April 21, 1944

LIB

Thomas Vien (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I must ask the hon. member (Mr. Hansell) to withdraw that statement.

Topic:   PRIVILEGE-MR. HANSELL REFERENCE TO REMARK OF MR. KNOWLES IN DEBATE ON APRIL 20
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?

Some hon. MEMBERS:

Withdraw.

Topic:   PRIVILEGE-MR. HANSELL REFERENCE TO REMARK OF MR. KNOWLES IN DEBATE ON APRIL 20
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LIB

Thomas Vien (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I ask the hon. member for Macleod to withdraw that statement.

Topic:   PRIVILEGE-MR. HANSELL REFERENCE TO REMARK OF MR. KNOWLES IN DEBATE ON APRIL 20
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SC

Ernest George Hansell

Social Credit

Mr. HANSELL:

Mr. Speaker, might I ask the hon. member for Winnipeg North Centre first to withdraw his remarks with respect to the policy we are expounding, which he has described as "international anarchy"? If he will do that I shall be pleased to withdraw my remark.

Topic:   PRIVILEGE-MR. HANSELL REFERENCE TO REMARK OF MR. KNOWLES IN DEBATE ON APRIL 20
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LIB

Thomas Vien (Speaker of the Senate)

Liberal

Mr. SPEAKER:

The hon. member has made a statement reflecting on another hon. member which he must withdraw. It is not parliamentary.

Topic:   PRIVILEGE-MR. HANSELL REFERENCE TO REMARK OF MR. KNOWLES IN DEBATE ON APRIL 20
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SC

Ernest George Hansell

Social Credit

Mr. HANSELL:

I will be a gentleman and withdraw that remark.

Topic:   PRIVILEGE-MR. HANSELL REFERENCE TO REMARK OF MR. KNOWLES IN DEBATE ON APRIL 20
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STANDING COMMITTEES

CHANGES IN PERSONNEL

LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:

That the name of Mr. Nicholson be substituted for that of Mr. Maclnnis on the special committee on social security.

That the name of Mr. Noseworthy be substituted for that of Mr. Maclnnis on the standing committee on banking and commerce.

That the name of Mr. Farquhar be substituted for that of Mr. McKinnon (Kenora-Rainy River) on the special committee on defence of Canada regulations.

That the name of Mr. Rickard be substituted for that of Mr. McKinnon (Kenora-Rainy River) on the special committee on reconstruction and reestablishment.

Topic:   STANDING COMMITTEES
Subtopic:   CHANGES IN PERSONNEL
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Motion agreed to.


HYDE PARK DECLARATION

PRESS REPORTS AS TO CANADA'S FINANCIAL


, RELATIONS WITH THE UNITED STATES


LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Hon. J. L. ILSLEY (Minister of Finance):

The other day the leader of the opposition (Mr. Graydon) made some inquiries based cm certain speculations which have appeared

in the press concerning Canada's financial relations with the United States. I wish to take this opportunity to explain to parliament the present situation and some of its background, and thereby, I hope, to correct some of the false impressions which may have been created by the rumours to which the hon. gentleman referred.

May I state at the outset that as a result of a recent series of conferences between the treasuries of Canada and the United States, I was able to reach a complete understanding with the Hon. Henry L. Morgenthau, Jr., Secretary of the United States Treasury, in regard to our mutual financial arrangements which had their origin in the Hyde Park declaration of April 20, 1941.

The house will recall that that declaration was made at a time when Canada's reserves of gold and United States dollars had been reduced to dangerously low levels as a result of our huge and steadily increasing purchases in the United States of machinery, equipment and materials, which were required both for our own war effort and for the production of war supplies for our allies. Even in normal times, Canada purchases much more from the United States than we sell to our neighbours. Since the outbreak of war, however, these imports from the United States have shown an extraordinary increase and last year according to the trade returns they amounted to no less than SI,424 million, of which imports for the armed services and war production accounted for roughly one-half. It is therefore not difficult to realize why our limited supply of United States dollar exchange was for so long the most serious bottleneck in our war effort or why we had with considerable reluctance to take so many drastic measures to conserve our dwindling resources of this scarce commodity.

This exchange problem was the most urgent problem in our economic relations with the United States, which engaged the attention of the Prime Minister of Canada and the President of the United States when they met at Hyde Park just three years ago yesterday. However, there was also a growing danger of possible unnecessary duplication of production facilities on the north American continent, with consequent undue pressure on scarce labour and materials, if each country tried to make itself wholly self-sufficient in the field of war supplies. The basic principle of the Hyde Park declaration, therefore, was an agreement that "in mobilizing the resources of this continent each country should provide the other with the defence articles which it is best able to produce and, above all, produce

Hyde Park Declaration

quickly, and that production, programs should be coordinated to that end." Hence, while Canada's purchases of war supplies in the United States had increased greatly and were bound to increase still further, the United States undertook to increase its purchases in Canada of urgently needed war supplies . in respect of which we had facilities for speedy and economical production. A second provision of the declaration was that in so far as Canada's defence purchases in the United States consisted of component parts to be used in equipment and munitions which Canada is producing for Great Britain, Britain would be able to obtain these parts under the lend-lease act and ship them to Canada for inclusion in the finished articles being produced here for her account. This provision has proven difficult to apply in practice and its effect has therefore been limited.

This very simple understanding, which by the way was never embodied in any formal treaty or document, is an outstanding example of the neighbourly good will and the capacity for constructive cooperation which our two countries have so frequently displayed in their relations with one another. It was not a onesided arrangement but was entered into for the mutual advantage of both countries. True, one of its primary purposes was to assist in solving Canada's exchange problem, but the reason for desiring to solve this problem was merely to enable Canada to continue to make her enormous purchases of war supplies and other goods in the United States. We never wished to ask the United States for lend-lease assistance-we always felt that, as a nation in a favoured position, free from the ravages of war, we were in duty bound to stand on our own feet and indeed to share with the United States in assisting other less fortunate of our allies in carrying on the war against the common enemy. That position we have been able to maintain and we shall continue to do so-I am sure it is a position which this house and the Canadian people will approve. I need scarcely add that to the extent that the United States increased its purchases in Canada, Canada gave full value for the money in the form of vital munitions of war which contributed to the war effort of the United States without increasing the strain upon its material and labour resources.

The successful working of this Hyde Park declaration has been referred to on previous occasions. In my budget speech of last year, for instance, I stated that our shortage of United States dollars had ceased to be a major problem. Early in 1943, therefore, we reached

an understanding with the United States Treasury to the effect that if our holdings of gold and United States dollar reserves should tend to rise above an agreed maximum we would take appropriate steps to offset that tendency, and the United States on its part agreed to follow a programme of procurement of war supplies such as to prevent our holdings of these reserves from falling below an agreed minimum.

Hon. members are aware of the legal provisions of the Exchange Fund Act prohibiting disclosure of our exchange holdings, and I shall not assist the speculators by transgressing in respect of that principle. It will perhaps be sufficient for me to say that the agreed range to which I have just referred was measurably below the country's total holdings of gold and United States dollars at the outbreak of war, a time at which those holdings were not unduly large.

During 1943, unanticipated developments, not related to the Hyde Park declaration, served to increase our supply of United States exchange beyond expectations, in spite of the steps taken to offset its expansion. The arrangement which was concluded with the United States Treasury last month covered, therefore, a series of measures, to be taken by Canada, intended to reduce our balances to the agreed range. In addition to immediate payment for certain past purchases of United States equipment and supplies for which bills had not yet been presented, the Canadian government has undertaken to reimburse the United States for all the airfields constructed by the United States government in Canada and for the telephone line from Edmonton to the Alaska boundary also built by the United States government. Some time ago, the decision to reimburse the United States for all permanent improvements to airfields on the northwest staging route and in the northwest generally was announced. This arrangement has now been extended, and Canada is assuming the cost of permanent improvements to all airfields constructed in whatever part of Canada by or for the account of the United States government. A conference of officials of the two governments will be held shortly to finalize the cost of these permanent installations. Further, a number of contracts placed by the United States army and navy in Canada will be cancelled. This procedure affects, of course, only a relatively small part of the United States contracts placed in Canada. The productive capacity which otherwise would be released by these cancellations of United States contracts is being taken up by

International Monetary Fund

orders placed by the Mutual Aid board for the purpose of meeting the urgent war needs of other united nations.

The understanding which I reached last month with the Secretary of the United States Treasury brings to an end the special financial arrangement entered into last year. Canada and the United States are mutually released from the obligations assumed under that special arrangement.

However, in so far as the Hyde Park declaration is concerned, the principle of close collaboration in war production, which was an essential part of that declaration, and the provision relating to components for the United Kingdom, still stand.

I trust that information which I have given will not lead hon. members to jump to over-optimistic conclusions. We have passed safely through a period of extreme gravity in our exchange position. I hope that

i.t is now over, but the experience which I have had in the first three or four years of war has given me a vivid appreciation not only of the seriousness of exchange problems but also of the rapidity with which the position may change.

Topic:   HYDE PARK DECLARATION
Subtopic:   PRESS REPORTS AS TO CANADA'S FINANCIAL
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INTERNATIONAL MONETARY FUND

PRINCIPLES GOVERNING CONSTITUTION AND OPERATION


Right Hon. W\ L. MACKENZIE KING (Prime Minister): I desire to take this opportunity of making an announcement which is being made to-day in other capitals. Over many months, officials of a number of the united nations have been giving close study to the international monetary arrangements which will be desirable after the war. The house will recall that on April 14, 1943, I tabled in the house a proposal by United Kingdom officials for an international clearing union and one by United States officials for an international stabilization fund. On July 12, 1943, the Minister of Finance tabled tentative draft proposals of Canadian experts for an international exchange union. These proposals were all directed to the same ends, namely, the achievement of international monetary arrangements compatible with the balanced growth of international trade and with domestic economic policies aimed at high employment and incomes, but there was a considerable divergence in the methods suggested for achieving these objectives. Since that time, continuous efforts have been made to reach a common view as to the principles to be followed in post-war monetary arrangements. (Mr. Usley.l I am glad to be able to announce that as a result of discussions among experts of the united nations there is now a consensus of opinion among those participating on the need for the establishment of an international monetary fund and a statement has been drawn up of the principles which should govern its constitution and operation. I wish to make available, with the permission of the house, a document setting out this statement of principles, but to conform to arrangements with other governments, it will be tabled when the house reassembles at 8 o'clock. In announcing this agreement on the principles which should govern the constitution and. operation of an international monetary fund, I should like to make quite clear that what has been achieved is an agreement among experts. No government is in any way committed to this document or to the views of its experts. The statement is made public at this time in order that there may be public knowledge of the progress which has been made and informed discussion of the proposals before governments proceed further. This statement of principles on international monetary relationships is conceived as part of a general plan of international economic cooperation, which as a whole will have for its objects the progressive expansion of international trade, high levels of employment, improved standards of living, reasonable stability of prices and .machinery for orderly exchange arrangements. The Canadian government is thoroughly aware of the importance of establishing international monetary arrangements favourable to the expansion of trade and employment, and is keenly sympathetic with the particular objects to which this statement of principles is directed. It is equally anxious that common views should be reached on other parts also of a general plan of international economic cooperation, particularly on a reduction in the barriers to trade expansion, a reduction vital to Canada's welfare and necessary if conditions favourable to stable monetary arrangements are to be achieved. The view which will ultimately be taken by the Canadian government of any proposed monetary arrangements will be greatly, perhaps decisively, influenced by the progress which it is possible to make in achieving agreement on other aspects of international economic policy with which monetary arrangements are inseparably linked.


SC

Victor Quelch

Social Credit

Mr. QUELCH:

Can the Prime Minister say whether or not a day will be set aside for the discussion of the international monetary proposals before any commitment is made?

Topic:   INTERNATIONAL MONETARY FUND
Subtopic:   PRINCIPLES GOVERNING CONSTITUTION AND OPERATION
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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

I cannot make any promises at the moment.

International Law

Topic:   INTERNATIONAL MONETARY FUND
Subtopic:   PRINCIPLES GOVERNING CONSTITUTION AND OPERATION
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INTERNATIONAL LAW

April 21, 1944