April 16, 1946

SC

Victor Quelch

Social Credit

Mr. QUELCH:

He was not referring to trade agreements; he was referring to the Bretton Woods agreement. He was discussing the Bretton Woods agreement at that time and saying that if they came under the agreement and got into difficulty, they could always withdraw, that, thank God, there was an exit.

I am suggesting that if we wait until they reach the point where they have exhausted their quota and are not able to meet their obligations, then they are going to be in a far more difficult situation than they would have been in if they had refused to go into it in the first place and adopted measures within the sterling bloc. The hon. member for Temiscouata (Mr. Pouliot) stated the other day that we should have demanded security from Great Britain. I say to the hon. member that that would be altogether too crude. Public sentiment being what it is, there still being present the fervour of war, the people would not like it if we were to say to the United Kingdom, "We will give you this loan if you give us security, say in the form of some of your colonies or certain islands."

I would point out to the hon. member that that sort of thing is pretty well taken care of in the Bretton Woods agreement, but it is done in a more subtle way. If a nation defaults under the Bretton Woods agreement and cannot meet her obligations and has used up her resources, if she has exhausted her quota and cannot meet her obligations with gold, she will have to get a loan. When a loan is given to that nation security may be taken for the, loan. I suggest to the hon. member that that is the time that security will be demanded for the loan. That time would be several years after the war, and probably there would not be quite the same reaction throughout the world that there would be now if a nation demanded security.

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

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

It would be ruinous to Great Britain.

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

Victor Quelch

Social Credit

Mr. QUELCH:

I do not think the hon. member for Temiscouata was worrying very much about whether it would be ruinous to Great Britain.

Loan to United Kingdom

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

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

I am afraid he was not.

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

Victor Quelch

Social Credit

Mr. QUELCH:

Personally I would be opposed to the giving of security. I have criticized some of the things the Minister of Finance said, but I should like to say now that I agree with him 100 per cent when he says that after this war the people of Canada should have a higher standard of living than they had before the war. The standard of living should be higher than they had or ever dreamed of. We have a much greater plant capacity than we had before tlie war, and we have far more skilled labour. It is merely a question of applying that skilled labour to our resources in order to give the people of this country the highest standard of living they have ever had. In this regard I should like to refer to a statement made by the hon. member for Muskoka-Ontario, and I quote from page 773 of Hansard of April 11, 1946. Speaking on behalf of the Progressive Conservative party and referring to this loan, he said:

We have become so accustomed to these fabulous and astronomical amounts that we are getting to feel they are just figures in books, and some people tell us that they are just figures in books.

I should like to interject and say that if he had us in mind he was wrong. At no time have the members of this group ever suggested that exports were figures in books. We have always criticized the policy of exporting without taking imports in return, because it means an absolute loss of wealth. We believe that the proper function of trade is the exchange of goods. We are not prepared to support international trade on the basis of making foreign investments in other countries which very often are later repudiated. The net result is that you have made a gift and have lost some of your wealth. To go on with what the hon. member said about the loan:

Why do we do that? Do we do that just to make ourselves good fellows, because we are generous-hearted? No. Why do we do it? All hon. members know why we do it. I ventured to say last autumn when the exports credits were up that we could not afford not to afford them. I say the same thing about this amount. Why do I say that ? What do I mean when I say it? All hon. members need to do is to look back over the last fifteen years. They do not need to go another step backward to see what foreign trade means in the life of this country. We remember the figures of 1929. Our exports amounted to something like $1,400 million. Then it went down in 1933 to little more than one-third of that amount. I believe it was $534 million.

I think the hon. member for Muskoka-Ontario was confusing effects with cause when he made that statement. It is true that our

trade was low in that period but prior to that falling off in trade we had a heavy restriction of credit, a deflationary policy was imposed. A statement was made by a former minister of finance, Mr. Cahan, that that restriction was somewhere in the neighbourhood of $900 million between 1929 and 1932. Certainly a deflationary policy was in operation throughout the world. People did not, have the money with which to buy goods and therefore imports were not brought into this country. Then the hon. member for Muskoka-Ontario went on to deal with the question of conditions in Canada. He apparently did not agree with the Minister of Finance. He had this to say:

We taxed ourselves to the extent of about two and a half billion dollars, and on top of that we borrowed almost another two and a half billion dollars. In various other ways the minister managed to raise about another $500 million. Altogether we took out of our pockets about $5,500 million. The result was we were all rich. We all had money in our pockets. There is great danger lest we feel somehow or; another that these good times with these fabulous amounts can just go on. The truth of the matter is that we are like a man who had an income of $2,500 and then borrowed $2,500 and spent the whole $5,000 in one year and said, "This is grand," and did not bother very much about what is to come afterwards.

The Minister of Finance smiles.

I certainly do not blame the Minister of Finance for smiling because a statement like that would be enough to make a horse laugh, let alone the Minister of Finance. Why do I say that? I say it for this reason. The condition of a man who borrows an amount equal to his income and then spends the whole amount is not in any way analogous to the position of Canada. For that to be analogous to the position of Canada would mean that this country would have had to [DOT]borrow the amount of its income of $9,000 million and then spend that in addition to its own income of $9,000 million.

Was that the situation? Not only did Canada not borrow externally; I believe she lent a small amount of money to other nations. But note her borrowings were internal. Therefore, after the war, if other nations repay us what they owe us we shall be able to spend our own income plus the income of those other nations which they pay us on account of their borrowings. I know what the hon. member for Muskoka-Ontario had in mind. He was thinking that Canada has borrowed large sums of money. But she has not borrowed externally. For the position of Canada to be analogous to. the case cited, Canada would have had to borrow from other nations. What is the situation? Canada borrowed in-

Loan to United Kingdom

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:

Would the hon. member be good enough to repeat those questions?

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 Canada be prepared to accept goods from the United Kingdom in repayment of loans? How will the United Kingdom maintain convertibility of the pound if Canada and the United States do not provide the United Kingdom with dollars by purchasing British goods to the extent of the British credit?

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:

As the hon. gentleman

pointed out, I indicated in my speech that we did not intend that there shall be in the forseeable future an adverse balance of trade, adverse to Canada as between Canada and the United Kingdom; but it is not necessary that there should be adverse balance of payments as between Canada and the United Kingdom in order to enable the United Kingdom to repay the loan. It is the essence of multilateral trade-

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

Victor Quelch

Social Credit

Mr. QUELCH:

But how will she pay? She will have to obtain dollars from the fund and she can do so only up to a certain quota. If she exceeds the quota, what will she do? The only way in which she can replenish her supply of dollars will be to sell goods to Canada.

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:

She can pay for Canadian goods by exports to other countries as wrell as to Canada. Under a multilateral trading system and convertible currencies-

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

Victor Quelch

Social Credit

Mr. QUELCH:

She has to maintain a favourable balance of trade.

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:

Yes, that is true. If Great Britain gets into a heavily indebted position, and she is now, she must expect to expand exports and have a favourable balance of trade, and the creditor countries, as the hon. gentleman has said, must recognize their obligations to take imports on a large scale.

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

Victor Quelch

Social Credit

Mr. QUELCH:

Yes. Well, when she obtains funds from other sources she can exchange them for United States and Canadian dollars; but if the United States and Canada are not accepting goods from other nations in payment the fund will be short of United States

dollars and the United States will have to make loans. That means a further increase of debt. There should be some way whereby nations can liquidate debts without being forced into further debt to do so.

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:

I do not follow the hon. gentleman at all. Suppose the creditor countries accept goods from other nations- not necessarily Canada accepting goods from Great Britain in great quantities-if countries like Canada and the Unted States, specifically the United States, which is really a creditor country, accept goods from other countries so as to make United States dollars available to the world, and the United Kingdom has a favourable balance of trade with other countries, the United Kingdom thereby acquires the necessary United States dollars to meet its interest payments to the United States, and the same may apply to Canada. The only point of difference that I can see is that the hon. gentleman seems is be tying it down to one country dealing with another.

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

Victor Quelch

Social Credit

Mr. QUELCH:

After all, the only way for the countries to obtain United States and Canadian dollars is to have a sufficient quantity in the fund to enable them to replenish their supply of United States or Canadian dollars. If the United States is to continue to maintain a favourable balance of' trade, United States dollars are bound to become scarce in that event, and the United Kingdom will not be able to obtain them. When that currency becomes scarce that nation can apply for a loan.

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:

Yes.

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

Victor Quelch

Social Credit

Mr. QUELCH:

Does the minister really feel that the policy of Canada and the United States in the future is to be as Mr. Razminsky pointed out, one that shows a change of heart? Is the minister prepared to recommend a policy of real trade? Are we to accept goods in payment for goods, or are we more interested in exchanging our goods for foreign securities?

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:

I cannot answer for other nations; but certainly the United States has been following a very much different policy in recent years, not so much a different policy, as expressing different views, liberal trade views, in recent years, as compared with a number of years ago. That is set out in the speech that Lord Keynes made in the House of Lords. I have not it here but he expressed it very well.

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

Victor Quelch

Social Credit

Mr. QUELCH:

Let us take Canada alone. Will the minister say that the future policy of Canada would be one of trying to balance

Loan to United Kingdom

trade rather than one of maintaining a favourable balance of trade? I realize we have t'o maintain a favourable balance of payments for a while in order to meet certain foreign obligations. Will the policy be one of a balanced trade rather than one of maintaining a favourable balance?

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:

We have repeatedly said that we must look forward to a policy of increased imports. Of course Canada is still a debtor country. It is not a creditor country yet even if we count these loans. The important fact that puts Canada in that position is the heavy United States investments in Canada, the large amount that our citizens owe United States citizens.

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

April 16, 1946