October 31, 1966

FEDERAL-PROVINCIAL CONFERENCE STATEMENT FOLLOWING FISCAL DISCUSSIONS

LIB

Mitchell William Sharp (Minister of Finance and Receiver General)

Liberal

Hon. Mitchell Sharp (Minister of Finance):

Mr. Speaker, in response to questions on October 26 and 27 the Prime Minister (Mr. Pearson) undertook to make a statement today concerning the federal-provincial conferences and the meetings of the tax structure committee that were held last week. Because of a minor throat ailment the Prime Minister has asked me to make the statement today on his behalf.

The more important federal statements made at the conference have already been distributed to hon. members in both languages and can be tabled officially if so desired later today. I should like to ask, Mr. Speaker, whether I have permission when we have gathered the documents together in both languages to have them tabled later today.

Topic:   FEDERAL-PROVINCIAL CONFERENCE STATEMENT FOLLOWING FISCAL DISCUSSIONS
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LIB

Lucien Lamoureux (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Is it agreed?

Topic:   FEDERAL-PROVINCIAL CONFERENCE STATEMENT FOLLOWING FISCAL DISCUSSIONS
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?

Some hon. Members:

Agreed.

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LIB

Mitchell William Sharp (Minister of Finance and Receiver General)

Liberal

Mr. Sharp:

On Monday, Tuesday and the first part of Wednesday, October 24, 25 and 26, the conference concerned itself with the rapidly increasing needs of higher education in Canada which are imposing so great and growing a burden upon the provincial governments. The talks of last week showed very clearly that all jurisdictions in Canada are vitally concerned to play their full part in strengthening the educational system at all levels. Such action will foster the nation's growth, will enable Canada to play its full part in the world of today, and most important of all will enrich the lives of young Canadians.

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

The federal government recognizes that it must assist in providing the financial resources needed for the general support of our institutions of post-secondary education. In the light of this recognition, proposals were put forward by the federal government to assist the provinces through a special arrangement of fiscal transfers related in

amount to the operating costs for postsecondary education in Canada. The plan would replace the present university grants program and much of the assistance for technical and vocational training under the current agreements which expire next March.

In the conference there was agreement with the principles underlying the new arrangement and with the concept that the transfer, though taking into account the costs of higher education, should be unconditional and designed to exert no influence on the structure and content of provincial programs. Differences of view were expressed as to the amount of the transfer and the manner in which it should be calculated. There was, as expected, difficulty in finding an acceptable definition of post-secondary education, one that would recognize the diversity of present educational systems and at the same time be equitable in relation to all provinces. Subject to settling this definition and that of "operating costs", the amount of the federal fiscal transfer to be recommended to parliament will be based on 50 per cent of postsecondary operating costs. Taking into account the recommendations of the Bladen Commission and the universities we would regard this as a suitable contribution now toward both the operating costs of institutions of higher education, and the capital costs of buildings and equipment. An optional measure is proposed, amounting to $15 per capita, which would expand in proportion to the growth in the total operating costs of post-secondary education in Canada generally-

The new arrangements would take into account the expiry on March 31, 1967, of the agreements under which operating and capital grants have been paid in respect of vocational high schools, technological institutes, trade schools and other facilities for technical and vocational training. Several provinces were strongly of the view that the proposals first made by the federal government for transitional arrangements in respect of capital grants were inadequate and did not take into account commitments they had made in the expectation that the agreements would be continued. After the government considered the provincial views on this matter, the Prime Minister proposed on October 26 that

October 31, 1966

Federal-Provincial Conference the transitional arrangements should provide that capital grants would be available, without limit as to time, for the purposes covered by the present agreements, until they had reached, for each province, $800 per capita of its population aged 15 to 19 as of 1961. For Canada as a whole some $548 million in capital grants will remain available over a period of years after next March 31.

We must recognize that rapid technological and industrial change now require more and more training and re-training of adults. This is of fundamental importance if full employment and increased productivity are to be achieved. The federal government has a responsibility for ensuring that the required training is financially possible for people in the labour force.

For this purpose, the federal government proposes to pay training allowances directly to adults who are taking occupational training, in place of sharing provincial costs as we are now doing. The federal government will also purchase the necessary training services on behalf of these adults from provincial training institutions and from industry, wherever suitable occupational training facilities are to be found. We will thus meet the full costs of such training.

Our proposal was to define an adult as one who has been three years out of school and in the labour force. Several of the provinces felt this was unduly restrictive. We undertook to discuss immediately with the provinces whether some modified definition is possible which would meet more of the training needs of people who have been in the labour force for less than three years, while still preserving the important distinction between this training program and the school system.

We believe that the federal government's proposals for financing the costs of higher education and for the training of the labour force provide a sound foundation on which federal and provincial governments can discharge their respective responsibilities. By facilitating the expansion in education facilities and increasing the amount of training in respect of the labour force, our proposals will help greatly to ensure expanding and equal economic opportunities for people in all parts of Canada.

On Wednesday, Thursday and the beginning of Friday, October 26, 27 and 28, the tax structure committee met for the fifth time following its establishment by the Federal-Provincial Conference of 1964. The committee gave further intensive consideration to the

fiscal questions that had been referred to it, including proposals that I made to the fourth meeting on September 14, 1966. The views presented to the tax structure committee, and the committee's discussions, were communicated to the federal-provincial conference to assist it in reviewing the matters it had referred to the committee.

The conference later accepted a recommendation from the tax structure committee that it should be authorized to sit again during 1967 and 1968. The principal purpose of these further meetings will be to discuss the implications for federal and provincial tax laws of the reports of the federal and provincial royal commissions and committees on taxation, and to consider again in that context the use of tax fields by the federal, provincial and municipal governments.

The conference proceeded on October 28 to review the federal fiscal proposals in their entirety. The federal government's proposals relating to the equalization and stabilization of provincial revenues met with a substantial measure of approval. None of the provinces decided to accept at this time the proposal which I made on September 14, 1966 relating to the possible transfer to the provinces of 17 points of personal income tax, with accompanying equalization payments, to cover the costs of established and continuing shared-cost programs in the health and welfare fields already covered in the case of Quebec under the Established Programs Act.

With regard to the sharing of tax fields, the premiers of all the provinces took the position that was to be expected: they expressed strongly the view that the needs of the provinces required the transfer of substantially more tax resources to the provinces than was proposed by the federal government.

The Prime Minister and I explained the considerations which made it impossible for the federal government further to abate federal personal and corporate income taxes at this time, for reasons that have been given in the published federal statements. After much serious discussion, the conference recognized that it was not possible to arrive at a tax sharing arrangement which could be regarded as fully satisfactory to both the federal and provincial governments.

New tax collection agreements to prevail for two years were discussed and will be proceeded with. During that time substantial

October 31. 1966

adjustments will have to be considered in the light of the decisions taken by governments following the consideration of the reports of the royal commissions and committees on taxation to which I have already referred.

Estimates of the financial effects of the new proposals are set out in a table which I

Federal-Provincial Conference should like to have incorporated as a part of my remarks at this point.

Topic:   FEDERAL-PROVINCIAL CONFERENCE STATEMENT FOLLOWING FISCAL DISCUSSIONS
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LIB

Lucien Lamoureux (Speaker of the House of Commons)

Liberal

Mr. Speaker:

Is that agreed?

Topic:   FEDERAL-PROVINCIAL CONFERENCE STATEMENT FOLLOWING FISCAL DISCUSSIONS
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?

Some hon. Members:

Agreed.

[Editor's Note: The table referred to above is as follows:]

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ILLUSTRATIVE COMPARISON OF FISCAL TRANSFER TO THE PROVINCES UNDER PRESENT AND NEW ARRANGEMENTS FOR EQUALIZATION AND EDUCATION AS CALCULATED BY THE FEDERAL GOVERNMENT


Present Arrangements 1966-67 (Estimated) Provinces Equalization (Present Arrangements) (1) University Grants $5 per Cap. Adjusted (Interim Arrangements) (2) Technical and Vocational Training Operating and Capital (3)1 Total University Plus Technical and Vocational Training Operating and Capital1 (4) Grand Total Present Arrangements (5)'Nfld 37.2 2.2 i.i 3.3 40.5P.E.I 10.6 0.6 0.2 0.8 11.4N.S 50.2 5.1 4.1 9.2 59.4N.B 44.6 4.0 3.4 7.4 52.0Que 149.5 28.9 68.3 97.2 246.7Ont - 33.4 63.7 97.1 97.1Man 27.5 5.1 4.8 9.9 37.4Sask 33.2 4.5 4.5 9.0 42.2Alta - 7.0 7.3 14.3 14.3B.C 8.9 12.9 21.8 21.8Total... 352.8 99.7 170.3 270.0 622.8New Arrangements 1967-68 (Estimated) Equalization Fiscal Technical and Total GrandProvinces Transfer Vocational (ii)+(ni) Totalre Training Post-Secondary Capital Education Operating2 "Phase Out" a) (id (in) (IV) (V)Nfld.... 69.2 7.7 0.8 8.5 77.7P.E.I... 15.3 1.7 0.8 2.5 17.8N.S 74.4 11.5 6.0 17.5 91.9N.B 66.4 9.5 2.0 11.5 77.9Que 266.2 87.9 45.0 132.9 399.1Ont 105.7 40.0 145.7 145.7Man 28.7 14.6 5.0 19.6 48.3Sask 26.6 14.5 7.0 21.5 48.1Alta - 22.4 7.0 29.4 29.4B.C 28.6 8.0 36.6 36.6Total... 546.8 304.1 121.6 425.7 972.5 'Does not include adult operating or capital expenditures under Technical and Vocational Training Agreements. 'The provinces will have a choice between two options: 50% of post-secondary operating costs or $15 per capita. These figures are calculated on the basis of $15 per capita only, and therefore do not reflect the higher amount to which certain provinces would be entitled if they chose the 50% option.



October 31, 1966



Federal-Provincial Conference


LIB

Mitchell William Sharp (Minister of Finance and Receiver General)

Liberal

Mr. Sharp:

I think it will cover all the specific questions that were asked of the Prime Minister on October 26 with regard to the changes resulting from the new proposals. I should make clear that it has been necessary in preparing this table to estimate the amount that should be excluded from the present grants as covering the costs of adult training, which the federal government is proposing to assume directly. Because of the way the records have been kept it is necessary to estimate these amounts after endeavouring to forecast how many will be covered by the new definition of adult.

The total of the financial transfers to the provinces in this year 1966-67 under the present equalization arrangements and existing grants for universities and technical and vocational training comes to approximately $623 million. The parallel arrangements proposed for next year, 1967-68, after making the necessary and difficult adjustments which flow from the changes in the nature of the arrangements proposed, come to $973 million-an increase of about $350 million or over 50 per cent in a single year. There is no magical way to transfer funds like this: they have to be found either from reductions in other federal programs or by getting higher revenues. It was a measure of the federal government's concern for higher education that it was prepared to vacate four points of personal income taxes and one point of corporate income tax to make it easier for the provinces to secure the revenues they require. We did not feel that we could go further than this.

These figures I have cited do not include the costs of adult training which the government intends should be expanded vigorously. The assumption of the full cost of this program by the federal government will also add to our expenditures next year.

In 1966-67, equalization payments are expected to total $353 million. In 1967-68 under the new proposals they are forecast to reach $547 million-an increase just short of $200 million. These equalization payments account for far the largest part of the $350 million increase to which I have already referred.

[DOT] (2:50 p.m.)

In conclusion, Mr. Speaker, and this will not come as any great surprise to hon. members, may I say that the main area of disagreement was one, and one alone-money. To have expected agreement on this complex and controversial subject would be naive. We believe that the results were sound and they

will, both in the immediate future and in the long term, redound to the advantage of Canadians generally.

Hon. members of course will have several opportunities to debate these matters as legislation is brought forward to implement the proposals.

Topic:   ILLUSTRATIVE COMPARISON OF FISCAL TRANSFER TO THE PROVINCES UNDER PRESENT AND NEW ARRANGEMENTS FOR EQUALIZATION AND EDUCATION AS CALCULATED BY THE FEDERAL GOVERNMENT
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PC

Francis Alvin George Hamilton

Progressive Conservative

Hon. Alvin Hamilton (Qu'Appelle):

Mr. Speaker, the report of the Minister of Finance (Mr. Sharp) on this very important dominion-provincial conference is long and, in some respects, detailed. Just by listening to the report one cannot make a completely detailed answer but I do think that certain salient points come to a head in his report. The first deals with education.

After the report of the Bladen commission-the Bladen group, which was arranged for by the Association of Universities, supported by the Ford Foundation-and after the report of the Canada Council last fall, one would have thought that the warning lights would be on the show that education must be recognized as a national need, requiring the highest priority in Canada at this time of her industrial development if we are to compete successfully in the modern international race for markets.

But what has happened? Just listening to the minister's report one sees where the provincial governments have been given a small number of corporation tax and personal income tax points, from which they will be required to meet the fantastically rapid increasing costs of education. With the tremendous pressure on provincial governments to meet the costs not only of higher education but of all levels of education, one can understand why the provinces left this meeting very unhappy or, as somebody has said, equalized in unhappiness.

I would think, Mr. Speaker, that the attitude of all federal parties should be that, regardless of past positions taken by them on the subject of education vis-a-vis the federal government and the provinces, the time has now come to accept the fact that in the national interest the federal government will have to play an increasingly larger part in the field of education. This I say without intent whatsoever to interfere with the rights of the provinces in their control over the subject matter of education at the elementary and secondary levels.

I simply point out that all parties, 100 years after we signed the original B.N.A. Act, have to accept the fact that education is no

October 31, 1966 COMMONS

longer purely a provincial matter. The federal government must take part in the training of our people to meet the challenges of the century ahead, and therefore it is a question of devising the formulae whereby we can help without interfering with provincial rights.

I would suggest that the training of staff for the universities, research at universities, which is very expensive, the plant itself, and the per capita grant system all offer combinations to produce a formula that would not interfere with the provinces' rights to control the educational content, but I submit this opportunity was missed by turning over more of the resources of the federal government to the provinces and saying, "You do it; you take on the worries". On the contrary the national need requires much more joint effort not less. I would gather that the provincial premiers and treasurers felt, following this meeting, that they have been left alone to carry this burden.

The second point I want to make, Mr. Speaker, is that on this question of control over education one thing that seemed to be forgotten at this dominion-provincial conference was that the universities themselves are objecting more and more strenuously not only to the impending control that there might be from the federal government but also to the fact that more and more provinces are interfering with the educational functions of our universities.

Our universities can produce this free frontier type thinking only when they are free not only from federal but also from provincial interference as well. I think some thought should have gone into introduction of some formula whereby more money could go into higher education, with hands off by both the federal and provincial governments. There are precedents for this.

The third point I should like to make has to do with the shared cost programs. From the experience of the last three years when we have seen the federal government backing up and backing up under the pressures from strong provincial governments, I know it is natural for us in this federal house to applaud a government which says, "all right, take over the shared program and we will give you more money". But this omits and forgets the essential fact that we in the federal parliament do have responsibility for this whole nation and for good government of this whole nation, and should be reluctant at all times to give away our power or initiative. This in effect is what has been going on.

DEBATES 9293

Federal-Provincial Conference

I do not think this is a matter for division on a partisan basis. I see it simply as a trend which can be very dangerous to Canada if we have to face either the serious menace of recession or the serious menace of outside pressure. In an effort to make all provinces equal I suggest that this tendency to turn over the initiative of the federal government can put us in a strait-jacket in the future.

Topic:   ILLUSTRATIVE COMPARISON OF FISCAL TRANSFER TO THE PROVINCES UNDER PRESENT AND NEW ARRANGEMENTS FOR EQUALIZATION AND EDUCATION AS CALCULATED BY THE FEDERAL GOVERNMENT
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Mr, R. W. Pritiie (Burnaby-Richmond):

Mr. Speaker, I will confine my remarks to the educational aspect of the minister's statement. He did not tell us very much about the tax structure committee and the recommendations of that committee. The different proposals concerning university education will satisfy no one. The provincial premiers have gone away unhappy because they have not got as much money as they wanted. The Canadian universities are unhappy that the federal government seems to be withdrawing from this field altogether. The president of the University of British Columbia deplored the fact that the federal government is withdrawing from the field of university education. The case for provincial control over elementary and secondary education may be quite clear, but I suggest there is a very great deal of doubt concerning secondary education at universities in particular. We feel there is a place for federal leadership here.

As the hon. member for Qu'Appelle (Mr. Hamilton) has pointed out, the universities will be completely under the control of their respective provinces, quite apart from the fact that they should expect federal leadership in this field. There will be general disagreement that the government is phasing itself out of the field of technical and vocational education. The only part of the program with which we find satisfaction is that concerning adult or technical education. This is a broad field and the government should play a useful role here. On the question of higher education, particularly at the universities, the problems facing the universities in Canada in respect of research and graduate training will not be solved on an individual provincial basis. The 10 systems might be quite different. There is a real need for federal leadership here. Provincial premiers notwithstanding, and provincial autonomy notwithstanding, a large number of people expect the federal government to play a role here without taking over the lower levels of education.

9294 COMMONS

Federal-Provincial Conference

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

Topic:   ILLUSTRATIVE COMPARISON OF FISCAL TRANSFER TO THE PROVINCES UNDER PRESENT AND NEW ARRANGEMENTS FOR EQUALIZATION AND EDUCATION AS CALCULATED BY THE FEDERAL GOVERNMENT
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RA

David Réal Caouette

Ralliement Créditiste

Mr. Real Caoueile (Villeneuve):

Mr. Speaker, we listened very attentively to the statement made by the Minister of Finance (Mr. Sharp) about the federal-provincial conference held last week here in Ottawa.

The minister spoke quite frankly when he said that the general disagreement between the federal government on the one hand and the provinces on the other was of a financial nature. Everyone thought of it, everyone heard about it; not a single premier went home satisfied with the outcome of that federal-provincial conference which finally ended in failure, something we have come to expect in all the years that those federal-provincial conferences have been held.

No doubt this caused the premier of the province of Quebec to say that the Ottawa Minister of Finance was not diplomatic enough, whereas the Prime Minister (Mr. Pearson) was too diplomatic. And from that statement one concludes that the Prime Minister was conciliatory and the Minister of Finance was not or is not.

Mr. Speaker, education was discussed the whole week. In the field of education, the provinces want to keep their autonomy, their independence and their right to decide. Today, the Minister of Finance told us that all the provinces are asking the federal government to contribute more and more to education while respecting provincial autonomy. Not later than last night, the Minister of Forestry and Rural Development (Mr. Sauve) who attended the whole conference last week said: Because the provinces do not want to increase taxes, they are asking the federal government to assume responsibility for it and since the latter will have to pay $350 million more per year to the provinces, it is normal that it will have to increase taxes and, therefore, impose heavier fiscal or financial burdens on the Canadian taxpayers.

Mr. Speaker, I would like the Minister of Finance to tell us very clearly this afternoon which of the provincial premiers suggested, for instance, to the federal government that the services of the Bank of Canada be used to finance education in the provinces, education for the young as well as adults, to find the financial means without increasing taxes? Which of the provincial premiers suggested to the Minister of Finance to adapt the financial system to Canada's needs and not to impose on Canadians additional burdens which they cannot assume at this time? The hon. Minister of Finance is aware of that.

DEBATES October 31. 1966

Mr. Speaker, it is all very' well to be told, here, on the morrow of a week-long conference, that the whole problem was nothing but financial, that all the provincial representatives, as well as the hon. Minister of Finance and the right hon. Prime Minister, discussed monetary matters without, however, attempting to modify the system and adapting it to the conditions and needs of 1966.

We were told, even before the conference, that the Quebec premier had given the hon. Minister of Finance the following ultimatum: Give us 100 per cent of personal and corporate income tax or else we may have to secede from the rest of Canada. Was it mentioned last week? Certainly not, nobody ever mentioned it.

Mr. Speaker, education is one of the most important matters that have been discussed last week and I will remind the Minister of Finance that the education of our youth, and to a lesser degree adult education is of the utmost importance.

During my visit to Russia last year, I had the opportunity to find out that university students were paid 35 rubles per month to continue and complete their studies. This takes place in Russia, a communist country. And what does it mean?

Students are given a presalary without any obligation, except that they probably have to be true communists, so as to allow them to carry on their studies.

But I would like to call the minister's attention to the following point: If, in a communist country, a government can manage to pay salaries to students, why is it that in countries like ours that claim freedom of choice and democracy, we do not have the means to help our university students by paying them a presalary while they are attending university or high school?

Mr. Speaker, this matter is serious enough to make governments ponder, especially those that are called free governments or governments respecting private enterprises. I feel that if socialists and communists can do it, we too can do it by taking advantage of the means at our disposal, namely the Bank of Canada, instead of continually turning to the United States and begging permission to do what we are able to do here ourselves. Mr. Speaker, I believe we have had enough of this manoeuvring and these proposals which, in the end, are meaningless.

October 31, 1966

I do not wish to delay the house any longer but, before concluding with my comments, I insist it is time the hon. Minister of Finance stop fooling and going against the provinces. He and the government should concentrate on putting the Bank of Canada at the disposal of the Canadian citizens and then, the conflict which exists at present between the provinces and the federal government would disappear; the provinces would be respected and the federal government would be fulfilling its purpose. This is what the Creditistes and the Social Credit party have been claiming all over Canada.

[DOT] (3:10 p.m.)

Topic:   ILLUSTRATIVE COMPARISON OF FISCAL TRANSFER TO THE PROVINCES UNDER PRESENT AND NEW ARRANGEMENTS FOR EQUALIZATION AND EDUCATION AS CALCULATED BY THE FEDERAL GOVERNMENT
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SC

Howard Earl Johnston

Social Credit

Mr. Howard Johnston (Okanagan-Revel-stoke):

Mr. Speaker, in view of the length of time required for the negotiations which have led up to this statement of the Minister

of Finance (Mr. Sharp), and considering its great importance it would have been preferable had each official party in the opposition been given a copy of it. We are faced with a considerable burden in replying immediately to a statement of this length and importance.

Having regard to the disposition of funds to universities I think it important that we do not lose sight of the fact that universities should have several sources of funds. These sources should not all be governmental. One source is by tradition the fees, and another is through gifts by people who are interested in a university and wish to see it progress.

I am afraid this is one area of university revenue that has tended to dry up in these last few years, owing to the onerous tax burdens that are being placed on so many of the citizens of this country.

We welcome the additional aid in grants for the adult training programs but we think that this action is belated. The federal government could well have moved into this particular area earlier and the adult training programs could have proceeded at a faster pace than at present.

It is difficult to make a comment at the present time, on the fiscal proposals because of their complex nature, which has baffled many experts and has also baffled the people who write newspaper headlines over the past week. I understand the premier of British Columbia is quoted as saying that that province held its own and that this constituted a victory for the province. Possibly I should not be too critical of those proposals. Nevertheless I do feel that the appalling task of providing sources for the

Questions

financing of public projects makes it all the more necessary for the federal government to pay attention to the proposals and ideas which have been presented by the Social Credit party in this parliament.

The time is fast approaching when what has been said by this party regarding financing through parliament and through the Bank of Canada is becoming increasingly true and will have to be implemented.

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QUESTIONS


(Questions answered orally are indicated by an asterisk.)


FORT PROVIDENCE, N.W.T.-INDIAN HANDICRAFT CO-OPERATIVE

LIB

Mr. Orange

Liberal

1. Is there an Indian Handicraft Co-operative incorporated at Fort Providence, N.W.T., and, if so, on what date was it incorporated?

2. Has the Department of Northern Affairs and National Resources provided technical, financial or marketing assistance to this co-operative and (a) if so, what is the nature, type and amount of such assistance (b) if not, are there any plans to provide such assistance to this co-operative?

Topic:   QUESTIONS
Subtopic:   FORT PROVIDENCE, N.W.T.-INDIAN HANDICRAFT CO-OPERATIVE
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October 31, 1966