March 21, 1949

LIB

Andrew Wesley Stuart

Liberal

Mr. Stuart (Charlotte):

That is what the hon. member believes. The hon. member is ready to discard the foreign exchange control board which would bring about the same conditions as those existing between 1930 and 1935. What guarantee would we have that we would get the premium on United States money? I can tell hon. members that I was paid hundreds of dollars for sardines which were sold in the United States, but that it was all paid in Canadian money. There was nothing we could do about it. I can assure hon. members that that statement is correct. As I have said, I support the foreign exchange control board for the reason that since it has come into existence each and every citizen of this country has been treated exactly the same. I for one would not want to see the day come again when one man will get 18 per cent premium for his United States dollar and another only 12 per cent. For that reason I will support this measure and I feel that I have the support of a good many people in Canada in making that statement.

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

William Irvine

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

Mr. William Irvine (Cariboo):

Mr. Speaker, the bill before us for second reading merely provides that the Foreign Exchange Control Act shall remain in force and have effect until sixty days after the commencement of the first session of parliament commencing in the year one thousand nine hundred and fifty-one. I had hoped that the bill would pass its second reading before the noon hour, but after listening to the speech of the hon. member for Muskoka-Ontario (Mr. Macdonnell) I am moved to inflict another speech on this assembly.

That hon. gentleman is one whom we all respect most highly and who usually has something worth while to say. If I should strike fairly strongly at what he said today, I hope he will not regard it as being a personal matter. I assure him that I hold him in the very highest regard indeed-

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

An hon. Member:

But.

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

William Irvine

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

Mr. Irvine:

-but I listened-I know these "buts" are bound to come, but this is something human that I am trying to say. I shall try to be human about this. During the hon. member's speech I was reminded of the story that is told about Browning. Some friend quoted a verse of Browning to Browning and then asked Browning if Browning knew what it meant. He thought for a little

while and then he said, "I have no doubt that when I wrote those lines I had something in mind, but what that was now God only knows". No doubt the hon. member for Muskoka-Ontario had something in mind, but what that was I know that most of us do not know; I do not know whether he knows and I shall not speculate as to what other powers may know.

The hon. member seemed rather ill at ease. He appeared to me as having been called upon to spearhead an attack in which he had no heart, which he felt he could not properly defend. He seemed to be performing a task perhaps for reasons of friendship or honour. He did not attempt to give whatever reason there was for objecting to the bill, if indeed there ever was a reason. If there was a reason for his opposition I still do not know what it was. It may have been that what he saw wrong in the bill was really something which he was unable to state. It may have been that he fully intended to say what was wrong, if anything was wrong, but that he failed to say what it was, or what he would do about the thing that was wrong.

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

Angus MacInnis

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

Mr. Maclnnis:

If it was wrong.

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

Gladys Grace Mae Strum

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

Mrs. Strum:

Or what it was.

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

William Irvine

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

Mr. Irvine:

If it was wrong. He said that he was living in a dream world and I think it was hardly necessary for him to assure the house about that because I think he proved that to the hilt. He went on to say that it was so difficult to settle exchange problems that even the wisest man or the wisest group of men might blunder in doing it. Since it was so difficult to solve problems of exchange we were to leave it alone, not to touch it at all, as though there was some inherent, infallible intelligence in exchange itself which would guide it properly in its operations in the nation's business. Therefore, he said, leave it to settle itself.

But there seemed to be a great many differences even about what "settle" means to the official opposition. Some say it means to find its own level-it never had a level. Others say it is to find a realistic position in which it can rest-its position was always realistic. Others say it is to devalue the dollar. It is really not clear what it is that foreign exchange should be left alone to settle, but whatever it is I do not believe it can do it if it is left alone.

The hon. member for Muskoka-Ontario wants to have it crystallized. I have no objection to crystallizing it. He wants a restoration of reality. I will tell him that reality needs no restoration. Reality will always be able to restore itself. He can be absolutely sure about that, and need not worry further about it. Finally, at the close

of his speech, in apparent desperation he said, "Mr. Speaker, let's do something." It seems to me that when he said, "let's do something" what lie really meant was, "let's do nothing", just as when his associates moved that the question be now put they moved that in order that the question should not be now put. Here is a case where he cries out to do something, meaning that they do not want to do anything; and to do something means that you kill the only bill that proposes to do anything.

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

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. Knowles:

Explain.

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

William Irvine

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

Mr. Irvine:

As I saw him in this dream world in which he was living, I had to come to the conclusion that he was unwittingly making a speech in defence of the return of gambling with the exchange problems of the country. As I saw him in that dreamland I saw him with one leg over the bull and another leg over the bear. They were racing together towards the grand horizon of restored reality to do something, but neither the bull nor the bear nor the hon. member for Muskoka-Ontario (Mr. Macdonnell) knew what it was they were going to do.

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

An hon. Member:

That is a bad dream.

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

William Irvine

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

Mr. Irvine:

So much for the argument of my hon. friend. I want to come now to the question itself. I ask, why was exchange control instituted in the first place? Those who have been interested in the question know very well that it was brought into being by order in council on September 15, 1939, under the provisions of the War Measures Act. It was brought into force for sufficient reasons, which were stated by the then Minister of Finance. Roughly those reasons were that in the first place there was danger of a shortage of United States dollars which, if such shortage developed during the war, would inevitably interfere with Canada's war effort. One of the things which the Minister of Finance feared at that time was the unloading of securities held by foreign owners in Canada. The United States then as now was a foreign country, and she was not at war at that time. Those individuals who owned securities in Canada might easily have panicked, sold their securities on the Canadian market, and taken out the proceeds in the form of United States dollars, which action would have impaired very greatly the war economy of the country.

The second reason was to prevent fluctuation in exchange, and my hon. friends to the right, the official opposition-speaking for Hansard, "my hon. friends to the right" will mean nothing there, and as my hon. friend, the member for Muskoka-Ontario spoke to Hansard I am, of course, speaking to Hansard

Foreign Exchange Control too-I therefore say the official opposition are now arguing that foreign exchange should be permitted to fluctuate. The Minister of Finance of that day, however, thought that two things would happen if that were permitted. One would be that the cost of living of the Canadian people would be affected by fluctuations in foreign exchange rates, and secondly that ordinary business in a general way would be disrupted by the fluctuations. There can be no doubt as to both of those views. These things happen all the time, and have happened in Canada constantly throughout its history, because we never had control before the birth of this measure. If we kill it now we will go back to lack of control again, and money and exchange should not be left to be gambling instruments for anybody. I think the best thing that can be done with any kind of currency is to maintain it as stable as possible so that the people may be able to depend upon it in doing business, so that it will always buy what it buys now, and so that people can deal with confidence.

The third reason for bringing this measure into effect was that panicky sales of securities, which might easily have happened in wartime, would have greatly hindered the financing of the war.

The second thing I ask, Mr. Speaker, is whether any of these reasons remain today. It has been argued that all the emergencies which were associated with the war have passed. It is true that the war is ended, but there were things begun in the war that will never end. The effects of the war on almost every institution of the country, on the economy of the world, and on the interrelations of nations, may never be ended. These effects go on perhaps forever, and some of the emergent conditions to which the war gave birth are just as strong today as they were then.

Let me deal with one, and this is one of the realities which I want to reconstruct. The fact is that we are now selling more to Great Britain than they can sell to us. That applies equally to Europe. We are buying more from the United States than we are able to sell to them. Those are realities. I need not go into what happened to Great Britain which brought about those conditions. They were caused directly by the war, and the inability of Great Britain now to meet her accounts with us is a post-war emergency of the greatest gravity, not only to Great Britain but to us, and to the United States as well. Everyone knows that before the war Great Britain was able to pay for her extra imports of Canadian goods by her income from her foreign investments. We

1704

Foreign Exchange Control were paid in United States dollars which made up our deficit with the United States of America. Things ran along fairly smoothly then, but now things have changed. Great Britain lost all her foreign investments which, if they existed as they were before the war, at present prices would purchase one and a half billion dollars' worth of goods. Surely the wiping out of that fund is an emergency and one which is not, as I say, confined to Britain. It is one which affects all nations, particularly and directly Canada.

The next question I want to ask is, would the abandonment of exchange controls help Britain or Europe to sell more goods to Canada? Primarily, that is the question. As everyone knows, this is not essentially a financial question; it is the question of exchange of goods. It is true that stupidity in matters of finance can hinder the exchange of goods, but even perfect financial arrangements alone will not solve the problem. I am asking those who wish to kill this bill if they are sure-I do not want any guessing about it-that if we leave the dollar to find its level, if we reduce it by ten per cent, if we allow our exchange to crystallize, if we turn it into a restored reality, or whichever of these proposals they want to adopt, it will help to sell more British goods in this market. I believe that is the issue. We need to be certain that any or all of their proposals will do that. We cannot guess about it.

The next question is, would the devaluation of the Canadian dollar help? Again I say we should be certain about it. I think the real certainty is that it would not. The real certainty is that it would mean ultimately that Britain would sell less to Canada than she is selling today. This question was dealt with by the Minister of Finance and I do not wish to deal with the technicalities involved, but I shall if anyone questions what I am saying. I say that the devaluation of the Canadian dollar at the present time would inevitably mean greater difficulty for the British to find a market for their goods in Canada.

I am supporting this bill, therefore, Mr. Speaker. I notice that those who are opposing it are opposed to all kinds of controls. I am quite sure that, as the days and years go by, more and more controls will be necessary. The member for Rosedale (Mr. Jackman) said something about following the natural economic laws. Sometimes, sir, that means following unnatural economic blunders. In this case, that is exactly what it would be. 1 conclude, sir, by hoping that these few enlightening remarks of mine will convince the member for Muskoka-Ontario (Mr. Macdonnell) and that we shall be unanimous on this bill.

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

Victor Quelch

Social Credit

Mr. Victor Quelch (Acadia):

I did not intend to speak on this measure again, but after listening to some of the speeches that have been made today I feel like making a few comments. I listened with great interest to the remarks of the last speaker, and I agree wholeheartedly with the latter part of his speech. I tried to follow the first part of his speech through the maze of reasoning of the member for Muskoka-Ontario (Mr. Macdonnell) which seemed to lead to a policy of despair. I was myself beginning to despair, because I also listened with a great deal of interest to the member from Muskoka-Ontario and other members in that party. It does seem to me they are very good at criticizing the government, but they are not prepared to put forward any constructive proposals. They finish by saying, we must do something. If the government is going to do something, we should tell the government what to do; otherwise the thing it does may be the opposite of what we want. I am not prepared, therefore, to follow that type of reasoning.

As I said during the debate on the resolution stage, we in this group are supporting the measure because we believe it is in the interest of the country to have a foreign exchange control board continue in operation. I am satisfied that with the world in the state it is in at the present time, and the state in which it is likely to be for many years, we shall need a foreign exchange control board for more than two years. I quite realize that the import restrictions that were placed in operation last year were not popular. On the other hand, I think any fairminded person, realizing the situation that existed, will agree that some of those restrictions on imports from the United States were essential unless we were to go heavily into debt to that country. Therefore, I do not think any member should try to make political capital out of that situation.

I noticed several members of this house have spoken outside the house from time to time in an attempt to link the Social Credit group with the Conservative party. I would say that the gap between this group and the Conservative party on the question of financial policy is so wide that the greatest engineer in this country could not possibly bridge it.

I have listened to a lot of this talk about letting the dollar find its own value. Put quite frankly, what does it mean? It means that we should make the value of the dollar the subject of speculation. I recall that in 1938 I went over to England. I was only there for two weeks, and yet, in that short time, the value of the pound dropped twenty cents. Why? Because people became frightened of the situation and started to buy United States securities. Consequently, when

I went to the bank to change my balance of sterling back into Canadian dollars, I found that the value of it had dropped twenty cents on the pound owing to speculation.

I have noticed that the Conservative party is very keen about multilateral trade based upon the convertibility of currencies. I would say it is not possible to have multilateral trade based upon the convertibility of currencies so long as you have a situation in which there is a large unbalance of trade in the world. That situation exists today and, according to the report of the organization for European economic co-operation, there will still be a large unbalance even by 1952. It had been hoped that through Marshall-plan aid a balance would be arrived at before that date. Today, even the most optimistic believe there will be an unbalance of at least one billion and probably three billion by 1952.

The nations have therefore been turning to the system of bilateral trade agreements and the imposition of restrictions on imports for the purpose of attempting to establish a greater degree of balance. Under that policy perhaps we shall be able to bring about a greater degree of balance. If international trade were successfully balanced throughout the world, then it would be possible to have multilateral trade based upon the convertibility of currencies. How long would it be possible to remain on that basis? I would say that as soon as we adopted that system, unless the great exporting nations were willing to balance their trade, we would very soon find ourselves in a position of unbalance once more.

Then, once again, the nations would have to return to bilateral trade agreements. For example, if we exported goods to Britain and demanded payment in dollars instead of accepting goods in payment, then naturally Great Britain would have an unbalance with this country unless we accepted the responsibility of finding some alternative dollar market for Britain. There would be an unbalance of trade that would grow from year to year.

It is true that the international monetary fund was supposed to take care of that situation. This fund could only take care of that situation so long as it was a temporary condition of small degree. When the international monetary fund was set up, it was never stated that it could rectify a chronic situation. So far as Europe is concerned, this, unbalance of payments is a chronic one, a condition that has been growing ever since 1913. The quicker we realize that it is a chronic condition and not merely one resulting from the 29087-108J

Foreign Exchange Control war, the quicker we will be in finding some solution to this problem. [DOT]

We never believe in criticizing unless we are prepared to make certain constructive proposals. That is why we have insisted time and again that what the world needs today is multilateral trade on a goods basis instead of a convertibility of currencies basis. In other words, let us accept blocked credits in Europe for our goods, and then trade any surplus blocked credits with other European nations through an international exchange. In that way you could maintain a balance of trade and you would not have to have convertibility of currencies.

When I spoke at the resolution stage, I stressed the fact that the shortage of dollars in Europe was making it almost impossible for Canada to maintain food contracts at the present level. Instead of dealing with that question himself, the Minister of Finance (Mr. Abbott) said that he would let the Minister of Agriculture (Mr. Gardiner) deal with it. I just want to quote what the Minister of Agriculture said, because I want to prove that the statement I made was absolutely correct, and that the statement the Minister of Agriculture made in this house was not in line with the statement he made when he was in England. The Minister of Agriculture, as reported at page 1638 of Hansard, said this:

I want to agree with what the Minister of Finance has said, namely, that so far as the main agricultural products for which we expect to have a market in Great Britain are concerned, we have made arrangements which are satisfactory . . .

Having figured the quantities which we had, and having determined that we could sell certain quantities in other countries, we made agreements with Britain which are taking all the surplus products that we have for sale to Britain.

He suggests there that the agreements are satisfactory. But what did he say when he was speaking to the Canadian chamber of commerce in England after the agreement had been made? I quote-

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

Anthony Hlynka

Social Credit

Mr. Hlynka:

From what?

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

Victor Quelch

Social Credit

Mr. Quelch:

From the speech that he made to the Canadian chamber of commerce on December 17, 1948. I would ask hon. members to bear in mind that in the house here he has just told us that the agreements are satisfactory. This is what he said then:

It is difficult for us to understand why anyone should expect us to be other than disappointed with the 1949 contracts. They provide for 160 million pounds of bacon, for 50 million pounds of cheese, and no cattle or beef.

Then later he goes on:

There are no dollars available in the United Kingdom with which to purchase Canadian apples. Partly because of this we have financed the pulling-out of 240,000 apple trees in Nova Scotia. There are no dollars available with which to purchase Canadian fish.

Foreign Exchange Control

And then later:

All of our discussions on food bulk contracts were proceeding satisfactorily until difficulties arose in adjusting the relationship between dollars and sterling. We were aiming at being able to provide the United Kingdom with 350 million pounds of bacon, 125 million pounds of cheese, 75 million dozens of eggs and having 400,000 head of cattle which we could dispose of either to the United States or the United Kingdom.

Then again:

Our hopes were dashed to the ground when the United Kingdom traders came over one year ago and said they were grieved to find themselves without the dollars to be certain they could buy any of our food excepting wheat.

Then again:

In the light of these circumstances we entered into agreements to deliver to the United Kingdom 87,000 tons, or 195 million pounds, of bacon-

Again remember that he said that we were all set to sell Britain 350 million pounds of bacon. Finally they had to agree to selling them just 195 million pounds of bacon.

-120 million pounds of beef, 80 million dozens of eggs, and 50 million pounds of cheese.

Whereas he stated that they were all ready to make an agreement for selling 125 million pounds of cheese.

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

Robert Ross (Roy) Knight

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

Mr. Knight:

We did not fulfil our previous contract.

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

Victor Quelch

Social Credit

Mr. Quelch:

An hon. member interjects that we could not fill the last agreement. But apparently the Minister of Agriculture hoped that under Liberal policies we could expand our production and fill a larger quota. The point I want to make is that, when I made this statement that our contracts had been reduced owing to the fact that Britain lacked dollars with which to take a larger quantity of food from us, I was basing that statement upon the statement made by the Minister of Agriculture himself. He was so concerned about the situation that he suggested drastic action. Further on he stated:

... I am convinced that the world is not in any state of mind where it can be expected to agree that the manipulation of any system or systems of currency is going to be allowed to interfere with getting surplus food to those who have empty stomachs. It might be a good thing for everybody if the United Nations meetings were closed down long enough to permit of the United Kingdom, United States and Canadian experts getting together and settling some basis upon which dollars and sterling can be converted to allow nations like Canada to produce and distribute food to feed the starving millions.

I think that statement fully justifies the remark I made to the effect that we were having difficulties in establishing contracts with Britain at the former level owing to the fact that Britain had a shortage of dollars. Again I suggest that the most logical way in which to deal with that situation would be for us to accept blocked sterling in Britain and then trade any surplus of blocked sterling

we might have in Britain with any other European country that was willing to supply us with goods and take goods from Britain in payment.

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

Edmund Davie Fulton

Progressive Conservative

Mr. E. D. Fulton (Kamloops):

We should remember, Mr. Speaker, in dealing with this bill now before the house, that it completes the trio of so-called emergency measures which are being submitted at this session and completes the network of controls over the Canadian economy. The other two measures are the emergency powers act and the Agricultural Products Act. With the addition of the control over foreign exchange, the system of potential control over the whole economy is complete. Under those circumstances it is not surprising to find my hon. friends of the socialist party in this house entirely in agreement with what the government is doing in seeking to continue this measure of foreign exchange control for another two years.

We have heard it said frequently in this debate, particularly this afternoon, that the official opposition does not know what it would do about foreign exchange or about the Canadian exchange. That statement, of course, is not correct. I do not think it is so necessary to justify our position as it is to expose the weaknesses of the government. But since the two are the concomitant stages of the same picture, I would again refer to what we said we would do and what was the core of our amendment which, unfortunately, has been ruled out of order. I must say, Mr. Speaker, that I do not agree with your ruling; but as it has been given, I will not question its merits. Our intention is perfectly clear if one takes the trouble-which I take it my hon. friends criticizing it have not done-to study the amendment offered by this party. What we wanted to do was, first, to insist that the rate of exchange on the Canadian dollar be allowed to seek its own level, whatever that might be, within the terms of the present Bretton Woods agreement. Since, under the Bretton Woods agreement, exchange rates can only be varied by ten per cent, it becomes obvious that it would be necessary to put a floor of ninety cents or a ceiling of $1.10 on the dollar for the time being. That was the first step, to allow the dollar to find its natural level within those limits. Secondly, we felt that exchange control would be necessary for a limited period, which the government would need in order to consult with the international monetary fund with a view to finding some method by which all exchanges could be readjusted to a more realistic level. I do not see that there is any mystery or secret or anything incomprehensible about that. My hon. friends opposite, and of the socialist party, who profess to be such great experts in

exchange matters, should surely not find that a policy difficult to analyse or understand. No, Mr. Speaker; their opposition to our suggestions is not because they do not understand them. Their opposition to our suggestions is pecause we are seeking to restore a measure of freedom to the Canadian economy, and that is not consonant with their policy of seeking complete control over every aspect of the national life.

That being said, it still remains a fact that, nevertheless, the government has refused to accept our suggestion of prolonging the life of this measure for only one year. They insist upon prolonging it in its present form for two years, and they give no indication that they will make any real effort during that time to adjust the facts of the situation which at present make foreign exchange control necessary. Therefore, it would be inconsistent if we did not oppose continuation of this measure on these terms. We want to see those steps taken which will make control of exchange unnecessary. We see no signs that the government propose to take these steps, and we are therefore opposed to allowing them carte blanche to continue exchange control for a further period of two years without any assurance that they will take the steps within that time to make further continuation unnecessary.

I should like to give some reasons why we are opposed to the present system of control of our exchange. In the first place, the controls are arbitrary and absolute, and give opportunity for the irresponsible exercise of power to the detriment of the whole of the Canadian economy and to every one of the Canadian people. They absolutely prevent convertibility of exchange. So long as this act and regulations remain in force in their present form, convertibility of exchange is an impossibility.

I shall just refer to one or two examples of that absolutism and one or two of the sections which prevent convertibility of exchange. Section 15 of the present act, which is sought to be extended into force for two years, turns every customs officer and every postmaster in Canada into agents of the foreign exchange control board, requires them to snoop, and to inquire and to investigate into the activities of ordinary Canadian citizens; and every customs officer and postmaster in Canada is thus drafted into the army of snoopers from which this country already suffers. I suggest it is an improper use to make of these civil servants.

Section 18 gives the governor in council unlimited powers to set exchange rates, and even to vary exchange rates from one specific transaction to another. It places in the hands of the governor in council the most arbitrary,

Foreign Exchange Control irresponsible power to exercise control and to discriminate between one Canadian citizen and another, even from one transaction to another.

Finally, in sections 21, 22, 23 and particularly 25, we find the absolute denial of any right of ownership of money to the individual in the first place; and secondly, an absolute barrier to free convertibility. These are not powers which we are willing to see continued in the hands of any government. This act contains the denial of the principle, and the power to give effect to that denial of the principle, of an individual's ownership of his own money.

Furthermore, as I have said, we believe that the problem confronting the world today with respect to trade is the problem of convertibility of currency, and the Foreign Exchange Control Act makes impossible the convertibility of currency. We are therefore opposed to the continuation of the act in force for another two years.

The second general reason why we are opposed to this measure is because it gives sweeping powers to this government and I have no hesitation in saying that we do not regard this government as a fit custodian of those powers. I shall give one or two concrete examples of why I feel that way, and a reference to an indication of the frame of mind of this government in respect to powers which reinforce that belief. You will remember, Mr. Speaker, that when the foreign exchange bill was before the house in 1946 the Minister of Finance, who sponsored it, stated in clear and categorical terms that it was not intended to use the bill except with respect to exchange and with respect to certain capital transactions. He indicated clearly and unmistakably that it was not intended to use the bill to control the movement of goods, to impose embargoes or any other form of tariff structure. That clear and unmistakable statement was made in 1946, on the strength of which the bill became law. In 1947, about fifteen or sixteen months later, we found, however, that the act was put to the very use which we were assured it would never be put to, in that under the authority of the Foreign Exchange Control Act embargoes and quotas were imposed against the importation of goods into Canada. That was defined then, Mr. Speaker, and it still stands, as a breach of faith by this government. To take an act which they had said would never be used for a specific purpose, and sixteen months later to use it for that purpose, can only be described as a breach of faith.

With respect to this type of control, this type of unusual invasion of the sphere of private rights, we find that when we criticize

1708 HOUSE OF

Foreign Exchange Control these methods, when we criticize, for instance, what are in effect breaches of the constitution, when we point out that what is being done is a denial to the individual of what had previously been accepted as his fundamental liberties, and when, because of the importance of the issue, we take a stand on these matters in the house and criticize the government as it should be criticized, we are told that we are indulging in a futile discussion on procedure. We are told that by the Prime Minister (Mr. St. Laurent). Yet I would remind you, Mr. Speaker, that only seven years ago that right hon. gentleman was one of the leading lawyers in this country. It was his duty to his clients to insist upon proper procedure. The Prime Minister knew then very well the importance of proper procedure. As a constitutional lawyer and as one who appeared before the privy council in matters involving the constitution, no one knew better than he, or represented better than he, the importance of constitutional and procedural propriety, and the importance of following and observing the constitution of the country, or of a corporation which might happen to be his client.

Seven years ago that was the attitude of the Prime Minister. Now, only seven years later, and within only a few short months of his becoming Prime Minister, he characterizes discussions of constitutional procedure as "futile", and works himself up into a high state of indignation. He describes this whole question as "a futile discussion of procedure." Thus we saw another example of how power corrupts, and how absolute power corrupts absolutely.

I give those two examples as only two of the many which could be advanced as to why we should not trust the government with sweeping powers over our economy such as they have had under the Foreign Exchange Control Act, and as a second reason why we should refuse to allow the extension of that act for a further two years.

The third general reason is that the Foreign Exchange Control Act has not worked. It has not given us any freedom of trade. It has, in fact, prevented and continues to prevent the convertibility of currency. Not only does it not in fact gain for Canada new fields of trade, new sources of currency and new sources of American dollars, but this act, along with the foreign exchange control regulations and the import restrictions with which it is coupled, in many instances prevents our earning American dollars.

Let me give the house one example of the ridiculous, far-fetched and almost impossible results which flow from the application of these exchange and trade restrictions. We

have in my constituency a company incorporated for the purpose of operating a number of tourist camps. As the house knows, and as you know, Mr. Speaker, the tourist business is one of the most fruitful sources of American dollars. It will be recalled that under the Foreign Exchange Control Act, and kindred legislation, last year certain restrictions were placed upon imports of goods from the United States, because it was said that we lacked the reserves of American dollars to buy those goods.

It so happens that one of the officials of this company has access to American sources of materials, without the expenditure of a single Canadian dollar, and without in any way depleting our reserves of American dollars.

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

Clarence Decatur Howe (Minister of Trade and Commerce)

Liberal

Mr. Howe:

Do you mean without creating a debt?

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

Edmund Davie Fulton

Progressive Conservative

Mr. Fulton:

I mean without creating a debt. What he wants to do, and what he could do, is to bring into Canada equipment from the United States which would enable him the better to operate and the better to enlarge the facilities of his camp. That, in turn, would enable him to offer greater facilities and thus bring in more American tourists, increasing the supply of United States dollars in Canada.

However, Mr. Speaker, there is now in Canada a regulation which says that no one can import this type of equipment or supply from the United States. We know the purpose for which this regulation is said to have been imposed; but it applies to this individual in the same way that it applies to everyone else.

So we have the ridiculous situation of regulations which, in their inception, were said to be designed to save us United States dollars, operating, in fact, not so as to save us United States dollars but to deny us the possibility of procuring more of them. It is that type of impossible and ridiculous situation which could not be foreseen when these measures were first put into effect, but which we find more and more resulting from them, which gives us concern.

This is only one small example. I mention it because only recently I placed the matter before officials of the department. I did so last year, and they would not change their ruling. I have had it reviewed this year, and in their letter to me of March 17, only four days ago, they again refused to change their ruling, despite the fact that they agree with me that the proposal of this gentleman would not deplete our reserves of American dollars, but in fact would add considerably to our potential supply of those funds.

Because of conditions of that kind, and because we find Canadian trade throughout the world reaching a more difficult state, I say we should not continue this restrictive measure for a further period of two years. There are other examples which make it abundantly clear that, far from helping Canada's trade, the exchange restrictions are in fact hindering it.

One of the clearest examples is found in the speech of the Minister of Finance (Mr. Abbott) himself. Speaking in the house when the resolution was under discussion, the minister first sought to give the impression that the restrictions imposed in the fall of 1947 under the Foreign Exchange Control Act, and applied since, have in fact been largely responsible for the great improvement in our American reserve position.

The minister went on to paint a picture of tremendous improvement. While he stated modestly at one point in his speech that he did not claim that all credit for this condition was due to the government's action, he made it clear that he claimed a large part of the credit as being due to the restrictions imposed and to the policy administered under the Foreign Exchange Control Act. Very shortly after that, however, he concluded his remarks by showing that the position with respect to the reserve of United States dollars is not nearly as satisfactory as at first he would have led us to assume. He told us that in 1939, the first year of the war, when foreign exchange control first came into operation, we had in reserve more than enough American dollars to pay for over half a year's imports from the United States. On the other hand, after ten years of foreign exchange control, and after a year and a half of embargoes, restrictions, and the most stringent measures of exchange conservation, we had hardly enough American reserves on hand to pay for four months' normal imports at the current rate.

Not only has the exchange control policy not enlarged our trade, and not sufficiently increased our reserves of American dollars, but it is the exchange control policy itself, coupled with the government's action in July of 1946 of restoring the dollar to parity, which resulted in the depletion of our official reserves of American dollars. Because if one brings about a situation where no Canadian can obtain an American dollar except through the foreign exchange control board, through its being made available from our official reserves, it means that the government and the board have to stand back of every Canadian who wishes to buy and who receives consent to buy an American dollar. Thus the government entered into the foreign exchange business in a large way. Then when

Foreign Exchange Control you have coupled with that the fact that they restored our dollar to parity, thus making it easier and more attractive for Canadians to buy United States dollars, one can see that a greatly increased demand for United States dollars would be created. That is exactly what the government did. They got into the foreign exchange control business and then made it easier and more desirable-more tempting, if I may use those words-for Canadians to get United States dollars. Naturally they found a tremendously increased demand and they found their reserves of United States exchange rushing down the drain at an alarming rate. As a result they had to put into effect the restrictive policies of November, 1947.

While no one perhaps can go so far as to say that the government's action was entirely to blame, nevertheless the minister cannot laugh it off and say that his policies did not have any effect on that matter. His policies had more effect in creating the difficult exchange reserve position than they had in curing it. His policies will not cure the situation from which Canada suffers. They are restrictive and the situation in which Canadian trade finds itself today will not be cured until we restore the convertibility of exchange. That will not be done so long as this act is maintained on the statute books and is in effect in this country.

Then the minister dealt with the situation with regard to gold. I must say that it is difficult to speak with any degree of reasonableness when one bears in mind the things which have been said, and more than that the things which have been suggested by hon. members opposite and hon. members of the socialist party with respect to the motives of hon. members of the official opposition in saying that the gold mining industry of Canada is entitled to some consideration. When one sees the dangerous situation that is developing for the whole Canadian economy, when one sees one example of that situation in the gold mining industry, and then puts forward the position of that industry as an example of what government policies are doing to the economy of the country, one finds it strange that there should be members irresponsible enough to suggest that we are speaking solely for the gold mining interests.

I find it particularly interesting that the hon. member for Spadina (Mr. Croll) should weep such tears, such readily summoned tears, about the workmen in his riding, who he says benefit from the present policies, and should be completely indifferent to the situation of the workmen in the gold mines of Canada-who far outnumber the workmen in the riding of Spadina. I find it extremely

Foreign Exchange Control interesting to note that the socialist party are so ready to make political capital out of their old policy of saying that the Conservatives represent special interests that they completely disregard the welfare of the workers in the gold mines.

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

Some hon. Members:

Oh, oh.

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

March 21, 1949