June 29, 1955


Clause agreed to. On clause 3-Schedule A further amended.


CCF

Frederick Samuel Zaplitny

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

Mr. Zaplilny:

Clause 3 of the bill refers to certain tariff items which appear in schedule B, and which are to become part of schedule A to the act, if it is passed. I would refer particularly to item 207c which refers to ethylene glycol and mixtures of ethylene glycol and other glycols in which ethylene glycol predominates, for use in the manufacture of antifreezing compounds. In the rate schedule there is shown a proposed British preferential tariff of 10 per cent, a most favoured nation tariff of 10 per cent, and a general tariff of 25 per cent.

When we were on the budget resolutions a few days ago I raised this question with the Minister of Finance and inquired why he proposed to place tariffs of 10 per cent and 25 per cent on an article or commodity which hitherto has had free entry. As I understand it, if it has been imported for the purpose of making explosives it has been on the free list since 1926. Since 1939 it has been on the free list for both antifreeze and explosive purposes. It is proposed to leave the ethylene glycol to be used in the manufacture of explosives on the free list, but to impose tariffs of 10 per cent and 25 per cent on the glycol used in the manufacture of antifreeze.

When I inquired of the minister as to the reasons for that, he expressed the preference that this question should be left until the bill was before the house. In order to accommodate the minister I did that. Now that the bill is before the house it is important that we give due consideration to this rather major change.

It is a major change in two respects, Mr. Chairman. In the first place it involves a commodity which is very widely used in Canada, particularly in the agricultural parts of Canada and perhaps more particularly on the prairie provinces, where antifreeze is a commodity that is used not only for domestic purposes by those who own automobiles and so forth but is also used in tractors, combines, trucks and all other vehicles that have to be

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exposed to below freezing temperatures. It is easy to imagine the great effect it might have on the price of antifreeze if this protection gives the Canadian manufacturers of antifreeze, or of the base product, ethylene glycol, an opportunity to raise their prices unduly.

I have gone over the tariff board hearings on this question, as suggested by the minister, and I am not too sure that we come to the same conclusions. Quite obviously we do not, because I am opposed to the imposition of this tariff. Apparently the minister is in favour of it. On going through the hearings before the tariff board we learn that there were originally two companies that made representations calling for the imposition of a tariff. Up until November, 1954, the two companies interested were the Dow Chemical Company of Canada and the Dominion Tar and Chemical Company of Canada. There was a slight change in the line-up in November of 1954, because Union Carbide Canada, which is a subsidiary of Union Carbide of the United States, purchased the plant owned by the Dominion Tar and Chemical Company in Montreal East, and then of course became directly interested in this product.

What is the result? Representations were made actually by three companies, but as a matter of fact there are only two companies now which are in a position to manufacture ethylene glycol in Canada. In addition to that, I am given to understand that Dow Chemical itself is a subsidiary of a United States company, which is Dow Chemical of Midland, U.S.A. So here we have the situation that at the present time two companies, both subsidiaries of parent companies in the United States, appear before the Canadian tariff board to argue for the imposition of a tariff on the base used in the making of antifreeze.

What are they asking? I turn to the evidence again, and I should like to read from the words of their own representative to show what they are actually doing. On page 55 of the evidence of October 5, 1954, Mr. W. T. Wood, who appeared for Dow Chemical Company of Canada, is reported as having given the following evidence. The chairman asked him the following question with reference to the brief which had already been presented:

I see these words "rightful share of the domestic market". If your cost is 17 cents (that is per pound) and the United States is 10 cents, and the tariff were such as to bring the laid down cost of the American product to 17 cents then you would have the entire market.

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Robert James Wood

Mr. Wood:

The entire market, which the present Canadian manufacturer almost requires.

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Mr. Chairman@

So, your meaning of "rightful

share" is the whole market?

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Robert James Wood

Mr. Wood:

Yes.

That is clear enough and categorical enough. What those companies are asking is that the imposition of the tariff shall have the effect of handing over to them, both now subsidiaries of parent companies in the United States, the whole Canadian market for ethylene glycol. That to me is a dangerous situation, because when we consider the possibilities of what two big manufacturing outfits of that nature can do, to combine and set up a virtual monopoly in that field and then push up the price of their product to suit themselves, we can see that it certainly would not be in the public interest to take the step which is being proposed.

What about prices? Nowhere in the evidence was I able to find that either of these companies that asked for virtually the whole Canadian market for ethylene glycol presented its balance sheet or statement of profit and loss. At one point there was some question asked as to the financial position of one of the companies, and they declined to answer. Of course it is their own business if they wish to keep their balance sheet confidential. I am not going to argue about that so far as the tariff board hearings were concerned. But certainly when the government proposes an increase in the tariff item dealing with ethylene glycol for the benefit of two companies that are out to get the whole Canadian market, according to the statement of their own representative, then I think we have the right to demand and have the balance sheets of these companies laid before us in order that we might know just what financial position they are in, and whether they are justified in asking for this protection.

As to the retail prices of antifreeze, there is quite a range. I am going to give the figures that were presented by the tariff board itself as the result of a survey that was made in 42 centres in Canada in 1954, as presented in their report. They found that the retail prices ranged from $3.95 to $4.25 a gallon. On going through the evidence further I found that the manufactured cost of ethylene glycol in Canada in 1954 ranged from $1.45 to $1.65 a gallon. That is the same product that, when mixed with a few detergents and other chemicals to turn it into antifreeze, retails at from $3.95 to $4.25 a gallon. That is a tremendous spread, and in itself would indicate that these companies are in a position to make a pretty hefty profit.

I should like to refer to some of the evidence of the representative of Radio Oil Refineries, who have a plant in Winnipeg

and who are in the business of what they describe as canning the antifreeze; that is, they buy the base product and put it through whatever process is necessary and put it into cans for the wholesale trade. They put it through whatever process is necessary in order to prepare it for the wholesale trade. Mr. Hechter, who represented Radio Oil Refineries Limited, was reported on page 74 of the submission as saying:

Today, when you have only two companies in Canada which manufacture ethylene glycol, if you put a tariff on, you set up a monopoly.

That is pretty strong language from one who is so intimately connected with the trade and who I think would be in position to know.

Whether you like it or not that is actually what is happening.

Then on the next page of the submission:

Ethylene glycol brought into this country has to be treated and handled before it is fit for automotive use. Therefore, Mr. Chairman, I am personally very much opposed to the restriction of free enterprise by placing this tariff on and if you place this tariff on you are going to jeopardize us in western Canada by giving us a higher cost.

That is a categorical statement which sets out the opinion of the representative of that company. Of course I have not dealt with all the evidence, in the interests of brevity and in an effort not to hold up the work of this committee. But I submit it indicates that there is a good reason why this committee should be very cautious about allowing this item to slip through at this time. The government has not attempted to make a case for the imposition of a tariff on ethylene glycol, and the companies which appeared before the tariff board certainly made out no case so far as their financial position was concerned.

It is reported that Union Carbide paid in the neighbourhood of $5 million for the plant of Dominion Tar in November, 1954, which would indicate that in making an investment of that size at that time they must have expected to be successful in selling their product. It certainly would not indicate that the market situation was such that these companies were suffering from undue competition from the United States.

As I said, the companies did not make out a case which was satisfactory to me or to anyone who is interested in the consumer of this product. So far the government has made out no case. The statements of the representatives of these companies make it quite clear that the motive or objective is to corner the Canadian market. Under those circumstances I would suggest that we would be wise to leave ethylene glycol on the free list as before.

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If the companies which have made this request will supply us with details of their financial position in an effort to show that they require protection in the future, then the matter can be brought before the house again. But on the face of the evidence given at the tariff board hearing and on the face of a situation where the two major companies in Canada are in position to form a virtual monopoly and restrict competition, I should think we would be well advised not to accept the proposal of the government. That is one ground on which this is a major change of policy.

Before I go on to deal with the other matter I have in mind I should like to mention that the tariff board report was not unanimous. Apparently one member of the board, I believe it was Mr. Leduc, submitted a minority report in which he opposed any change in the tariff items covering ethylene glycol and antifreeze. He stated his reasons for so doing, and that is an additional reason why the members of this committee should not at this time accept the proposal of the government. If one of the members of the tariff board who heard all the evidence given at all the meetings was not convinced as to the wisdom of this move, then certainly the members of this committee should hesitate before-

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William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

He was in favour of the increase; it was the decrease in antifreeze there was some dissent about.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplitny:

The gentleman who put in

the minority report stated that he was not in favour of any change in the tariff items which would remove ethylene glycol from the free list.

The other matter to which I wanted to refer as a major change of policy is the noticeable trend, to which my leader referred earlier, on the part of this government to-become more and more protectionist, to become a high-tariff government. I say that with a certain amount of sadness rather than anger, because there are many people on the prairies who over the years have been persuaded that the Liberal party is the low-tariff party of Canada. I can remember attending meetings where I heard politicians holding forth on the question of high tariffs or low tariffs. In those days it was quite clear that the Liberals and the Progressives, who later became the Liberal Progressives, were the advocates of free trade or the closest thing possible to free trade; were in favour of removing all restrictions, customs tariffs and so on, and then on the other side were the Conservatives, who were holding out for higher tariffs and greater protection.

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A sort of pattern or mould was established in western Canada, and I think the government will admit that there was no question as to which political philosophy the people of the prairie provinces favoured. For example, when the Progressive party came out as a strong free trade party, one of the strongest we have ever had since the early days of the Liberal party, they swept the prairie provinces and their representatives in this house did a grand job in trying to remove as many restrictions as possible to international trade. But as time went on and others came along that was brushed aside or forgotten, but there still lingered in the minds of the people out west the belief that the Liberal party was the low-tariff party and the Conservative party the high-tariff party.

That this no longer is the case is quite unmistakable. Going back to 1953 we had Bill No. 29, which was the foot in the door, the thin edge of the wedge. That bill placed the Minister of National Revenue in the position of being able to virtually dictate what the customs duty shall be on particular items attempting to enter Canada. We have had it in his own words that that bill was instrumental in raising the duty on certain items that entered Canada and had prevented perhaps an indefinite volume of goods from entering this country because those who wished to export to Canada, particularly from the United States, could not know just what the duty would be. That uncertainty prevented them from attempting to send their goods into Canada. I hope I am correctly interpreting what the minister said.

As time went on we had another bill passed in the course of this session which gave the Minister of National Revenue some extra power along the same lines. Now we have this tariff item which places an impost upon a commodity which is very widely used across Canada, particularly in the west.

The thing that bothers me is this. Much as I disagree with the philosophy with respect to tariffs of my friends of the Progressive Conservative party, I must admit that I have a little more admiration for the way they go about it than I have at the present time for the Liberal party. I say that not in a spirit of bitterness, but in a spirit of sadness. At least the Conservative members make it clear that they believe in higher tariffs and they have no objection to big business getting bigger and better protection.

That is fine. Even big business is entitled to representation in this house. In a democracy everyone is entitled to be represented. Anyway, they state their case. As I say, I disagree with it most heartily. But what is the policy now of the Liberal party? They

do not come out and say to us, "We have decided to become as conservative as the Conservatives have become progressive. We are now going to take a certain part of the Conservative policy and put it into our statutes by raising the tariffs on seven items, and we are going to stand by it." They sneak these tariff increases in through side doors, through the back door, through the chimney and everywhere except through the front door, with the exception of the one we are now discussing, which gives us an opportunity to face the situation.

For example, clause 1 of this bill, which gives the Minister of National Revenue almost indefinite and infinite discretion, is merely a back-door method-I was going to say a sneaky method, but I do not like to use that word, though perhaps it would be more explicit-of doing the same thing which they have denounced the Conservatives for attempting to do in the last two or three days.

It is time the people of this country knew what was going on and came to the realization that, so far as the party which supports the government is concerned, it is no longer the low-tariff party. Any resemblance between liberalism and the present Liberal party is purely coincidental. It has become a restric-tionist, protectionist, high-tariff outfit and is doing the same things it has denounced the Conservatives for doing, but it is doing them chiefly through the back-door method. However, in this item they are doing it openly.

I say these things because a great deal more than tariffs is involved. What happens when we allow this government to increase the restrictions on imports? They benefit huge industrial concerns like the two to which I have referred, which are in a perfect position to form a combine and monopolize the whole field, and even have the temerity to state before the tariff board that this is their objective. If the government are doing that in order to assist them to corner the market, they are being the handmaidens of monopoly in this country.

That is also a trend which is causing many of us concern. Not long ago the Minister of Trade and Commerce played his part in the setting up of a pipe-line combine, which has been his problem child ever since. Now we have the government assisting in the setting up of an antifreeze combine which, if predictions work out, is going to result in a much higher cost of antifreeze to the consumer in Canada.

On the basis of all these things it is time the private members of this house-and not only those on this side of the house-protested. As a matter of fact I do not expect

much support on this from my Progressive Conservative friends, because I think they are in favour of this tariff. I sensed that; but I shall leave that to them. Certainly my friends to the left, of the Social Credit party, and about 50 per cent of my Liberal friends across the way should be on their feet fighting this instead of sitting back and letting the government assist two big companies, both subsidiaries of companies in the United States, to corner the Canadian market for this commodity and bring the price up to suit themselves.

I should like to hear some of these free traders from the prairies raise their voices. I should like to hear a storm of protest before this session ends, so that for once the private members of this house, regardless of where they sit, will tell the government what they think of its tariff policy.

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William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

Mr. Chairman, may I

reply at once to the hon. member for Dauphin? He has informed the committee that he has read the tariff board report in which these three tariff item changes have been recommended. I am surprised, however, that having read it, he could so badly misread it and particularly misinterpret it to the house. I believe he has the document in his hand, and I ask him again to read the minority report to which he referred.

I would point out to him that the board was unanimous in the matter of recommending a flat 10 per cent on the ethylene glycol in both the pure and the impure type. The board split two to one in favour of the reduction from 20 per cent to 15 per cent on the antifreeze the finished product the consumer uses, which this government has implemented in item 207d. The antifreeze compounds, with which his constituents would be chiefly familiar, were reduced from 20 per cent to 15 per cent.

I would emphasize to the house that there is no net increase of protection in this field. There is merely a rearrangement of a group of rates that previously were rather unbalanced. The tariff board so recommended. This statement can most clearly be substantiated by the fact that these were items that were covered by a GATT agreement.

Hon. members will recognize that the chief contracting party affected in the most favoured nation group would, of course, be the United States. In order to make a readjustment of this item, following the tariff board report, it was necessary to approach the United States and do some negotiating. The United States was prepared to make a trade, under which they accepted an increase in item 207c from the rate of free and 20 per cent to 10 per cent in return for the

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reduction from 20 per cent to 15 per cent on the antifreeze. In addition to that, I would point out to my hon. friend that there is an additional reduction in tariff of some consequence, in item 207c ethylene glycol and mixtures of ethylene glycol, because when in less than the pure state, there will now be a tariff reduction from 20 per cent to 10 per cent.

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CCF
L L

William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

Item 207c. If he looks at the resolution as presented to the house on June 2 he will see not only the proposed rates but the former rates. As I say, the new tariff has the effect of reducing the rate on ethylene glycol mixtures containing less than 97 per cent of ethylene glycol from 20 per cent to 10 per cent in the case of the most favoured nation, which is the trading area of importance in this field.

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CCF

Alistair McLeod Stewart

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

Mr. Stewart (Winnipeg North):

Could the parliamentary assistant give me this information? Last year how much glycol was imported as such, and how much of the compound was imported?

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William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

That again is a very interesting figure. I think the figures do not in any way bear out the argument of the hon. member for Dauphin that these changes on balance represent an increase in tariff. With respect to the finished product-and this budget brings in a reduction with respect to antifreeze-our imports last year from the United States were something in excess of $2 million. With respect to ethylene glycol mixtures, with respect to which there is an increase, our imports amounted only to $850,000.

In addition to that, in reading the report my hon. friend pointed to the fact that the producers of this product in Canada went to the board and asked for increases, but he did not tell the committee that one of the companies asked for a tariff of 40 per cent and, as you know, the recommendation of the tariff board and the recommendation of the government on this item is 10 per cent.

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LIB

William Alfred Robinson (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The Chairman:

Shall clause 3 carry?

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplitny:

No, Mr. Chairman. I want to thank the parliamentary assistant to the minister for the correction he made. I had referred to Mr. Leduc in the wrong context but, Mr. Chairman, the parliamentary assistant did not reply at all to the argument I made. He pointed out a few of the obvious things. For example, no one argued that there was no reduction on the finished product. I made no reference to that at all, and therefore there was nothing there to argue about.

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William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

You ignored it.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zapliiny:

We have not yet reached the item, as a matter of fact. I am now speaking of item 207c. The other one is item 207b. I am quite prepared to come to it if that is necessary. As a matter of fact I did not state that there was no reduction in the mixtures he referred to on which the tariff was not increased. What I was arguing about was simply why it was necessary to raise the tariff on imports of ethylene glycol to the extent of 10 per cent, 10 per cent and 25 per cent when it was previously on the free list. I asked the parliamentary assistant to make a case for that. He did not make or attempt to make a case at all on the actual argument I put forward.

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William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

What was the reference of my hon. friend when he refers to an increase from free to 25 per cent?

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CCF

Frederick Samuel Zaplitny

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

Mr. Zapliiny:

Ten per cent, 10 per cent and 25 per cent. That is under item 207c.

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William Moore Benidickson (Parliamentary Assistant to the Minister of Finance)

Liberal Labour

Mr. Benidickson:

My hon. friend when he used the 25 per cent rate is referring to the general tariff under which we do no trade in this item.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zapliiny:

Either we are not reading the same document or something is wrong here. I am speaking now of item 207c.

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June 29, 1955