March 21, 1949

PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Oniario):

Certainly.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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SC

John Horne Blackmore

Social Credit

Mr. Blackmore:

I am sympathetic to what the hon. member has been talking about, and I agree with him that something should be done. Is the hon. gentleman able to suggest anything that could be done, for example, to avoid bilateral deals-

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Oniario):

Will

the hon. member permit me to say that I did make one suggestion, and there will be others? I shall refer to that again. Perhaps if the hon. gentleman will permit me to continue, I shall cover in the course of my remarks, the things he has in mind.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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SC

John Horne Blackmore

Social Credit

Mr. Blackmore:

The hon. member will not mind if I ask him a few questions from time to time?

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Oniario):

No.

I should like to deal with the minister's speech and quote something he said. I should like to quote many of the things he said, but I shall confine myself to this particular remark. I shall quote a good many authorities that I think the minister will respect, including the governor of the Bank of Canada, who think the price situation in the sterling areas and in western Europe has already grown to the point where those countries are pricing themselves out of our market.

Mr. Abb oil: I said that myself.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Oniario):

I want to read what the minister said at page 1569 of Hansard:

-but the Canadian exporters who are affected by this situation will, I know, agree with me when I say that their difficulties do not arise because their prices are too high-a situation which might be corrected of course by a change in the exchange rate-but because the foreign countries simply will

Foreign Exchange Control not make dollars available for certain goods; and the lowering of the Canadian exchange rate could do nothing to correct that situation. On the contrary it would aggravate it.

The minister pressed that point further; but I want to make the point that I am not attempting to fix the Canadian exchange rate. I am suggesting we should try to move towards a more realistic rate.

Referring to the minister's other point, I wish now to read an extract-I apologize for the reading of these extracts, but I do not think one can avoid them-from the London Economist. This extract covers two or three points to which I shall refer later. The reference is right on the target we are discussing:

In an interview with the Canadian Press Association, Sir Stafford Cripps this week reviewed the prospects for Anglo-Canadian trade and gave a very frank summary of the position as seen from the British angle.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Douglas King Hazen

Progressive Conservative

Mr. Hazen:

What is the date of that article?

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Oniario):

February 26, 1949.

He went over the familiar ground of the historic and persistent lack of balance in the two-way flow of Anglo-Canadian trade, and stressed that Britain had made plans to bring its purchases from Canada more into line with its ability to pay for them. The reductions hitherto made have fallen mainly on food and timber. What had been done so far to reduce imports was, however, insufficient, and the United Kingdom might be obliged gradually to limit its imports of bacon, cheese and eggs from Canada, though Sir Stafford added the somewhat comfortless reassurance that this would be done only "after the fullest consultations with the Canadian government". Sir Stafford went on to explain how large a proportion of British imports of certain foods still came from Canada. He also stressed the difficulties that are being met in expanding British exports to Canada, saying that Britain could not sell all the steel Canada needed because it had to reserve certain quantities of scarce materials for use in bilateral negotiations with other countries.

I stress that particularly.

This somewhat gloomy review of Anglo-Canadian trading prospects was perhaps more remarkable for what it left untouched than for what it said. For example, the chancellor seems to have made no reference to the extent to which the problem ^ of payments with Canada might be eased by bringing into play the whole of the trade between Canada and the sterling area.

I would remind the minister at that point that in considering these exchange rates the other day I said we had to consider the broad situation and not merely our exchange rate with this country or that country. I continue the quotation:

If the export drive to Canada could involve all sterling area produce and not only UK manufactures, the problem might be found much more amenable than it appears if seen purely in Anglo-Canadian terms. Nor did the chancellor refer to the delicate subject of prices. There can be no doubt that the main obstacle to the British export drive to Canada is to be found in the fact that British prices are, by and large, too high for the Canadian market.

Foreign Exchange Control Now, that is the opinion of the Economist, for what it is worth. I continue the quotation:

That fact is likely to be increasingly impressed upon all concerned if the trend of prices in the United States continues to be downward.

You will observe that in this quotation there are three points of particular interest to this problem. First of all we have here what I pointed out, the effect of bilateralism. You have the British government which says that because of bilateral negotiations with other countries-this is apart from the question of prices-Britain cannot let us have certain goods. You have a government with ideological views which is making bilateral deals for that purpose. You have the reference to British costs-that is, that they are pricing themselves out of our market. I commend that to the minister.

There is another quotation from page 384 of the Economist which I should like to give to the house:

At the same time, it cannot be said that Canada has chosen the happiest moment, from its or Britain's point of view, to announce the reimposition of the import duties on British textiles which were suspended in 1947.

I take it the minister is going to tell us something about that tomorrow night; so we will leave that point until he has dealt with it. In this connection, I should like to quote from a public address-I checked on it to make sure it was published- delivered by the executive assistant to the governors of the Bank of Canada and alternate chairman of the foreign exchange control board. It contains some interesting comments on this very point. He says:

At the present time many of the ERP countries are discriminating against imports from the western hemisphere in order to economize in their use of dollars.

I skip a portion of the material and continue the quotation-I should have told you earlier that these quotations are from a lecture delivered by Mr. Rasminsky to the National Defence college on December 1, 1948:

But the danger in these policies, which we might as well recognize, is that the countries concerned, as part of a program of economizing dollar outlays, may impair their own capacity to earn dollars. They will do this if they establish special techniques for trading with each other at high prices without having to face the competition of efficient producers in Canada and the United States. Exports by the countries forming this system to each other will be easier than exports to the western hemisphere. In the long run, I think such a system would break down. There are no continuing rewards for high cost production.

There is a remark which might well be borne in mind by people who seem to think that this question of exchanges is one that can be dealt with in an arbitrary manner

by the wisdom of this or that person. "There are no continuing rewards for high cost production."

Also in this connection I should like to quote one sentence from a report by Mr. Towers. Mr. Rasminsky is a wise man and puts all his statements in a rather conditional form. He says it could have this effect or it could have that effect, but Mr. Towers goes a little further and says it did. I am quoting from page 5 of the report of the foreign exchange control board, at which point Mr. Towers says:

Moreover, the discriminatory restrictions imposed on dollar expenditures keep out competition from the western hemisphere while the special financial arrangements referred to encourage trade within the area. In these circumstances trade within the area takes place in many cases on the basis of higher prices than those prevailing outside the area.

I suggest to the minister that - he read, mark, learn and inwardly digest what those two able assistants of his have said.

I now wish to refer to one point which the minister made in his speech and which I really do not think he should have made. He referred to the possibility of the dollar going to some discount; and he said that might mean an addition of say seven per cent, or even ten per cent, to the cost of some things we have in Canada. It seems to me I remember that, in the decree which the minister made on November 17, 1947, some taxes were put on there that were not just seven per cent or ten per cent but were twenty-five per cent; and I suppose that they added to the cost of living.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

They were not on necessities, though.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Ontario):

I do

not know about that. The hon. member for Rosedale (Mr. Jackman) would tell you that they were on some necessities.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Harry Rutherford Jackman

Progressive Conservative

Mr. Jackman:

Yes, sir.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

They were not on coal, oil, steel and bread.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Harry Rutherford Jackman

Progressive Conservative

Mr. Jackman:

Ask your own colleagues; they will tell you.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Ontario):

I think that was not one of the minister's better answers.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

You find a better one yourself.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Muskoka-Ontario):

In this connection I want to say a few words about the hon. member for Rosetown-Biggar (Mr. Coldwell), because he also took up the point.

I am going to suggest to him that there is a danger in letting your whole economic thinking be governed by one particular consi-

deration. The hon. member for Rosetown-Biggar seemed to be concentrating so much on the fact that there might be a little addition to the cost of living that, so far as I can see, he was prepared to contemplate a situation which might result in our losing hundreds of millions of dollars from the proceeds of selling our Canadian wheat. I should like to ask a simple question of the hon. member for Rosetown-Biggar-I am sorry he is not here at the moment. Is it better to have some money in your pocket to buy things at a little higher price, or is it better to have prices low and to have no money in your pocket?

Do not let anyone suggest that I think that, if we again run into difficult prices for wheat, the western farmer is to be left to bear the whole burden. I do not suggest that policy at all, because we have learned a great deal since those days. Nevertheless I suggest that if Canada as a whole loses some hundreds of millions of dollars because our European market for food products is destroyed, that loss will hurt us all, including the western farmer-and it will hurt him most of all, because in many cases he will have to choose a different way of life. Such a situation would have far more than an economic effect, because if anything happens which lessens the agricultural population in this country, it is a great loss, not merely economically, but intellectually and spiritually as well.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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CCF

George Hugh Castleden

Co-operative Commonwealth Federation (C.C.F.)

Mr. Castleden:

We tried the private enterprise system before.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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CCF

William Irvine

Co-operative Commonwealth Federation (C.C.F.)

Mr. Irvine:

Does my hon. friend think that if we left exchange to its own way of doing things, the result would be a drop in the exchange, or a rise?

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Harry Rutherford Jackman

Progressive Conservative

Mr. Jackman:

Both.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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CCF

William Irvine

Co-operative Commonwealth Federation (C.C.F.)

Mr. Irvine:

And if there should be a drop, would that help Europe and Britain to sell more goods to Canada?

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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March 21, 1949