Mr. W. A. WALSH (Mount Royal):
Mr. Speaker, after listening to the former Minister of Agriculture (Mr. Motherwell) quote scripture so freely I began to wonder what was the relation between the question under discussion and the experience of Saul of Tarsus on the road to Damascus or the parable of the good Samaritan. I am afraid that my hon. friend is somewhat of a Scotsman, and the suggestion is that a Scotsman is one who is well versed in the scriptures but who nevertheless has a strong commercial instinct.
The last speaker (Mr. Deachman) referred to the "nonsense of discussing trade balances," if I understood him correctly, and then proceeded to take fifteen or twenty minutes of the time of this house to give a very considerable number of figures in connection with trade balances, which I believe very few members of this house knew anything about. If it is nonsense to discuss trade balances- and that was his opinion-I do not see why
during the last campaign the Liberal party did not make a greater effort to discuss trade balances from that point of view from platforms all over the country.
In discussing the question before the house I should like to suggest at the outset something that no doubt can be taken for granted; that is, that I find I am not in agreement with this resolution. In a very brief space of time I should like to outline why I have reached that conclusion. I do not know whether or not my reasons will have any effect on the course of this debate; nevertheless I should like to have the privilege of recording my personal views, which I believe are in harmony with those of my party.
As we have been told on many occasions the tariff serves two distinct purposes, the one to raise revenue and the other to afford protection to both industry and labour. For a moment I should like to deal with the first point, the purpose of raising revenue, and I do so in order to suggest to this house the possibility of placing more emphasis on that feature of the tariff and less on the second feature I mentioned. By reference to the publications of the Department of Trade and Commerce I find that in 1890 the total revenue of this country was 838,500,000, of which the customs tariff supplied $23,300,000. In 1913 the total revenue was 8168,600,000, to which the customs tariff contributed $111,700,000. Coming down to 1934 we notice a tremendous shrinkage in the amount of revenue raised through the customs tariff. In that year the total revenue was $324,471,270, of which the customs tariff gave only the meagre sum of $66,305,356.
I would urge, Mr. Speaker, that in future more attention be given to the possibility of raising revenue through the tariff rather than through the process of direct taxation. For my own part, and I think I speak for the majority of the citizens of this country, I believe that is a fairer method of taxation; at least it distributes the taxes equally and more equitably among the people as a whole. I would far rather go to a store and pay $30 for a suit of clothes, if I could ever raise that amount of money, than pay $28 and then have to write out a cheque for the additional amount by way of income tax at the end of the year. I also believe, naturally, that we should continue to endorse protection as a policy. Canadian labour requires protection against unfair competition from countries where the wages paid for labour are ridiculously low, and our industries also require this protection not only because of the amount of capital invested in them but also because of the number of workers employed.
Canada-U. S. Trade Agreement
Many references have been made to the history of Canadian tariffs, and particular stress has been laid on the previous reciprocity treaty that came into operation in this country on March 16, 1855. That treaty was abrogated by the United States, and if I might intrude the remark at this stage I would suggest that the same step will be taken in the near future and the United States will abrogate this treaty that I presume we are about to consummate. As I have said, the first treaty was abrogated. The reason for that action was not as suggested by a previous speaker, as is well known to all students of economic history. It was terminated because of (1) friction which resulted from the civil war in the United States; (2) retaliation for a Canadian tariff imposed in 1859, shutting out United States manufactured products.
A little later we had the consummation of confederation, which opened up a very wide market within Canada for Canadian manufactured and agricultural products. At that time, and immediately following, we also had a small but nevertheless increasing market in Great Britain. In 1878 we had brought forward in parliament by way of legislation the so called national policy. If the right hon. Prime Minister (Mr. Mackenzie King) would permit me to do so, I should like to take exception to the suggestion he made during the course of his remarks, when he said that that policy was introduced as a retaliatory policy against the United States. If the right hon. gentleman would study again Canadian economic history he would quickly appreciate that the national policy was introduced by the Conservative party not for that reason but to correct the ills which had befallen this country chiefly because of the previous administration that had been in power previous to 1878, I would quote the words of Sir Leonard Tilley who, upon presenting his budget in 1879, said that the national policy was being put into effect select for a higher rate of duty those articles which are or can be manufactured in Canada, and to have those that are neither made nor likely to be made in Canada at a lower rate." That is the reason for the national policy, and I suggest that we note the two reasons he advanced, one being that of protection and the other the possibility of financial revenue.
We also notice the trade development in Canada during succeeding years. In 1896 there was a Liberal victory at the polls. Immediately following that election the late Right Hon. W. S. Fielding was placed at the head of a commission to investigate tariff conditions in Canada. May I pay tribute
to the then minister of finance, because I believe he was an outstanding Canadian and one to whom a prominent place will be given when the history of Canada from 1896 to the time of his death is written. As the head of the commission he made a thorough investigation, but found no reason for changing to the extent of one iota the national policy under which Canada had operated for the previous few years. He continued to govern under the same policy.
The first important change made in Canadian tariff policy was about 1907. At that time we find three columns in place of the previous two which, in turn, had replaced one column. To-day we have the British preferential. the intermediate and the general tariff. Reference has been made to the reciprocity campaign of 1911, and I am surprised that so many men otherwise endowed with good judgment should inject into a discussion of that campaign certain remarks offered as facts, but which in my estimation were somewhat distorted. One hon. member supporting the government suggested that the election in 1911 was won by the Conservative party because it played only one string of the instrument, namely the possibility of annexation to the United States. That might have been mentioned during the campaign, but I suggest emphatically that it was not the cause of the defeat of the Liberal party. My Liberal friends well and truly know the truth of my statement. Reciprocity was defeated at that time because the people believed that if such legislation became effective Canada would be prosperous for only a day, and that after the treaty had been tried and abrogated by the United States, as the previous treaty had been, the people of Canada would have to find new avenues of trade.
We have always experienced considerable difficulty in our trade relations with the United States. Trade with that country is an uncertain quantity. Down to 1920 it was more or less peaceful, but following that time it was disturbed first by the Fordney-MeCumber tariff, and then, to make matters worse, by the Hawley-Smoot tariff, the provisions of which were directed principally against our primary products of fish, cattle, lumber and agricultural products. As a result of those tariff restrictions we were forced to find markets elsewhere, and proceeded to do so. Even my Liberal friends, while in office from 1921, were forced to take cognizance of conditions actually existing and to endeavour to find avenues of trade with countries other than the United States.
Canada-U. S. Trade Agreement
In a few moments I shall quote figures to show that we have been more or less successful in seeking other markets, and that the government in office after 1930 was eminently successful in finding new avenues of trade for Canada. Those avenues were within the empire first, and then with other countries, not neglecting the United States. When we are farther removed from 1932 and when the history of that year is written I believe that standing out in prominent relief will be the trade agreement made by the present leader of the opposition (Mr. Bennett), who suggested the possibility of the conference in Ottawa, at which were effected the empire trade agreements. May I add that no more important piece of legislation has been introduced, and no legislation that gave such an immediate stimulus to trade, than the trade agreements made in Ottawa in 1932. Does any hon. member suggest that the Ottawa agreements had a disastrous effect upon Canadian trade? Let us examine the figures for the year ended March 31, 1934. I am going to examine them not from the point of view of the tremendous increase in trade between [DOT] Great Britain and Canada, but in a broader sense. I want to see if that increase in trade with the British empire, and the United Kingdom in particular, had any disastrous effect upon our trade with other nations, particularly with that of the United States.
Our greatest exports go to the United Kingdom, the United States ranking second. In 1934 the value of exports to the United States was $194,443,139, and I would remind hon. members that we had that amount of trade after the trade agreements signed in Ottawa had been in effect for a year. Does that represent an increase or a decrease in trade as compared with the previous year? It represented an increase of $51,282,000 over our trade with the United States in 1933.
Did the trade agreement of 1932 have a disastrous effect on our trade relations with other countries? Not in the least. I find that we had our greatest imports from the United States, with Great Britain ranking second. From the United States we imported $238,187,000 worth of goods, representing an increase of $5,639,000 over the previous year. Nevertheless we continued to have an unfavourable trade balance of about $44,000,000. I agree with the previous speaker in his suggestion that we should not consider trying to establish a favourable trade balance with every country with which we trade. I believe that is an economic theory with which most hon, members will agree. I must emphasize the fact, however, that it is not advantageous to have an adverse trade balance with countries
as important as the United States or Great Britain, for the simple reason that our money markets are situated in both those countries, and if our unfavourable balance in actual trade is too great it adversely affects our borrowing powers in those markets, particularly when we have to add to that unfavourable balance in actual trade the amount of money we have to pay out in interest and dividends to the New York and London markets.
I notice by reference to the statistics that Canada's external trade for the year ending March 31, 1934, was slightly over one billion dollars, an increase of 14-9 per cent, and this gave us a favourable trade balance of $218,000,000 despite an unfavourable trade balance with the United States. I must emphasize, in considering the motion before the house, that as a debtor nation Canada must maintain a favourable trade balance to facilitate the payment of our international obligations. Our Prime Minister realizes that; our Minister of Finance appreciates it; all members understand it is important, and I feel that careful study should be given to every phase, of this agreement, bearing in mind our adverse trade balance with the United States at the present time and the tremendous amount of money we must of necessity pay in interest and dividends to that country.
I should like now to make reference to one particular industry that is adversely affected by this trade agreement, and I mention this one in particular because I am familiar with it and because it exemplifies many others placed in a similar position. The duty on the product of this industry, before the signing of the present agreement, came under the general tariff, with a rate of 32J per cent. Now the products of that industry have_ a protection of only 30 per cent. The British preferential was 20 per cent, which was later reduced to 15 per cent. When we take into account the rate of wages paid in Great Britain as compared with Canada, and the lower cost of fuel and raw materials in Great Britain and some other countries, the 15 per cent and the 32J per cent represent not enough protection for that particular industry. Yet part of that protection has been removed and the result is anxiety not only on the part of those financially interested but also on the part of labourers and others actively engaged in the industry. In this particular industry the wages paid in Canada are about the same as in the United States, but our raw material costs are from forty to one hundred per cent greater in Canada, and for that reason the industry feels the effect of this new tariff arrangement. Very unfortunately the government, in the short
Canada-U. S. Trade Agreement
sightedness of their policy, lowered the tariff on the finished article of this concern and forgot to lower the tariff on the raw materials entering into its product. The result is that the industry is suffering a handicap, and it cannot face any lower duty. The duty on the raw material of this particular company is exactly the same under the general as under the intermediate tariff. With your permission, Mr. Speaker, I should like to come back to a discussion of that particular phase a little later on, and to speak of another feature at the moment.
The raw materials wdiich this company purchases wherewith to make its manufactured goods come into this country, or rather they are assessed in order to prevent them from coming in, on a specific duty basis, and not on an ad valorem basis. Let me give you an example of exactly what is happening. In previous years the raw material of this concern cost $4 a ton; to-day it is selling at $2 a ton, and the specific duty has remained exactly the same. That gives those who are manufacturing this particular material a protection, not of twenty-five per cent, but of fifty per cent, with the result that the company is charging seventy cents more for the product in Canada than is being charged for the same product in the United States. They are taking advantage of the tariff because the tariff is so arranged that the duty on the raw material is on a specific rather on an ad valorem basis. I would like to pursue that subject further a little later.
_ Coming back to the first question, I ask if it is not reasonable to expect that an intermediate tariff will be lower than a general tariff. If it is not, for what reason is there an intermediate tariff? If there is a rate in the general tariff of 324 per cent, why should we find that same rate, 32J per cent, in the intermediate tariff? We extend intermediate tariff privileges to certain countries, and they think that they are enjoying a benefit, but in reality they are not. In my estimation, Mr. Speaker, there should always be a difference between the general tariff, which should be higher, and the intermediate tariff, which should be lower. Otherwise you are going to have constant recurrence of this same trouble in industry where the raw material is assessed in one way and the finished article in another, where the raw material is protected on a basis where both the general and the intermediate tariffs are the same, and the finished article is protected on the basis of a difference between the general and the intermediate tariff. It is not fair, and I hope that the Minister of Finance will give consideration to that particular point.
_ There is another point I wanted to discuss in connection with specific duties. I do not believe in specific duties. They are handy and convenient at times, but they work out into a nefarious influence in our tariff arrangements with other countries. I refer you particularly to a certain heavy chemical, the duty being three-tenths of a cent a pound under the general and intermediate tariffs. When that tariff was instituted the chemical in question sold at $2 per 100 pounds. That represented a protection of about 25 per cent. To-day that same chemical is manufactured and sold at $1 per 100 pounds, and yet the specific duty remains exactly the same. It means that the industry is protected to the extent of fifty per cent, and I contend that that is not a fair way in which to make the tariff arrangements of this country. I would advocate doing away with these specific duties and placing the greater number of them, if not all, on an ad valorem basis.
I would also like to urge upon the attention of the house the fact that, on account of the influences that have been brought to bear from time to time, the tariff has been made into an unwieldy and peculiar proposition. Certain discrepancies we know are hidden in it. Certain primary industries that are so well protected that they are getting what I consider exorbitant prices, as compared with other countries, for the article they produce, and that in turn forces a higher price on the finished article of some other industry in this country. I would urge the Minister of Finance, when he is giving consideration to this treaty, to bear in mind such points as these, with a view to lessening the evils that may otherwise be done.
The suggestion is made in connection with this treaty that it is going to cause traffic to flow from Canada to the United States and from the United States to Canada; but I would like to ask, does it actually work out that way in practice- Is there not more theory than practice in that. Let us take an example. The tariff is lowered, but is the manufacturer of a certain line of goods going to discontinue his operations because of that. No; he is going to try to meet the competition from the United States, and if necessary, he will reduce his price. Some hon. members say that is exactly what they desire, but what happens to an industry under those circumstances. The manufacturer is intent upon maintaining the same rate of profit in his business, and in order to be able to sell at a reduced rate he endeavours to increase the efficiency of his plant. In other words, if a workman has been producing fifty articles per day in the past, in order to meet this new
Canada-U. S. Trade Agreement
arrangement he must now produce fifty-two articles so that the profits of the industry may be maintained and the United States competition met. Canadian industry is going to endeavour to keep out the products of United States industry; it is going to meet the competition and there will be no flow of trade between the United States and Canada if they can help it. The only time that a flow of trade will take place will be when one of our industries is forced to the wall. Such an occurrence will be disastrous, not only to the financial interests but also to the workingmen of this country. Every time our tariff arrangements are changed, some industry is affected. If our manufacturers are to be placed in competition with the manufacturers of outside countries, they will endeavour to meet that competition; they will attempt to meet it at the expense of our workingmen. I do not think it is fair for any government to put a manufacturing concern in the position of having to meet outside competition by taking it out of the workingmen. This is what will happen, and every hon. member realizes it.
American industry has three prices, commonly referred to as the l.c.I. price, the c.I. price, and the quantity or preferred price. If I am a small purchaser in the United States I am quoted the l.c.I. price; if I am a large purchaser I am quoted the c.I. price, but if I am an exceptionally large purchaser and happen to be in that preferred class, I get a still better price. When the American manufacturer enters into competition in a foreign market, does he quote the first price? No. Does he quote the second price? No. He quotes the third or preferred price. I maintain that industry in this country is being placed in an unfair position when it has to meet the lowest possible price American industry can quote. That is not fair or reasonable competition and we should not expect Canadian industry to have to meet it. We must realize that the finished product of one industry becomes the raw material of another. Once we begin to meddle with tariffs in the way suggested by the resolution now before this house, there will be a disastrous effect upon business. That effect will be felt in financial circles and also in the homes of the labouring class.
The Prime Minister (Mr. Mackenzie King) has suggested that "night will follow day." If he gives full effect to this treaty so soon after coming into office I am afraid that "night will follow day," not only in the industrial and commercial world but also as far as the Liberal government is concerned. What did the Liberal government do from 1921 to 1930 when they were faced' with the effects of the
Fordney-McCumber and the Hawley-Smoot tariffs. In his address to this house the Prime Minister suggested that the Liberals had done a great deal, but he gave us no example. I do not know whether the rules of the house make it necessary to accept a statement of that kind as bona fide, but I know in ordinary business such a statement would have to be followed up by one or more concrete examples before full effect would be given to it.
The Minister of Mines (Mr. Crerar) was loud in his applause the other evening when an hon. member mentioned his gratification at the clause giving S100 exemption to tourists.
I invite him or any other member of the government to go before any meeting of boot and shoe retailers or any other retail organization in this country to see if he can get the same volume of applause as he gave to the hon. member. I am not playing politics when .1 say that this provision is going to have a serious effect upon certain Canadian businesses. The business life in many of our cities and towns will be affected, and I urge the government to give very careful consideration to this provision. In the interests of the many small businesses that have been built up through the years, the government should be very careful in defining what is meant by a tourist. If this is not done, many businesses in the towns and cities not too far from the border will have to close.
In conclusion, I should like to make one further plea. It is that in the future the tariff should not be considered as a political football. Whenever a change is made in the tariff, no matter how small, a ripple of discontent and fear runs through the industrial life of this country. Tariffs should be removed from the field of politics. A competent commission should be appointed, a commission composed of real experts. With due respect to the Minister of Labour (Mr. Rogers), I contend that these experts should not be all from our universities; some of them should be men of practical experience who know how to handle this intricate problem. Such a commission should be free from political influences and be able to remodel and revise our tariff system so that the discrepancies I mentioned in the early part of my address will disappear entirely and the business men of this country may have absolute faith in any government that may be in office. I do not agree with my hon. friends to my extreme left when they say that the Liberals and Conservatives have again been riding their "old hobby horses."
Canada-V. S. Trade Agreement
Topic: CANADA-UNITED STATES TRADE AGREEMENT PROPOSED APPROVAL SUBJECT TO LEGISLATION MAKING PROVISIONS EFFECTIVE