Mr. GORDON GRAYDON (Peel):

I

should perhaps preface my question by saying that I have not been able to give notice of it to the Minister of National Defence. There have been many rumours, semi-official press reports, and reports in the press which seemed almost official, in regard to the eventual disposition of General Kurt Meyer, who was brought to Canada last week. I wonder if the Minister of National Defence would consider making an official statement to the house in behalf of his department and the government so that we may know and the public may be informed as to exactly what is going on in connection with this man. I raise the question to-day because some veterans in my own constituency have been somewhat figitated over it, and they are anxious that someone in the house should raise the question in order that the government may have an opportunity of making a statement as soon as possible.

Hon. DOUGLAS ABBOTT (Minister of National Defence):

Perhaps I can answer the question now. The person in question, Brigade Fuehrer Ivurt Meyer, is confined in Dorchester penitentiary, as the house is aware from statements that have appeared in the press. The Department of National Defence no longer has anything to do with the matter of his custody, which is now the concern of the Department of Justice. He is incarcerated in Dorchester penitentiary under the same conditions that apply to anj other criminal; and whether he stays there or is moved to

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another penitentiary is a matter which I assume would be dealt with by the Department of Justice in exactly the same way as they would deal with the care and custody of any other prisoner.

Mr. POULIOT:

Is it true that the government will build him a mansion?

Mr. ABBOTT:

No.

The CHAIRMAN:

When the committee last sat it was considering section 4.

Mr. POULIOT:

Mr. Chairman, this morning I did part of the work that should have been done by the Minister of Finance, the leader of the opposition, the leader of the C.C.F. group and the leader of the Social Credit group. For some time we have been discussing trade without having definite data about it. My information comes in the first place from Whitaker, a well known English publication, and in the second place from the official report of the Department of Trade and Commerce :for the year ended March 31, 1945. It has been said that the United Kingdom is our best customer. That is incorrect and untrue. According to Whitaker, 1944, the total trade of the United Kingdom and Canada in millions of dollars for 1938 was as follows:

(In millions of dollars)

Exports Imports Total United Kingdom . 2,090 3,813 5,903Canada

889 678 1,567This means that the exports of the United Kingdom were two and a quarter times those of Canada, while the imports of the United Kingdom were five and two-thirds times those of Canada. The total trade of the United Kingdom, as I have said, was $5,903 million, while that of Canada was 81,567 million. It would be interesting to know the trade of Canada with the United Kingdom. I do not have that for the year 1939, but I have it for 1938, and there would be only a slight difference in 1939. In 1938 our paid exports to the United Kingdom amounted to $349 million, while our paid imports from the United Kingdom were $104 million. That is a total of $453 million, which was less than one-third of the total Canadian trade for that year. Those figures .

come from Whitaker. Now I turn to the official report of the Department of Trade and Commerce. In 1944 the total Canadian trade, as compared with that of 1939, was as follows:

(In millions of dollars)

Exports Imports Total

1944

3,439 1,752 5,1911939

924 751 1.675

These figures indicate a surplus difference of $2,'515 million as between the two years in regard to exports, and a surplus difference of $1,001 million in regard to imports, or a total surplus difference in 1944, as compared with 1939, of $3,516 million. In other words the surplus difference in our total trade in 1944 was more than twice that of 1939; and it is important to note also that during the war our total trade was nearly as great as the pre-war trade of the United Kingdom. The total trade of the United Kingdom in 1938 was $5,903 million, while our total trade in 1944 was $5,191 million. What is important? The important thing is to compare the 1944 Canadian-United Kingdom trade with that of 1939, and to show the result in millions of dollars. The following table will give that information:

1944 Canadian United Kingdom trade compared with lh39 (in $ million)

Unpaid exports Paid imports Total

1944 ... 1,235 110 1,3451939 . .. 328 (normal) 114 442

plus 907 minus 4 plus 903

Total Canadian "Exports" to United Kingdom (in $ million)

1939 328

1941 G58

1942 741

1943 i,032

1944 1,235

I,hold in my hand the annual report of the Department of Trade and Commerce, which is available to every hon. member. This report states that during those five years only once-in 1941-did we export more to the United Kingdom than we did to the United States. Besides that, our exports to the United States in each year were greater than those to Great Britain.

Mr. ILSLEY:

Was that 1939 to 1944?

Mr. POULIOT:

In the years 1939, 1941, 1942, 1943 and 1944. In the same years our imports from the United States were considerably larger than those from the United Kingdom. These are the figures showing our imports from those two countries:

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Imports from Imports from Year United States United Kingdom

1939

$ 496,898 $114,0071941

1,004,498 219,4-191942

1,304,680 161,1131943

1,423.672 134,9651944

1,474.286 110,599

There is a very large margin in connection with imports, much larger than applies to exports, because our exports, to the United States were paid while those to the United Kingdom were financed. That is altogether different. I say they were unpaid from 1942 to the present time, because the loans sometimes were gifts, or amounted to that. It is unbelievable that a small nation, with one-fourth the population of the United Kingdom, and constituting only a small fraction of the British empire, including the United Kingdom and all the other British possessions, should finance the whole trade of the sterling area.

I have the utmost sympathy for the minister, because others made commitments upon which he had to act. This matter is very deep, and is of considerable importance. However, on March 18, 1942, the minister said that the whole of the sterling area's deficit had been financed by Ottawa out of its own resources. Hon. members who were not in the house at the time may not have read this, but it is of tremendous importance. On that occasion the minister said, in the first, instance in connection with financing by Canada of the sterling area's net defiicit of $1,770 million:

This deficit has been financed in three ways. In increasing order of importance they are: gold payments from the United Kingdom to Canada; redemption of purchase, mainly in advance of maturity of Canadian security obligations held in the United Kingdom; and the accumulation of sterling balances held by the foreign exchange control board on deposit in London.

He said that the whole of the sterling area deficit had been financed by Ottawa, out of its own resources^ Then he continued:

Gold payments by the United Kingdom have amounted to $250 million over this whole period. As the house is aware, the last payment was received in December, 1940, and since that time the whole of the sterling area deficit has been financed by Canada out of its own resources.

International accounts, naturally.

Over the period as a whole gold payments have covered less than 15 per cent of the sterling area deficit in Canada.

Not only have gold payments by the United Kingdom been kept to relatively modest proportions, but every ounce of gold we obtained from the United Kingdom was promptly converted into United States funds and used-

For Canada? No.

-to pay for United States goods needed to complete war orders for the United Kingdom.

We did not keep the money that we received. We passed it over to the United States, to credit the account of Great Britain. Then he continued:

Exact statistics are not available, but there can be no doubt whatever that the amounts we have paid out in United States exchange in connection with British war orders in Canada are very greatly in excess of the amount of hard currency settlement received from the United Kingdom.

That is what was said on that occasion by the Minister of Finance. It was not said by any leader of an opposition group or by any private member who had been accused by the ultra-imperialist press of being isolationist; it was the Minister of Finance himself who declared that the gold payments by the United Kingdom had covered less than fifteen per cent of the sterling area deficit in Canada and commented that they had been kept to relatively modest proportions. The minister said that since December, 1940, we have taken the whole burden on our shoulders. The minister's words were:

Until December, 1949, the United Kingdom shared with us the burden of providing the necessary hard currency. Since then we have taken the whole burden on our own shoulders. The burden has not been a light one . . .

I admit it. I am sorry for the minister. I know he is honest and I know he is in a very difficult position. If he were not honest I should be speaking to him in a very different manner. As Minister of Finance he must take care of the commitments that have been made by others, and I shall come to that in a moment. I have another reason for respecting the minister. It is because he is a hard worker, and I think everyone will agree with that statement.

The date, December, 1940, is of the utmost importance. It was in that month, first, that Canada received the last gold payment from the United States; second, that the United Kingdom discontinued to share with us the burden of providing the necessary hard currency, and, third, that we took the whole burden on our shoulders. This having been said, the minister then went on to say that the burden had not been a light one. The burden of financing the whole sterling area could not have been a light one. He made other statements which are all included in a book I wrote but never had published. I had intended to have it published in Toronto, and I thought it would be a good idea to read an advance

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copy to my colleagues. By the way, I had the honour of having it described a long time ago as the great Canadian book of the year.

Mr. MacNICOL:

It will be a good book. When it comes out we shall all want copies.

Mr. POULIOT:

There will be a word of praise in it for the support I received from my hon. friend in haying the public accounts improved. I thank the minister for meeting the request made by the hon. member, the hon. member for Broadview, and myself. Once again we were doing the work of the leader of the opposition of the time, of the leader of the Social Credit group and of the leader of the C.C.F. group. We were trying to reform the public accounts, and after we had made our representations the minister agreed to do it. I quote'again from the minister's remarks:

Our United States dollar problem and our need of foreign exchange control are in part a direct consequence of our assistance to Great Britain.

Then a most unusual thing occurred. The Minister of Finance went so far as to express deep concern about the result of the financial policies he had been sponsoring. He said:

I warned the house in introducing the budget last April- *

1940.

*-that the need for United States exchange conservation had not passed; and lest any one should think that the Hyde Park agreement has solved our United States dollar exchange problem, 1 should like to say that our official reserves of gold and United States dollars fell by $142,000,000, United States dollars, in 1941. Moreover, although the outlook is far from clear, it must be recognized that, failing remedial action, we appear to be faced with another sizable loss of reserves this year. Our United States dollar position is. therefore, still a major cause of concern. I stress this point because our United States dollar problem and our need of foreign exchange control are in part a direct consequence of our assistance to Great Britain.

At that point the minister made this remark:

When we are proposing to open a new chapter in our financial relations, the record regarding the past should be made quite clear.

I agree with that. The new chapter in our financial relations with Great Britain was not opened on March 18, 1942, when the minister made that statement on the sterling area financing scheme; it dated back to fifteen months before; it dated back to December, 1940, when Great Britain made its last gold payment and when we took on our own shoulders the whole burden of financing the sterling area deficit.

Mr. ILSLEY:

We could not have got any more gold from Great Britain.

Mr. POULIOT:

I know, but that was the last time we received gold from Great Britain. Instead of keeping it here for our trade we sent it to the United States for the benefit of Great Britain, as the minister said on March 18, 1942. The Minister of Finance did not try to escape any responsibility, but he did not make the record regarding the past clear enough.

On November 7, 1940, the late Arthur B. Purvis was appointed by the United Kingdom to the new war purchasing commission. A dispatch to that effect appeared in the Montreal Gazette of November 8, 1939, but I shall not read it. This board replaced the previous board. The defence purchasing board was set up under the Minister of Finance in July, 1939, a short time before Mr. Dunning's resignation and departure for London. It was under his successor in that capacity, Colonel Ralston, when it was replaced by the war supply board with "extraordinary powers, under the War Measures Act, to mobilize and regulate industry, production and other resources in Canada for a concentrated war effort" and when Mr. Purvis was appointed to it. The news appeared in the press more than eight months before the Prime Minister introduced the Mobilization Act in June, 1940.

On November 15, 1940, Colonel Ralston left for London. The minister of national defence had died in June. At the time the minister of national defence was also acting minister of finance. I was the only member of parliament to protest against this. He was more a minister of international finance than a minister of national defence, because the brass hats ruled the department when he was there.

On June 11, Colonel Ralston recited to the house the details of what he said was his most useful e veiling with the late Arthur B. Purvis. Colonel Ralston said:

Mr. Purvis was good enough to give me, in the way he can give it quickly, concisely and comprehensively the fullest statement possible with regard to production in United States and with regard to the needs of Britain with regard to munitions and supplies. I do not know when I spent an evening which was more useful in connection with the work that I was doing, and it gave me an idea of how we could integrate our production with that of the United States and our needs with the needs of Britain.

I emphasize those last words:

It gave me an idea of how we could integrate our production with that of the United States and our needs with the needs of Britain.

Colonel Ralston added that he kept that information for his colleague the Minister of Munitions and Supply. Neither of them said any more to the house about Purvis' statement. "The record regarding the past,"

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read in the house by the Minister of Finance March 18, 1942, makes it clear beyond doubt that the Purvis "statement" to Colonel Ralston was the suggestion to finance the whole of the sterling area deficit by Ottawa out of its own resources-and we may draw the conclusion that it was because it was so promptly accepted by Colonel Ralston that Mr. Ilsley expressed so much concern about it, and went so far as to state that-

-our United States dollar problem and our need of foreign exchange control are in part-

Note the words:

*-are in part a direct consequence of our financial assistance to Great Britain.

He specified that "we have taken the whole burden on our own shoulders" from December 1940, 'the time when Colonel Ralston spent his most useful evening with Mr. Purvis.

I sympathize with the Minister of Finance because he was responsible for the whole product of that nefarious triumvirate of Purvis, Dunning and Ralston, and I was the only member of parliament to protest against it. And now one of Ralston's chums is acting as political adviser to the leader of the opposition and one of his former law partners is head of the National Liberal Association. It reminds me of an old serial, "The Clutching Hand" which appeared on the screen a long time ago, in which at the end of every episode a hand seemed to reach out to clutch everyone in the audience-just like the octopus of international finance.

I understand that the main argument of the Minister of Finance in favour of this loan is that it is a preparation for the coming international trade conference to be held this summer. Is not that so?

Mr. ILSLEY:

No, I would say that that was not the main argument in favour of the loan. The lending plans of the United States and Canada and the Bretton Woods arrangements, and the trade arrangements perhaps, are all part of a great plan to extend trade throughout the world. But I would not say that the loan to Britain can mainly be defended on the ground that it is a preparation for the international trade conference.

Mr. QUELCH:

I should like to ask the Minister of Finance a question, but first I will refer to a statement made in the debate yesterday by the hon. member for Calgary West, who said at page 1239 of Hansard:

Why all this fuss now about some United States citizens buying Canadian Pacific shares? Is it suggested that we should put restrictions on them, that they must be held in Canada?

Just prior to that, I had been asking questions regarding the sale of Canadian Pacific securities in the United States, and I referred

to them simply because I had the report at hand; for I feel exactly the same way about all Canadian securities, not merely Canadian Pacific. I think it is definitely detrimental to the welfare of this country to sell Canadian securities outside of Canada, because it means the expansion of our external debt. Surely nobody would argue that the expansion of our external debt would be a good thing for this country. The hon. member for Calgary West said that in the olden days Canadian Pacific shares were sold abroad. That is true, but the situation then was entirely different. We had to sell Canadian securities abroad then to get the capital required to develop this country because we had not the machines we have to-day. But to-day no one would suggest that Canada is not able to finance the development of its own resources without borrowing externally.

If anybody has any doubt on that point, recall what happened in the war. We financed our war effort to the extent of five billion dollars without borrowing one cent externally, and if we could finance our war effort to the extent of five billion dollars without selling Canadian securities abroad, would anybody suggest that it is necessary now to obtain external capital in order to bring about every expansion in this country that is desirable? The undoubted answer is that it is detrimental to the welfare of this country to sell Canadian securities abroad, whether Canadian Pacific or any other securities, public or private.

I wish to refer to a question put by the hon. member for Springfield at page 1241 of Hansard. He asked the Minister of Finance:

Is the financing done through the Bank of Canada or by borrowing from the private banks?

The Minister of Finance answered:

The amounts are not segregated. They are just like any other money which the dominion obtains by taxation or by borrowing from the public or by borrowing from the chartered banks and perhaps to some extent, from the Bank of Canada, but that latter is very limited.

Then the member for Rosetown-Biggar asked:

Will it necessitate borrowing the savings deposits standing to the credit of the people of Canada in order to pay for the goods that flow to England so that the people who make them here can be paid for them in Canadian currency?

And the Minister of Finance replied: yes. But over the page he had stated that the money was obtained by the dominion by taxation or by borrowing from the public or by borrowing from the chartered banks and perhaps to some extent the Bank of Canada. So evidently when he gave that answer to the

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member for Rosetown-Biggar he did not mean to say that we were going to finance entirely by public issues.

Mr. ILSLEY:

No.

Mr. QUELCH:

But there is a danger that some people may think that the minister's answer means that the people's deposits will be borrowed by borrowing them from the banks. The minister will agree that it does not mean that, because when you borrow the people's savings you cannot borrow them from the banks. When you borrow from the banks you have an expansion of credit. The banks cannot lend their deposits.

I take it that we shall finance this loan to Britain largely by taxation and secondly by another victory loan, by whatever name it may be called, and there may be a certain amount of borrowing from the chartered banks. I take it that on borrowings from the people the rate will again be three per cent?