October 27, 1966

INDUSTRY

STATEMENT ON IMPORTATION OF VOLKS-WAGENS BY STUDEBAKER COMPANY

LIB

Edgar John Benson (President of the Treasury Board; Minister of National Revenue)

Liberal

Hon. E. J. Benson (Minister of National Revenue):

Mr. Speaker, on Tuesday I was questioned with respect to the importation of Volkswagen cars by Studebaker Corporation under the terms of the automotive pact and its predecessor, order in council PC 1963-1/1544. I was asked by the right hon. Leader of the Opposition to table a letter written in this regard by an official of my department.

In so doing let me make it clear that under either of these authorities, and in fact under the authority of the Customs Act and the transfer invoice procedures of very long standing, any person may, before goods are cleared through customs, sell such goods and transfer title to a new owner so that he may become the importer of record. Of course these transactions must be bona fide and supported by the proper customs and other documentation.

In this instance before us inquiries were made by Studebaker as to whether they could carry out such transactions. The answer was "yes", as evidenced by the reply addressed to them by the department, a copy of which, with the consent of the house, I hereby table along with copies of the automotive pact and the related order-in-council, its predecessor order in council and the departmental memorandum and instructions concerning transfer invoices.

The fact that Studebaker could import Volkswagen vehicles free of duty under the automotive pact or its predecessor did not alter this right in any way. Any Canadian manufacturer of motor vehicles who meets the contitions of the relevant tariff items and orders in council has been and is free to import foreign made vehicles of any make.

As hon. members know, the automotive pact is to encourage increased production of motor vehicles and automotive parts in Canada. As part of this plan, which also seeks

rationalization, Canadian manufacturers become entitled to enter vehicles and original equipment parts duty free provided, of course, they meet the conditions under the pact and the related orders in council that entitle them to this free entry.

[DOT] (2:40 p.m.)

The house will recall that prior to the automotive pact there was an earlier program which allowed duty free importations of automobiles and parts by a company which earned this right by increasing its exports from Canada of an equivalent value of cars and parts. Studebaker in fact availed itself of the right to import foreign cars on a duty free basis under both the old program and the present program which replaced it.

One of the conditions of the present program which must be met is that the automobile manufacturer in question has to maintain the ratio between his production of automobiles in Canada and his total sales of automobiles in Canada. This condition is spelled out precisely and clearly in a tariff item contained in order in council P.C. 1965-99 dated January 16, 1965 and tabled in the house at the time the automotive pact was under discussion.

This means that if the company chooses to import automobiles from abroad and sell them in Canada it must increase its production in Canada by an amount equivalent to such importations. Studebaker claims to have done this. It can be seen therefore that if Studebaker performed in accordance with the requirements of the relative tariff items it would have raised its total production of cars in Canada, thus creating jobs and providing additional business for Canadian suppliers, which were the central purposes of the automotive program.

Studebaker, a recognized car manufacturer in Canada, which had earned its right to free entry, found itself in the unique position of being unable to import Studebaker cars after the production of their parent company in the United States had ceased. As a result it chose to import other cars, as it was entitled to do because of its greatly expanded manufacturing activities in Canada. It chose to import Volkswagen cars, but before doing so it wrote to the department to ascertain whether it

Oclober 27, 1966

Importation of Volkswagens could purchase and import such cars duty free. As I have pointed out, they were entitled to do so, as any other manufacturer of motor vehicles in Canada would have been, provided they abided by the Customs Tariff, the Customs Act, the relevant orders in council and the established procedures.

The question now is whether or not they in fact did so. This will be established in the course of the departmental audit of their company, to which I have already referred in the house, as it will in the case of all other car manufacturers required to meet not only the terms of the auto pact and related orders in council but also the customs law and established procedures.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Right Hon. J. G. Diefenbaker (Leader of the Opposition):

Mr. Speaker, I wish to point out that the elaborate explanation given by the minister regarding the transaction cannot be regarded under any circumstances as evidence that jobs in Canada will be provided to Canadians. Let that be perfectly clear. It is very interesting that the investigation into this transaction only began after the latter was revealed, which apparently was only a few days ago.

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LIB

Edgar John Benson (President of the Treasury Board; Minister of National Revenue)

Liberal

Mr. Benson:

Mr. Speaker, on a point of privilege-

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

The minister can reply afterward.

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LIB

Lucien Lamoureux (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Order, please. I hope we will not get involved in another series of questions of privilege. If the minister thinks he has been misquoted I suggest to him he cannot raise this on a question of privilege, although I do not wish to disqualify him from rising at this time. However, he may consider the wisdom of making the correction later on.

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LIB

Edgar John Benson (President of the Treasury Board; Minister of National Revenue)

Liberal

Mr. Benson:

Mr. Speaker, I think it is a question of privilege, in that the statement made by the right hon. Leader of the Opposition is a direct contradiction of what I said in the house and what I said to him privately the day before yesterday. I told him that the investigation was started several months ago.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

No.

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LIB

Lucien Lamoureux (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Order, please. With respect to the remark made by the minister, I suggest to him it was not a question of privilege but the type of correction which he is at liberty to make later on.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

Mr. Speaker, the hon. gentleman is very touchy on this. The statement that he made was this, as I remember it although I do not have Hansard before me; that the investigation started before yesterday. This was the statement he made in the house. They waited a long, long while, and the effect of the explanation given to us that the investigation started before yesterday I would regard as an admission that it commenced within very recent days. An investigation that commenced six months ago or longer certainly would not be described in colloquial language as "before yesterday".

I want to refer to the document which was filed, and I thank the minister for filing it. I am in agreement with the terms under which it was filed. These are the words in this letter dated December 3, 1964 from the assistant deputy minister of national revenue to Mr. Grundy, president of Studebaker of Canada Limited:

Dear Mr. Grundy:

I have your letter of November 30, 1964, enclosing a copy of your communication of the same date to Volkswagen (Canada), Limited, Toronto, in connection with the proposed importation of automotive vehicles from Europe.

It is noted therefrom that you contemplate entering into an arrangement whereby your company will import Volkswagen motor vehicles from Germany duty free under the terms of order in council P.C. 1963-1/1544, dated October 22, 1963, and subsequently sell them to Volkswagen (Canada) Limited, Toronto. You request departmental confirmation that the order permits of such customs clearance. In this connection, I would advise that to the extent to which you possess duty free entry privileges as determined under the order, you may import Volkswagen motor vehicles duty free thereunder.

It is noted, too, that you intend to enter the vehicles on the basis of transfer invoices prepared by Volkswagen (Canada) Limited. On the understanding that the documentation presented at customs represents the true transaction, the transfer invoice procedure may be used, provided of course, the terms of departmental memorandum D44-3, copy herewith, are observed.

In accordance with your request, a copy of this letter is being sent to Mr. K. L. Barths, managing director of Volkswagen (Canada) Limited, Toronto.

If this be the offspring of the Canada-U.S. auto agreement, then indeed it is an offspring of which no government can be proud. What this amounts to is that Volkswagen has been able to bring these automobiles into Canada

10,000 of them, I think-through an opening that is provided in the agreement. Does the Canadian consumer benefit as a result? He does not benefit one bit. The tariff of 17 per cent, or whatever the amount is, goes to Studebaker and not to the people of Canada. This thing is wrong and unjustifiable

Oclober 27, 1966 COMMONS

in every sense of the word. Jobs have been lost to Canadians. The Studebaker Company has been permitted to make a large killing at the expense of the Canadian taxpayer. It has denied jobs to Canadians, and the minister has the collosal effrontery to say it is good for Canada. This is all I have to say at this point.

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NDP

Thomas Clement (Tommy) Douglas

New Democratic Party

Mr. T. C. Douglas (Burnaby-Coquitlam):

Importation of Volkswagens of these companies with respect to this kind of transaction. Because, in spite of what the minister said, this transaction will do nothing to increase jobs for Canadian workers. All it has done so far is deprive the Canadian treasury of $2 million, most of which apparently was taken by Studebaker which was not entitled to that money.

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RA

David Réal Caouette

Ralliement Créditiste

Mr. Real Caouette (Villeneuve):

Mr. Speaker, the statement which has just been made by the Minister of National Revenue (Mr. Benson) is indeed contradictory, and I am in full agreement with what has just been said by the hon. member for Burnaby-Coquitlam (Mr. Douglas), to the effect that this whole transaction, in the final analysis, means only profits for the Studebaker company, which ceased its manufacturing operations in the United States and which the government says still has enough credits to purchase 10,000 Volkswagens and more than 75,000 other automobiles in the future.

The minister tells us also that this authorization given by his department was such as to promote production of cars in Canada. How can production of cars in Canada be promoted when regulations are made and an agreement is signed with the Studebaker company whereby it can, as the hon. member for Burnaby-Coquitlam said a while ago, deprive the federal treasury of a sum of $2 million? They do not do that much for our manufacturers here in Canada. And this agreement with the federal government has no other purpose-it is the only one we can see-than to allow the Studebaker company to continue certain operations in the automobile field in Canada, because Studebaker cars are going off the market.

Now, we allow them to buy cars such as Volkswagens, that Volkswagen dealers could procure before and which brought 17 per cent in customs duties to the federal government, the federal treasury.

Now, we take away that 17 per cent duty from the treasury and put it into the hands of a company to enable its directors or its organization to make profits. This is not even a shadow of action in favour of the Canadian worker and the Canadian taxpayer.

And I also share the views of the Leader of the Opposition (Mr. Diefenbaker). It is shameful to have allowed such a transaction or to have made such an agreement with the Studebaker company. If the minister and the

government really want to increase production and consumption in Canada, instead of allowing a company to make millions of dollars in profits, they should start by cutting taxes for the benefit of the Canadian taxpayers and citizens; the minister and the government could then say: We have truly adopted a piece of legislation or an order in council that will benefit the Canadian citizen.

Mr. Speaker, the statement made by the minister is shameful because the Canadian citizens, the Canadian people are deprived of something that belongs to them. No one has the right to serve the Studebaker company at the expense of the Canadian people, and I maintain that this agreement must be cancelled. If a company no longer exists in Canada or in the United States, it should not be granted credits allowing it to import cars, which leads to some kind of dumping of those cars in Canada.

Mr. Speaker, it is time for the government to assume its responsibilities and, above all, for the treasury board to recognize that the interests of all Canadians and not those of any company, the Studebaker company or any other, should be the primary concern.

[DOT] (3:00 p.m.)

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SC

Horace Andrew (Bud) Olson

Social Credit

Mr. H. A. Olson (Medicine Hat):

It seems to us that the whole purpose of the automobile agreement as explained in this house was, first of all, to assist Canada with her balance of payments problem; second, to reduce prices charged to Canadian consumers relative to prices being paid in the United States for similar automobiles

in other words to narrow the differential-and, last, to increase employment in Canada.

If there are loopholes in this agreement, or misuse of the concessions respecting import duties, which would allow a transaction of this kind to be carried out without any of the stated purposes of the agreement being fulfilled, then I think we had better take another hard look at this agreement. I suggest that both Studebaker and Volkswagen must have had some doubts whether a deal of this kind could be made under the agreement and the several orders in council, otherwise they would not have made inquiries of the Department of National Revenue with regard to it.

It seems to me that the government should have assumed responsibility, particularly in the initial stages, for ascertaining whether this transaction fulfilled one or more of the

October 27, 1966

stated purposes of the agreement. If they found that it did not assist Canada in her balance of payments position-and certainly the importation of 10,000 automobiles does not help in that respect; if they found it would not result in lower prices to consumers-and certainly the evidence before us indicates that there was no reduction in price to the consumers at all; and if it did nothing to increase employment in Canada-and surely the importation of 10,000 automobiles does nothing to enhance the prospects of a market for Canadian produced automobiles in Canada, then it seems to me the government should have advised the two companies concerned that a transaction of this kind was not in accordance with the stated purposes which the agreement and the subsequent orders in council were designed to accomplish.

I suggest, therefore, that the government should now take a long, hard second look at this agreement to block loopholes which might allow further transactions of this kind or permit other transactions which would deprive Canada and Canadians of the stated benefits of the agreement.

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B.C.-TABLING OF CORRESPONDENCE RESPECTING FEDERAL ASSISTANCE IN DAM CONSTRUCTION


Correspondence between the premier of British Columbia and the Minister of Finance (Mr. Sharp), dated September 16 and September 23, 1966.-Mr. Chretien.


LIB

Lucien Lamoureux (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Does the house give leave to the parliamentary secretary to table the documents?

Topic:   B.C.-TABLING OF CORRESPONDENCE RESPECTING FEDERAL ASSISTANCE IN DAM CONSTRUCTION
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?

Some hon. Members:

Agreed.

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CRIMINAL CODE

AMENDMENT RESPECTING PENALTIES FOR DRUNKEN AND IMPAIRED DRIVING

October 27, 1966