What is the difference?

Mr. Pearson:

This is a pretty serious subject, Mr. Speaker, and I think my hon. friends opposite might at least listen to it seriously. I forgive however, the exuberance which often descends upon them at this time of the evening.

Take the defence aspect of this economic co-operation. We have been discussing in this house in recent days the necessity for treating defence on a continental basis. My hon. friend the Minister of National Defence (Mr. Pearkes) had some things to say on that subject the other day and we all agree that in this aspect of defence-the military and

strategic aspect-it must be treated on a continental basis and that there must be the closest co-operation between the two countries. Perhaps indeed that co-operation should, in certain circumstances, extend to integration. But the economic aspects of defence so far as Canada is concerned at times seem to be treated by our neighbours to the south-by the United States-on a purely national basis. I suggest that it is going to be increasingly difficult to deal with defence in its military aspects, continentally and in its economic aspects, nationally.

We have a very good example of this position in NORAD. As contrasted with the United States emphasis, and it is quite proper emphasis, on the building up of NORAD on a continental basis; in contrast with that emphasis, there is United States national action taken in the field of oil imports into that country from Canada. I suppose in NORAD the planes under that command will operate under a joint continental command but the gas used by those planes, if they are United States planes, will be United States gas only; if commercial considerations seem to make that necessary. There is a pretty startling contrast between United States economic and strategic approaches in this respect.

It is going to be difficult to deal with our defence strategy on a joint basis and to develop our resources for defence on a national basis. I think this is something which should secure the preoccupation and attention of those in positions of responsibility, not only in this country but more particularly in Washington.

When in years gone by the United States took steps to interfere with our exports to that country in a way which we thought was unjustified, and perhaps at times almost irresponsible, we were urged by my hon. friends opposite when they were over here to stand up to the United States. When we mentioned, as we often did mention, the notes of protest which were sent to Washington on occasions like these a good deal of scorn used to be poured on those notes and it was said that all we did was to write notes and we were asked why did we not take action, retaliatory action.

I remember the eloquent invective that used to be hurled at us on such occasions, but what has happened in the last six months with respect to economic relationships with the United States? We know what has happened. Almost on the morrow of the election statements were made, by the Prime Minister (Mr. Diefenbaker) in particular, regarding a contrived diversion of trade from

the United States to the United Kingdom and commonwealth markets. The Prime Minister made a statement which caused a good deal of interest and a good deal of excitement at that time. If I may lapse into the metaphor of baseball he threw a fast ball-a high hard one-which was immediately knocked over the fence by the United Kingdom through its late chancellor of the exchequer when he made his free trade proposal. Nothing much has been done about these free trade proposals and I may have something to say on that subject a little later.

However, the statement and the attitude of the government in regard to the removal of trade from the United States to the United Kingdom were not, I am sure, overlooked in Washington and perhaps may have had a greater effect on the attitude of the administration towards Canadian economic problems than we would like to think. Be that as it may, the government attempted to recover from this free trade knockout by sending a mission to Washington which, as I have already stated in this house, consisted of the four members of the cabinet who were described by one organ of the press as the power hitters of the administration. We know what happened to that mission.

We got a very comforting statement in the house a few months ago about the effect of the mission. The Minister of Finance (Mr. Fleming), and I am sorry that he is not able to be in his seat tonight, gave us to understand in the house and certainly in the communique which was issued upon their return from Washington that this time something really had been accomplished, that they had now secured a commitment from the United States administration which would be a great help in our trade relationships in the future.

What has happened since that time? As was pointed out in the house the other day, the United States secretary of agriculture is about to appear before congress which will be convened in Washington today with a request for a very large additional sum of money to encourage United States agricultural exports. When that was mentioned in the house the other day the Minister of Trade and Commerce (Mr. Churchill)-his comforting words were re-echoed this afternoon by the Secretary of State for External Affairs (Mr. Smith)-indicated that he did not think this additional sum to help the United States dispose of their surplus food products was going to harm us very much. We will see about that.

Only the other day, and this has been referred to many times since, the United States administration put on its 15 per cent restriction or, if you like 15 per cent diversion, of

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Canadian oil imports from Canada to domestic producers. In that regard it is perhaps interesting to recall that in 1956, while we exported $106 million worth of oil products to the United States, we imported $270 million of oil products into this country. Consideration might be given to that unbalance when the government is wondering what could be done about the 15 per cent restriction.

When I mentioned this matter the other day in a question addressed to the Minister of Finance I asked him if he realized-I am not quoting exactly my words-that twice in recent years the administration in Washington had taken action to restrict imports of oil into that country and that on both occasions Canadian imports were excluded by agreement from that restriction as a result of our diplomatic representations, formal and informal, in Washington. On this occasion, however, the action was taken in such a form that our oil was included with the oil from other countries which was to be restricted.

While that is a depressing indication of the lack of success of the diplomatic methods of the present administration in its dealings with Washington there is a real danger of further and even more serious action being taken against our exports. I suggest, and I think it is fair to suggest this, that the talk here in government circles-the official talk and unofficial talk of diversions from the United States to the United Kingdom, desirable as that diversion may be in principle to correct the imbalance of our trade-of that, and especially the 15 per cent proposal, is giving ammunition to those people in Washington and out of Washington in the United States who are contemplating in their own interests further action against Canadian imports. It is quite easy to realize what they will say when they go to Washington in their pressure groups-"The Canadians are looking after themselves, they are arranging to take away our exports to Canada. All right, surely we are not going to be so tender about their exports to this country". Perhaps before long-and I hope it will not happen-there may be action taken down there which will be very dangerous to our trade in base metals and fish products, and if that action does take place-

I bet you hope it does.

Mr. Pearson:

That is a very unworthy observation. No member of this house, unless he is inspired by the lowest partisan considerations, is going to take any satisfaction from any action, whether on the part of the United States government or of another government, which interferes with our trade and our welfare. I am pointing out that as a result of the policy or lack of policy carried out by this

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government ammunition may have been given to those interests in the United States which in recent years have been trying to increase the protection of United States tariffs against certain Canadian exports to that country. This is not new, this proposed action, and I refer again to base metals and fish products. This has been before their tariff board before but it has been possible in the past to bring influence and friendly pressure to bear on the United States government to assist those down there in Washington who were opposed to this kind of action.

Now surely it is fair to say that if emphasis is placed by the present Canadian government upon proposals to take away trade from the United States and divert it to the United Kingdom it is going to be hard to keep at bay and in check those forces in Washington which if they are successful will bring about a greater interference with our exports than anything that has happened up to now with regard to base metals and fish products. If this does happen I do not for one moment say this government is directly responsible, but I think it is fair to say that the policy they have adopted and the attitude they have taken will make it more difficult to prevent such action and, therefore, they will have to take that measure of responsibility for the action if it occurs. I repeat, Mr. Speaker, that I hope the government's intervention will be successful and that the action will not be taken.

Mr. Green:

May I ask the hon. gentleman a question? What did he and his government do to right the adverse balance of trade between Canada and the United States.

Mr. Pearson:

That is a perfectly good question, Mr. Speaker, but I suggest to the leader of the house that the adverse balance would have been even greater if the United States government had not been able to resist the measures proposed to it to interfere with our exports of fish products and base metals to that country over the years. The balance of trade situation was bad, but it would have been far worse if we had adopted the attitude and policies which the hon. gentlemen are suggesting.

Let us take another crack at the ball.

Mr. Pearson:

I have not been struck out yet.

Two strikes on you.

Foul ball.

Mr. Pearson:

If we can abandon just for a moment this baseball terminology, which I confess I introduced myself, I suggest also that this attitude of the present government, which

of course is not one on their part of any unfriendliness, deliberate or otherwise, toward the United States; this attitude of uncertainty, confusion and diversion of trade from the United States and the lack of knowledge as to where we stand in these trade matters is bound to have an adverse effect on investment in Canada from abroad. The figures prove- I do not need to labour the point-that investment from abroad and particularly from the United States and the United Kingdom is of great importance to our future development. We have heard a lot in this house in recent years about the political and economic dangers of United States financial penetration of this country, and indeed there are dangers attached to it. There is no doubt about that. But I suggest, also, that this investment from the United States in Canada in recent years has been an indication of the confidence of the people of the United States in the development of Canada as Canada and not as a satellite of the United States. If we had not had that kind of investment in recent years, not only would we have been in far greater difficulty than we were over our trade balance on the whole but the entire pattern and basis of our development would have been altered and would have been slower; and I do not know anybody in Canada who would now say we should have slowed down that development.

Therefore it is important to maintain this atmosphere of confidence in Canada which has had such a marked effect upon investment in Canada. We can and we must protect ourselves against pressure, political and economical, from foreign investment from any quarter, and the only quarter where those pressures are likely to be of importance is I admit, the United States. But I think we should be very foolish and very short-sighted if we in any way brought about an atmosphere which would discourage the participation of American investment in the future development of this country. If we did it would slow down development, and the slowing down of development would mean the speeding up of unemployment.

The Minister of Public Works (Mr. Green) has mentioned the imbalance in our trade. Over the years we are bound to recognize that this has become a problem. It would be foolish to underestimate the seriousness of that problem. It would also be foolish to exaggerate its dangers and its significance in recent years at a time of great capital development and expansion in this country, an expansion which could not have taken place without the import of capital which, in effect, covered that imbalance in visible trade. We ought to be accustomed in

this country to imports and exports not balancing. They have never balanced since confederation. I have been reading, as no doubt some other hon. members have been reading- I am sure members of the C.C.F. party have read it-a very interesting pamphlet put out by the labour research department of the Canadian Labour Congress, the editor of which is Dr. Forsey, a man not notable for his excess of friendliness toward the Liberal party. On the question of unbalanced trade and how did we pay for this imbalance, this gap between our exports and our imports, he said:

We didn't. We borrowed. Canadian individuals, businesses and governments bought a whacking lot of goods and services on credit. We borrowed, of course, mainly from the Americans, because they have the most money, because they are the nearest, because they know the most about the possibilities of profitable investment here, and because they provide the biggest effective demand for the things we can produce by developing our new resources.

And incidentally, when we develop those new resources, as we are, from funds supplied in part from outside our country we are by that fact increasing our exports to those countries from which we got the money in the first place. Dr. Forsey goes on:

Borrowing on such a scale (almost $3 billion in the last four years) makes a lot of Canadians very uneasy, to say the least. Surely it's not healthy to go into debt like this?

The first answer to that question is that we have done it before, and survived.

The second, and main, answer is that the healthiness or otherwise of borrowing depends on what you do with the money. The spendthrift borrowing for a lost weekend is one thing: the businessman with a solidly based business borrowing to expand that business is another and very different thing.

And that is what we have been doing in this country in recent years. Then, he says:

There can be little doubt that Canada is the businessman rather than the spendthrift. We are borrowing to develop our resources. They are rich resources, and there is every prospect that most of the developments will pay handsomely.

No doubt it would be better if we could do the developing ourselves, without having to borrow. Then we should not have to pay interest or dividends or repay principal to external investors. But the plain fact is that, unless we are prepared to slow down our development, or finance it all ourselves, we cannot get along without large borrowings from the United States.

Are we prepared to slow down our development? It would be interesting to find anyone who would say yes.

Therefore, Mr. Speaker, I suggest that the proper policy to follow in these matters is not to create an atmosphere which will restrict trade or restrict investment but to create an atmosphere which will encourage investment and encourage expansion to all trade areas; not diversion but expansion. It seems to me, Mr. Speaker, that there has

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seldom been a time in our history when trade expansion was more necessary than it is at this time of slackening and reduced employment. That this is occurring is undeniable. We know the figures for mid-November were 352,000 unemployed and I suppose they are higher now. Indeed a Conservative member of the provincial legislature in Toronto-I quote him because he will not be suspected of betraying the country or rocking the boat-has prophesied that before March we shall have 800,000 unemployed. I hope he is wrong.

When we mention this problem of unemployment in this house we are accused -we have been accused-of trying to create a panic and increase a problem which is already serious enough. I suggest, Mr. Speaker, that that reaction to our efforts to bring this problem to the house and to the country is an unworthy one, I only have to recall to hon. gentlemen opposite their own fulminations and their own doom and gloom speeches in 1954 and 1955 when the situation was not as bad as it is now.

If we call attention to this problem, this very human problem behind the statistics, and if we call attention to its relationship to trade, to expanding and not restricting trade, it is so that in this parliament we may be able the better to do something about it and to encourage the government to bold, resolute, imaginative and wise action. I, of course, admit, as all hon. members must admit, that they have done something. They have primed the pump; they have encouraged construction, and all these things are good as far as they go. But they have not gone far enough yet to meet the problem which is looming up ahead of us, and I suggest they will have to take bolder and more imaginative action than that before the winter is over. I suggest also that this problem of unemployment will be increased in this country if we are not given stable, wise, constructive economic and trade policies which will create that atmosphere of confidence at home and abroad which could be the basis for our future prosperity as well as that for dealing with our present difficulties. We will not do that, Mr. Speaker, if we talk about diversions and restrictions or if we talk about action to reduce foreign trade by keeping out foreign goods in the interests of domestic employment.

We have had periods of recession and depression in this country before and one which we are not likely to forget; but surely we must have learned from the experience of those days that that kind of restrictive,

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panicky protective, policy does not aid employment. In the long run it creates unemployment and I hope it will not be followed by this government.

May I suggest one area where perhaps there is a possibility for imaginative and bold action, the effect of which may not be felt immediately but would be felt before long, and that is our trade relationships with the West Indies, the new federation of which was born just the other day. I know that we in this country have done a great deal for undeveloped countries, perhaps not nearly as much as we should or could do; we have made a respectable contribution to what we call underdeveloped areas. We have such an area close to home, materially and economically underdeveloped, in the West Indies. Perhaps it would be worth considering whether we cannot tie that new part of the commonwealth, as it soon will become, more closely economically and financially, to our own country, Canada, by exploring the possibility of free trade between the West Indies and Canada, or a freer trade area, and by tying up our two currencies, which would encourage trade and transport between us. I throw that out as merely one suggestion.

As to what can be done so far as the free trade proposal of the United Kingdom is concerned, we do not know where we are in that matter at all. We have asked and asked and asked what progress, if any, has been made, what consideration has been given to it. We know that the Minister of Trade and Commerce was in the United Kingdom for three weeks. We know that he saw the prime minister, the chancellor of the exchequer and the president of the board of trade. We know that he did not mention the British free trade proposal in those interviews because he said so. We know that the Prime Minister was in the United Kingdom and he met the United Kingdom leaders in Paris. He said he was not able to discuss this matter with them at the time. We know that the president of the board of trade is on this hemisphere at the present time but he is in Venezuela rather than in Ottawa. We know that the prime minister of the United Kingdom is going around the commonwealth at this moment but he is not coming to Ottawa to discuss the British free trade proposal. I suggest that one of the most astonishing things that has happened in the last six-months period in which my hon. friends have been in power is this proposal that the British made and the way in which it was made, which commanded so much attention. It died from that moment on so far as the Canadian government was concerned.

Mr. Green:

May I ask the hon. member a question?

Mr. Pearson:

Yes.

Mr. Green:

Are the hon. member and the Liberal party in favour of free trade with the United Kingdom?

Mr. Pearson:

That is a perfectly reasonable question, Mr. Speaker. I have been asked it before. What we are trying to do, of course, as an opposition, and as it is our duty to do, is to find out the policy of those who are responsible for these matters.

Oh, oh.

Mr. Pearson:

But, Mr. Speaker, I will be very glad indeed to tell my hon. friends what I would have done in the matter. I would have announced at once that this is a far-reaching, imaginative and constructive proposal on the part of the United Kingdom government and one which seems to indicate the seriousness of their intention of getting closer economically to Canada, something which my hon. friends have often talked about, and I would have followed that up by saying that this proposal should be immediately and sympathetically considered in discussions between the two governments.

Mr. Green:

Yes, but are you in favour of it?

Mr. Pearson:

And, Mr. Speaker-

Mr. Green:

Why not answer the question?