April 16, 1946

LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

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

I inadvertently left the answer to that question in my office, and I shall have to give it later. Will to-morrow be all right?

Topic:   NATIONAL HOUSING ACT
Subtopic:   PART 3-FARMERS AND RESIDENTS OF TOWNS AND VILLAGES
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CCF

Alexander Malcolm Nicholson

Co-operative Commonwealth Federation (C.C.F.)

Mr. NICHOLSON:

Before the Easter

adjournment.

Topic:   NATIONAL HOUSING ACT
Subtopic:   PART 3-FARMERS AND RESIDENTS OF TOWNS AND VILLAGES
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CANADIAN FORCES

ALLEGATIONS AS TO TREATMENT OF CANADIAN SOLDIERS AT HEDLEY DOWNS


On the orders of the day:


?

Thomas Miller Bell

Mr. M. J. COLD WELL (Rosetown-Biggar):

May I direct a question to the Minister of National Defence, notice of which I sent him. I would have put the question on the order paper were it not for the fact that there is some degree of urgency in view of the house rising to-morrow. Has the minister received a communication signed by Mr. N. M. Lee Rolfe, president, Veterans of Foreign Wars, Halifax, relating to serious allegations regarding the treatment of Canadian soldiers at Hedley Downs Detention Barracks, England? If so, is an investigation being undertaken, and will the minister make a complete statement to the house?

Topic:   CANADIAN FORCES
Subtopic:   ALLEGATIONS AS TO TREATMENT OF CANADIAN SOLDIERS AT HEDLEY DOWNS
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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Hon. DOUGLAS ABBOTT (Minister of National Defence):

Yes, I did receive the letter referred to. I have ordered an investigation but I have not yet received a report. When I do I shall make the statement asked for.

Loan to United Kingdom

Topic:   CANADIAN FORCES
Subtopic:   ALLEGATIONS AS TO TREATMENT OF CANADIAN SOLDIERS AT HEDLEY DOWNS
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ELIGIBILITY OP FORMER R.C.A.F. AIRCREW FOR FLEET AIR ARM


On the orders of the day:


PC

Lawrence Wilton Skey

Progressive Conservative

Mr. L. W. SKEY (Trinity):

I should like to address a question to the Minister of National Defence, arising out of newspaper reports of new rates of pay in the armed forces, and shortages that are reported in the Royal Canadian Navy. Will the Royal Canadian Navy consider accepting former R.C.A.F. aircrew for entry into the new fleet air arm? I have particular reference to air force pilots, navigators, gunners and wireless operators already trained in naval cooperation.

Topic:   ELIGIBILITY OP FORMER R.C.A.F. AIRCREW FOR FLEET AIR ARM
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LIB

Douglas Charles Abbott (Minister of National Defence; Minister of National Defence for Naval Services)

Liberal

Hon. DOUGLAS ABBOTT:

(Minister of National Defence): It is very difficult to answer that question offhand. I was given no notice of it. I am sure that they would consider any applicant whose physical category, education and previous training qualify him for entry in the naval forces.

Topic:   ELIGIBILITY OP FORMER R.C.A.F. AIRCREW FOR FLEET AIR ARM
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LOAN TO UNITED KINGDOM

APPROVAL OF FINANCIAL AGREEMENT SIGNED


The house resumed, from Friday, April 12, consideration in committee of bill No. 2S, respecting the financial agreement between Canada and the United Kingdom signed on the 6th day of March, 1946-Mr. Ilsley-Mr. Macdonald (Brantford) in the chair. On section 1-Short title.


IND

Jean-François Pouliot

Independent Liberal

Mr. POULIOT:

Mr. Chairman, I have done my best to summarize the speech made the other day by the Minister of Finance. I give him credit for his hard-working spirit, but when I read his speech I understood nothing from it, and it took me about two days to try to put his argument in order so as to understand something of it. I shall have to quote part of it before asking the minister a few questions which he may answer later. I have sent him a copy of his speech so that he may correct me if I happen to make an error.

In the first place the parliamentary assistant to the Minister of Finance declared on April 1, 1946, that since September, 1939, Canada had made to the United Kingdom only one loan, of 8700,000,000, under the War Appropriation (United Kingdom Financing) Act, 1942. The interest rate is nil. The loan is being repaid by proceeds of sales or redemptions of British-owned Canadian securities. It has since been reduced by repayment to 1538,000,000 odd.

In the second place temporary loans have been made under the Export Credits Insurance Act to eight countries. The interest rate varied from two per cent to 3'5 per cent, and the time of repayment also varied from 1950 in the case of Russia to 1977 in the case of China. The total commitments are $644,500,000. They include $30,000,000 for Norway aDd $65,000,000 for the Netherlands East Indies.

This information is not satisfactory. It is too broad, and I hope that the minister will be kind enough to supply information about the first loans that were made to those countries and also in respect to the further loans. In regard to Norway, for instance, I remember that one of the members from Toronto said that he was satisfied with the progress of the Falconbridge Nickel mines in Norway during the war. I have now the company's report to the shareholders, and when I showed it in the house some of my colleagues were surprised. I will tell hon. members where it comes from. It comes from a boy in the navy who has some stock in the company. He was dumbfounded to see that this Canadian concern was boasting of making a huge profit by dealing with Germany in German-occupied territory.

With regard to the Netherlands East Indies it is important to know if it has been supplied only with money, or with some ammunition and arms. With whom did the Canadian government deal, since there was no recognized government over there?

In the third place temporary advances have also been made to fifteen allied countries under section 3 of the War Expenditure and Demobilization Appropriation Act and previous war appropriation acts.

The Minister of Finance said at page 766 of Hansard that the British authorities have estimated that the deficit will be $3,300 million Canadian for 1946, and $2,220 million Canadian for the two years 1947 and 1948; that the deficit in 1948 should be small, and a balance should be achieved by 1950. This is what the British refer to as getting back to equilibrium, the minister said.

I would ask one question [DOT] of the minister at that point: What about the Canadian equilibrium? If we are so much interested in the equilibrium of the United Kingdom, we should have some information about the equilibrium of Canada.

Again the minister said, at page 766:

The figures I have given apply to Britain's total position and not her position vis-a-vis Canada alone.

He said at page 765:

Loan to United Kingdom

The losses incurred in shipping during the war have reduced, at least temporarily, the income from her merchant marine . . . British overseas earnings in respect of insurance and financing services, which also helped to pay for imports-

-have been interfered with by the war. Lloyd's, for instance, a powerful insurance society has never been taxed. I suggested to the minister that he tax them, but it was not done. I do not see how there can be a greater competitor dealing with the Canadian people, but it is not being taxed because it is a society instead of a company. Again the minister said, at page 766:

Britain is confronted with a very serious deficit in her international accounts which she is trying to keep down by the utmost economy in her purchases and expenditures abroad and by the utmost efforts in promoting her exports.

Nothing is said about reducing taxation in the United Kingdom. That is an example for Canada. I quote the minister again:

This deficit, however, must

*

The word1 "must" is used; it must be done.

*-must be financed by borrowing in one form or another.

Another question: From whom will Canada borrow to finance her own deficit? Will it be from the United Kingdom later on? I quote the minister again where he says that the British deficit for 1946, 1947 and 1948 will be $5,500,000,000 Canadian. Then he says, at page 789:

The United States loan will provide her with the equivalent of 4,120,000.000 Canadian dollars for future purchases.

Canada will provide her with $1,250,000,000 Canadian which would bring the total up to $5,375,000,000. The remainder, says the minister, $1,250,000,000 Canadian'-

-the United Kingdom will need to find elsewhere-

He uses the word "elsewhere".

together with such amounts as are required to discharge existing indebtedness, which, of course, is not included in the estimate of her deficit on current account.

What is the total amount of that deficit on current account, if it is different from the one reported by the minister? And does "elsewhere" mean all the other dominions and the other countries of the empire?

The minister referred to "a credit of this magnitude". He admits that it is considerable. Then, to quote him again, at page 765, he says with regard to Britain-

that her need for credits is huge in comparison with the other countries with which we have dealt.

And again, the same page:

There are special factors in the case of the United Kingdom . . . that necessitate and justify-

These are strong words.

-different terms from those we have offered as a matter of policy in other cases.

And again:

During the five years from 1946 to 1950, the United Kingdom will he going through a period of transition and reconstruction, both in its domestic and in its international economic affairs.

What will be our own period of transition and reconstruction in our international economic affairs? How will we do it? But the minister is concerned only with what will happen in England in the future. Nothing is said about Canada. He has his eyes there, and made the speech that Joe Chamberlain would have made at the beginning of the century.

I quote again, page 765:

It is necessary for Britain to do much more than to regain the pre-war levels, however, if she is to pay her way internationally. She has had to sacrifice many of the overseas investments she had made.

The income she previously had therefrom must be replaced by increased exports to help her pay for imports.

I quote again, where the minister states, page 766, that after 1948-

-she will be financing her deficit in Canada from other sources, for example, by selling us gold, or other foreign exchange that we require.

We shall be paid after 1948 only if Great Britain has the gold, or other securities. Why are they not given to us in payment now? Why should we wait until 1948? I quote further, from the same page:

The case of the United Kingdom is unique.

There the situation is

a special one requiring terms and conditions in a financial agreement that are quite different from those in our other loans. "In the financial agreement of December 6, 1945, the British agree to their removal within one year from the effective date of that agreement."

Then, what about our British preference in trade? That is another question. I quote the minister again-page 764:

If we are to he successful in our public finance, we cannot afford to he hesitant and halfhearted in promoting the foreign trade which is the basis of our prosperity.

Foreign trade is not our trade with Great Britain. Our trade with Great Britain is our external trade. The minister will not use the word "foreign" as applying to Great Britain. I remember an incident in the days of Lord Dundonald, when Sir Wilfrid Laurier used

Loan to United Kingdom

I want hon. members to follow this very closely.

[DOT]-and the freedom of each country to use any currency that it has obtained through trade with another country in carrying on trade with any third country. This type of policy would make possible not only a high level of trade but freedom in the direction of trade.

Again, what about the British preference? I draw the attention of hon. members to the whole of pages 767 to 770 to make the comparison, and they may read the distinction which the minister makes between liberal trade and the other kind of trade. I cannot understand it. That is perhaps a defect of my intelligence, but he has been splitting hairs to make the distinction. I refer hon. members to Hansard. I cannot analyse it, it is beyond me. Now, the minister again, page 768:

The British are now worse off to the extent of about 20 billion Canadian dollars than they were when the war commenced.

So that if the loans are approved-

-she will end up with her international position worsened by the equivalent of over twenty-five billion Canadian dollars as compared with her position in 1939.

63260-58J

Some hon. members who had spoken and who were reared in England say that we want to improve the condition of England, but the minister himself has said that the financial situation of the United Kingdom will be worsened to twenty-five billion dollars if the United States loan and the Canadian loan are granted to them. Is that an argument to induce those who love the United Kingdom to vote for this proposal? I quote from page 768:

We must realize that Britain is no longer a wealthy country in international terms. She has sacrificed her international financial strength in meeting the costs of the war. Before the war Britain had substantial overseas assets that yielded her, on balance, an income of approximately a billion dollars a year.

We have come to the conclusion-

Says the minister.

-that the British government will be able to meet the terms of this agreement over the next fifty-five years.

Well, there will be water under the mill before we reach that date. Another question in passing is, what is the detail of the settlement of the war claims, which may be discussed, and which should be discussed? We have no information. The government says "We found it all right and we accepted it." What was it? AVhat were the claims ofCanada? What were the claims of the United Kingdom? We know nothing about it; andthis is why I have insisted on having an

expose instead of a mere plea for the ratification of the loan. The minister continues, at page 769:

In fact, as I have already indicated, the British deficit of Canadian dollars will likely be such that the total amount of this credit will be drawn before the end of 1948.

That is most important. The piece of

legislation which we are studying now is not the last one, because before we start to receive interest, if any, in 1950 all the money which will be'lent to Great Britain by Canada and by the United States will have been spent.

The British representatives made it clear to us that they expected that Britain would need to finance additional purchases in Canada from other cash resources.

This is matter for thought.

She cannot afford to pay interest in this period without making additional credits necessary.

Is anyone who is considered solvent not able to pay at least the interest, if not the capital? What about the gradual and orderly repatriation of Canadian securities owned in the United Kingdom?

Now as to the British commonwealth air training plan, listen to this-page 771:

Loan to United Kingdom

It was found that the United Kingdom's share of the cost exceeded what she had contributed and paid by $200 million. Similarly, when the details for the second plan, ending at March 31, 1945, were worked out, it was found that the United Kingdom had paid or contributed an amount that fell short of her share of the costs by $225 million.

Instead of saying that the United Kingdom had failed to pay this, we are told that she had "paid or contributed an amount that fell short of her share ... by $225 million." How well said!

In agreeing to cancel this amount owing by Britain in respect of air training, the government has been motivated by a number of strong reasons . . . We came to the conclusion after much consideration-

Mark you, sir,-"after much consideration", -that repayment of this $425 million was beyond the United Kingdom's capacity to pay within any reasonable period.

How then can we expect any repayment of the billion and a quarter if the United Kingdom could not pay an indebtedness of $425 million, or about one-third of that amount, representing her debt in connection with the commonwealth air training plan? Again, what about the British preference in trade? What is the detail of the settlement of the war claim? The minister said at page 769:

In fact, as I have already indicated, the British deficit of Canadian dollars will likely be such that the total amount of this credit will be drawn before the end of 1948.

And it goes on like that. Well, sir, there is one thing that is forgotten in all this. It is that, though nations may unite to wage war, as soon as the war is over they become competitors in trade. That is an elementary truth that is known to all and we cannot consider any country our ally in trade. A country is a separate unit and must consider the interests of its inhabitants, and the idea of being under the yoke of the United Kingdom, in the matter of trade, is no better than the idea of being under the yoke of the United States. It is dangerous to consider these matters from a sentimental point of view.

The other night there were two or three members who made jokes at the expense of members of parliament who are not favourable to this measure. That is an old trick. It is not the first time it has been played. It is an effort to impress members, to frighten them and prevent them from expressing their opinions in this country, which is called a democracy. I remember when I was discussing some matters during the war there was a little arrangement of the kind and two Liberal members, one from eastern Ontario and the other from western Ontario, started telling me

that I was taking up too much of the time of the house. That was my own business, and it was for my colleagues to decide whether they would listen to what I said or to disregard it. However, I was in no mood to take a calling down from any of those gentlemen and I told them to look at the bull moose over there, a little statue in front of the ladies gallery, and the bull buffalo over here, another statue. I told them to look well at those two statues, to fill their eyes with the bull moose and the bull buffalo, because they would never see them after the election. Well, I was right. One of them lost the convention and the other was defeated at the polls.

At the same time there was one member banging his desk, making a terrific noise in order to impress me, in order to show that I was wrong. He ran again and lost his deposit, thank God. Sometimes, some members have family links with the old country and they say, "We have relatives over there". That is true. But why do they not bring those relatives to Canada? Canada is the country of the future, but Canada will not be the country of the future if we pass this legislation and other measures of the same kind.

I warn my colleagues. Some of them have expressed themselves in favour of the loan. That is their business and I respect their views, but I tell them that every time Canadians ask for something which is denied by the government, every time they fill in their income tax returns, every time something goes wrong, from their own point of view, they will say it is because of this loan that has been voted to Great Britain. They will say it is because of this gift.

A country as poor as this cannot enter into that kind of finance. It is impossible. Think of it, sir. According to the figures of the British experts, at the present time the increase in indebtedness in Great Britain as a result of the war is twenty billions. If our national debt is at the present time sixteen billion dollars, only four billions less than Britain's debt in connection with the last war, how can we expect to lend money-lend, not give? We know very well that when the time comes for the settlement of the loan the Minister of Finance will reason with the government of Great Britain, as he has done with regard to the British commonwealth air training plan, and the Englishmen will only have to come here and say, "We cannot afford to pay" and that will settle the question.

All right. Very good. The Canadian taxpayer will pay for it. That is absurd, and I am sorry to say that to a Liberal government.

Loan to United Kingdom

How much, I would enjoy saying it to a government leading another party in the house. It is a shame to me to have to say that to my party, but I want to try to bring them to their senses, just as we throw a glass of cold water into the face of a fainting man.

But that is not all. There is more to it. There is something that the minister has not told us. How much have we given to Great Britain since the beginning of the war? Our debt now is sixteen billions. Our debt before the war was two and a half billions. That means that our war debt is thirteen and a half billion dollars. If we have not given to Great Britain ten billion dollars already we have not given a cent. We must know what has been done.

Do you know, sir, there are two different periods with regard to war finance? The first one was from September, 1939, to December, 1940, and the second was from December, 1940, until the present time, and1 perhaps until ten years from now if we go on like this. In the first place, the United Kingdom, for what she was buying from Canada, was sending gold. The business was dealt with normally, but since December, 1940-and the Canadian taxpayers will know about it-all that we have got from Great Britain has ben turned over to the United States to pay the United Kingdom debt. It was said by the minister-and I have it here on record just as I have recorded his speech of April 11-every time that we received something from England it took its way to the United States to pay for her. Nothing !was left here. Then the other day I had a question on the order paper about the fulfilment of the United Kingdom obligation with regard to the commonwealth air training plan. The question stood on the order paper for a long time, and then it was passed as an order for return and I have not got it yet. Why did I not get it? It was because it was showing precisely the fact that the United Kingdom had not fulfilled her obligation, that Great Britain had not fulfilled her obligation to Canada during the war. _

Topic:   LOAN TO UNITED KINGDOM
Subtopic:   APPROVAL OF FINANCIAL AGREEMENT SIGNED
Sub-subtopic:   MARfcH 6, 1946
Permalink
?

Thomas Miller Bell

Mr. COLDWELL:

I do not propose to

follow the hon. member for Temiscouata (Mr. Pouliot), who has just spoken. I suppose the minister will reply to the series of questions that he has propounded. In all probability some of the things I shall say will have some bearing on the speech that has just been made. May I say, Mr. Chairman,' that when the resolution was before the house the other afternoon most of us understood that on that occasion the speeches would be short, and probably at this stage we would be discussing

the matter more fully. Consequently I am taking this opportunity of saying some of the things I might have said and did not say the other afternoon.

A great deal of the opposition to the loan in this house and in the country is based upon the idea that we are doing something for Great Britain that we are not prepared to do for other people, and that this is an indication that Canada is still in somewhat of a colonial stage of development. In my opinion and in the opinion of my colleagues, that view is erroneous. As a matter of fact I believe we can discuss this proposition from the point of view of cold economics and cool logic and show that what we are actually doing is something which is beneficial for our own country and for the world. The fact is that the recovery of Europe and, particularly as far as we are concerned, of the United Kingdom as a great trading area is essential to our own recovery, and indeed to the progress and peace of the world in the days to come.

As an exporter of foodstuffs and other raw materials, Canada has a selfish interest in the welfare of the people of the rest of the world, and in particular perhaps in the welfare of the people of the United Kingdom. If we had no political associations with the British commonwealth, our economic interests would compel us to consider this proposal favourably.

Those of us who know the history of this continent know that historically an important factor in the development, of North America has been its relationship to the economy and the economic policies of the United Kingdom. Once upon a time the ability to develop this continent was largely dependent upon the export- from the United Kingdom to this continent of all kinds of machines and of other materials: That was particularly true in the United States at the beginning of the last century, and toward1 the end of that century it was true of our own country.

The proposed loan by the United States to Great Britain is not a sign of the colonial association of the United States with Great Britain, but rather a recognition of the fact that the recovery of Europe and of the United Kingdom means, to a very large degree, the economic progress and prosperity of our great neighbour to the south. It is from that point of view rather than from the point of view, which perhaps some, of us share, of gratitude for what the British people did in withstanding the fascist and nazi aggression that we should discuss this proposal.

Loan to United Kingdom

The United States realizes, as members who are supporting this loan do, that year in and year out the United Kingdom has been, as is sometimes said, the world's best customer. The prosperity of the world, and particularly of Canada which relies upon British purchases of our products to enable us to pay for goods we import, not only from Great Britain but from other countries of the world, depends upon her ability to remain the world's best customer. Somehow then she must be enabled to regain an ability to pay for the things that she must buy.

In former days, as has so often been said in the house, and as the Minister of Finance so well said the other afternoon, Great Britain was able to pay for the supplies she needed from abroad, very largely because of her overseas investments-investments, of course, by her nationals; and she received interest in the form of goods, and goods in the repayment of the capital that she had formerly left in these countries. But in the common struggle-and I -use the words "common struggle" because it was a common struggle-against Hitlerism she was compelled to sell a substantial -part of these securities, not only in order to get food but also to get the necessary supplies of -munitions of war to enable her to put up the resistance against the aggressor. She delivered us from a greater evil than we perhaps apprehended at the beginning of the war. Therefore at the present time the position- is that Europe, and again particularly Great Britain, must expand her exports in order to pay for the goods that she needs to import. In other words, with her overseas investments depleted she must export in order to get the supplies she needs. Various economists have estimated that the United Kingdom will need to export in -the next few years from fifty to seventy-five per cent more than she exported before the war. In addition to this there must be a reconversion of her industries. She must rebuild her destroyed1 factories and machines; she must replace her obsolete machinery and at the same time provide food, clothing and shelter for her people. Therefore the bald fact is that if she is to regain her standards of living and continue to act not only as our best customer, but as the world's best customer, she must obtain goods either as gifts or on a deferred payment plan. In other words, somebody must give or make loans. We find that the United States, recognizing this, is proposing a large loan to Great Britain at the present time, and- we are proposing the loan which is now before us.

CMr. Coldwell.]

In my opinion this agreement negotiated between the two governments is not an agreement negotiated from the point of view of giving an advantage to the United Kingdom but a mutual advantage to both Canada and the United Kingdom- In the main this is, as has already been said-, a loan repayable in the future with interest. We wipe out certain other indebtedness, that on account of the air training plan and so on, which I take it is part of our war contribution and a recognition of our good fortune in escaping the devastation and physical destruction of war which Europe underwent. Again I say I approve of that proposal.

There is just one other thing I want to say in connection with another matter which is not settled by this agreement. Early in the war we did make a loan of $700,000,000, as -hion. members who were here at that time will remember, to adjust an accumulated sterling balance. That is to be extended- and we understand that it will be settled at some future date. May I suggest that that should be considered apart from what we are now discussing and should be settled) on a business basis, as was suggested when the loan was originally made, and when the time comes to settle the loan certain securities now -held in Britain might be considered in payment thereof. But I do not want to discuss that this afternoon, as I do not wish to introduce a side issue. I believe that the problem at this moment is a much more important one than the settlement of what remains oustand-ing of the $700,000,000 loan.

What we have to remember is this, that the economic plight in which this great purchaser of goods finds herself to-day is bound to be reflected in our own economy in the future unless something is done to rehabilitate Great Britain as a great customer. If we fail, and other countries fail, to render the aid that is necessary at this time-we are discussing mainly a loan to Great Britain, although this applies to other European countries and indeed other countries of the world as well-we shall ultimately suffer ourselves because we have not assisted in rehabilitating the world. It is often forgotten When we speak of a loan of this kind that we are not discussing money. We think in terms of money, but here we are not discussing money but goods, the ability of Canada to produce goods, the ability of Canada to ship these goods, and if we fail in this we shall find our own trade in a state of stagnation. I want to emphasize that our welfare depends -upon our ability to sell our goods, in the markets of the world and therefore upon the ability of th-e world to consume the goods that we produce. What is true of

Loan to United Kingdom

Canada is true of the world, of course. Canada cannot be prosperous apart from a prosperous world. In a depressed world, in other words, Canada is depressed too.

Now let us look at what this trade between our countries means. In 1038 four nations took 49-8 per cent, roughly SO per cent, of the total world exports. That is to say, of all the goods placed on the markets of the world, four nations took practically SO per cent and Britain, with only two per cent of the world's population, took 21 per cent of the exports available on the markets of the world. Germany took 10-9 per cent; the United States, with her great population, took only 10-9 per cent, and France took 7 per cent. It is clear I think to all of us that Germany will not recover her position in the world economy for some time to come. The United States with her rich resources and with the war developments in the production of synthetic materials, such as rubber, to take the place of imported raw materials, will in all probability find it very difficult, and particularly so because of the pressure groups within her own country, to take very much more than her present 10-9 per cent, but unless she does the world is headed for disaster. I think much depends on the ability of the United States to accept from the world a larger share of the exports available on the markets of the world.

There are two nations which remain, Britain and France, and the rehabilitation of both these countries as great purchasers on the world markets is of paramount interest to Canada and to the world. I am very glad indeed to be able to support substantial loans to both these countries in order to enable them to regain the position that they must take once more in the markets of the world. '

As has already been said, in the last year of peace, 1938-the hon. member for Temiscouata quoted 1939, when the figure was slightly less, , but I am taking 1938 because it was the last year of peace before the war-forty per cent of our total exports went to the United - Kingdom, or in round figures, $69,000,000 worth out of total exports of $172,000,000. Is that about right? I think it is. I looked up the figures, and those are the figures I found. I submit, Mr. Chairman, that the prosperity of our purchasers is inextricably linked with the 1 recovery not only of Europe but of Canada's own best customer, the United Kingdom. This loan therefore becomes to us a matter of economic interest rather than a matter of sentiment. I know that there is a disposition in some quarters of this house to consider that

those who are supporting this loan are supporting it because of a sentimental attachment to Great Britain or from some colonialism or imperialism. But I would point out that considering it purely from the point of view of Canada's selfish economic interest, what we are doing is a good thing for Canada, and it is because it is a good thing for Canada that I am warmly in support of it.

Let us bear in mind that during the war years there has been a very significant change in the exports that we have been making to Great Britain. In addition to being, as we were before the war, a principal supplier of cereals to Great Britain, we became during the war a principal supplier of meat and meat products to Britain. Coming as I do from western Canada I must say that our farmers are very anxious indeed to maintain the market we have built up for our pork and other meat and meat products in Britain, and they are anxious also, of course, to retain our market for cereals such as wheat, flour, and so on.

Again, if I may speak of the capacity of the United Kingdom to absorb meat products, the United Kingdom has always been a large purchaser of meats on the markets of the world, and the greatest purchaser of dairy products. Each year before the war-again I am taking the official figures-the United Kingdom purchased 81 per cent of the total amount of pork and pork products entering the markets of the world. Similarly she took 80 per cent of the beef and 78 per cent of the butter sold on the markets of the world. The United Kingdom before the war was a large importer of foods and raw materials, and she must remain so if the world is to prosper. It is true that during the war she has expanded to some extent her production of wheat and other cereal products. Anyone who knows the British isles knows perfectly well that that has been done very largely under the pressure of war, and that much of the production has been on land which otherwise would not have been cultivated because of its marginal quality.

As an exporter, then, of many of these raw materials and foods we are vitally concerned in anything we can do to assist in the restoration of her economy and in tiding her over a very difficult four or five years which now lie ahead. [DOT]

I say, then, that if for no other reason than that of our own self-interest we should give support to this bill. What I have endeavoured to say up to now is this, that the prosperity of the world depends upon the ability of the

Loan to United Kingdom ,

world to exchange goods and that is in reality what we are trying to arrange, so far as we are concerned.

Nations do not .pay in currency, they pay in goods. In the old days, of course, deficits of usable goods were often made up by exports or imports of gold. As world trade expanded, and because of developments in recent years, the amount of gold became too little and became inefficient as a medium. Very properly, I think, it has been discarded.

The Bretton Woods agreement, which we discussed last December, the stabilization fund, and the international bank, which were parts of it-these were steps in the direction of providing the world with the necessary credits and currency in order to encourage trade between nations and to develop the more backward areas of the world. That is why we of this party supported the Bretton Woods agreement, recognizing as we did that, like all compromises in this far from perfect world, the Bretton Woods agreements were not by any means perfect.

There are still those, of course, who believe that we can get along as a self-sufficient nation. I do not share that view. Our policy must be one of an exchange of products. Obviously we do not produce all that we require to maintain our economy. We must import. And if we are to import goods in exchange for goods we send out, then they should be used to give our people a progressively higher standard of living than we have known in the past. But, again, that should be discussed on another occasion.

Some people say. there is an alternative, and that while Canada cannot live alone the British commonwealth of nations could. I do not believe that, either. If one looks at the goods produced within the commonwealth he will find that the commonwealth is by no means a self-sufficient unit, even if we could get agreement among the component parts and tried to live that way. Our prosperity, I believe, and the prosperity of every unit of the British commonwealth of nations, does not depend upon the relations within the commonwealth, but rather upon the state of the world itself. In other words it is not a commonwealth problem; it is an international problem.

The loan then, in my view, is one contribution of Canada to international action. And to that extent, as I have already said, is an indication of enlightened self-interest, on our part. The United Kingdom is our best customer. She is the world's best customer. If we contribute to her rehabilitation as a great consumer for goods, as well as a

,

great exporter of goods, then we make our contribution to the rehabilitation of world economy and to a more prosperous world. But it is not, I repeat, a matter of sentiment. It is a matter of cold economics.

Last week I said, in discussing commonwealth relations, that the Ottawa agreements were restrictive in their effect. I believe they were. True, perhaps they were defensible, in a way, because of the Hawley-Smoot tariff of the United States, which about that time was put into effect. Nevertheless they contributed to the building up of self-sufficient nations in the world; and from that point of view were a detriment to our own country and the world. They increased barriers, rather than helped to remove them. It seems to me an attempt is now being made in the world, through the Bretton Woods agreement, the food and agricultural organization, the social and economic council of the united nations, the American loan and this loan, to break that vicious circle which constricted the world before the outbreak of the last war. Will these attempts be successful? I do not know that they will be; I hope they will be. Indeed, I believe they will be. They are worth trying.

But certainly, as part' of the great world, and depending upon world commerce to the extent we depend upon it, our prosperity depends upon the success of the economic experiments now being made in the world. I know there is one other consideration one cannot forget, and that is that if we fail now, and the world enters again upon a period of cut-throat competition-if we force the United Kingdom into cut-throat competition, so that she must buy again in those places where she can drive down the prices to the lowest level, then we shall be the sufferers, indeed. And since this agreement looks toward some measure of stabilization, some intelligent economic policies in the world, I believe it is indeed worthy of our support.

Speaking in Toronto on January 10 Mr. Morrison said this, indicating what the policy was, if they have a chance to follow it:

To eliminate fluctuation in international prices so that producers can safely plan future production and to reduce unnecessary distribution costs. We believe that the maintenance of a sound nutrition policy will give the great advantage of stability to overseas producers and will also help to earn a long-term market for our exports.

In other words, the advantages are mutual.

I have discussed this matter this afternoon purely from the point of view of Canada's economic advantages, but I would not have anyone think that I am thinking only in

Loan to United Kingdom

terms of economic advantages. None can have a deeper appreciation of the sacrifices made by the people of the United Kingdom during the war than those of us who had the privilege of visiting there during that time.

I was over there, as were you, Mr. Chairman and the hon. member for Rosedale (Mr. Jackman) who is in his seat this afternoon, and with the hon. member for Lethbridge (Mr. Blackmore) whom. I also see. That was in the autumn of 1941. We saw the devastation wrought by German bombing. We witnessed the steadfastness and courage of a great people in a great crisis. German troops were at the gates of Moscow. The United States was still a neutral country. The outlook was dark indeed. But the British people were determined that no matter what came, they would resist the German aggressor. One could only admire the courage with which they withstood those dark days in the autumn of 1941. With some other of my colleagues, one of whom was the hon. member for Cape Breton South (Mr. Gillis), who is in his seat at the moment, I witnessed the flying bombs in the autumn of 1944. Again the devastation; again the courage of the people who withstood those onslaughts of the German aggressor.

Out of the meagre resources she had at hand, during this winter Britain has contributed to the relief of starvation and disease on the Continent of Europe. These people have shown a remarkable degree of courage, in trying to do something for themselves and for others in distress. They have accepted the austerity programme with a courage which is the marvel of the world. While I am not speaking from a party standpoint now, merely as an indication of what the British people are thinking let me point out that despite the fact that the Labour government of Great Britain has had to institute even a greater degree of austerity since it was elected in July of last year, by-elections and, more recently, municipal elections, have endorsed that austerity programme at the polls.

So I say that to-day we have an opportunity, even if we put aside all the considerations which I have named in the last few moments, to contribute not only to the welfare of the United Kingdom-because that must not be our first consideration-but also to the welfare of Europe, of the world, and of Canada as a nation. In other words, in my opinion this is an opportunity for us to play our part in . the international sphere in order to bring about a greater measure of understanding and of world prosperity.

Topic:   LOAN TO UNITED KINGDOM
Subtopic:   APPROVAL OF FINANCIAL AGREEMENT SIGNED
Sub-subtopic:   MARfcH 6, 1946
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I wish to make at this time a few comments and to ask the minister a few questions.

We are supporting this measure on moral grounds. We are not supporting it because we think it is a good thing for Canada, except in so far as it helps to maintain good relations with other nations. We feel that we owe a certain obligation, an obligation which we should1 meet; on the other hand, we look upon it as a sacrifice, but a sacrifice which should be made. We intend to support the measure because we feel that the situation which exists in the United Kingdom at the present time, which makes this loan necessary, is very largely owing to the fact that the United Kingdom fought the earliest, that she fought the longest, and in many ways I think it may be said that she fought the hardest, of any of the united nations; and she fought not merely for her own benefit but for the benefit of all peace-loving nations throughout the world.

I know it has been argued that we have made a number of contributions to the United Kingdom during the war. But we did not make those contributions in order to raise the standard of living of the people of that country; we made them in order to expand their war effort against the enemy for our own protection and for the protection of all the united nations which were fighting against the enemy. It might very well be argued that, had the United Kingdom thrown up the sponge after Dunkirk, there would not be a free France to-day, and it is quite doubtful whether or not we would be sitting here to-day as the parliament of a free people. Therefore we feel that there is every justification for making this contribution at this time.

It is well to remember that in the United Kingdom over three and a half million homes were destroyed, and that country's shipping tonnage was reduced from 41J million to 19i million, and that her foreign investments were practically wiped out. Her whole industrial plant was converted to war purposes; her standard of living was reduced to the bare necessities of life, and as a consequence there will be a long, hard road' of reconversion before the United Kingdom will be in a position to meet her obligations.

During the war the united nations to a very large extent pooled their resources for common use against the enemy. Every nation was expected to make its maximum contribution and to reduce its own standard of living to the bare necessities of life. I do not think anyone can argue for one moment that the United Kingdom did not go as far as or farther than any of the other united nations. It is just as well to remember that the cost of war does not cease with the end of hos-'

Loan to United Kingdom.

tilities. Heavy expenditures related to the war will continue for many months after the war. Those expenditures, will continue until the repatriation and demobilization of troops has been completed and until the reconversion of industry has taken place to the extent that will make it possible for the nations to rebuild their factories and to produce the goods needed to bring in the imports which they require. Therefore, I think, many nations were somewhat shocked at the indecent haste with which the United States of America cancelled their lease-lend help to the United Kingdom, and made further help dependent upon Great Britain becoming a signatory to the Bretton Woods agreement. I do not think it was to the credit of Canada that we joined with the United States in that squeeze play, and I think it is to the credit of Australia, of New Zealand and of Russia that they had not signed that agreement by the end of the year.

So that on moral grounds we are supporting this, motion.

However, when the Minister of Finance asks for our support on the ground that we benefit by the trade resulting from this loan I do not think his argument is so soundly based. What does making this loan at this time really mean? It means that we are going to have to make available to the United Kingdom goods which are at the present time, and will be for a number of years, in short supply. Whether or not we make this loan to Britain, there will be no difficulty in getting rid of any surplus goods we may have at that time, because they are actually in short supply throughout the world. What it will mean is that we shall take the repayment of this loan in goods at a time when they will be no longer in short supply, because we do not begin to take repayments until 1951 and wei shall continue to accept repayments for the next fifty years;

I dio not suppose there will be any shortage of goods in this country during that time. Therefore we are making goods available at a time when they are short and accepting payment at a time when there will be surpluses. To that extent, I think, it is unquestionably a sacrifice on our part: hut, as I say, it is a sacrifice we should be willing to make.

What is happening as a result of these large loans which we are making abroad? In Canada to-day there are many projects which people are asking to have carried out, but which we cannot attend to because we have not the necessary goods available, and these goods are not available because: we are fulfilling certain obligations which we have abroad. To-day there is a great demand for the expansion of

social services such as pensions for the aged and the disabled, and many other social reforms, These also are being denied because we are having to make goods available to other nations where they are in short supply to-day, and we cannot satisfy the demand for the expansion of social services in this country until we are able greatly to expand production to take care of these demands. Therefore I say that this loan does represent a sacrifice.

The minister emphasized the fact that this loan was not merely to help the United Kingdom, but to help Canada expand her trade; and the hon. member for Muskolca-Ontario gave it the support of his party on this ground. Although he made it quite clear that he would also support it on moral grounds, he based his argument entirely on the economic good of Canada. The minister pointed out that the United Kingdom must do more than merely regain her pre-war levels of exports. He pointed out that they must expand that by a considerable amount beyond pre-war levels in order to pay their debts. I noticed1 in the speech made by the president of the board of trade of the United Kingdom that it was estimated that they would have to expand their exports by fifty per cent over pre-war levels. Some speakers put it as high as seventy-five per cent. In other words, the United Kingdom will have to maintain a very large" favourable balance of trade, and we in accepting payment will have to maintain an unfavourable balance of trade when the time of repayment takes place, in order to accept payment.

I realize thett the minister will put forward another argument, which I shall deal with very shortly. I should like to ask the minister: Will Canada be prepared to import more from the United Kingdom than she sells to the United Kingdom? Also, will the United States of America be prepared also to be paid likewise?

Topic:   LOAN TO UNITED KINGDOM
Subtopic:   APPROVAL OF FINANCIAL AGREEMENT SIGNED
Sub-subtopic:   MARfcH 6, 1946
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

What is the second one?

Topic:   LOAN TO UNITED KINGDOM
Subtopic:   APPROVAL OF FINANCIAL AGREEMENT SIGNED
Sub-subtopic:   MARfcH 6, 1946
Permalink
SC

Victor Quelch

Social Credit

Mr. QUELCH:

Will the United States of America also be prepared to maintain an unfavourable balance of trade with the United Kingdom in order to make it possible for the United Kingdom to pay the United States? Perhaps the minister will wait until I finish and then he can answer my questions all together. I think the minister made it quite clear in his speech that that was not the intention, and I quote from page 764 of Hansard of April 11, 1946:

To accomplish this purpose we must be able to use the proceeds of our exports to the United Kingdom and the continent of Europe in paying our own bills and debts in the United States

Loan to United Kingdom

and in making purchases wherever we can best obtain the goods we need. We have a special interest in being able to use the currency that we receive for our exports, to obtain other currencies that we need for the payments we must make.

If we use the credits accruing to us in the United Kingdom to buy goods in the United States, how will the United Kingdom obtain United States dollars to pay the United States unless the United States is prepared to take it out of goods? I quite realize that under the Bretton Woods agreement currencies are convertible, but if that policy is continued for fifty years the quota of the United Kingdom will quickly be exhausted unless Canada and the United States are prepared to have unfavourable balances of trade with the United Kingdom. Further, the United States will be exporting goods to the United Kingdom and obtaining credits for them. The United Kingdom will not be in position to discriminate against United States imports unless she is prepared to discriminate against all other imports at the same time. The United States will also have credits from the loan that she is making at the present time. In addition, the United States will also have some of our British credits which we will trade to her.

Will the United States be prepared to accept payment in British goods for all those credits? Personally I doubt it very much. If she is not prepared to, if she is not prepared to balance her trade with the United Kingdom, and if we are not prepared to balance our trade with the United Kingdom, then it is bound to be only a question of time before the United Kingdom suffers default. She will exhaust her quota, and if she has not gold to meet her obligations she will have to take a further loan. I should like to ask the minister how long sterling will be convertible into dollars under such a policy. Britain's quota will soon be exhausted and for that reason she will require further loans. If the creditor nations fail to deal squarely with the United Kingdom, it seems to me the United Kingdom will be bound to default.

The minister goes on to say that he thinks the United Kingdom will be able to meet her obligations, and I turn to page 768 of Hansard where he states:

We have also come to the conclusion that the British government will be able to meet the terms of this agreement over the next fifty-five years.

And again:

They have been determined from the outset, and indeed they made this determination clear to us as early as 1944, that they would not incur debts which they could not honestly believe they would be able to discharge.

I do not doubt for one minute that the United Kingdom will desire to meet her obligations. Second, I do not doubt that the United Kingdom will be able to meet her obligations in goods if the creditor nations play the game. But the record of the past causes me great misgivings as to whether or not the creditor nations will be prepared to play the game.

I recall at the last session when Mr. Ras-minsky appeared before the banking committee. He admitted quite frankly that on the basis of the record of creditor nations in the past there might be some concern with regard to the success of the Bretton Woods agreement. He stated he believed that there had taken place a change of heart on the part of the creditor nations and he hoped that in the future the creditor nations would be prepared to play the game. Mr. Ras-minskv, and also the minister in the debates, emphasized the fact that the difficulties that we were referring to would, in his opinion, be a matter to be taken care of under trade agreements rather than under the Bretton Woods agreement.

I have here a copy of the proposals for the expansion of world trade which have been communicated to the United States. I understand that these are to be the basis for discussion when the conference meets. I turn to page 15, where the question of unbalance of trade is dealt with as follows:

2. Restrictions to safeguard the balance of payments. Members confronted with an adverse balance of payments should be entitled to impose quantitative import restrictions as an aid to the restoration of equilibrium in the balance of payments. This provision should be operative under conditions and procedures to be agreed upon. These conditions and procedures Then we go down to '(d), which reads:

(d) should provide for the full application of nondiscrimination in the use of such restrictions after the transitional period.

For example, take a nation that is suffering an unbalance of trade. Suppose the United Kingdom was able to maintain a balance of trade with the majority of the nations but had a serious unbalance of trade with the United States because the United States was not prepared to play the game, was not prepared to take Britain's exports in exchange for her own. Surely, in circumstances such as those, the United Kingdom would be absolutely justified in discriminating against imports from the United States in order to balance her own trade. Yet, according to this agreement, which is to take care of that very thing, we find that one of the great defences of debtor nations is removed and they are even worse off in that regard than they were before the agreement.

Loan to United, Kingdom

I certainly feel that the Bretton Woods agreement, instead of expanding trade, may very easily have the opposite result unless, as Mr. Rasminsky says, the creditor nations have a change of heart and are prepared to be good creditors in the future instead of the bad creditors they have been in the past. If they are not prepared to accept goods in payment for their exports, what is bound to be the result? The result is bound to be that nations suffering unfavourable balances of trade will consider policies of economic nationalism.. The Bretton Woods agreement may very easily bring about an intensification of economic nationalism. Apparently that has already taken place in the United Kingdom, and I wish to quote the Prime Minister of that country in that regard. I should like to quote from the British Hansard, page 26, column 25, where a question is asked by Mr. Norman Smith as follows:

Mr. Norman Smith asked the Prime Minister whether, in view of the difficulties in paying for imports, he will direct scientific research to the substitution of home-produced for imported raw materials used in British factories.

The Prime Minister (Mr. Attlee): The circumstances of war have already obliged us to do our best to substitute home-produced for imported materials within the limitations imposed by our natural resources. The government consider that these efforts should be continued both by the government and by industry, with the full support of scientific research, in such a way as will contribute effectively to the solution of our balance of payment difficulties.

The greater difficulty Britain has in balancing her trade, the more will that policy be intensified. The minister says that we do not need to use the proceeds of this loan only to buy British goods, that we can spend it in, the United States. That is certainly going to aggravate the situation, and that is why I am interested in knowing whether that is to be our policy, and whether the minister can intimate whether or not that will be the policy of the United States.

As I was saying, if the creditor nations fail to deal squarely with Great Britain, then Great Britain will be bound to default on this measure. I noticed when the chancellor of the exchequer, Mr. Dalton, praised the Bretton Woods agreement he concluded his remarks with the statement "Thank God there is an exit." That seemed a very funny thing for the chancellor of the exchequer of Great Britain to say when praising the Bretton Woods agreement. I think a person would be naive to suggest that you can sign an agreement in order to get certain benefits and, having got the benefits, you can withdraw. I do not think it will be quite so easy to withdraw. Otherwise,

we shall have people signing the agreement, coming in one door and' going out the other as it suits them, just running around in circles.

Topic:   LOAN TO UNITED KINGDOM
Subtopic:   APPROVAL OF FINANCIAL AGREEMENT SIGNED
Sub-subtopic:   MARfcH 6, 1946
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Did not the chancellor mean that if the United States loan agreement did not go through the United Kingdom would have to get out of the Bretton Woods agreement?

Topic:   LOAN TO UNITED KINGDOM
Subtopic:   APPROVAL OF FINANCIAL AGREEMENT SIGNED
Sub-subtopic:   MARfcH 6, 1946
Permalink

April 16, 1946