Right Hon. L. S. Si. Laurent (Prime Minister):

Mr. Speaker, I wish to lay on the table a summary of orders in council passed during the period November 1 to November 30, 1949.

The previous summary was tabled on November 30. As agreed, this summary does not include the minutes of treasury board.

Right Hon. L. S. St. Laurent (Prime Minister):

Mr. Speaker, I should like to make a declaration of government policy with respect to the Canadian merchant marine.

During recent months the government has been giving very serious and careful consideration to the state of the Canadian deep-sea shipping industry. The main facts of the situation are fully set forth in the report of the Canadian maritime commission; since that report was prepared an increasing number of Canadian flag ships have been laid up. The government proposes to deal with the matter promptly.

The problem stated in simple terms is this. Canadian flag vessels are no longer able to pay their own way. This situation is not new. Not since the beginning of this century has the business of owning and operating deep-sea vessels really prospered in Canada. In fact from 1900 to 1919 there was very little Canadian participation in deep-sea shipping. However, the building of ships in Canada during the first world war led the government of that day into a post-war venture of a government-owned merchant fleet. That fleet proved to be uncompetitive in the world market, and when the Canadian government merchant marine was finally liquidated in 45781-189

1936, the total loss to the government, exclusive of interest on capital and other advances, amounted to over $82 million.

During the second world war it again became necessary for Canada to build ships to carry essential supplies. In 1946 the Canadian merchant fleet was the fourth largest in the world. The Canadian government at that time, instead of continuing to operate a government-owned fleet in a period of high freights, decided to dispose of its vessels.

In 1946 there was a strong demand for ships both in Canada and abroad. Companies in Canada were most anxious to purchase ships, and under these circumstances it appeared only right and proper to give to our own people the first opportunity to buy. Thus the bulk of the war-built fleet was sold to Canadian operators at reasonable prices and on favourable terms, but they purchased these vessels at their own risk. On the 16th day of June, 1947, my colleague, the Minister of Trade and Commerce, then Minister of Reconstruction and Supply (Mr. Howe), in addressing this house said:

Hon. members are well aware that a merchant navy is basically an industry which, like other industries, has to pay its way if it is to survive.

During the years 1946 and 1947 ocean freight rates remained at high levels and Canadian owners were able to operate their vessels profitably and successfully. About the middle of 1948, however, Canadian ships began to experience greater difficulty in obtaining dollar cargoes and freight rates began to decline from their high wartime levels. In March of this year a steady decline set in which has continued and at present rates and at Canadian costs Canadian vessels cannot be operated without substantial losses.

As I have said, the Canadian government has sold all its ships, the majority of which have been purchased by Canadian owners. At the present time we have 118 dry-cargo vessels operating under Canadian flag, and an additional 58, which likewise have been sold, are due to be returned from United Kingdom flag to Canadian registry next year, making a total of 176 ships which we must take into consideration. I am advised that, in order to enable those ships to operate competitively in the world market, over $25 million in annual subsidies would be required.

The maintenance of a Canadian flag merchant fleet can be justified only on the basis of one or both of two assumptions: (1) that

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the fleet is a net economic asset to the community, or (2) that the fleet is important for purposes of national security.

In considering the studies which are available to us on the subject, we have concluded that we are not justified from an economic viewpoint in maintaining a Canadian flag fleet by artificial means. It is not the intention of the government to maintain an industry at the expense of the taxpayer, and of other export industries, by the unhealthy method of subsidies, unless these countervailing considerations are very strong indeed.

There are many objections to shipping subsidies. They do not tend to promote a healthy and efficient industry. They constitute a steady and usually increasing drain upon public funds. In a world in which some types of ships are already in oversupply they represent a waste of the taxpayer's money.

I do not propose to go into all the difficulties involved in shipping subsidies, since the government's basic objection to a policy of subsidization rests on wider grounds. The world is still suffering from the effect of two great wars. Dislocation resulting from such wars has disrupted world trade to an extent that nations are taking extraordinary steps for the preservation of their economies. Our view has consistently been that it is not possible to seek a solution to our trade and currency difficulties on a purely national basis. Canada has goods to sell, but our European customers lack dollars to buy them. They cannot acquire such dollars unless we do our share of buying from them. In other words we must seek to encourage imports from countries to whom we desire to sell our goods and in this sense shipping services of other countries represent an import. We must not adopt measures which would hinder the revival of world trade and defer the achievement of balance between dollar and non-dollar trading areas. If we were to adopt a policy of subsidization of national shipping, it would be a protectionist measure disabling other countries from trading with us.

The problem of preserving some part of the fleet for national security purposes deserves further consideration. In a world at peace with itself, this would not be necessary. Each nation would perform those functions which it could carry out most efficiently and economically, and if Canada were unable to conduct deep-sea shipping operations as well as other countries, such operations would be abandoned. Safeguards would have to be set up to prevent countries engaged in shipping from discriminating against countries which had no shipping.

However, we must regard the world as it is and make a realistic approach to the problem.

Safeguards to prevent discrimination have been set up under the machinery of the United Nations, and the constitution of the intergovernmental maritime consultative organization is designed to prevent unfair shipping practices. But although Canada has ratified the IMCO convention, it has not yet received the agreement of sufficient nations to bring it into operation. Furthermore, unhappily, we cannot say that war is not a possibility. I am strongly of the opinion, however, that arrangements should be made between the peace-loving nations of the world to pool their shipping resources in the event of war. If proper assurances were received in this respect, it might not be necessary for those nations who cannot operate ships economically to continue to maintain merchant fleets to meet an emergency.

The maintenance of adequate ocean-going shipping, shipbuilding capacity and ship repair facilities is fundamental to the defence organization of the North Atlantic treaty. It is, like defence proper, a collective responsibility which the partners must share in relation to capacity, aptitude, and relative efficiency. An increasing degree of specialization along the lines in which each country can make the greatest contribution to the common defence and welfare is the natural complement of the principle of integration in defence planning which we, together with our partners in the North Atlantic treaty, have accepted and have begun to apply. The implications of this approach are plain.

The experience of two wars has made it plain that allies have to pool their shipping resources. This lesson has not been lost on the countries which are now associated, for purposes of common defence, in the North Atlantic treaty. It is our hope, to further which we shall use our best endeavours, that arrangements can be completed in peacetime which would ensure the prompt, fair and efficient use and allocation of all available shipping in any emergency. Conversations to this end are already under way. In particular, discussions on this subject have taken place between officials of the government of the United Kingdom and Canada. Those discussions have not yet been completed, but I believe that if Canadian ships are transferred to United Kingdom registry, arrangements can be made to treat such ships as part of the Canadian contribution to any allied shipping pool in the event of war. Similar conditions would govern any transfer of registry for operating purposes to the flags of other countries upon whose close co-operation in mutual defence we can confidently

rely. By proceeding along these lines and within the framework of security which we are building up, it should no longer be necessary for each individual country to risk the waste of its national effort in duplicating facilities and services which can be more efficiently carried out in peacetime by their partner countries, and which will be available to serve the needs of all should a war come.

The government has therefore decided that, for the next year-and I stress "for the next year"-while an allied defence shipping pool is being created, it is advisable to maintain some proportion of the present fleet under Canadian flag. For that purpose the government has decided to recommend the provision of a sum of $3 million as an aid to the Canadian ocean shipping industry for one year only. It is estimated that over 500,000 deadweight tons of dry-cargo shipping will remain under the Canadian flag, but it may be that not all vessels comprising that tonnage will receive assistance. The number of ships to be assisted, and the amount of assistance required by each, will be left to the Canadian maritime commission, who will administer the fund under the provisions of the act, if parliament sees fit to pass it.

It is recognized that the reduction contemplated in the fleet will compel a number of seamen to find shore employment. In order to assist them in this transfer, the government has decided to extend the vocational training scheme to admit eligible men applying on or before the 30th day of September, 1950, and commencing their approved training before the 31st day of January, 1951. The ministers of transport and veterans affairs will have discretion with regard to the restricting provisions respecting age and the granting of allowances as at present set out in the merchant seamen vocational training order. Hon. members know that the terms of that order restricted training to men under thirty years of age.

Mr. Green:

Is that being lifted?

Mr. St. Laurent:

That is to remain the rule; but there will be discretionary provisions enabling the Minister of Veterans Affairs and the Minister of Transport in exceptional cases to extend the privilege to men who have passed the age of thirty.

The vessels of the Park fleet, which, I have said, were sold by the government to Canadian companies, were purchased under the terms of an agreement containing the following clause:

It Is one of the essential conditions of the present agreement that except with the prior written approval of the seller-

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The government.

-the vessels sold will be operated under Canadian registry by the purchaser as well after as before the full balance of the final or adjusted purchase price and interest has been paid; and the purchaser agrees for itself, its successors and assigns, not to make any application for transfer of any of the vessels out of Canadian registry without the prior written approval of the seller.

If it had not been for this clause, Canadian companies could have transferred their ships to foreign flag at any time. That covenant has now been in force for about four years, and it is now felt, in view of what I have said, that it is fair to give relief in respect of this restriction, as it has been demonstrated that Canadian vessels with their present high costs cannot be operated. Applications from shipowners may now be made to the Minister of Transport, through the commission, to transfer flag, and transfers will be permitted under such conditions as he may impose. This is in conformity with what I said previously about the concern to have an arrangement for a shipping pool that would give us the confidence that ships would be available in the event of an emergency.

Such transfer of flag, of itself, does not of course affect the ownership of the vessels, which will remain in Canadian hands. In permitting transfers the government will see to it that there will be tonnage available to meet Canadian needs in the event of war, and it is hoped that by means of such transfers Canadian-owned vessels will be able to secure cargoes which have not been available to them by reason of currency restrictions.

Let me emphasize again that the relief which is now being granted to the shipping industry is temporary and for one year only. It is given to assist shipowners to meet the emergency created by the decline in the freight market, and in the hope that they will be able to reduce their costs in order to operate competitively.

May I take this opportunity to pay a tribute, which I think all hon. members would wish to pay, to the efficient and intelligent work which has been done by the maritime commission, under the chairmanship of Mr. Clyne, in coping with a most difficult and somewhat discouraging problem under the conditions which prevailed when they had to give all their time and energy in an attempt to find a solution to that problem.

Mr. Green:

I should like to ask the Prime Minister one or two questions. I understand from his statement that legislation will be required, and I should like to know whether it will be introduced at this session, or not until the next. Then the Prime Minister said that an attempt would be made to retain a tonnage of approximately 500,000 tons, but I am not sure whether he said deadweight tons

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or gross tons. The recommendation of the maritime commission was that there should be 750,000 deadweight tons, which I think is about 562,500 gross tons.

The Prime Minister said nothing about the $26 million now held in escrow, being the proceeds of sales that have already taken place. Under present provisions that money cannot be paid out. Would the Prime Minister explain what will be done with that money?

Finally, has the government given consideration to the fact that in some cases ships have been transferred to the Panamanian flag? Panama is not a member of the North Atlantic alliance, and I am wondering what would happen if ships are transferred to the flag of that country.

Mr. Si. Laurent:

I shall deal with the last question first. There have been no ships transferred to the Panamanian flag, and it is not the intention to authorize transfers to that flag. The intention is to authorize transfers under conditions that would leave us with the assurance that ships would become available in the event of an emergency.

Mr. Green:

Only to North Atlantic treaty nations?

I would not like to tie it down any more firmly than to say that when an application is made, the merits will be considered. The intention is to reach some kind of agreement within a year that would provide for the pooling of the ships that would be required in the event of an emergency by the members of the North Atlantic security pact.

With reference to the first question asked by the hon. member, it is 500,000 deadweight tons of dry cargo shipping, and I am told that that would be about forty ships. With regard to the amount now in escrow, under conditions which require it to be expended for the production in Canadian yards of Canadian ships, at the moment no change is contemplated in those restrictions.

The hon. member asked if it was intended to introduce the legislation at this or the next session. There is no intention of introducing it at this session. There is still the hope among a great many of us that this session may be pretty close to prorogation, and it was felt that, in view of the general interest in the matter, it would be desirable to announce government policy at this time, and the intention of the government to introduce legislation as early as possible in the next session to implement that policy.

Mr. Coldwell:

Mr. Speaker, this is a most important statement, and a number of questions have arisen in the minds of hon. members, as indicated by those asked by the hon. member for Vancouver-Quadra (Mr. Green). I am at a loss to understand why this statement was not made yesterday before the estimates of the Department of Transport were finally completed, so that we could have obtained some information to carry back to the country. It is regrettable that we did not get this statement before those estimates were finally adopted.

Mr. St. Laureni:

I shall have to deal with the hon. member's remarks in two parts. The statement was not made before because it was not ready. We have been giving it careful consideration and have been expediting its preparation, but I was able to get it only this morning. Even when I did get it this morning, there was one change that it was found necessary to make.

With regard to the estimates of the Department of Transport, it was convenient to have them called yesterday, although it might have been preferable to deal with some other estimates and call the transport items today. I repeat that the reason this statement was not made before was that we were expediting its preparation, and I was able to get it in its final shape only a few minutes before I came into the chamber.

Mr. Knowles:

The minister said that we would not get the statement unless we put his estimates through last night.

Mr. Gillis:

There is just one question I should like to ask the Prime Minister, and I think it is important. Can he inform the house whether there is such a thing as a ship of Canadian registry? I understand that all Canadian ships are of British registry regardless of the flag they fly. That is, there is no such thing as a Canadian registered ship leaving a Canadian port.

Mr. St. Laureni:

Oh, there is. These ships are of Canadian registry.

Mr. Gillis: