March 22, 1949

PC

Charles Elwood Stephenson

Progressive Conservative

Mr. Stephenson:

Knowing that in any case we have to have funds to purchase goods in the United States, if United States funds have been purchased, has Canada had to pay a premium on them?

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:

No, there is no premium paid on those funds.

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

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

Earlier this morning the minister answered some questions as to the relationship between the foreign exchange control board and the consolidated revenue fund. I wonder if he would supplement the information he gave respecting assets and liabilities of the exchange fund account as it appears at page 28 of the 1948 report of the foreign exchange control board. This indicates that at December 31, 1947, advances from the consolidated revenue fund stood at $505 million, whereas at December 31, 1948, they stood at $1,025 million. These of course are calendar year figures. If we subtract the 1947 from the 1948 figure we have not a figure which would tally with the fiscal year for which the minister keeps his books. In other words the increase of $520 million in advances from the consolidated revenue fund as between December 31, 1947, and December 31, 1948, represents the twelve months of the calendar year 1948, and does not bear any relationship to the fiscal year ended March 31.

What is the position with regard to the effect in 1947 and 1948 of increases in the consolidated revenue fund on the books of the Department of Finance with regard to such things as surplus? I am aware of the figure appearing at page 1 of the report indicating holdings in United States dollars and gold. But what I want to get at is this: in 1947 we had a substantial reduction-

Foreign Exchange Control I believe it was about $700 million-in the board's holdings of United States dollars in gold. So far as I am aware, this was not reflected in the figures the minister gave the house. It was not reflected in a reduction of the national debt.

In 1948 we see a substantial increase in advances from the consolidated revenue fund. From a statement issued earlier in the year, which appeared in the Canada Gazette, it appears that these increases in advances from the consolidated revenue fund to the foreign exchange control board are going to have the effect of reducing the surplus available in the hands of the Minister of Finance for the reduction of debt. If it does not work in 1947, how does it work in 1948?

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:

I am afraid my hon. friend has not read carefully the prepared statements I have issued in the last two or three months in connection with the comptroller of the treasury's monthly statements, where I have been endeavouring to demonstrate the difference in public accounts between what is referred to as budgetary surplus and cash surplus. In public finance there are many items which are not budgetary items but which have to be paid for in cash. On the other side there are a great many budgetary expenditures which do not have to be made in cash. If my hon. friend will look back at my budget speech of 1947 he will find that I referred in specific terms to the fact that during the then fiscal year we had received several hundred million dollars as a result of payments made to me in my official capacity from the exchange fund account. The trend has been reversed this year; in fact we have had to provide out of the cash resources of the government between $400 million and $450 million for the exchange fund account in order to provide dollars, mainly for exporters who have turned over their United States dollars to the exchange fund account.

That fact has nothing to do with the amount of the budgetary surplus which the government has at the end of its fiscal year. It has a significant bearing on the cash requirements of the government, which is something completely different. I am not revealing any budget secrets when I say that in the course of my economic survey this evening I shall have something to say on this particular subject. Perhaps my hon. friend will accept this short explanation this morning, and this evening I hope to be able to deal with the question he has raised, which is an important one, in considerably more detail.

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

Eric Bowness McKay

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

Mr. McKay:

I should like to ask a question arising out of a news report in the Toronto Star of March 18, which reads:

Vancouver,, March 18-"Restoration of Europe might well be the task of a generation or more, and to that degree Canada will be without its traditional customers capable of buying from this country," declared Graham Ford Towers, governor of the Bank of Canada, in an address to the northwest credit conference yesterday.

Mr. Towers said European recipients of aid had been forced by dollar shortages to form trading arrangements among themselves and with countries outside the dollar area. "Some of these international trade policies are enough to make classical economists turn in their graves," he declared.

I assume that when Mr. Towers refers to international trade policies which are causing classical economists to turn in their graves he is referring to barter trade. On several occasions the minister has indicated to the house that he is at least in principle opposed to barter trade arrangements. If he is opposed in principle to barter arrangements, will he tell the committee what the government has to offer in place of those barter arrangements, other than granting Europe increased loans and credits so that they can purchase goods from 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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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abboli:

As I have said before, I am not going to enter into an extended debate on trade policy when we are in committee on this bill. I think it would be completely irrelevant. We had a long discussion on it the other day, and on a more appropriate occasion I shall have a good deal more to say on this question of barter deals. I do not think it is in order to go into the matter this morning, and I shall give, as I have done before, excellent reasons why I do not think it is in the interests of this country to go into them.

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

Alexander Maxwell (Max) Campbell

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

Mr. Campbell:

What percentage of the profits made in Canada by United States firms has been converted into United States dollars during the past year?

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:

I cannot give my hon. friend the percentage, but every dollar of profit made in this country by a United States firm during the past year could, if the firm wished to do so, have been taken to the United States at the official rate of exchange. A good many of them, in accordance with past practice, have allowed current earnings to remain here and have reinvested them in the business. But Canadian policy is, and always has been, even in the worst days of the war, to allow nonresident investors to take their current earnings out of the country at the official rate of exchange.

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:

Following the questions asked by the hon. member for Saint John-

Albert, will the minister say whether a farmer or businessman who retired to the United States would be permitted to have all his income in Canada sent to him in the United States at the official rate?

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:

That is correct.

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:

Irrespective of what the amount may be?

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:

If he has been granted a change of status. That is my information.

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:

Is there any particular trick about being granted a change of status? Would that apply to a person who has been there, say, for a year, and has taken up domicile?

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:

I think there must be some justification, as was indicated by the hon. member for Saint John-Albert, such as health or other reasons. If a Canadian feels that he must leave Canada, he is always free to do so, but it is discretionary with us to say whether he is given a change of status for exchange purposes-in other words, whether we will allow him to take his capital out of the country.

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:

Supposing a businessman or farmer wanted to go to the United States in order to carry on business, in order to get away from restrictions; would this government allow him to have the income from his Canadian investments at the official rate of exchange?

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. Abboil:

Not necessarily.

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:

In other words he must pass through the hands of the bureaucrats before it is decided whether he can go to the United States. Last night we heard the Minister of Justice say that this government is eager to get out of controls with the utmost possible speed, but we must not forget that when the Foreign Exchange Control Act was before us, the government would not consent to any limitation as to time. It was only because of the work of the other house that any limitation was placed on the act.

May I ask the minister why he has put a two-year limit on at this time? I say that partly because of what I see in the report that the staff has been increased from 420 to 472. Naturally I am concerned about the future of the young men and women who make up the staff there, to say nothing of the large additional expense which has been incurred and which amounts to no less than $10,000 per head for the fifty-two additional people.

I should like to ask the minister a question which is relevant to the time factor in the bill

Foreign Exchange Control before us. If in the eyes of the government our currency becomes sufficiently strong to stand on its own feet, is it the intention of the government to do away with the foreign exchange control board, or does the minister feel that under his obligations, as they now exist and as he contemplates they will exist under Bretton Woods, it will be necessary to maintain the foreign exchange control board with a fairly substantial staff? If it should come about that there was freedom and convertibility of currency, what staff would be required in addition to the staff now employed?

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. Abbotl:

As I have said on other occasions, I am never too keen about answering hypothetical questions, and I certainly have no intention of stating what government policy might be under contingencies as yet undeveloped. I did point out either yesterday or the day before, or previously when we were discussing this measure, that it is perfectly open to parliament to repeal the measure at any time. The fact that there is a time limit does not prevent that.

As I have said on numerous other occasions, I think it would have been better to follow the ordinary British constitutional practice and not put in a time limit-leave it to parliament to repeal the statute when it was no longer necessary. However, that principle was accepted in the other place when the act was before that body for consideration in 1946. The approximately two-year time limit is put in because that period will terminate early in the life of the next parliament. But there is nothing to prevent parliament from repealing it this year or next year.

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

Arthur Henry Williams

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

Mr. Williams:

In one of the answers given by the minister this morning he referred to prosecution of people who had been evading the rules and regulations of the foreign exchange control board. Is it possible to have an itemized statement, not giving the names of the people involved but in the form of case A, case B, case C, and so on? May we have such a statement so that we may see just what the situation is?

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. Abboit:

I gave a fairly well itemized statement, but I will see if I can give a little more. Let us take 1948, the most recent figures. There were 105 attempts by resident travelers to export currency without the necessary permit. There were twenty cases of residents obtaining United States funds in excess of the annual travel allotment by malArig false declarations to authorized dealers. Thirty-nine residents failed to sell United States dollars to authorized dealers, or illegally disposed of United States dollars.

1760 HOUSE OF

Foreign Exchange Control There were twenty cases of non-residents importing unofficial Canadian funds, mainly in the form of drafts, acquiring United States funds in Canada, or illegally attempting to export Canadian currency. There, as I pointed out to the hon. member for Lake Centre, the fines were the highest in the whole group.

As to other illegal dealings in foreign exchange, there were ten cases, and there is a classification' of miscellaneous, whatever that may mean, with twenty-two cases, making a total of 216. These were formal prosecutions before the exchequer court. I have not the breakdown here of the seizures of currency in amounts of $100 and over, but of course in the great majority of these cases people were attempting to cross the border with amounts of currency in excess of the legal limits provided under the regulations.

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 22, 1949