May 30, 1941


Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 77, to amend the War Exchange Conservation Act, 1940. Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Fournier (Hull) in the chair. On section 1-Duties of customs, schedule two.


CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

In the resolution stage Bill No. 77 received scant attention and consideration, although it is a most important measure. Under the circumstances I think an explanation is due the committee from the minister. Perhaps he would give a more exhaustive statement than was given on the resolution. The probability is that since the resolution was introduced on May 23, the day preceding Victoria day, he has received representations. If there are to be changes from what appeared in the resolution, the committee would like to know about them.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Hon. J. L. ILSLEY (Minister of Finance):

I do not know that I can add anything to what I have said before. The measure was discussed in resolution stage.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

It was only a short discussion.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It speaks for itself. I

explained when the resolution was before the committee what was being done under the measure. For the most part this bill consists in a reduction of duties on goods coming from the United Kingdom. That is its main feature. I explained the reductions proposed, and I do not know how I could go much further.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

Since the situation has not been enlarged upon by the minister, I should like to make some further observations, the first of which is that all hon. members are very anxious to do everything possible to bring in from Great Britain anything she can export in order that she in turn may be supplied with more Canadian dollars. That, Mr. Chairman, is the foundation for the remarks I purpose making.

At the same time, as we all know, the United Kingdom has suffered considerably from air raids and other conditions arising out of the war. Plant after plant, factory after factory,

War Exchange Conservation Act

has received direct hits. The operation of plants has been greatly disturbed. In the main, the machinery in bombed factories is still there, although a good deal of it has not been put back into service.

My point in mentioning these facts on the present bill is that many of the plants operating in England would like to remove to Canada the remaining machinery and other manufacturing equipment and establish branch factories here.

Speaking in reply to a question of the leader of the opposition the minister stated that this legislation is only for the duration of the war. The leader of the Cooperative Commonwealth Federation observed yesterday that once these changes are made they will remain. I hope the minister did not pay too much attention to that point raised by the hon. member, and I am hopeful that with the close of hostilities the war exchange conservation measure will be dispensed with.

This is a tariff which the minister has described as a tariff for revenue, but it is one which we all know has protective features as well. The minister himself knows that very well. He will recall that in 1932 there was passed in this house a certain British empire trade agreement which contained protective features. In fact, I rather believe he had the privilege or the honour of voting for that trade agreement. The features which were embodied in that, perhaps the greatest of all agreements between the United Kingdom and Canada, are pretty well nullified by this measure in respect of groups 1, 5, 6, 7, 8, 9, 10 and 11 of the Customs tariff. Those are really the main items in matters of trade between Canada and the United Kingdom. Taking that large group and giving them a duty discount of 50 per cent will not tend to encourage industry in the United Kingdom to establish branch plants in Canada if the minister and the government and all sections of the house do not adhere to the view that this legislation will be done away with at the cessation of hostilities.

I have in mind a large group of commodities in which the labour content is at least fifty per cent, such as non-metallic minerals. We imported about $9,500,000 worth of these from the United Kingdom in 1939, the duty being in the neighbourhood of 8500,000. There is an abundance of raw material in Canada, such as aluminum, copper, lead, and so on. All through my remarks I want to convey the idea that our fellow Britishers in the United Kingdom will be anxious now, as they were several generations ago, to move out to a new country. In the old country are many

artisans, technicians and men trained in these arts and trades. If we can stimulate this movement by encouraging the establishment of branch factories, we shall be doing a great deal to take care of the difficult situation which will face us when hostilities cease.

In connection with the other group, iron and its products, I do not suppose there are any better mechanics in the handling of iron than those who come from Scotland and the old country. Normally we import about $20,000,000 worth of these products each year. Many of the goods in this group have a large labour content, in some cases as high as sixty per cent. These goods are in universal use both here and in the United Kingdom, and their manufacture fits in with the establishment of branch plants in Canada. What obtains in that regard, obtains in respect of chemicals and chemical products. I am thinking of the salt deposits in the lakes of western Canada and the other basic chemicals which are available in Canada. I am thinking of the possibilities of using the coal to be found in the west and establishing manufacturing plants in Alberta where coal is plentiful. The manufacture of these articles requires a good deal of heat treatment, of fuel, and so on.

What applies here, applies also to the miscellaneous products which come in from the United Kingdom to the extent of $10,000,000 a year. All in all, the value of the manufactures coming in from Great Britain is well over $150,000,000. The United Kingdom is grateful and thankful for what Canada has done in this regard of its own free will. They have realized that we want to help them in every possible way. At the same time I hope that all those who have studied this situation will realize that we are anxious for them to locate here after the war. One thing that will bring them here is the hard, common-sense view that the Englishman takes of a problem of this kind, the pounds, shillings and pence view. If he knows that he is to be given some protection as between the mother country and this country in the days to come, he will feel more disposed to establish his branch plant in Canada.

I have a criticism in regard to something that happened in connection with this legislation. I have under my hand a cable which I received two weeks before the budget was brought down, before we knew that there was to be any change in the discount rate which would be allowed on goods coming from the United Kingdom, making a general rise in the British price of commodities equal to the concessions being given by this legislation.

War Exchange Conservation Act

I am not making any charge and I do not know whether our United Kingdom friends had an inkling that this was going to happen. I hope it was because they felt that their costs were going to be a little higher and they should raise their prices from ten to twenty per cent. I had hoped when the cables came in that that was the condition obtaining in the United Kingdom, that their costs were higher and they had to have more money. But the rise in the level of costs represented in the main by this $100,000,000 odd coming from Great Britain is given back by this legislation, and the delivered price in Canada is much the same.

The minister and the leader of the opposition have both said that they did not receive many representations from the trade opposing or criticizing this particular legislation, and I think in part that that is the answer. I am happy that the United Kingdom is getting an extra ten or fifteen per cent during this critical time. Our Canadian people are happy to pay this extra amount and I suppose they are grateful to the administration for increasing the discount rate and thus reducing the cost of the commodities so that the general situation in the price levels with regard to exports to this country is as the United Kingdom dictates, the United Kingdom getting the extra dollars from the increase they have made in their prices. But at the same time I want the administration to know that there is a possibility of something happening which enables the United Kingdom producer of commodities ordinarily exported to Canada almost to equalize the benefits which we have passed on under this legislation.

A moment ago I referred to the fact that this is another breaking down, as it were, of the British empire trade agreements of 1932 and the Canada-United Kingdom agreements of 1937. So much so that Australia and New Zealand, which have been shipping goods to Canada in conformity with United Kingdom shipments to Canada, more or less in agreement, by quota or otherwise, now find it difficult to make shipments to Canada by reason of this particular concession to the United Kingdom. I do not complain of that. Australia will have to take it, and New Zealand likewise. I just make the observation so that it will be realized that this bill is of great importance, far-reaching in character, and will have to be given very serious consideration when hostilities cease. I suggest to the minister that if those engaged in industry in Canada have no idea that something is going to happen, how do our friends over there seem to know that something is going to happen?

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LIB

Gordon Benjamin Isnor

Liberal

Mr. ISNOR:

Would the hon. member give us the name of the commodity mentioned in the cable to which he refers?

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

I shall be glad

to cable England and get permission to release the information if my hon. friend so desires.

The other question I wished to raise was why there should be such a difference between the discount rates on different commodities. Just why was one group singled out for 25 per cent while the main body was given 50 per cent, and why were boots and shoes favoured? It seems to indicate that some of the trade had an idea as to what was going on. I am sorry that the Minister of Justice (Mr. Lapointe) is not in his seat. Years ago, whenever boots and shoes were touched in any way whatsoever or there was even a suggestion of it in the house, we used to get the undivided attention of the hon. member then representing one of the Quebec city seats, now the Minister of Justice. If that little item of boots and shoes from the United Kingdom does not amount to anything, why were our producers of boots and shoes not put in the 50 per cent discount class along with the other manufacturers? I do not ask that that be done. I am just wondering why some seemed to be favoured. Looking over the explanation when the bill was introduced, I see no particular mention made of boots and shoes other than that the trade was small.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

There is just one point I should like to discuss briefly, and that is the suggestion that British exporters in some way had foreknowledge of these changes. That was impossible because the changes were not decided upon until a very short time before the budget was introduced

a day or two, I think, or two or three days.

The fact that some commodity prices quoted to importers here advanced about two weeks before the budget was introduced by the amount of duty reduction which came with the budget is easily explained. Prices have been advancing in Great Britain. If I understood the hon. gentleman correctly, he said that there was not much difference in prices there.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

No-if I may interrupt. There is not much difference now in the general level of prices because the amount by which they have raised prices is taken care of by the discount.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not think that is so. I have figures here showing price rises in some United Kingdom goods since September, 1939. Prices on these goods have advanced on an average 70 per cent between August 1, 1939,

War Exchange Conservation Act

and February 28, 1941. Following are indices for some of the more important materials, taking August, 1939, as 100:

(August, 1939 = 100)

Cotton 156

Motor spirit 135

Copper 124

Spelter 177

Coal 134

Wool 167

Rubber 148

Lead 156

Tin 148

Farm crops 166

These figures are taken from the Economist of March 29, 1941. So there is nothing to give ground for any suspicion of a price rise two weeks before the budget.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

While that is quite true, at the same time there has been a price rise in Canada, but not to quite the same extent.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Nothing like It.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Does the minister suggest that the two events have no relation to each other, and that it was just intelligent anticipation over there of what was going to happen?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I should think it was extremely improbable that those exporting the goods had anything in mind relating to our budget. Costs were going up and they were putting the prices up. This has been happening ever since August, 1939. This is what I said in committee of ways and means on May 20:

It is believed that a discount of 25 per cent from the British preferential tariff should be adequate to enable British woollens and boots and shoes to remain competitive. These products are not handicapped to the same extent as most with respect to either raw materials or labour, and due to their relatively high value in relation to weight they are affected less by increased transportation costs. Moreover, there has not been apparent any tendency for imports from foreign countries to replace British woollens and boots and shoes in the Canadian market.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

As I understand it, any change whatsoever in the United King-dom-Canada trade agreement affecting either the remnant that is still in the empire trade treaty of 1932 or the main portion of the Canada-United States trade agreement must, by clause 17, be made by consultation. The minister says that he decided on this only one or two days before the budget was brought down, but I should imagine there was consultation between Canada and the United Kingdom before this change was made.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

You do not have to consult if you are reducing duties against the United Kingdom. Consultation is in cases where you

would be depriving the other party of something by reducing his preference. Consultation would take place if you were increasing the duties against the other party or reducing the duties on goods from other countries.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Is that

specifically mentioned in the covenant?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not know.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I do not think it is.

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May 30, 1941