Mr. COLDWELL:

Yes.

Mr. HANSON (York-Sunbury):

Does the hon. member know that half the paper companies in Canada operated for years at a loss?

Mr. LACROIX (Beauce):

For thirteen

years.

Mr. HANSON (York-Sunbury):

For at

least ten years some of them operated at a loss, but they continued to give employment.

Mr. COLDWELL:

That may be true, but it does not affect the argument I am making, namely that unless industry can see the prospect-I shall use that word-of a profit, there will be no industry, and the industry that can show a profit will be the one which will be operated. All one has to do is to look at our own economy to know that that is true. Industries such as those owned by distillery and liquor interests operated continuously because they could obtain money and make a profit fMr. Cold well.]

while other industries which might have given work and essential services to our 'people were idle.

Mr. McCANN:

Does the hon. member

know of any essential industry which is closed because of inability to make a profit?

Mr. COLDWELL:

A number of essential

industries were shut down or on part time during the depression.

Mr. McCANN:

This is war time.

Mr. COLDWELL:

In some cases they

were closed for days and weeks. Take the mining industry, for example. I know of mines that were closed down when people in the province in which I live were without coal. The need for the coal was there, but there was no profit because the people had no purchasing power and consequently the industry would not make deliveries.

A few days ago I asked for a return from the Minister of Munitions and Supply (Mr. Howe). I was anxious to obtain some information regarding new plants being built. I find that a great deal of the information which I require in order to understand what is going on has not been given because it is not considered to be in the public interest to give it. The government should tell the exact basis upon which plant extensions in private industry are being made. Many plants are being built and extended by the governments of Canada and Great Britain, and. if I understand the matter aright, there is a similar proposal involved in this.

If my information is correct, the rate of depreciation being allowed in privately-owned plants is such as these publicly-financed extensions can be written off in five years. My information may not be correct, and I have asked questions in order to get the correct information. If what I have just said is incorrect, then I want it corrected so that I may know precisely what is going on in the department. I want to protest against this method of making special allowances for depreciation or depletion to corporations under the Income War Tax Act and the Excess Profits Tax Act, if, in the opinion of the governor in council, such assistance is necessary in order that an expansion of the exports of any individual, partnership or corporation receiving such assistance may take place. That covers a great deal of ground, and in my opinion we are giving a very dangerous power to the government in providing that this type of assistance may be given to industry.

Mr. KINLEY:

I think the hon. member

has missed the important point of this resolution. The purpose of the resolution is to increase Canada's exchange. I cannot conceive

War Exchange Conservation Act

of a healthy business without profit. It may be that the government will take that profit to carry on the war, but that is another matter entirely. Let us consider the individual. The profit that an individual makes is what he lives on.

Mr. COLDWELL:

Oh, no.

Mr. KINLEY:

The profit that an individual in business makes is what he lives on. If he has a loss, he will have nothing to live upon. In the case of a corporation, the officials are paid before the profit is computed and there is a slightly different situation. I do not think this resolution is framed for the rich or large companies. I can see in it possibilities for the fishermen in my riding. The herring and mackerel fishermen in the maritime provinces can catch fish, but the prices on the foreign markets are so low that they have no profit. If certain expenses can be eliminated, then these men can ship their product to foreign countries and we will have the advantage of the exchange. I have in mind the vinegated herring industry, or herring cured in vinegar. There are fishermen and dealers in my riding who operate in a small way but who produce thousands of barrels of these vinegated herrings. This product has a ready market in the western states but at present the price is not sufficient to make a profit possible. Surely it would be in the interests of the country to have this industry stimulated.

Then in connection with the newsprint and pulp industry, it seems to me that if this industry can increase its production it would bring more exchange to the country. At the present time no newsprint or pulp is coming in from Europe. Surely abnormal extension expenditures could be written off in a way that would not prove a burden when we return to normal times. I think this would be eminently in the interests of the people of the country. To make this resolution the subject of an attack on the capitalistic system is not in keeping with our war effort. The capitalistic system is not perfect; it was conceived by man and anything conceived by man is not perfect. But for the last hundred years it has been the best way devised for the orderly progress of society, and until I can see something better-I am always looking for something better-I am not prepared to step into some unknown which will reduce this country to a condition similar to that prevailing in the countries of Europe where the conflict is going on at the present time.

Mr. HARRIS (Danforth):

Last evening the minister said that if hon. members opposite to him were able to see some deep meaning in this legislation which he could not see, he 14873-48

wished they would tell him. This resolution provides for assistance to individuals, partnerships or corporations by way of tax credits or special allowances for depreciation or depletion. There are individuals, partnerships or corporations which have invested United States funds in this country to develop our natural resources. If in due time they have dividends to disburse and ask the foreign exchange control board for United States exchange, then I suggest to the minister that should any of these individuals, partnerships or corporations appeal for assistance under this section they should be told either to pay their dividends in Canadian funds or to refrain from going to the foreign exchange control board for United States funds with which to pay dividends.

Mr. ILSLEY:

The hon. member is referring to United States owned companies.

Mr. HARRIS (Danforth):

I tried to make that abundantly clear last night. I have one other suggestion to make, apart altogether from this one, but having to do with the conservation of foreign exchange. Many United States owned companies make interplant shipments from Canada to the United States which are invoiced at prices far below the true market value. It is difficult to establish this, but these prices should be checked in the United States in order to make sure that we are getting the full United States exchange for these exports. Some commodities are shipped to the United States for further processing before being marketed. I have one firm in mind which placed $100,000 in their depreciation reserves for the day when commodity prices might drop considerably. When any of these individuals, partnerships or corporations appeal for concessions under this resolution I hope the department will see to it that they invoice shipments from their Canadian to their United States plants at the full market value in order that Canada may obtain the full exchange value of the shipment. I just throw that out as a suggestion.

Mr. ILSLEY:

I think the income tax

division takes some pains to see that that is done.

Mr. O'BRIEN: Mr. Chairman, so far I have remained almost mute in the deliberations of the house, and it is not my desire now to delay the committee. I find this discussion very interesting for the reason that as I am in business, as most of the members are, it is something that we can put our teeth into. The war discussion has been so abstract at times that I have felt bewildered.

During this discussion the word "incentive" has been mentioned, and the leader of the opposition (Mr. Hanson) has voiced a view

War Exchange Conservation Act

which I should like to commend. The immediate incentive is not altogether the point, but, it seems to me, as he so ably suggested, that the future is a very important item to consider. .

Coming as I do from the county of Northumberland, which depends almost entirely on the lumbering business, as do also the constituencies of Gloucester, Restigouche-Mada-waska, Victoria-Carleton, York, Kent, and virtually all the northern counties of New Brunswick, I know that this item is a matter of vital importance to our province and particularly to what I might term the owner-managed type of business. Some reference has been made to-day to corporations. Corporations I think are usually able to take care of themselves, but the smaller owner-managed type of business usually suffers owing to the fact that there is no organization in which their difficulties can be discussed with a view to getting relief. For that reason I wish to compliment the minister upon the degree of flexibility which is being achieved, because, as we all know, in times like the present there must of necessity be generally speaking, rigid control.

When a government or a department is dealing with matters of business, certainly business principles should be followed; for any business, to be successful, must of necessity have a great degree of flexibility in its structure. Therefore I am happy to note with reference to individuals, partnerships or corporations that each situation may be flexibly treated on its merits. That I think is a splendid thing.

Referring to the Ottawa Journal of this morning, to which the leader of the opposition also referred, it seems to me that the report as to government aid to the newsprint industry is a bit premature because that is what we are attempting to determine here at the moment. But if it should be the decision of this committee that aid should be given to the newsprint industry, and the department is given the necessary authority, I suggest that if relief is given, and I am in favour of the principle in the circumstances-

Mr. ILSLEY:

No relief is to be given

to the newsprint industry, but the same concession will be available to them if they can produce exchange as a result of the concession. But the idea is not to relieve the companies.

Mr. O'BRIEN: Concession or relief.

Mr. HANSON (York-Sunbury):

Before any return is made they must do thus and so.

Mr. ILSLEY:

Yes.

Mr. O'BRIEN: I would hope that we might follow along the same line in connection with the primary producer, the producer of pulpwood, for instance. I am not going to quote any figures here to-day because frankly I believe business should be smart enough to govern its own affairs and create its own destiny so that government would not be forced to interfere and control business.

Whether it be done by statute or by persuasion, and I much prefer persuasion, it seems to me that the newsprint industry should be informed that the primary producer of pulp-wood, the farmer, is not receiving a sufficient return in view of the increased profits and the much greater returns which evidently the newsprint companies are making to-day. I am informed that pulpwood in Nova Scotia-it may be so-called distress wood-is now being sold at $7 a cord, which I think is a price unfairly low. Whether the matter should be looked after by the war-time prices and trade board or by some other agency I do not know, but on October 29 I wrote the Canadian Pulp and Paper association drawing attention to the matter and stating my belief that the pulp and paper industry should consider it. I received a non-committal reply, almost a month later. I hope the pulp and paper business will be smart enough to realize that if this adjustment is not made voluntarily by the business itself it will eventually be done through government control.

There is another matter in connection with the small lumber business, to which I should like to refer. I wrote to the minister with regard to this and received a friendly and I think useful reply, stating that he would be glad to have any suggestions. In the lumber business as carried on in New Brunswick and Nova Scotia, the operations take place in small portable mills, which do not permit of any large capital investment; consequently depreciation on the plants used by these small owner-managed businesses is practically nil. I am convinced that those of us engaged in the lumber business in the maritime provinces wish to carry on that business in order to supply the necessary material required for Great Britain's war effort. We are not particularly anxious to make enormous profits. But as the leader of the opposition has suggested, provision should be made so that in the future some reserve may be allowed. That is perhaps looking too far ahead, but I have been wondering if it would not be possible to devise some scheme along this line. Let us say that a company pay a $5,000 tax-I am speaking of an owner-managed business. In return a certificate might be given to them for a certain portion of that tax to be re-issued

War Exchange Conservation Act

without interest to the person making the payment, so that in future years, when war business ceases and unemployment and depression are perhaps again our unhappy lot, the certificate might be taken by the lumber operator or the operator of any other line of business to his bank as security. Some future generation might thus reimburse the present day operators in view of the severe war conditions they have to contend with to-day. As a matter of fact I think such a certificate of the dominion would be as valuable to the bank as some types of bonds. I hope that when these concessions are being arranged-because I appreciate the necessity for creating exchange-some consideration will be given to the primary producer, particularly the small farmer pulp-wood producer.

Mr. CASSELMAN (Edmonton East):

Mr. Chairman, I rose for the purpose of asking a question of the hon. member for Rosetown-Biggar (Mr. Coldwell) but he has left the house so I shall have to leave that till later. Somebody had asked him whether he would consider farming an essential industry to be taken over by the government.