bulgaria and Greece; the great naval disarmament conference at Washington. Everywhere men were endeavouring to lay the foundations for peace and prosperity.

Order and good government.

Mr. BENNETT:

Order and good government; not in the sense in which hon. gentlemen mutter it under their breath, but in the very broadest sense they were laying the foundations of ordered peace and regulated prosperity.

The League of Nations, which had come into being at the end of the war, was discharging great functions in a manner satisfactory to increasing numbers of people. Everywhere men filled with courage and hope were going forward to their allotted tasks. It is true that conditions in Europe were not as favourable as they were in other parts of the world; among the belligerents of Europe conditions were anything but satisfactory, but there was steady improvement. Figures supplied by the League of Nations show that seven years after the war production had increased by 18 per cent as compared with 1913, while population, because of the great losses of the war, had increased only 6 per cent. That meant better standards of living; that meant that the world was better able to take care of the conditions under which its people lived. Although in 1925 international trade in Europe had fallen, the average man on that continent was better off than he was in 1913.

Then come the next four years, from 1925 to 1929. Without taking up too much time to deal with this matter, I need only bring to the memory of hon. members of this house the fact that almost every country had again based its currency upon gold-Great Britain in 1925 and other countries at varying dates -for the purpose of having a universal standard of values and a universal medium of exchange. Industry had been reorganized, which made possible greater production; trade had been expanded consequent upon the increased production, and crude products, according to

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the figures of the League of Nations, had increased at the remarkable rate of 4| per cent per annum. The process of manufacturing had, of course, added greatly to their value.

These are the conditions to which I refer; that is, world trade had outrun world population-in 1929 the one had increased by 18 per cent as against an increase in the case of the other of 6 per cent. Europe's increase in production or trade had increased by the enormous figure of 22 per cent over what it was in 1913. It had regained its pre-war position, and it might be said that ten years after the great war, ten years after the representatives of this dominion met the representatives of other nations in Paris, the world had increased its productiveness to a point far beyond what it had been in the years before the war. The business cycle reached its peak in 1929.

Let us look for a moment and see what were the conditions then prevailing. You had a steadily increasing production which had outrun population; you had an expansion of trade; you had conditions vastly improved over those of 1913; you had adjustments rapidly taking place in every part of the globe, starvation had disappeared, impoverishment was not known and the world was getting back to real normal conditions where men buy and sell, make and exchange and trade and do business from one end of Christendom to the other.

What happened in 1929? By that year we had reached the peak of the cycle. Some hon. members may doubt whether or not there are cycles in business, and upon that point you will find that great authorities express divergent opinions. In the very nature of things I think there must be something in business cycles; but, at any rate, in 1929 the business cycle had reached its peak. However, there were other forces at work. You had, for instance, difficulties in connection with the conditions obtaining in Jiurope, brought about, not by reason of what was taking place there but because of what was taking place on this continent. In no part of the world had recovery been equal to what it was on the American continent. The reason was obvious. Because of a late entry into the war the United States had accumulated a vast wealth, estimated by some economists to be as great as forty billions of dollars, as a result of her production and trade prior to her entering into the war. The result was that there was prosperity on this continent such as we had never had before, and during the war years this country shared to some extent in that prosperity. >

It was one of the very strange anomalies of life that along with the destruction of men and materials which took place during the Great war there was a distinct improvement in the prosperity of the countries engaged in the production of the means of destruction. That was so particularly upon the American continent. Then came that feverish expression of mass psychology, so often found upon this continent, and speculation became rampant to a scale never known before. When I say never known before, I am but quoting the words of one who has studied the matter from every angle and standpoint. Men, women and children-when I say children, I mean boys and girls under the age of twenty-one-were all engaged in speculation.

Speculation has a well-defined place in economics. Although I am in no sense an economist, I know the conditions under which speculation sometimes becomes a highly beneficial state, that is, speculation based upon judgment. For instance, there are men who with a rising market think it desirable to make large investments, and then they realize upon those investments and take the benefit of the rise in the market. There are others who speculate upon margins, and the psychology of the people upon this continent being as it is, speculation upon margins reached a scale almost impossible for one to express. I recall, that when I was in the place now occupied by the right hon. gentleman opposite, I expressed to this house the view that unless something was done to curb this reckless speculation, the result would be inevitable and disaster would be certain. Of course, to make a statement like that is like baying to the moon; in the midst of speculation, no one pays any attention to an opinion of that kind. When you found ten and twelve per cent being paid for money in order that speculation might be carried on, when you found what you thought were reasonable men exchanging five per cent bonds for securities which yielded two per cent for speculative purposes, you knew reason was dethroned and men had capitulated their judgment to the speculative craze. The result was apparent in every part of the world but, as I say, particularly apparent upon this continent.

What was the result in Europe? All you have to do is to read the bank returns of Europe and you will find that there was a constant drain upon their resources in order to send money to the great centres of finance upon this continent. That drain became so great that legislation was enacted for the purpose of preventing the further weakening of the resources of European countries. It did

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not stop; it continued and in the end the boom burst. Do you recall the break in values? Do you realize what it meant? It meant that suddenly the pyramiding of conditions which had been going on in this era of speculation had brought about such a situation that, top-heavy, it broke and prices reached a low level, such as we had not seen before, and equalled only during recent months as a consequence of something to which I shall presently refer.

So we passed into the year 1930. In that year there were evidences of the foundations being more firmly established, the bottom being reached and improvement beginning. If any hon. members have stood in a field and watched a flying machine suddenly just raise its nose from the ground before it takes the air, they will realize exactly what I mean when I say that there were some evidences of a slight improvement. At that moment men were beginning to take fresh hope and they continued to do so. We in this country, owing to conditions to which I have on more than one occasion alluded, namely, the almost sudden diminution in the prices of our principal crop for the purposes of ready new wealth, found ourselves in a more difficult position than some other countries, but we were making a certain progress, very little it is true, but some.

Then there was an event the significance of which I always think hon. members with whom I have spoken do not fully realize. It was the passing of Great Britain from the gold standard. The effect of that upon the world was greater than any other single event which confronts us at this time. The world's banker, so to speak, had become insolvent; that is the way in which it was regarded. Sometimes, when I listen to or read the speeches that have been delivered during the last few days, I feel that very few members seem to realize that practically the greatest part of the world's business was transacted on a basis of sterling. Bills were drawn from Scandinavia and other parts of Europe expressed in terms of pounds, shillings and pence, because this was a stable exchange that had been created, not in five or ten nor yet in a hundred years, but over a period of hundreds of years the basis of trading as it is known on Lombard street had been established. Far off in South America the importer, drawing his bill upon an acceptance house in London, attached to it the insurance policy and the bill of lading. When they reached London they were taken around to the acceptance house which accepted the bill for whatever amount it might be. Then it was sold by the broker and ultimately found its way into

a joint stock bank and finally into the Bank of England. Those were the methods by which England over a period of centuries had established herself as the financial centre of the world. The war had created an interruption, but in the end nothing could take from her that position which had been established by long habit, by centuries of such dealings as I have indicated. So the Lombard street system became known all over the world. Dollars had no significance except in the terms of exchange value for pounds, shillings and pence. If any hon. member had visited Europe in 1921 and 1922 as I did, he would have found that a five-pound Bank of England note was the readiest form of exchange that could be carried with one, because in every country, whether it be France, Germany, Austria, or Switzerland, it was always exchangeable on account of the fact that it had a reputation; there was behind it a history, a fixed value. After 1925, when England went upon a gold basis again, there was never any question of the exchange value of the pound sterling. In our money, it was $4.86; on the exchanges of other countries its value was established by their bankers and known to everybody.

Under those conditions, after credits had been established that it was believed were ample to take care of any demand that might be made, suddenly, without much warning, the bank was unable to meet its obligations in gold; there was no longer a free market in this commodity and England went off the gold standard. The repercussion, the effect of this upon the world we are only beginning fully to realize; in every part of Christendom that is so; in the far east, in the far west, in every part of the world, that is so. Even to-day, notwithstanding the fact that the pound has not been stabilized, although the other day we heard Sir Josiah Stamp say that it must be-and the value may be $4.86, may be $4, may be any other figure so far as we are concerned, but it must be stabilized-bills are still being drawn upon England from Scandinavia, central Europe, every part of the world, and the sterling area is being extended day by day because it still represents the medium of exchange with which men are accustomed to deal, about which they know the most and in which they transact their international trade.

That being so-and I think every hon. gentleman will realize how fully that is true- the disturbance that came about by reason of the happening to which I have just alluded, was felt tremendously in this country. It will be recalled that President Hoover, in an endeavour to meet the situation, had granted a moratorium with respect to debts to last

The Budget-Mr. Bennett

Mr. GRAY:

We did not hear that in the

campaign.

Mr. BENNETT:

You certainly did not,

because the campaign was over in July, 1930. I have been endeavouring to point out just as clearly as I could that in 1930 there were, according to the evidence of every authority, signs that this country, in common with every other part of the world, was making progress towards ultimate improvement. But if one blinds one's eyes as my hon. friend from West Lambton (Mr. Gray) would; if one will not see because he does not wish to see, or having eyes to see, sees not; if he does not take note of conditions as they are and observe the changes that time has wrought, it is not my. fault.

Mr. GRAY:

I heard the right hon. gentleman in Sarnia.

Mr. BENNETT:

I tried in 1930 to point

out as clearly as any man could, and I believed then as I believe now, that if it had not been for the abnormal conditions to which I have alluded, and the existence of which no man can deny, Canada would have attained that degree of prosperity which it reached during the years when it reflected the changed conditions in the world. When I hear hon. gentlemen opposite talk of the prosperity of Canada and of our great advancement in export trade from 1925 to 1929, I wonder if they have read the figures. Do they realize that that but reflects conditions in the world at large? Canada did not stand differently from other countries except in this, that being a new country rich in raw materials, we did march forward rapidly with respect to exports until we had attained to the position of sixth among the exporting countries of the world. And to-day, notwithstanding the greatest depression that the world has ever seen, we stand fifth among the exporting countries of the world, being exceeded only by Great Britain, France, Germany and the United States of America. There is no record in the economic history of the world of a people so small in numbers, a country so vast in area, having made such progress under present conditions.

Mr. SANDERSON:

Does the Prime Minister take credit for that?

Mr. BENNETT:

There is one thing he

would not do: he would not accord it to you. I trust the hon. gentleman knows what I am talking about. Let us go a step further. I have been endeavouring to point out that in

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1930, at the very time that this government came into power, the conditions which had been steadily improving were, for the reasons I have indicated, showing-

Oh, oh.