June 2, 1921

UNION

John Allister Currie

Unionist

Mr. CURRIE:

I simply ask your ruling if it is in accordance with parliamentary usage for an hon. gentleman in this House to rise in his place and state that a minister of the Crown is like a Dick Turpin.

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UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

I agree that that

would be out of order. I think the Minister of Finance, who is most concerned about this, would know that I did not intend any discourtesy to him. I was really paying him a compliment. I was saying that, as regards what he was doing in this matter, he would at all events have admiration for the boldness with which he proposed it. While we might credit my hon. friend with some boldness in the matter, what shall we say when we find him doing precisely the same thing, I will not say in a backhanded way-that was an expression of the member for Simieoe-but in a roundabout way; I will niot say, with intention to deceive, because that might be unparliamentary? Let us see what the situation is. By this resolution we are practically increasing the duty on the products of some countries now having a duty of 30 of 35 per cent to 70, 80, and 90 per cent, and really in the case of Germany we are going to impose duties of 200 per cent.

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UNION
UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

My hon. friend says "Hear, hear." I am not anxious that anybody shall trade with Germany. I do not want to buy any German goods. If I know it, I will not buy any for a long time. If you and I and the thousands of others who feel as we do are unwilling to buy German goods at any price, that is our individual right; that is the penalty which Germany must pay for her crimes against civilization. But, as a dominion or as a nation, if my hon. friends prefer that term, we have no right to legislate against Germany. We have made our peace with Germany. Rather needlessly, as I think,

we have laid our treaty with Germany on this Table; we have sealed it with our own declaration; we have set forth in that Treaty of Peace the reparation that she must make. We have magnified it, some think, although others think otherwise. It is a contract and if we, as a nation, attempt to legislate against Germany, then we are treating our own treaty as a scrap of paper; we are doing the thing that we have denounced Germany for doing. While individually we have a right to do as we like with Germany, as a nation we have made our bargain, and as long as she complies with the terms of the treaty, we are bound to treat her decently and in order. What are we going to dio? By this provision you are giving a false value to goods of a foreign country, you are actually increasing the duty in the case of German goods to 210 per cent. The thing is so amazing that hon. gentlemen opposite will think that I cannot be right, that I must be mistaken. What is the position? The German mark is worth 23 cents ordinarily. I have taken my figures from the Trade and Commerce Bulletin, and a few days ago the German mark was worth 1.88 cents, or a little less than 2 cents. You are going to say, by the terms of this clause, that when any goods come in from Germany bought on the basis of the mark being worth 2 cents or a little leiss, for customs purposes the mark ils worth lli cents, because you cannot make the valuation at anything less than. 50 per cent. That is to say, when the German mark is really worth 2 cents or a little less to-day, for customs purposes you are going to say that it is worth lli cents. You are multiplying the valuation of those goods by five times and under the duties imposed you are nutting a tax pf 210 per cent on German goods. My hon. friends opposite on reflection must be startled at that. I was startled at the ifirst thought of it, but these figures are absolutely beyond question. It is an economic law that when the currency of a country becomes depreciated, the price of articles in that country ascends proportionately, so that the purchasing power is not materially changed. After all, the world's gold standard fixes the value of things, and the world's gold standard has fixed the value of the German mark, which is now worth less than 2 cents. If I send $100 to Germany to buy goods that money is no good in Germany; it has to be converted into German money before I can buy anything. I convert it into

German currency at current rates, but it is quite certain that I get only $100 worth of goods. But when those goods are brought to Canada, I am to be told that that is not the whole value, but it is to be multiplied five times. It is marvellous that hon. gentlemen opposite should present such a project to this country. I do not see how they can justify it for a single moment. The fact that Germany was an enemy country serves no good purpose in the world in argument. We have made our peace with Germany, and we are bound to treat her decently so long as she keeps her part of the contract.

We need not confine the argument to Germany, which is the worst case. We have lent some money to Roumania, and some people think that we are not going to get it back. It is one of the principles of economy that you do not get payment in gold, but in goods. How are we going to do business with Roumania under those conditions? The Roumania lei, as they call it, is ordinarily worth 19 cents; it is now worth about 1.90 cents. 50 per cent of the ordinary value would be 9| cents. Therefore, if you buy any goods from Roumania,-I do not imagine that you will have much chance to buy them-you are going to have the real value of those goods multiplied about five times. You are going to say that, where-as the real value is 2 cents, you are going to call it 9i cents, which is very nearly multiplying the value by five.

Take if you will the case of Italy, which is not an enemy country, which was one of our allies and associates in the war. Italy is surely entitled to decent treatment. What is the situation there? The Italian lira is usually worth 19 cents; it is now worth 6 cents, but you are going to declare, by this legislation, that in every transaction with Italy, whereas the real value is 6 cents, you are going to call it 9i cents. You might just as well multiply the duties openly and squarely, because there is no question in the world that under this fictitious valuation that you are quoting here, you are making an enormous increase in the customs duty. What my hon friend from Qu'Appelle (Mr. Thomson) said a few moments ago is only too true: You are making enormous increases in the duties, not in a straight and open, manner, but under cover, and that is a very modest expression to use. I cannot imagine that hon. gentlemen supporting the Government realise the immense increases made by these proposals. This cannot be justified. It is not decent treatment in the case of Germany; it is worse treatment in the

case of Italy, and it is not fair treatment to the consumers of Canada who will have to pay an enormous and unjustifiable rate of taxation.

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

I admit at once that this is a matter of great difficulty. It is not a matter that can he got rid of by a few general observations. It is one which I think so far nobody has been able properly to solve. It is a matter with which England herself is having a great deal of trouble, as well as France, and one in which Italy is also deeply interested. My hon. friend from Shelburne and Queen's (Mr. Fielding) says that it is not fair to France. I wonder if it is not fair to England, I wonder if it is not fair to Italy, that one chief source of competition to which these countries are subject is placed under a heavier handicap. But, after all, this is not a question to be got rid of by general declaration I have answered my hon. friend in kind, and I will now try to get down to what the proper economic considerations ought to he.

In the first place, let me point out that I think it is pretty generally understood by any hon. gentleman who has taken the trouble to look into it, that Germany's policy has been steadily in one direction, that policy being to get out of the payment of her reparations in any way that she well can. Her policy has been to show that Germany, a country practically untouched by the war, without a single factory destroyed, with her territory just as good as it was before, is nevertheless in such a position that she cannot carry on. She is certainly taxing her people in such a way as to produce very large deficits. In that regard she is doing everything she can to show that her position is the position she would have us think it to be. In that connection I desire to quote from my hon. friend's paper, the Journal of Commerce, with reference to a matter that enters very largely into the cost of manufacture, and that is the question of taxation. Germany, as shown by his paper, and as shown perfectly correctly, the figures being taken from the statistics collected by the International Financial Conference, is taxing her people at the rate of $12.50 per head, France at the rate of $34.60 per head and the United Kingdom, $87.90 per head, while our rate of taxation in Canada works out at the rate of practically $50 per head. In other words, in so far as the cost of carrying on business in Canada is concerned, the added burden and expense on the Canadian producer or

manufacturer from taxation is four times as great as that burden of taxation in Germany. I quote again from my hon. friend's paper:

The profits of the German nation look to he inverse proportion to the burden of taxation and cost to which they are now subject.

The paper goes on to show that the savings bank deposits of Germany increased by 6,500,000,000 marks in 1918, by 4,500,000,000 marks in 1918-1919, and by 6,259,000,000 marks in 1920. The paper goes on to show extravagance and the expenditure of large amounts of money, and generally a pretty good condition in Germany.

The next thing to know is whether there is the same value in Germany for the mark as the value established by that gold standard which my hon. friend says gives the true test of value; in other words, it is to ascertain whether the mark is the mark. I wish to quote in that connection from the London Statist, which in its issue of April 30 says:

To take the example of the German mark. Partly on account of the chaotic condition of German finances, rendering the real value of the mark peculiarly unstable, and partly perhaps as a result of a deliberate policy on the part of German financial and business interests, the purchasing power of the mark in the foreign exchange market is considerable less than is warranted by its commodity value in Germany itself. '

That view is one that has been adopted in more countries than in England. Leading authorities in the United States have come to the same conclusion, mainly, that so far as Germany's policy at the present time is concerned-and she is right, she is playing her game-it is to sell just as much as she possibly can. She is out to sell far more than she buys, and she is right. She realizes just the same as any man with any knowledge of finance realizes that in order to solve successfully her problems and meet foreign competition a low and debased currency is a very good thing. That is what she is doing, and I wonder how it is working out. I have not said anything yet as to Canadian conditions, but the matter is a good deal wider and broader than Canada considered by itself. The London Financial Times of May 12, 1921, contains an interview with Mr. Hichens, chairman of the large firm of Cammell, Laird and Company, whose name is very familiar to many hon. gentlemen in this House, in which he says :

I am a manufacturer of goods and am seeking foreign markets. If I can compete with my trade rivals I get the business. If I cannot, I do not. That is the position in a nutshell.

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L LIB

Lucien Cannon

Laurier Liberal

Mr. CANNON:

Mr. Chairman, I do not wish to interrupt the minister, but I rise to a point of order. I understand that we are supposed to prorogue on Saturday-

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UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

No.

Mr. CANNON -and if the minister would just lay this paper on the Table of the House so that members would have cognizance of it he would save time.

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

I am nearly

finished.

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PRO

Michael Clark

Progressive

Mr. CLARK (Red Deer) :

I think I can make a better suggestion than that: That the Minister of Customs should give us an exposition of what the Minister of Finance means.

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

In the meantime I will try to get along. I think the hon. member for Red Deer has got a pretty good idea of where I am drifting to.

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L LIB
CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

One of the

difficulties in arriving at what the local value of the mark is pretty well shown by Secretary Hoover of the United States Administration. He says, emphasizing the amount of indirect subsidies biting granted by the German Government:

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REVISED EDITION. COMMONS


An analysis showed its expenditure would indicate roughly that of a total budget in excess ot 80 billion marks somewhere between 50 billion and 60 billion marks are spent through relieving German manufacturers, railroads and public utilities, etc., of costs that would normally apply. The German Government even goes to the extent of importing a large amount of food supplies and re-selling them at a loss to the consumers. The fact is that we have come to the opinion, rightly or wrongly, that there is a difference in the value of these coinages, and a situation under which Germany is in position of toeing able, in certain businesses at any rate, to undersell alt will. Now, through the courtesy of a gentleman on the other side of the House, some inside information was given to me very largely corroboratory of the public information which I had been able to get. What the onlooker and the investigator, endorsed by one of the gentlemen on the other side of the House, says is this,-and I may say he was there for a long time looking into conditions, and was good enough to think the matter of sufficient importance to bring it to my notice- German exporters have a policy under which they are represented in foreign countries by special agents. This is one of the ways in which the mark is kept up. These agents are informed of the lowest possible cost price at which they are to send in orders. They are then instructed to sell at the highest possible price, but under prices of competitors, sending in their orders to the German factories at the cost price, plus ten per cent, which is all the German manufacturer shows as profit. The manufacturer then divides with the agent all the excess profit over ten per cent, and the agent is generally instructed to deposit this surplus profit in a foreign bank, in many cases under a fictitious name or account to the German manufacturers' credit. This results in keeping down German manufacturers' taxation and also has an adverse effect on the exchange situation. It is evident that the Germans are not very anxious to see the present exchange situation right itself as the people are at present willing to exist on available materials in order to help their employment situation and to do everything possible in this way to hurt the interests of Allied countries.


L LIB

Lucien Cannon

Laurier Liberal

Mr. CANNON:

While the minister has this statement before him, may I inquire if it was prepared prior to the decision of the reparation commission or afterwards?

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

This statement was prepared shortly before the Budget was brought down.

Deposits are often made in Scotch banks.

One particular dye was sold at 300 marks, another grade of the same dye was sold at 700 marks, and the selling price in the United States of the *700 mark grade was $55 a pound. On this basis the Germans are also selling acetic

acid in England and other European countries at fifty per cent of the cost of production in the United States and Canada. Germany are giving entries for export for chemical dyes under names of printers' ink colours so as to avoid the reparation committee. In such industries as the Germans have tlje necessary equipment and are unable to purchase raw material owing to the exchange situation, the German Government issues-*

That goes off on the question of handling raw materials, in which I do not suppose the committee is interested. On the question of cost though, this gentleman got toys which sold there for 40 and 60 marks; they are worth here $5 and $10. Binoculars he could get there for 200 marks, as against $20 and $25 here. He also stated that the wage scale was 45 to 60 marks a week, and that it now ranges from 190 to 250 marks a week.

Now, we believe the result to be, following the ideas of the same authorities, that there are two standards of value for the mark; that is, in Germany, measured in the value of the mark on the exchange rate, there have been large decreases in wages as against very large increases in this country, and that at the moment at any rate-and I think at much longer than for the moment-while undoubtedly it is in the interest of everybody to help the other fellow we have got a very vital interest in trying to keep things going in this country. There is in Canada, for example, an industry making gloves, the German selling costs of which are about five-eights the actual cost of the Canadian manufactory. There are 1,065 people employed. I think already I have given the committee information as to the toy businesses which are closed, I think, altogether. Now the Germans in the past have not been exporting very largely into 'Canada, but they are now commencing, and there are quite a large number of invoices coming into the customs, covering chiefly laces and trimming, dolls, toys, toilet preparations, musical instruments, optical instruments, magic lanterns, clocks, cutlery, enamel ware, aluminum ware, china-ware and other ware. Unless something is done there is no doubt what is going to happen in connection with unemployment. Well, there is the situation: keep up the value of the mark as it is, allow free entry of German goods, and with the present German rate of taxation as compared with the rate in this country it will not be long before hon. gentlemen will be asking who won the war.

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L LIB

Frank S. Cahill

Laurier Liberal

Mr. CAHILL:

Is it the intention of the Government that the cost in Canada shall

be the test of the cost of production of the goods?

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CON

Henry Lumley Drayton (Secretary of State of Canada; Minister of Finance and Receiver General)

Conservative (1867-1942)

Sir HENRY DRAYTON:

I do not think there is any such proposal.

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UNION

Fred Langdon Davis

Unionist

Mr. DAVIS:

the raw material is obtained in their own country. Therefore, we have nothing to fear from them in textiles, because, in the main, as regards the textiles from which they make their goods, they have to get their raw materials from abroad. When the Minister of Finance spoke of the way in which Germany had been cutting the cost in iron, these very words happened to be under my eye. I am quoting now from the Mining Journal of April 2:

The Germans appear to be afraid particularly of competition on the part of the Belgian works whose prices for iron and steel goods are lower than the Germans and they say the Belgians can beat them in price owing to the modernization of the Belgian plants which the Germans carried through when in Belgium, and which are now in a greater state of efficiency than the Rhenish-Westphalian works.

That does not "gibe" at all with what the Finance Minister told us as to the condition. At present, as has been said again and again to-night, trade conditions are so disturbed that you do not know where you are going to get hit next. For instance, the other day on the Pacific coast Chinese pig iron was offered at better prices than those at which the great United States Steel Corporation could produce it. How are you going to meet conditions like that by such, I am tempted to say, a "fool" regulation as is here proposed?

As regards wages, the Minister of finance said that wages were $100 a week ,in those trades in Germany. This is a ^Mining Journal which makes a survey of ,those lines, and it is worth while looking at the range of wages which are given for some twelve or fifteen different classes of .employees in connection with the 'production of metal. Drillers get from 247 ;to 980 marks per week, and this, I should Say, was in February, 1920. Since then conditions have changed adversely to Germany. No country can long, unless it lives within itself, keep its currency abroad at a different value from what its currency is at home. If I take just the instance which I have now given of the fact that when she has to buy abroad, she has to pay more for her goods, that comes back home, and it at once increases the cost of the goods at home. As that currency works back into her system, her whole costs abroad and at home work to one level. I am using Germany, because Germany is the outstanding example of this. God knows that I have no love for Germany, but we are discussing here questions which affect our relations, not with Germany alone, but with the whole world, and

as Germany is the outstanding example, I am taking her case because it best illustrates the problem. Turners are getting from 318 to 993 marks; iron moulders from 308 to 1,117 marks; brass moulders from 403 to 1,050 marks. Let us go to some of the cheaper kinds of labour. Helpers are getting from 205 to 961 marks. Blast furnace and smelter men are getting from 483 to 1,514 marks. The whole list is here if any one wishes to look at it in order to see whether I have made fair quotations from it or not. These are grades of wages which do not bear out at all what the Minister of Finance is saying about wages being very much lower there than they are with us. Indeed, it is quite possible that Germany, during the time when this question of reparations has been outstanding, has taken every advantage she can. That is the way in which she has been working in national affairs. We have suffered from this before, and in all probability she was doing the same at this time. But even Germany, devilish as she may be, is unable to control economic forces once she has set them at work, and' they are working here to a parity. Eventually, the currency which she has sold abroad in the shape of a demand loan will come back into her own circulation and will bring her prices to one level, and in that case, we are going to try to deal with a passing phase of the business. The same thing has been done in slighter measure by Italy; but there again the same forces are at work and will bring things at length to the same position. In consequence, if we want to trade, we must deal fairly with their conditions. There is no use whatever in putting such a difference in the value of their money as we are here trying to do because, in the long run, it can be beaten by buying through other countries, either under free trade or with smaller duties, and, in the end, these conditions will correct themselves.

Furthermore, what is our duty to-day? There are broad views to take upon this question. We stand to-day a favoured people, possibly 9,000,000 people in one of the world's great empty spaces. These people have suffered from the war even more than we did. They are looking for outlets, for better conditions, even as we' are, and yet with our immigration policy we are restricting them; we are denying them admission; we have almost to deny them for the preservation of our own ideals and the Canadian character of this state which we hope to preserve. Yet we

will go abroad and offend these people in every possible way. We will say: "Although we are better placed than you, go to destruction if you will; it is true that we fought with you as brother to brother, but now there is a dollar in sight, that is all we want." The consequence will be this, that we will gain the ill-will of these people. It is not merely for this day that these things count in connection with the policy of nations.

I take it that one of the ways in which we can now assist is out of the abundance of what we have got to endeavour to help them to make their conditions better. In saying that, understand, I am not appealing at all to generosity, I am trying to combat what is narrow-mindedness. It is not that we should part with it because they need it, but because we should take a broad generous view-the view that in the end will work profit to our own pockets in the matter of trade, besides having a valuable effect upon a world that talks a League of Nations but acts like a disunion of nations.

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PRO

Michael Clark

Progressive

Mr. CLARK (Red Deer) :

I hope I shall delay the committee only a few minutes while I point out to my mind what is the meaning of this clause and how it will act in a few places which have no been covered by previous speakers. I very much fear that the Goverment are taking up propositions without the knowledge that similar propositions have been taken up elsewhere and have already been given up. My hon. friend who has just spoken (Mr. Davis) has referred to the Reparations Act in Britain. Now for purposes of comparison with this proposal, it may be said that the Reparations Act amounted to the creation of a customs duty of 100 per cent against German goods. What was the result of that Act, which has led according to my hon. friend's statement to its being given up? The British people have had to run away with it. There are protectionists in the present Government in Great Britain, and they enacted this legislation along the line, not of protection, but of getting reparation. The consequence of that 100 per cent tariff was that the British ports were crammed with German goods, which the importers could not relieve, that Germany retaliated on Britain, and that commercial, confusion resulted between the two nations, leading the protectionists to desert the measure which they themselves had enacted at the dictation of the Prime Minister himself. Now this Act before us is a much worse Act in regard to the size of

duties it enacts. Fortunately our trade is much smaller, or we should be at once faced with comparative national disaster as a consequence of this measure that the Government are proposing. I say, fortunately our trade is smaller. All the nations affected by this provision do a comparatively small trade with us, so we shall not be hurt nationally to the extent which we should otherwise. But that is what has happened in Britain from similar legislation.

My hon. friend from Shelburne and Queen's (Mr. Fielding) has pointed out that this means a 210 per cent tariff against Germany, and similarly large tariffs against other countries. Well, that is a prohibitive tariff. Hon. gentlemen in the ministry and their supporters fondly think that even a prohibitive tariff against these places will increase our production at home. It will do nothing of the sort. What is going to happen to the production of our goods which previously have been paid for by goods that we got from Germany and Roumania? Clearly these goods will not be produced, and to the extent that we have done trade with these countries we are prohibiting that trade by an arrangement of this kind. We shall diminish the total industry of our own country, add to unemployment, add to the general conditions of distress-and I want to say in the calmest way that I have the gravest fears regarding our next winter in this country. I want to tell the Government that they are doing what they can by their tariff enactments to aggravate conditions in this country next winter.

Now, I would just like to put one or two questions to the Government, if I might. Suppose every country followed the course of putting on a prohibitive tariff against Germany. I should just like to ask how Germany could pay her reparations? They could not be paid, and ther'e is the unreasonableness of this legislation. If all the countries that trade with Germany put on a prohibitive tariff, then no reparation whatsoever could be paid, because in the end that reparation comes in goods. It seems to me it is the height of unreason to place a prohibitive tariff against the country from which you must take goods, if that country is to carry out another part of your arrangement with her.

I wish to put another question to the Government, which comes a great deal nearer to them and their policies. They are by this proposal putting on a prohibitive tariff against Roumanian goods. How do they propose to get the money r'eturned

which they have advanced to Roumania under their credit system?

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June 2, 1921