June 8, 1922

PRO

Thomas Alexander Crerar

Progressive

Mr. CRERAR:

If I may he permitted, I would suggest that the debate proceed this afternoon, and possibly an understanding might be reached at eight o'clock to-night. If the debate is to go on tomorrow, then I am quite willing to support the suggestion made by the Prime Minister that the other business be taken up and a division be taken later.

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IND

William Findlay Maclean

Independent Conservative

Mr. MACLEAN (York) :

When-this

week, or next week?

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?

An hon. MEMBER:

Next month.

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THE BUDGET

CONTINUATION OP THE DEBATE ON THE ANNUAL FINANCIAL STATEMENT OP THE MINISTER OF FINANCE


The House resumed from Wednesday, June 7, the debate on the motion of Hon. W. S. Fielding (Minister of Finance) that Mr. Speaker do now leave the Chair for the House to go into Committee of Ways and Means, and the proposed amendment thereto of Hon. Sir Henry Drayton.


CON

Henry Herbert Stevens

Conservative (1867-1942)

Hon. H. H. STEVENS (Vancouver Centre) :

Mr. Speaker, the occasion of the presentation of the annual budget to Parliament by the Minister of Finance (Mr. Fielding) is always one of great interest not only to hon. members of the House but to the business concerns of the country and to the people at large. This is more particularly the case upon the coming into office of a new Igovernment, especially, Sir, when the attainment of office has been preceded by indications and suggestions and statements that the public might expect some very important changes in the fiscal policy of the country. So that on this occasion, I say, the pronouncement of the Minister of Finance was followed with great interest by hon. members and with great keenness by the people generally.

I am forced to state this to my hon. friend the Minister of Finance: that his

utterances in connection with the budget, having reference more particularly to amendments to the tariff, will, I believe, tend at least to allay any alarm which may have been felt by the manufacturing interests who would have been seriously affected by the carrying out of any such radical changes as were indicated in the platform upon which he and his colleagues attained office. On the other hand, there are some things in the budget to which I feel it is my duty to offer very serious and pronounced objection. As a matter of fact, there is one particular item in the budget to which I intend to give special attention this afternoon, and which I shall come to in a moment, but first I would like to refer to one or two other matters.

There is the question of the stamp tax on cheques. I do not wish to labour this, I merely wish to say one or two things just in a general way. In the first place, I would point out to the House that the issuance of cheques has become a very important part of accountancy in the carrying on of business. It is a system of record more than a system for the payment of funds. In this regard the tax which my hon-friend proposes will, I think, very seriously interfere with the method of doing business to-day as it has grown out of the experience of recent years. I might give one illustration. Many firms, and particularly the best organized firms, attach a voucher to the cheque, which becomes a legal receipt for the transaction it covers.

Topic:   THE BUDGET
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LIB

Hewitt Bostock (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. I would ask

hon. members on both sides of the House not to conduct private conversations in the Chamber. It is not conductive to the decorum of the House, and furthermore, it is not fair to the speaker who is addressing the House.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I thank you, Mr. Speaker. I quite appreciate that the hot weather and the prolonged debate make it perhaps somewhat unpopular for one to be on his feet. However, without desiring to be vain, I think I have something to say which may contribute in a small measure to the debate.

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LIB

Hewitt Bostock (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Conversation may

also be coming from the lobbies. For the last two or three days we have been obliged to keep the doors leading to the lobbies open, in order to ventilate the

The Budget-Mr. Stevens

Chamber and prevent it becoming too stuffy. I will ask the Sergeant-at-arms to see that no conversation from the lobbies reaches the Chamber during the debate.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I will simply add that I shall try and be as brief as I think the importance of the subject will permit. Many firms, I say, have adopted this system of attaching a voucher to the cheque. It has therefore become a very important part of the system of keeping accounts, and I submit to the Minister of Finance that the cheque tax he now proposes is too onerous, and will seriously interfere with the legitimate and proper carrying on of business.

The tax on confectionery I consider to be of a discriminatory character and on that ground I object to it. I am not objecting to a tax on confectionery as part of a general tax upon other things, such as the sales tax, for instance, but to single out confectionery and put a tax on it seems to be unfair. However, we will discuss that further in committee. Now I merely cite these things and express my general objection.

There are three clauses repealed by this budget to which I wish to make special reference. One of those clauses is what is known as the anti-dumping clause. This was a clause passed, I think, last year, and I would call my hon. friend's attention to the fact that it was a clause passed merely to give proper effect to his own doctrine, in the anti-dumping clause of 1907, in his own tariff of that time. In 1907 an anti-dumping clause was included in the Customs Act. It is a good clause; it has been accepted as a sound doctrine, but it was found that certain commodities were of such a character that it was possible to evade the terms of that clause, and this practice grew up during the years. One of the articles to which I make particular reference is fruit, another is vegetables. The principle underlying the original anti-dumping clause is, that goods shall not be shipped into Canada and entered for duty at a valuation less than a fair selling price in the country of origin. But there are some goods the fair selling price of which in the country of origin it is difficult to ascertain. The price of fruit, for instance, fluctuates from day to day, and fluctuates very seriously. Local markets such as Buffalo, Seattle, New York, and others along the American line, might have a glut of fruit on one particular

day or in a certain week and be anxious to get rid of a surplus. Now, a fair market value on a day when the market is glutted would not be a fair market value on normal occasions. So, last year, another clause was inserted which provided in general terms that instead of taking the fair market value in the country of origin it was possible also to apply this principle, namely, the cost of production in the country of origin. In other words the two were interchangeable; either was optional. I may not be giving it exactly right, but I think the main principle I am giving is sound. We appeal to my hon. friend the Minister of Finance not to repeal that clause, or if he does, to amend his own original clause, of his own drafting-the idea originated with him, I believe-so that there cannot be the evasions which have occurred during recent years. If he will do that, it will be satisfactory, but if he merely repeals the anti-dumping clause as he stated in his budget speech he would do, I wish to say to him now that it will work very serious hardship,-no, not hardship, but ruin. My hon. friend smiles. He would not smile if he realized that it takes from ten to fifteen years to make an orchard a producing thing, something that will give a return. It is not at all comparable to a piece of land which can be ploughed in the spring and cropped in the fall. The investment in an orchard is heavy and the period of time the grower must wait is long, and there are many things entering into the business which are intricate, difficult, expensive. So I say to my hon. friend that it should be his object to safeguard an industry of that kind against utterly unfair competition.

Now I turn to what is to my mind the most important proposal in this budget, and that is the repeal of the Marking Act and the repeal of the Depreciated Currency clause of last year. The two go together.

I am not going to spend very much time on the repeal of the Marking Act. I think it is unwise to repeal it. I admit frankly that in the working out of that act the department officials have run up against difficulties; there is no question about that, but it was the duty of the government, of the old government and of this Government, to seek to overcome those difficulties, and not simply, because difficulties were met, to toss the whole thing overboard and say, "We will not bother our

The Budget-Mr. Stevens

heads any more about it." The main difficulties, I think, could quite readily have been overcome. There are many articles that you cannot mark without great inconvenience and difficulty. There are certain citizens who object to the marking of goods. Who are they? The importer, the merchant, the jobber, the wholesaler, and men of that kind. And no criticism is to be offered because they object to it; their business is simply to deal in the transfer of goods, they have no direct interest, for instance, in the manufacturing of goods; they do not feel the competition with the local market; their gain lies simply in the interchange of goods between different buyers. May I refer to that class of business-'and I do it with all respect because I am in this business slightly myself-the brokerage business. In regard to that class there is very little capital investment, comparatively speaking, as against the amount invested by, for instance, manufacturers. The manufacturer is keenly interested, very keenly interested, in the competition that he meets with from foreign countries. I shall, in a moment, refer to the unfairness of the competition; but I am not doing that just at present. Now then, in order to overcome (that we passed last year what is known as the Markings Act, calling for the country of origin to be marked upon the goods which were imported. Now, I want to say that while a power by Order in Council to continue that is provided, I think that to carry out the doctrine which my right hon. friend the Prime Minister so often insinuates, that power should be in the act-it should 'be a statute rather than an Order in Council. What I think my hon. friend should do is to address himself-or the officials of the department and the Department of Customs should do so-to the task of meeting the difficulties which have arisen by experience in the application of the Act, rather than that the Government should take the obscure and rather nebulous power to themselves and say what shall or shall not be marked. There is a decided objection to the proposal now before the House. I do not wish to say this in any spirit of recrimination at all, but there is this objection: That it gives into the hands of the minister-or, referring further back, into the bands of the officials who advise the minister-the power which I do not think parliament should give, namely, of saying with respect to this class of goods that it shall be marked, and regarding . another

class of goods that it shall not be marked. Therefore, I say it would be far better to maintain the Act as passed last year, amending it if necessary in the light of the experience of the year, and seeking to overcome the difficulties that have arisen.

Now, I come to the next point, and that is the depreciated currency clause passed in amendment to the Customs Act last year. It is not necessary for me to go into the details of what it was ; it was in effect pimply this: That in any country where the currency had depreciated below a point of fifty per cent of par, the valuation for duty purposes upon goods imported from that country should be figured at a rate not less than fifty per cent of par. Now, I am going to deal directly with the German situation, because unquestionably that is where this clause applies most extensively, although, Sir, I would pause to say this: The idea must not be too readily accepted that the Germans, or the German people, are the only ones against whom this is directed, or who would be affected. Now let me review-and I confess, Sir, that it is fairly complicated and perhaps dry and uninteresting on an occasion of this kind, but to me it is the crux of this whole budget, it is the most fatal thing in the budget, and I believe once fully realized by the House will make members pause before allowing it to pass into law-let me review briefly the situation as it is regarding Germany. Germany plunged this world into war. That is the first point I wish to lay down. Germany was defeated. Immediately after the defeat of Germany she began to scheme- and I do not blame her for doing it-'how she could evade paying reparation and to seize the fruits of victory which properly belonged to those who had defeated her.

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LIB

Charles Marcil

Liberal

Mr. MARCIL (Bonaventure) :

She has succeeded, too. .

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

She has succeeded, too, my hon. friend from Bonaventure says, and I will demonstrate that in a few moments. I make this statement, and I think advisedly, in the face of contradiction by eminent authorities, that she encouraged, actually encouraged, the depreciation of her own currency, and that I think I can demonstrate in a moment. As a matter of fact she was immune during the war;-I want the House to remember this-Germany was immune during the war, and she suffered no destruction, physical destruction, of her machinery, her factories, her plants, and so forth; as a matter of fact, her industrial life was stimulated. But

The Budget-Mr. Stevens

France and Belgium had hundreds of thousands of square miles of territory, and thousands of villages and towns, devastated; and hundreds of thousands-yes, I guess millions-of workmen thrown out of employment because of the absolute destruction of their implements of production- their factories,-their machines, and so forth-and their mines. Now France suffered that; keep that in mind. Since the war Germany has developed during the last two years-in particular in the industrial and in the commercial realm. She has contributed very, very little to the reparation of France and Belgium

she has contributed a little, but very little-and in the meantime France is bearing a terrific burden. Now, I knew that sometimes we think that France is actuated by passion, and revenge and resentment; but let us look at the simple facts. Here is a territory devastated and not yet renewed, belonging to those who resisted and conquered. On the other hand, here is a territory stimulated into greater activity than ever, the territory of a people who caused the war and who were defeated. It is an anomalous position that I do not think any logic can justify. Now, that is not all. If you look over the press from day to day, you will find that the great German capitalists, particularly that eminent gentleman Hugo Stinnes, are displaying remarkable activity. Stinnes is in Mexico, and his agents are in Russia, and all over the world. Doing what? Seeking trade, some one will say. That is true;-not only seeking trade but seeking the investment of German capital in foreign investments; seeking to invest German capital in Mexico, in Moscow, and in various parts of the world. Is not the situation monstrous? Germany protesting to the world at large that she cannot afford to pay any reparation to France, and at the same time sending millions upon millions of dollars in value out of the country for foreign investment?

Now I wish to go into the matter in a more statistical form-

Mr. BROWN Before you pass from that point-the difference between Germany and France as regards physical suffering. Do you regard that as an essential factor in the discussion cf the problem? For we must remember that some of the allied countries did not suffer any more than Germany.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I consider it as a very vital factor; not the whole basis of my

argument, as my bon. friend will see in a moment, but I say it is a situation that is utterly illogical, and I say this further: That we-who are after all participating in these conferences, who have our representative over there at the present time, I do not think he has yet returned-as a parliament ought to express ourselves in regard to this matter, ought to express ourselves, I think, more in sympathy with the French view than the German view at this time. Let me engage the attention of the House, if I dare do so, by some statistics. I do this for the purpose of laying a firm foundation for my subsequent argument. Germany has a deficit loudly talked about daily. There is not a day passes but what one sees, when he picks up the press, the discussion going on in Europe; and this question of the deficit that Germany is constantly faced with and her inability to meet the reparation claims is seized upon by many, for some reason or other, as an excuse why we should not press Germany for reparation. Now I propose looking briefly into that situation. Germany's budget deficits are caused by certain things. They are caused first by subsidies paid by Germany to industries within her own boundaries, and for wheat in particular; they are caused by themselves artificially keeping down the cost of living which I shall prove in a moment, definitely I think; they are caused by the issue of paper currency. During the last three years Germany has encouraged the creation of deficits by these methods I have mentioned. At the end of the year she made good that deficit by putting out another issue of paper currency, with the result that her gold mark, originally worth 23.8 cents, declined, and continually declined until to-day, it is worth about a third of a cent. These are facts I wish the House to remember. During last fall Great Britain had unemployment to the extent of 2,000,000 people, the United States 5,000,000, Canada 200,000. Germany had 150,000, which was below normal for Germany. Germany, with a population of 60,000,000, had only 150,000 to 200,000 unemployed, stated by their economists to be lower than normal; Canada with 8,000,000 people, had 200,000 and over unemployed. Now, we take another step. I want to make a comparison between 1913 and 1921, in order that the House may realize the situation in Germany and the political thesis of her position. In 1913 Germany had an adverse trade balance of 700,000,000 gold marks.

The Budget-Mr. Stevens

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LIB

Alexander Kenneth Maclean

Liberal

Mr. MACLEAN (Halifax) :

Can the hon. member give the exports of Germany for the period prior to the war, and the exports in the recent two years?

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I can give my hon. friend some of the information asked for, but I am not quite certain that I can give it all. I think, however, that my argument will answer the question. In 1913 Germany had an adverse trade balance of

700.000. 000 gold marks. That looked serious, but it was not a serious thing at all; there were invisible exports and imports which covered this difference. Let me give these to the House. The invisible imports consisted of 1,250,000,000 gold marks on foreign investment, which was not shown in the trade returns. It was cash to hand, or goods in lieu of cash. There was also the international freight traffic: that is not for carrying German goods for German merchants, but her services rendered to other nations all over the world with her mercantile marine, estimated at over 1,000,000,000 gold marks. Then, from tourists she secured a revenue estimated by this gentleman at 750,000,000 gold marks, or a total of 3,000,000,000 gold marks. Against that, there were foreign labourers who left Germany and took funds with them-and there were a great many of them-and banking exchange, making up about 1,750,000 marks, leaving a profit to Germany, after taking into consideration the imports over exports in actual trade, of 1,250,000,000 gold marks. I am giving these figures from Germany's own statistics. I will take 1921, and I can now give my hon. friend some information, perhaps, directly bearing on his question. In 1921 German imports amounted to 118,000,000,000 marks, paper; and her exports were

96.000. 000.000 marks paper, leaving 22,000,000,000 marks, paper, of imports over exports, or an adverse balance of trade. That sounds very ominous-22,000,000,000 marks; but when you reduce it, at present exchange, to a gold basis, it amounts to from $60,000,000 to $90,000,000, so that it was not so very serious after all. But that was her deficit. Germany's mercantile marine has been taken away and her foreign investments have disappeared. She cannot make up the deficit in the old way by services to the world with her mercantile marine, or by interest on the investments abroad, the only way she can make it up is by selling goods abroad. I want to make it perfectly clear that I am not one of those who feel any malice towards Germany, or desire to put undue obstruc-

tions in her way at all. That is not my attitude on this question. I think ' Germany should have an opportunity to sell her goods abroad, if she can do so, but only to do so on a fair basis, and not at the expense of the allied countries. Now she can only make up that deficit of $60,000,000 by selling goods abroad. Canada imported from Germany last year, in spite of the obstacles placed in the way of that trade by this clause to which my hon. friend takes such objection, about one and a half million dollars' worth of goods, but there came into Canada by other ways a much larger amount of goods than that, to which I am going to refer in a moment. Before doing so, however, let me take the House a step further; this, Sir, is the crux of the whole business. First I make this assertion, and then I shall demonstrate it beyond, I think, all possibility of question. The difficulty in determining our relations to Germany in trade matters is increased because the international purchasing power of the mark in Germany is three times its exchange or international value. That may seem extraordinary, but I think I can demonstrate it. I will first give two sets of figures, and then quote certain authorities which, I think, no one will question. And I submit this to the Minister of Finance (Mr. Fielding) : if what I say on this point can be accepted as accurate and true, I claim the minister must revise his decision in regard to this depreciated currency, and I most earnestly ask him to endeavour to follow me in this matter. I have simply the one earnest desire, to get at the root and the truth of this matter, because I believe it is going to be a serious thing. I am going to give the House further figures, taken from Dr. Elsas of Frankfurt, a recognized authority on economic subjects in Germany. On September 1, 1921, the internal value of the mark was eight pfennings and the external value five pfennings, a ratio of 8 to 5. November 1, 1921, this had changed to 7 pfennings internal and 2 pfennings external-three and a half times. January, 1922, it was 6 to 2i. March 1, it was four to one and three-quarters, May 1-only a few days ago-it was 3.19 to 1.44. That was the ratio or the difference between the internal and the external value of the mark. But I can give another illustration from figures, also from the same authority. I will give first the bald statement; the depreciation of German currency, from December 4, 1914, to December, 1921, was 4,735 per cent. The cost of living in Ger-

The Budget-Mr. Stevens

many, covering exactly the same period, was increased 1,638 per cent, or only one-third of the depreciated currency. Here are the actual figures :in 1914 one pound sterling equalled 20 marks: 1921 one pound equalled 947 marks, and that has increased enormously since December, 1921, which is the last figure I am giving in the comparison. The cost of living in 1914, the index figure, was 26.5 marks, but in December, 1921, the figure was 439 marks. In other words, currency had depreciated on the international exchange 4,735 per cent, while the purchasing power of the mark in Germany has depreciated only 1,638 per cent, or only one-third of its exchange value. Now I wish to quote an authority which the hon. member from Brome (Mr. McMas-ter), if he were here, would at once accept, Mr. Maynard Keynes. He is perhaps one of our most outstanding economists in the British Empire. I do not agree with all the conclusions at which he arrives; but his aim at the present time is to secure a revision of the Versailles treaty in order to make the figure of reparation possible for Germany. That is his general argument and object. With that, I am not concerned at the moment, I refer to it merely so that the House may know that when I quote him, I am not quoting a .prejudiced person. At page 82, of his "Revision of the Treaty", a book recently published, he makes this statement :

During the summer of 1921 the mark gold equalled 20 marks paper. The internal purchasing power of the paper mark for the purposes of consumption was still nearly double its corresponding value abroad.

That was in the summer of 1921, a year ago. He goes on:

In December 1921 it was between 45 and 60 paper marks to' one gold mark, while its purchasing power in Germany is three times what it is outside.

I give another authority, and that is Dr. Melchior, who was the chief of the German economic staff at Versailles, when the treaty was signed. Surely no one will question that authority as regards prejudicing the case of Germany. Dr. Melchior is recognized as one of the leading philosophers on economic questions in Germany, and indeed, in the world. Before reading what he says, let me refer to a statement made by the hon. member for West York (Sir Henry Drayton), that this constituted free trade with Germany.

168|

I want to say to the House that it does not constitute free trade with Germany; it constitutes paying a premium on Germany imports. The statement whidh I am about to quote was made by Dr. Melchior in the Manchester Guardian which, I am sure, would be endorsed by every hon. gentleman opposite, a paper which, I think, is one of the best papers in the world on general economic subjects as regards the assembling of information. I do not always agree with its deductions; but I must pay a high tribute to the Manchester Guardian as being one of the finest periodicals on commercial questions in the world. Dr. Melchior, in a special article in the Manchester Guardian, makes this statement:

The international value of the mark has a natural connection with its purchasing power in Germany, which in turn depends on inflation. The internal purchasing power of the mark .... is at present (April 1922) between two and three times its international value. . . .

I want the House to follow very closely these last few words:

The falling currency has, it is true, brought apparent prosperity to German industry by means of a premium on exports-

Then he goes on:

-which at the same time cripples the industries of the competing countries.

This is not my statement; this is not the statement of some wild-eyed, prejudiced person seeking vengeance on Germany; this is the statement of the highest economic authority in Germany who was at Versailles, who was the head of their economic agents and experts, and who has been at the head of almost every one of their conferences. Let me emphasize the words of Dr. Melchior

[DOT]" Which at the same time cripples the industries of competing countries." I turn from that for a moment to another picture, and I use France in direct comparison for the purpose of impressing upon the House the seriousness of this situation. I am not going to go into any great details; I want to visualize, if I can in a few words, the situation in France. We must remember the prosperity, the activity of Germany; the fact that there is practically no unemployment there; the extension of her trade; the upbuilding of her industries; the safe, sure and preserved position of all her industrial life during the war. France's budget for 1923 shows an estimated deficit of 4,000,000,000 francs. I

The Budget-Mr. Stevens

will translate that into Canadian currency as $360,000,000. To this must be added four or five times as large a sum for pensions, for reconstruction charges. France, for the year 1923, must find $1,-

860,000,000. That is what France is faced with, in addition to the ordinary expenditures of the country. Germany, however, says that she cannot afford to pay France reparation. Why does Germany say that? " Because," she says, " we have an annual deficit, and if you crowd us, our mark will go lower and lower, and we shall have economic ruin in Europe." This is her whole argument. But if we pay any attention to France with $1,860,000,000 to find for reparations, pensions, and to make up her internal deficits, the situation is appalling. The question I ask of the House is this: To whom is our duty due? Is it our duty to help Germany out of her hole and to plunge France into a worse condition; or is it our first duty to be at least neutral in the situation? I am not at the moment asking the minister to lend any special assistance to France; but I say: Be neutral; do not pay a premium on German goods and thus force France deeper into the mire than she is at the present time.

Austria is also affected deeply by this clause. I am not going into any details; I am going to say only this: Recently, Austria has placed her customs on a gold basis. What does this mean? Hon. gentlemen will know something about what it means when I tell them that at par on a gold basis, the Austrian crown is 24 to the pound sterling, and that is the basis upon which she admits goods

4 p.m. to her country. What is the exchange value of the Austrian crown to-day? The other day, May 16, it was 42,600 crowns to the pound. What is Austria doing? Austria says: For customs purposes, the gold basis will rule. Why, she has increased many of her customs charges in addition to that, 1,000 per cent in the last couple of months, and then we, forsooth, are going to throw away this bit of a safeguard that we have and admit German and Austrian goods in competition with our own. In Hungary, the other part of the old Empire of Austria-Hungary, hundreds of articles are absolutely prohibited. I do not need to give the House the particulars; let hon. members turn to the speech of the hon. member for East Quebec (Mr. Lapointe). That hon. gentleman read from records the

actions of many European countries in regard to this matter.

I wish to go into another phase of this question. Let me take a specific case, that of knives-and I am using this one illustration, because I think it conveys clearly the whole situation. The figures which I am going to give are absolutely authentic and accurate and may be verified. Germany is exporting to Canada all sorts of stuff, and while I have in my possession a list of the articles, I am not going to go into that, because to do so would only confuse the issue; I will take the one article to which I have just referred. A certain standard pocket-knife is recognized in connection with all manufacturers of cutlery and knives; it is what is known as a pocket-knife, and it may be taken as a sample article. That pocket-knife can be landed in Canada by Germany for 70 cents a dozen, including duty. I want to give my hon. friends who argue that we ought to be privileged to buy in the cheapest market, a few facts and let them come to their own conclusions. This is what will occur, if this clause is removed, that Germany can land pocket-knives in Canada at 55 cents, plus a duty of 16 cents, or 71 cents a dozen. Let me figure this out on the basis of the depreciated currency clause now in the act. This 55 cents is equivalent to 165 marks, and the duty at 50 per cent depreciation would be as follows: 165 marks valued at 111 cents to the mark, $18.98; the duty at 30 per cent amounts to $5.69 which, plus the 55 cents, would mean $6.24 a dozen for this particular kind of knife. Now, then, I admit at this point that it would appear that this figure of 50 per cent depreciation is perhaps high. 1 would suggest to my hon. friend, if that were considered to be so, that he reduce it to, say, 35 per cent- there is no particular objection to that-or do as the Americans are doing, make the market value in Canada the basis on Which to assess the duty.

But let me take the depreciation of 30 per cent, and then you will see the significance. Suppose we enact that the depreciation be put at 30 per cent instead of 50 per cent. Then we find the duty would be $3.45, and the value of this knife per dozen would be $4. The British knife, exactly the same as the German knife, is laid down at $5 a dozen; the American knife is laid down at $4.75 a dozen; the Canadian knife can be laid down and is sold at $4.50 a dozen.

The Budget-Mr. Stevens

Now, this is what I want to emphasize. The Canadian manufacturer to-day is manufacturing at a lower cost and underselling both the British and the American manufacturer of this particular article. Why should we ask him, however, to compete with such utterly unfair competition as that to which I have referred with this depreciated currency? I might give a few interesting figures regarding the importations of this German knife, tout I shall not do so at the moment.

What I wish to point out particularly to the Minister of Finance (Mr. Fielding) is that by the present system of valuation that knife is Shipped into Canada at one-third what it can be produced for in Germany; that is, when you take the depreciated value of the mark as the value upon which the knife is entered, and the value of the mark for domestic purposes in Germany, which is three times its value abroad. That, I submit, is utterly unfair competition to which to subject our Canadian industries.

Now, in case there may be those who question the wisdom of this suggestion, let me show what Great Britain -and Australia are doing. I shall also, if necessary, refer to what the United States is doing. But first let me refer to this point, and I invite the attention of both the Minister of Finance and the Prime Minister to what I am about to say. In the first ultimatum to Germany which was issued from London in March last, and to which Canada is a party, it was agreed that the various powers interested would pass an act imposing upon German goods coming into their respective countries a special duty up to 50 per cent, which special duty would be set aside and credited to the German reparations account. The British Parliament passed that measure. Why should we not do so? There is owing to ius on reparations 4.35 per cent of the 22 per cent due to the British Empire, but apparently we have small chance of ever getting it.

Now, let me bring the House back to the pocket knife and show where the profit is going. As my hon. friend said, the Germans ship that knife to Canada through Great Britain, Holland tand the United States. That is true to a certain extent. But how do they ship it? That knife is shipped to an agent of the manufacturer in London, who receives 5 per cent commission. He is virtually a member of the German firm. It is then reshipped to a firm in Montreal-Durkin, I think, is the name, who also are agents of the manufacturers. That firm enters the knife for duty purposes at the figure which I mentioned, 55 cents. I wish the House would follow me closely in this, because I think it amply justifies the position I am taking. That agent in Montreal, representing the manufacturer in Germany, enters the knife at 55 cents, and pays, of course, a low duty. Do the Canadian public get that knife at 70 cents, or with a small profit added? No. That agent distributes this particular kind of knife to the wholesalers at $3.75. Now, do my hon. friends get the point? In other words, there is a differential between 70 cents, the landing price to the agent, and $3.75, the distribution price to the wholesaler, of $3.05. Where does it go? To the German manufacturer; it does not go to the Canadian people at all. Do my hon. friends, the Minister of Finance and the Prime Minister realize this?

Let me repeat this at the risk of being monotonous. That German manufacturing firm-and this applies to all the goods they ship-ship their goods into New York or Montreal, or wherever it may be, in this case Montreal to a special agent, who in turn distributes those goods at a price just low enough to undersell the Canadian made article, in this particular instance at $3.75. The $3.05, the difference between the cost laid down and the distribution cost, goes to the German manufacturer in Germany.

Now, my point is this. We ought to have that $3.75 in the treasury, it ought to go into the funds of Canada, to be credited, if you like, to German reparations account, but I do not think that is necessary, I think it ought to go into the general revenue of Canada. Even then we are allowing those German goods to enter at a figure of 75 cents under the Canadian manufacturer's price.

Topic:   THE BUDGET
Subtopic:   CONTINUATION OP THE DEBATE ON THE ANNUAL FINANCIAL STATEMENT OP THE MINISTER OF FINANCE
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LIB

James Alexander Robb (Minister of Trade and Commerce)

Liberal

Mr. KOBB:

If I may interrupt my hon. friend-does he argue that these pocket knives have been coming in during the past year, or that they can come in under the proposed changes?

Topic:   THE BUDGET
Subtopic:   CONTINUATION OP THE DEBATE ON THE ANNUAL FINANCIAL STATEMENT OP THE MINISTER OF FINANCE
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

I know what my hon.

friend refers to, and I am not seeking to evade any point in this discussion. These knives have been coming in through the mediums mentioned by the hon. Minister of Finance through Great Britain, Holland and the United States. I reiterate what I said a moment ago, that these agents established in England, Holland, New York

The Budget-Mr. Stevens

and elsewhere are agents of the German manufacturers, not bona fide local jobbers. Do not forget that. The British jobber does not make a profit, the United States jobber does not make a profit. Bokers are the greatest cutlery manufacturers in the world. They ship to their agent in New York who in turn distributes the goods in the United States.- I have the figures for the United States: 75,000 dozen pocket knives at 70 cents a dozen; 38,000 dozen razors at 71 cents per dozen; 44,000 shears at 95 cents a dozen-all of which were cleared to the agent of the manufacturer. He paid the duty on the low exchange value of the mark, then he distributed the goods to the American wholesalers at the increased high price, making a tremendous profit of four hundred to six hundred per cent for the German Manufacturer. The Canadian government, the British government, the United States government, in these cases, get nothing, the profit goes into the pocket of Mr. Stinnes, whom I mentioned a moment ago, and the other German manufacturers, who, instead of having those funds remitted to them in Germany keep them in New York for use in invading the Mexican market and other markets in competition with this and other countries. And we are feeding them with the wherewithal to compete with us, without getting for the Canadian purchaser one cent of value. That is

the point of the whole business.

And now the hon. member for Bonaven-ture (Mr. Marcil) says they are turning round like rats cornered in a trench and saying: Make us a loan of a billion dollars. I hesitate to express any opinion upon that, because it is a complicated question, but as I study the matter I am more and more inclined to think that France is justified in saying to the Germans: It is about time you mended your own internal affairs; it is about time you put yourself on an economic basis comparable with that of other nations, instead of refusing to recognize your obligations in the way of reparations to the Allied powers and instead of building up an artificial credit by issuing new currency and depreciating the value of your own mark accordingly.

Now, let me refer to our sister dominion of Australia. I pause here-I had forgotten to do so hitherto, and my right hon. friend will forgive me-to congratulate him (Mr. Mackenzie King) upon the hon-

our recently bestowed upon him. I would like to hear him use these words uttered by Premier Hughes of Australia:

If you think I will vote in favour of trade with Germany, my life has been lived in vain.

What prompted Premier Hughes to say that? It was brought to his attention that German sewing machines had been offered in Capetown and sold there at 18 shillings, umbrellas at 3 shillings, safety razors at 4 pence, silk neckties at 4i pence, and so on. And what did Australia do? Australia passed an act, which they call the Preservation of Industries Act-under which the value of all goods landed in Australia from Germany was raised to the cost of a similar article made in Australia. What I say to the Minister of Finance and to the Prime Minister is this: Either take the basis of valuing goods for import at the Canadian value of the article imported, or

and this is what we believe is the right thing to do-value them at 50 per cent depreciation, or not less than 35 per cent depreciation. I may say -and I say it advisedly, after a good deal of thought-that I would not object to dropping the depreciation to 35 per cent; I would object, though, to going below that. It is surely unfair competition; it is a competition that does not contribute anything to the public treasury or anything to the saving of the purchaser in Canada. I leave that question, Mr. Speaker, with the Minister of Finance; I hope that when he makes the announcement which is promised he will include in it some change in respect to this matter.

We have heard a great deal in this debate about the alleged unfairness of our taxation system. I want to appeal to those who offer that criticism to consider the figures and to revise this oft-repeated -I do not wish to use a harsh word- fallacy, for I think it is a fallacy, which I believe many begin to look upon as an established fact because it is so often asserted. My hon. friend-I have forgotten his constituency-in speaking on this subject the other night used this same argument. I hold in my hand a pamphlet issued by the Council of Agriculture, an institution that ought to know better, in which they say-the same thing has been heard all over the prairies and has been reiterated here-that we raise only 6 per cent of our taxes by direct taxation. Now, that is a statement which is accepted by countless thousands of people in Canada.

The Budget-Mr. Stevens

If indirect taxation, which chiefly consists of customs duties, accounted for 94 per cent of our revenues, well might my friends be alarmed; well might they sing the doleful dirge that we have heard in this House. But what are the facts?

Topic:   THE BUDGET
Subtopic:   CONTINUATION OP THE DEBATE ON THE ANNUAL FINANCIAL STATEMENT OP THE MINISTER OF FINANCE
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PRO

Robert Alexander Hoey

Progressive

Mr. HOEY:

Will my hon. friend permit a question?

Topic:   THE BUDGET
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Certainly.

Topic:   THE BUDGET
Subtopic:   CONTINUATION OP THE DEBATE ON THE ANNUAL FINANCIAL STATEMENT OP THE MINISTER OF FINANCE
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June 8, 1922