I

should like to direct a question to the Minister of Fisheries. Is the responsibility of the search and rescue services on the Atlantic coast that of the Department of Fisheries,

The Address-Mr. Howe

the R.C.M.P. or the R.C.A.F., or do these three organizations act as a unit in providing these services?

Hon. Brooke Claxton (Minister of National Defence):

Perhaps I could answer that question. These services are carried on jointly but under the direction of the R.C.A.P.

Mr. G. K. Fraser (Peterborough West):

should like to ask the Secretary of State for External Affairs if the Canadian government, following the action of the United States government in directing its people to leave Hong Kong, has issued a similar order in regard to Canadian people?

Hon. L. B. Pearson (Secretary of State for External Affairs):

No direction of that kind has gone out to Canadians in Hong Kong, nor do I think such a direction would be necessary at the present time.

Mr. Graydon:

Has the minister any information about the number of Canadians in Hong Kong?

Mr. Pearson:

I have not, but I think the number would be quite small. I shall be glad to make inquiry as to just how many there are.

Mr. Fraser:

Has the staff of the Department of Citizenship and Immigration at Hong Kong been increased?

Mr. Pearson:

My colleague, the Minister of Citizenship and Immigration (Mr. Harris), would be the minister to reply to that question. I shall bring it to his attention.

Mr. M. J. Coldwell (Roselown-Biggar):

Can

the Secretary of State for External Affairs indicate whether there are any officials of his department on the mainland of China?

Hon. L. B. Pearson (Secreiary of Slate for External Affairs):

We have officials of the Department of External Affairs still on the mainland. I speak subject to correction, but I understand that our representative who has been in Nanking is on his way home on leave.

Right Hon. C. D. Howe (Minister of Trade and Commerce):

Mr. Speaker, I have two main purposes in taking part in this debate. The first is to outline the measures that are being taken to clear the way for and to speed up the progress of defence production. The second is to outline the present economic situation and to discuss the impact of defence purchasing upon the Canadian economy.

I should like to join with earlier speakers in congratulating the mover (Mr. McMillan) and the seconder (Mr. Breton) of the address in reply to the speech from the throne. It seemed to me that both speakers made addresses that were in the best traditions of parliamentary procedure; they were very fine efforts indeed.

Since parliament met last autumn, world events have moved swiftly. Canada, with the rest of the free world, has had to revise its schedule of preparedness. The challenge of aggressive communism leaves no choice but to move ahead at once, and quickly, with defence preparations planned on a scale never before contemplated except in time of allout war.

My colleague, the Minister of National Defence (Mr. Claxton), has outlined to you the equipment program of the armed services. Hon. members are aware that the Minister of Trade and Commerce, making use of the agency of the Canadian Commercial Corporation, is responsible for the procurement of that equipment. This is a responsibility that entails a volume of work that is being rapidly accelerated. To illustrate the rate of growth, I may tell you that, during 1950, contracts for military equipment, supplies and construction projects were placed on behalf of national defence to a value of $629 million. This is in addition to approximately $31 million spent on married service quarters and related projects by Central Mortgage and Housing Corporation. It is interesting to observe that, in the first quarter, contracts for defence materials placed totalled $56 million; in the second quarter, $88 million; in the third quarter $132 million and in the fourth quarter, $318 million. The rate of awarding contracts will be higher again in the first quarter of the present year.

The Address-Mr. Howe

This increased volume of purchasing has placed a heavy and growing burden on the staff of Canadian Commercial Corporation. To lighten the burden, all defence construction projects have been turned over to a new crown company, under the same minister, named Defence Construction Limited. This new crown company is successor to Wartime Housing Limited, the functions of which had long since been taken over by Central Mortgage and Housing Corporation, but the charter for which had not been surrendered. An application to the Secretary of State resulted in a change of name from wartime housing to Defence Construction. The new crown company has made an arrangement with Central Mortgage and Housing Corporation by which the organization of Central Mortgage provides engineering and other services as called upon. Central Mortgage has in being a decentralized engineering staff that can hardly be duplicated under present-day conditions, and is thus able to serve Defence Construction Limited in all parts of Canada. My colleague, the Minister of Resources and Development (Mr. Winters), who is charged with responsibility for Central Mortgage, has made this arrangement possible, and in doing so has contributed greatly to the efficiency of defence construction work.

However, further expansion of our defence procurement organization will be necessary. For that purpose, the speech from the throne announces the formation of a new department, to be named Defence Production, the duties of which will parallel those of the former department of munitions and supply. The intention is that this new department will take over from Trade and Commerce the functions having to do with war production that were moved into Trade and Commerce when the munitions and supply department was disbanded.

In anticipation of the new department, men from industry have been invited to head up branches having to do with steel, base metals, chemicals and explosives production, priorities, and finance, and these branches are now functioning within the Department of Trade and Commerce.

To date, it has been possible to place defence contracts without any material expansion of industrial facilities. It is now obvious that growing requirements will make it necessary to expand Canada's present industrial capacity. It is hoped that this expansion can be financed privately. A plan for accelerated depreciation is being worked out, to apply to that type of expansion required for war that will have a greatly diminished peacetime value. In addition, and as a last resort, it may be necessary to provide capital assistance for a few types of

expansion. Where capital assistance is used, the facilities so created will remain the property of His Majesty.

Certain expansion of sources of basic materials is already under way. Our steel industry has in progress a vast expansion program involving new investment of close to $100 million. Canadian production of copper, zinc, lead, nickel, and tungsten is being expanded as rapidly as possible, and an aggressive search is being made for cobalt, antimony, molybdenum and chrome. All these metals are now in short supply. Although Canada is the world's largest producer of aluminum, a vast expansion of this highly-strategic war material is being contemplated. Shortages of raw materials are the greatest handicap under which defence production is labouring, and by furnishing greater quantities of these strategic basic materials, Canada can make an outstanding contribution to north Atlantic defence.

To give the house an idea of the present impact of defence purchasing upon civilian production, I have grouped the contracts already placed under some broad headings, as follows:

million

Aircraft $267

Armament, ammunition and military

vehicles H6

Shipbuilding 74

General stores 41

Electronics and communication equipment 37

Textiles and clothing 24

Industrial equipment, scientific, medical

and testing apparatus and miscellaneous 35

Defence construction 35

To avoid misunderstanding, it should be noted that defence contracts awarded are not equivalent as to timing to defence spending. Some contracts are speedily fulfilled; others take a year or more to be completed.

Contracts for aircraft comprised 42 per cent of the total of defence contracts awarded last year. This is one of the fields in which Canada is making substantial progress, and a notable contribution to the joint defence effort. A Canadian firm has designed, built and successfully tested the most powerful jet engine yet to be developed in North America, the Orenda; and this engine will shortly be in quantity production. We are producing, in quantity, airframes for the most modern short-range jet fighters. We are getting ready to manufacture a long-range, jet-propelled, all-weather pursuit ship, designed and successfully flight tested in Canada. Quantity production of small aircraft of the Harvard trainer type is being undertaken, in part for Canadian account, and in part to meet United States requirements.

Canadian government contracts Jet for naval shipbuilding include 7 escort vessels, 14 minesweepers, 5 trawlers which will be

used as gate vessels, and an icebreaker. Construction of these vessels is taking place on both coasts and in the great lakes area, and work is being pushed ahead as rapidly as steel and skilled manpower makes this possible.

In the electronics field, Canada is producing a great quantity of radar equipment, some for use in this country and other for transfer to European countries within the North Atlantic treaty organization. Canadian ingenuity has created certain types of electronic and related equipment which, in quality and performance, are not surpassed by similar equipment produced elsewhere. For example, a Canadian-developed portable radio set has proven so satisfactory that large-scale production is being undertaken for use both by our own forces and by those of our allies.

Canadian Arsenals Limited, which operates the government-owned arsenals for producing munitions and military equipment, has been turning out increasing quantities of weapons with its existing facilities. The company is also retooling to produce a variety of small arms, ammunition, artillery and other weapons of the United States type. The first production of United States type munitions by Canadian Arsenals will be available in the near future, and preparations are being made for volume production of a wide variety of both weapons and ammunition.

Anticipating that defence preparations would in due course require control over certain critical materials, parliament at the last session passed the Essential Materials (Defence) Act. In November of 1950, steel was declared an essential material, and two orders have been issued under that authority. A third will be issued this week. The first prohibited the use of steel for certain types of less essential construction, such as theatres, bowling alleys and amusement structures generally. The first order, while different in form, had much the same effect as the prohibition in the United States upon the construction of similar types of buildings. Controls on imports were imposed at the same time to ensure compliance with the order.

The second order established a formal system of priorities for defence orders and defence-supporting projects.

These orders, the voluntary arrangements made by the steel mills to distribute supplies equitably among their established customers, and our various arrangements with the United States, have so far been broadly sufficient from the standpoint of defence production and civilian production. I think it well to add a warning, however, that further orders may

The Address-Mr. Howe soon have to be issued to assure supplies of structural steel for essential construction projects.

I give this warning so that those who contemplate construction projects which do not relate closely to our defence effort should not commit themselves to building operations unless they have the steel and other building materials, or know where they can be obtained. It would be unfortunate for those concerned, and a waste of valuable labour and materials, for projects to be started and then held up indefinitely for lack of some vital material.

One other point about steel is worth noting. The controls that are now in effect, and that may be forthcoming in the near future, are not solely and primarily for the purpose of assuring steel supplies for the fulfilment of defence contracts. In fact, defence contracts by themselves do not require a particularly large proportion of available steel supplies. The impact comes rather from the defencesupporting projects, such as the building of railway cars, locomotives and ore carriers to move essential materials and supplies. While technically not defence orders, these are no less essential at the present time than the production of guns.

Under the Export and Import Permits Act the government has restricted the export of a number of essential materials in order to conserve domestic supplies. It also requires permits for a wide variety of strategic materials and commodities, the export of which might be risky from a security point of view. In this we are co-operating with the United States by including all items which are under export control from that country to all destinations except Canada. United States export controls have never been applied against Canada, and I do not think that there will ever be any reason why they should.

Before leaving this subject of strategic materials, I might refer briefly to stockpiling, and advance production of defence materials. Orders placed for important key materials include substantial supplies of explosives, to ensure that shell and munitions programs will not be delayed after our arsenals are in production of U.S. type of ammunition. Materials for uniforms are being acquired. We have continued a modest but adequate program covering the acquisition of strategic materials which are not readily available in Canada. In the case of synthetic rubber, the government-owned Polymer Corporation has embarked on an important expansion program in Sarnia. This will involve a capital outlay of some $7 million, and should enable the company to raise its current output of

The Address-Mr. Howe between 55,000 and 60,000 tons of synthetic rubber annually to between 70,000 and 75,000 tons, an increase of about twenty-five per cent. Eldorado Mining and Refining Limited is also expanding its facilities for the production of uranium in the Goldfields area in northern Saskatchewan.

The national research council, which made so important a contribution to munitions production in world war II, is preparing to make another similar contribution. Under the direction of the council a new and larger atomic pile is being constructed to produce commercial quantities of plutonium.

Canadian defence production is being worked out in close co-operation with all North Atlantic treaty countries, and particularly with the United States. The decision of the armed forces to standardize on U.S. types of equipment has thrown added importance on our co-operation with that country. Incidentally, I can announce that the United States, the United Kingdom, France and Canada have been constituted a committee of the North Atlantic treaty organization to decide on standard types of weapons that will be recognized as such by all NATO countries.

Hon. members will recall the remarkable and highly successful arrangements which were made to achieve economic co-operation between the United States and Canada during world war II. These arrangements stand as a monument to the farsighted statesmanship of two great men: President Franklin

Roosevelt and Prime Minister Mackenzie King. [DOT]

Faced again with a common danger, and joined in a common cause, our two governments, on October 26 of last year, agreed to a statement of principles for economic co-operation. Hon. members are no doubt familiar with the general tenor of that statement, but it is of such historic importance that I think it fitting to read the full text into the record. It is as follows:

Statement of Principles for Economic Co-operation The United States and Canada have achieved a high degree of co-operation in the field of industrial mobilization during and since world war II through the operation of the principles embodied in the Hyde Park agreement of 1941, through the extension of its concepts in the post-war period, and more recently through the work of the joint industrial mobilization planning committee. In the interests of mutual security, and to assist both governments to discharge their obligations under the United Nations charter and the North Atlantic treaty, it is believed that this field of common action should be further extended. It is agreed, therefore, that our two governments shall co-operate in all respects practicable, and to the extent of their respective executive powers, to the end that the economic efforts of the two countries be co-ordinated for the common defence and that

the production and' resources of both countries be used for the best combined results.

The following principles are established for the purpose of facilitating these objectives:

1. In order to achieve an optimum production of goods essential for the common defence, the two countries shall develop a co-ordinated program of requirements, production and procurement.

2. To this end, the two countries shall, as it becomes necessary, institute co-ordinated controls over the distribution of scarce raw materials and supplies.

3. Such United States and Canadian emergency controls' shall be mutually consistent in their objectives, and shall be so designed and administered as to achieve comparable effects in each country. To the extent possible, there shall be consultation to this end prior to the institution of any system of controls in either country which affects the other.

4. In order to facilitate essential production, the technical knowledge and productive skills involved in such production within both countries shall, where feasible, be freely exchanged.

5. Barriers which impede the flow between Canada and the United States of goods essential for the common defence effort should be removed as far as possible.

6. The two governments, through their appropriate agencies, will consult concerning any financial or foreign exchange problems which may arise as a result of the implementation of this agreement,

I cannot, without trespassing too much upon the patience of hon. members, spend time elaborating upon the practical significance of this statement of principles. Two or three important developments, however, are worth noting.

By mutual arrangement, we are buying substantial quantities of war equipment in the United States, and that country is reciprocating by placing substantial war contracts in Canada. We are informed that the United States authorities have set a program objective for purchases of military equipment and supplies in Canada amounting to $100 million for the fiscal year 1951. The largest order placed to date is one for 3-inch naval guns for Sorel Industries Limited. A number of other substantial orders are now in the discussion stage. These orders are being placed in Canada through the agency of the Canadian Commercial Corporation.

Important arrangements have been made with the United States in the field of allocation of scarce materials, and particularly steel. Each country is extending to the other a similar priority to that extended for its own defence orders. I cannot think of a better example of mutual confidence between two countries.

Canada has been included in United States allocations of steel for essential programs, such as the building of railway cars, ships, locomotives, and for the steel warehouse trade. Other programs which both countries agree to be essential for the mutual defence effort are being studied.

The Address-Mr. Howe

New problems are arising every day in our relations with the United States, and I do not wish to leave the impression that all will be plain sailing because we have agreed upon a statement of principles. There are bound to be differences as to the best way to proceed; in fact, the statement of principles recognizes that there may be differences in approach, even though there is consistency of aim. However, I can report that differences are being resolved by friendly discussion as they arise.

I turn now to another aspect of our general defence planning, the North Atlantic treaty organization. Co-operation for defence production in this field is developing slowly but steadily. The basic principle of NATO production calls for the most efficient producers to contribute as fully as possible to the requirements of member governments. Member governments are also required, before entering into any large-scale production, to confer with the military authorities of NATO, to the end that its products shall be acceptable, from a military viewpoint. NATO is doing everything possible to encourage standardization between allies, in order to facilitate production programs. Canada's decision to standardize on American-type military equipment has made it possible for Canada to make available to Europe British-type equipment which we have been using up to the present. Equipment for one division valued at $57 million has already been supplied to The Netherlands, and further material will be made available as rapidly as arrangements for replacements can be completed.

For Canada, preparedness is a many-sided problem. We are increasing our military establishment and our civil defence. We are supplying arms and equipment to countries that have joined with us under the North Atlantic treaty for common defence. Equally important, but often overlooked, we are endeavouring to build up productive facilities and to increase the supplies of many of the vital raw materials, upon which the whole defence effort of the democratic world depends.

This is a complex undertaking requiring the most careful use of resources. Were we presently involved in all-out war, certain questions of priority would not arise. The emphasis in that event would be upon producing the maximum quantities of arms and equipment, with the productive facilities and the materials immediately available. But we are not now engaged in all-out war and may not be for many years, if ever. It is necessary, therefore, to give due weight to the long pull, to enlarging our capacity to

produce as well as our immediate output, so that if and when world war III does come, Canada will be in a position to make a maximum contribution. Moreover, it may be necessary at short notice to alter the approach and to shift the emphasis.

I could illustrate the problem by many specific instances. It appears most clearly perhaps in the case of strategic minerals and hydroelectric power, which are the very lifeblood of industrial mobilization. For example, how much of the limited supplies of steel should be used to enlarge steel-making capacity? Is it in the interests of the common defence effort to use steel to construct pipe lines for the transmission of oil and gas, or to build new dams and power plants? What will be the impact of early action on the St. Lawrence seaway? There will be other opportunities to discuss questions of this kind, but it is important that the house should appreciate the nature of problems that are now being encountered, and that will be encountered in even greater degree, in the course of the preparedness effort.

Economic aspects of defence preparedness. I will now turn to the economic aspects of the defence program'that has just been outlined. Hon. members will appreciate that we are imposing our defence production program upon an economy that is already operating close to full capacity. To illustrate, I will outline the economic position of Canada during the year 1950.

It is now estimated that the value of all goods and services produced in Canada during 1950 was about $17,700 million, an increase of about eight per cent over 1949. About half the increase was due to volume of output, and the other half to higher prices. If I may venture a prediction-and of course there are always risks in anticipating developments a year ahead-there is reason to expect that the gross national product' will rise to approximately $20 billion in 1951.

The high level of world and domestic demand is reflected1 in our foreign trade. The year 1950 established a new point, in the total volume of exports and imports, of $6,300 million. Canadian exports rose from about $3 billion in 1949 to $3-1 billion in 1950. A substantial rise in exports to the United States more than offset a general decline in sales to overseas countries. I am very glad to be able to report that while nearly all overseas countries, and particularly those of the sterling area, found it necessary to continue to impose restrictions against the dollar area, these restrictions are now being relaxed rather than increased. The rate of relaxation may not be as rapid as we in

The Address-Mr. Howe Canada might wish, or think justified, but at least we have reason to believe that the dollar problem is on its way to solution.

Imports rose even more rapidly than exports, from $2-8 billion in 1949 to $3-2 billion in 1950. Most of the increased imports came from overseas countries, contributing to their dollar earnings and thus helping to restore normal trade relationships. For the first time since 1931 imports exceeded exports.

I might point out that the small adverse trade balance reported above is an indication of increased internal activity, and particularly of increased domestic investment in productive facilities. It is traditional with us that adverse trade balances occur in periods of our greatest prosperity and that our highest favourable trade balances coincide with our periods of depression.

While on the subject of trade, it is appropriate that I should refer briefly to the efforts that are being made by the government to promote trade and a freer exchange of goods between nations. Hon. members will recall that, during 1950, restrictions upon imports under the Emergency Exchange Conservation Act were progressively relaxed and finally removed, which accounts in part for the higher level of imports.

The Canadian government is actively participating in the tariff negotiations and other trade discussions which have been under way at Torquay since last September. During the latter part of 1950, a trade delegation was sent to Latin America and succeeded in signing agreements with Venezuela, Ecuador and Costa Rica, providing for the exchange of most-favoured-nation treatment. A special mission visited European markets to promote sales of Canadian wheat and flour, with most encouraging results. We were able to arrange with the British government for a trade liberalization plan for our exporters to the British West Indies market, which arrangement came into force at the beginning of this year. Finally, I might mention the very successful international trade fair held in Toronto last year, and which will be held again in 1951.

The outlook for Canada's external trade during the present year is excellent, and the record levels of 1950 will probably be exceeded. The limiting factors will be those of supply. We are again in a seller's market for the goods normally exported by Canada. There are not likely to be burdensome unsold surpluses of any of our normal export products.

I will now turn to the other important dynamic element in our economy, the volume

of our investment in productive facilities. Here again a record was established during 1950. The total value of private and public capital expenditures rose by eight per cent over 1949. An interesting point is that businessmen altered their intentions within the year. Our early information was that investment in new machinery and equipment would be substantially down during 1950. Instead, this type of investment actually increased by five per cent, reflecting a change in the outlook during the year.

At the end of these remarks I shall, with the permission of the house, put on the record two tables which summarize investment expenditures, present and intended, and similar data on production of strategic basic and selected building materials. These two tables are advance statements of the two white papers on the investment outlook, 1951, and the building material outlook, 1951, which will be tabled as soon as they become available in printed form.

Expenditures on new construction increased by ten per cent in 1950, the increase being accounted for by industrial, commercial, institutional and government construction. Housing expenditures were up slightly in value, but down slightly in number of units, when compared with those of 1949. The number of houses started and completed in 1950 is estimated at 91,000 and 86,000 units, or two and six per cent respectively below the 1949 figure. This is reflected in the increase in the number of uncompleted houses at the end of last year, from 58,000 units at the end of 1949 to 62,000 units at the end of 1950.

Looking to the future, it is only too clear that during 1951 the limiting factor upon new civilian construction and upon the purchase of machinery and equipment will be that of supply. There is no lack of demand, no lack of confidence. A preliminary survey of investment intentions would indicate that private industry and governments are aiming at a capital investment program of $4,260 million, or thirteen per cent greater than in 1950. In view of physical limitations upon supplies, and the probable diversion of scarce materials and skilled manpower into high-priority defence and related production, it is unlikely that this objective can be attained in volume terms. Already, it has been necessary to prohibit the use of steel for certain types of non-essential construction, and restrictions on the use of steel and other strategic materials are likely to be extended from time to time.

The full impact of the defence program is yet to come. In the past twelve months,

defence expenditures accounted for about five per cent of our gross national product. This proportion will rise to eight or nine per cent during the coming year and will probably be taking an even greater part of current output by the end of the year. It should be borne in mind, however, that the impact of defence spending has, in large measure, been anticipated. For example, world markets for commodities such as rubber, tin, wool and cotton probably reflect anticipated demand, as well as present demand. I need hardly point out that there has probably been some spending in anticipation of shortages, which is producing present shortages where no present shortage need exist.

However, it must be recognized that the greater effort on the part of the free peoples of the world to prevent all-out war must inevitably cause increasing disturbance to usual living. There will be shortages. We must all learn to conserve scarce materials, and to exercise our ingenuity in the use of substitutes. Some plans for expansion and improvement will have to be postponed. Consumers may not have the wide variety of choice to which they are accustomed. These are inevitable consequences of military and economic preparedness, and I am sure that Canadians will take them in their stride.

In closing, I would like to say a few words about price control. The speech from the throne indicates the intention of the government to introduce a bill which will, if approved, confer upon the executive powers to impose price controls and other related controls for the purpose of maintaining economic stability.

These broad powers are being introduced to the end that the government will be in a position to take whatever action appears to be necessary from time to time. Introduction of this legislation does not mean that the present intention is to impose over-all price and wage controls, although there is always the possibility that events will develop in such a way that general price and wage ceilings are appropriate and workable. However, it should not be assumed, either, that a price ceiling is imminent, or that, if controls become more extensive, they will follow the pattern of those imposed during world war II.

The oyer-all ceiling worked in world war II. But it worked for very definite reasons and it cannot be assumed that history will repeat itself. Circumstances today are very different from what they were in 1941.

One of the secrets of the success of the over-all price ceiling was that we put it into effect overnight and without warning. It caught nearly everyone by surprise. This

The Address-Mr. Howe time many people expect the reimposition of the same kind of controls and are governing themselves accordingly.

The upward pressure on prices, both in Canada and abroad, was much less severe in 1941 than it is now. True, prices were rising during 1941 but they were still relatively low when the ceiling came into effect. Today, to pick a few examples, prices for wool, rubber, tin, cotton and other imported commodities are at the highest prices in history, and there is very little that Canadians can do about it.

Finally, we have to recognize that there would be a very different attitude towards over-all controls now from that which prevailed in 1941 when we were engaged in all-out war. In formulating plans for price controls, if we have to have controls, it cannot be assumed that the people of Canada will accept with the same willingness as they did in wartime the vast bureaucracy, the irksome restrictions and the other controls, for example, of wages, that go with an over-all price ceiling. I think it is significant, in this connection, that organized labour, while favouring price ceilings, does not look with equal favour on a wage ceiling.

I am not ruling out the possibility that sweeping price control measures will be needed, should the developing situation make action necessary, but it may well be that these measures should be different in form from those that were applied during the last war. Alternative measures are now under active study by the government.

At its last session, parliament enacted a measure authorizing the government to control prices of materials where shortage is caused by defence purchases. Up to the present time, defence purchases have not been of sufficient volume to be in themselves responsible for shortages, although prices of steel and other war materials have been kept under close observation. Obviously a more comprehensive price control bill is needed for any effective control of the Canadian economy, and it is such a bill that you will be asked to consider.

A few days ago the United States government applied a system of general controls to prices and wages. In some respects the action taken resembled the over-all price ceiling applied by the Canadian government towards the end of 1941. In other respects the U.S. controls are very different; for they do not apply, for example, to a great many foodstuffs which by the Defence Production Act cannot be controlled until they reach higher price levels.

The Address-Mr. Howe

We are watching with intense interest these efforts to control prices in the United States. We earnestly hope our American neighbours will succeed in attaining a reasonable measure of stability; for only if that happens can we in Canada hope to avoid serious trouble. Dependent as we are to a large extent upon the United States as a source of supply and as a market for our exports, it would be extremely difficult, even if it were wise, for us to insulate our prices from theirs.

I do not suggest for a moment that we can relax and let the United States solve our economic problems for us. That has never been our attitude, and, as long as this government is in power, that will not be our attitude. We must continue to pursue fundamental anti-inflationary policies as vigorously as ever. All I say is that if the United States succeeds in its efforts to stabilize prices, one of the most powerful external pressures toward rising prices in Canada will be relieved. At the present time, fiscal and monetary measures can be more effective

than price control in keeping internal inflationary pressures under control. With such measures in effect, there will be less need for direct controls of prices and wages, and if we do have to have more extensive direct controls, such controls should have a better chance of success.

Perhaps I should add, too, that even if we in Canada do not follow precisely the pattern of controls adopted in the United States, there will continue to be close cooperation between our two countries for the attainment of common goals. If we differ in method, we do not differ in objectives.

Mr. Speaker, I have only a few words to say in conclusion. It is most important that we should neither exaggerate nor underrate the magnitude of the task with which we on the production front are faced. We have to wage the battle of production against the enemies of freedom. We cannot hope to win that battle under the banner of "business as usual". There is much more than usual to be done, and I think that by united effort we can do it.