Right Hon. W. L. MACKENZIE KING (Prime Minister):
Mr. Speaker, I wish to give the house a statement on trade and financial arrangements between the governments of the United Kingdom and Canada, for which hon. members have been waiting.
As the house is aware, it was recently agreed with the United Kingdom government that a mission should come to Ottawa to discuss the trade and financial arrangements between the two countries, with special1 reference to the United Kingdom's purchasing program of Canadian supplies in 1948.
The mission, headed by Sir Percival Leisching, Permanent Secretary of the Ministry of Food, arrived in Ottawa on the 25th November. There has since been held with them a series of most valuable and comprehensive discussions covering the whole field of our trade with the United Kingdom, and I am happy to announce that as a result of the exchanges which have taken place agreement has now been reached with the United Kingdom government on all matters under review.
Both countries at the present time face a common difficulty, namely, a shortage of United States dollars. From the Canadian standpoint, this and other factors limit the extent to which the balance of the credit, provided for under the Financial Agreement Act of 1946, can be drawn on in order to make supplies available to the United Kingdom. Canada has made a very great effort-not exceeded by that of any other state-to assist in the restoration and reconstruction of countries damaged and destroyed by war. But she cannot continue indefinitely to export on credit, and import for cash. From the United Kingdom standpoint, her own shortage of hard currency equally limits the extent to which she can afford at this time to make payment in dollars for goods supplied from Canada.
The discussions with the United Kingdom mission centred around (1) the necessity for Canada of maintaining a balanced agricultural program and (2) the basic dollar difficulty in both countries. However, though there may have been a shortage of dollars on both sides, there has been also on both sides a surplus of good will and mutual understanding. Also, if there has been a common difficulty, there has been a common objective, the maintenance at this time and the extension in the future of a stable and steady market in the United Kingdom for Canadian farm produce. This means a restored and vigorous economy in the United Kingdom and a steady rise in her industrial production and exports. It means also a prosperous Canadian agriculture, the value of which has become increasingly realized in the United Kingdom during the war and post-war years.
Canada wishes to continue to send to the United Kingdom all those supplies of foodstuffs and raw materials which are playing such a vital part in sustaining the United Kingdom's reconstruction program. The United Kingdom's need for such supplies, in order to maintain the progress now visible in her recovery, is so strong and compelling that any interruption at this time would have very serious consequences.
In the arrangement for the provision of supplies, however, Canada has not been asked and will not be asked to go further than her financial situation permits. Likewise the United Kingdom will itself decide how to dispose of its present limited financial resources in the way most effective for its recovery.
It is in this spirit of mutual interest, mutual understanding and mutual assistance that the discussions have been conducted. It is in the same spirit that agreement has been reached.
The agreed arrangement provides for the continuance of the wheat agreement with the United Kingdom and for the continuance and renewal of the contracts for livestock products at prices adjusted accordingly. Thus the balance of Canadian agricultural production will be preserved, and there will be no interruption in these supplies to the British market.
The arrangement also provides for continued supplies to the United Kingdom of certain raw materials needed for reconstruction purposes, in particular timber and non-
ferrous metals, though the quantities have been adjusted in relation both to United Kingdom needs and the demands for these products from other countries.
In estimating the probable trading deficit on this basis, account has been taken of the increased exports from the United Kingdom and the sterling area which, following these discussions, are expected to be made available for the Canadian market during the coming year. The arrangement provides that in the three months period up to the 31st March next, the expected deficit of 145 million dollars should be financed by drawings on the Canadian credit up to 45 million dollars and by the payment by the United Kingdom of 100 million dollars. Our government will review the position at the end of the three months period.
A statement substantially similar to this is being made today in London by the United Kingdom Prime Minister.
Subtopic: CANADA-UNITED KINGDOM-TRADE AND FINANCIAL ARRANGEMENTS-1948 U.K. PURCHASING PROGRAM