February 25, 1936 (18th Parliament, 1st Session)

LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

Every effort was made. We were not successful for the reasons I have just mentioned. The Republican party was in office in the United States and had put up the tariff to heights unknown before, and had done so largely as a result of the fact that the Conservative party in Canada had defeated the reciprocity agreement and had not when in office subsequently taken advantage over a period of years of the offer wThich continued to be made by the United States to effect a reciprocal agreement with Canada.
As everyone knows, in the matter of international negotiations it is much easier to work out the terms of an agreement when there is plenty of time for negotiation than when the time available becomes increasingly limited. If the Liberal party had been in office two years sooner, as it should have been, and would have been had my right hon. friend gone to the country when the country was demanding he should, we would have been able to make a more favourable agreement than was possible at the end of last year. As the matter stood, the present agreement was reached within two months of the reassembling of congress and within a year of the date on which a presidential election is to take place. As all who are familiar with public affairs in the United States are aware, it is extremely difficult for the government of the United States or the president to give on the eve of the reassembling of congress the consideration to such matters that at another time it might be possible for him to give. Also in the year of a presidential election all such matters become frought with fresh difficulties. Fortunately, however, there remained time enough for us to make a very good agreement, but as I say the path was made more difficult for us by the fact that my hon. friends held on to office long after they should have, and during the whole of which time they took good care to see that no agreement was entered into with the United States.
May I mention another handicap? It has been said that the Canada-United Kingdom agreement was not an obstacle to negotiation; that my right hon. friend proved that it was possible to enter into an agreement with the 12739-32
United States notwithstanding the existence of the Canada-United Kingdom agreement. Let me say that the present administration, when it began the negotiation of this agreement, made it a matter of policy that nothing would be done in the agreement with the United States which would in any way affect any of the provisions of the Canada-United Kingdom agreements. No matter what it would cost us and notwithstanding that we did not like many of its provisions, we were prepared to take that position and we took it and held to it throughout. And although every effort was made to have us consider the matter otherwise, to fix margins, peg rates of duty in this agreement as was done in the Canada-United Kingdom agreement we took as strongly the position that we would not agree to restrict in any way our complete freedom of action with respect to any arrangements or agreements we might have or hereafter might wish to make with Great Britain or other parts of the empire. Had my right hon. friend and his government followed that plan in connection with the Canada-United Kingdom agreement, we in Canada would be in a better position to-day to make agreements with other countries. But as hon. members know, provisions were inserted in the Canada-United Kingdom agreement under which fixed margins had to be preserved. These fixed margins have prevented reductions in duties to other countries, and to thait extent have limited the powers of the government in the negotiation of other agreements. My right hon. friend said the other day that there were some things not in the Canada-United States agreement which he thought should have been. Had there been no empire agreements, some of those things which he finds missing might have been included, but we were prevented as he knows from negotiating with respect to anthracite coal, Indian corn, canned fruits, dried currants, raisins and other commodities. These are only some of the principal products on which our obligations to empire countries precluded more extensive concessions being granted to the United States in exchange for which we might have obtained a still more comprehensive agreement. To preserve the agreements made with other parts of the empire by my right hon. friend, in which duties were pegged at certain levels, we had immediately to say, "On these things we cannot negotiate further," although in some cases it obviously would have been in the interests of our consumers and producers alike for us to have been able so to do.
Now I come to something which seems to me pretty effectively precludes my right hon.

Canada-UjS. Trade Agreement
friend from taking exception to the lines on which we have proceeded, assuming he was in earnest in the negotiations he was conducting with the United States. A few days ago my right hon. friend placed on Hansard at full length a note dated November 14, 1934, from the Canadian Minister in Washington to the Secretary of State of the United States. The note sets forth what my right hon. friend, speaking as the leader of the government of which he was the head, and in the name of the Conservative party in Canada, purported to be their position as he saw it with respect to trade between Canada and the United States, and the basis upon which he was prepared to negotiate.
I wish to read a few extracts from that communication to hon. members so that they may see how much we had reason to believe that in our efforts to effect an agreement we would meet not with the opposition of my right hon. friend but with his hearty approval and cooperation. I rather expected that, at a time like this and respecting an agreement of such importance, my right hon. friend would have adopted towards the present administration something of the attitude which the Liberal party in opposition took towards his government when we accorded it the fullest freedom to make an agreement with the United States and did what we could to assist it in securing the most favourable terms. However he has not taken that attitude. The note begins as follows:
Sir, the government of Canada for many months have been giving careful consideration to the means whereby the exchange of commodities between Canada and the United States might be increased, and I have been instructed to present a statement of their views for the information of the government of the United States. The government of Canada believe that the time has come for definite action and that the declared desire of both governments to improve conditions of trade between the two countries should now be carried into effect by the negotiation of a comprehensive trade agreement.
You will recall that when the Prime Minister of Canada visited Washington in April. 1933, at the invitation of the President of the United States, the development of trade between the two countries was sympathetically discussed. On April 29, 1933, Mr. Roosevelt and Mr. Bennett issued a joint statement at the end of their conversations, which concluded as follows:
"We have also discussed the problems peculiar to the United States and Canada. We have agreed to begin a search for means to increase the exchange of commodities between our two countries, and thereby promote not only economic betterment on the North American continent, but also the general improvement of world conditions."
They were taking the large view-not merely the mutual benefits to be derived, but

a general improvement in world conditions. Then, a little farther on in the note I find this:
On February 22, 1934, the Department of State issued to the press a statement concerning trade negotiations with Canada, which reads as follows:
"The trade between the United States and Canada is larger in normal times than that between any other two countries in the world, and it is natural that both countries should desire to restore the reciprocal flow of commodities to normal proportions. We hope to be in a position at an early date to take steps looking to the conclusion of a trade agreement with Canada which will further the interests of both countries. We hope thus to bring into practical application the 'good neighbour' policy between these two great countries which have so much in common."
That is the end of the quotation. Then the note continues:
A few days later, on March 2nd, the president requested the congress to enact legislation conferring on him authority to enter into trade agreements, in a message which concluded with the following words:
"1 hope for early action. The many immediate situations in the field of international trade that to-day await our attention can be met effectively and with the least possible delay."
The legislation in question became law on June 12.
That made clear the feelings of the govern^ ment of the day, and indicated not only that an agreement was desirable but that no time should be lost; that there should be immediate action. Further on I find this:
It is hardly necessary to stress the importance to both the United States and Canada of their mutual trade.
And elsewhere:
The relative importance of the market of each country to the other, and the persistence of trading on a substantial scale throughout the changing phases of the business cycle, as revealed by the trade returns, demonstrate the inherent advantage of this interchange of commodities, and the tremendous potentialities of expansion under favourable conditions. But no useful purpose can be served by calculating the relative shares retained by each country in a total world trade that for four years has been steadily shrinking, until in 1933 it fell in value to approximately one-third of the level of 1929. If peace and prosperity are to be established on an enduring basis, it is essential to increase the absolute volume of world trade. No better beginning can be made than by taking steps to increase without delay the volume of trade between two countries which offer the most notable opportunity.
Could any language be stronger than that as to the wisdom of a reciprocal agreement within the framework I have indicated for the purpose of furthering the trade of the two countries? I shall read this further paragraph:
It should be realized that certain formidable obstacles to the lowering of tariff barriers now

Canada-U.S. Trade Agreement
prevailing in other parts of the world are not present between the United States and Canada. The opportunities of a new continent have resulted in a parallel economic and social development almost without precedent.
I am putting these matters on record, because I believe they will serve to answer my right hon. friend, by his own words, when he rises to speak against the agreement which is now before us for approval. He will find in his own words the answer to the arguments which he will seek to urge against this agreement. He continues:
Standards of living and working conditions are similar on both sides of the international boundary. The measures of protection which each government has imposed against the products of the other country have not been determined by a desire to exclude the products of cheap labour. In these difficult times, countries seeking to maintain high domestic standards of living have a common interest in expanding trade with each other. For the past year, also, the Canadian dollar has been close to parity with the United States dollar, and the disturbing effects of exchange instability have in large part disappeared. Even if the desired general revival of international trade should still be delayed for a considerable period, there is much to be said in favour of an immediate attempt to increase the volume of commerce between these two neighbouring countries, whose traditions and ideals of social and economic progress are so alike.
And a little further on:
The government of Canada is prepared to join the government of the United States in a declaration that their common objective is the attainment of the freest possible exchange of natural products between the two countries. It is recognized that this objective cannot be attained in the immediate future, as important interests in both countries would be disturbed unduly by the sudden removal of existing tariffs on all natural products. The government of Canada would therefore favour, as the first step, the reductions included in the proposals set out in the next paragraph, to be succeeded by progressive mutual reductions in the duties on natural products, leading to the attainment of the declared objective.
The note goes on to set forth the basis on which an agreement will be entered into, and here it will be observed that it is the only basis, as I have pointed out, on which any government in Canada could have entered into an agreement with the government of the United States. The powers which the president had were circumscribed. The policy of the United States was to make an agreement only on an exchange of most favoured nation treatment. When we come to consider what was actually done, and what could actually be done today, it will be seen that the basis set out in this note was the only possible basis.
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Topic:   CANADA-UNITED1 STATES TRADE AGREEMENT PROPOSED APPROVAL SUBJECT TO LEGISLATION MAKING PROVISIONS EFFECTIVE
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