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:

It is dated
November 14, 1934. It was in June, 1934, that the president had been given power to negotiate as I have indicated. This note was the outcome of careful consideration and compilation by the officials of the public service after investigation on their part and in collaboration with the ministers of the day. The note goes on to say-I ask the house to note this:
I am authorized to put forward' the following outline as a suitable basis for the negotiation of a trade agreement:
(a) A mutual undertaking to maintain during the lifetime of the agreement the unrestricted free entry of commodities now on the free list of either country.
That was the first step, and that has been done in the agreement which the present administration has effected. The note continues :
(b) The mutual concession of tariff treatment as favourable as that accorded to any other foreign country; this means that Canada would extend to the United States its intermediate tariff involving reductions from the present rates of duty on some 700 items, including both natural and manufactured products, together with a number of further reductions below the intermediate tariff rates through the extension to the United States of concessions made by Canada in trade conventions with foreign countries.
This again has been done in the agreement reached by this government with the United States-the exchange of most favoured nation treatment as between the two countries, with certain additional concessions. Then follows (c):
(c) The reduction by 50 per cent of the existing United States rates of duty, as authorized by the Tariff Act of 1934, on a specified number of natural products, including inter alia, lumber, fish, potatoes, milk and cream, and live cattle; a number of other agricultural products, and several minerals both metallic and non-metallic.
What is set forth in that clause has not been accomplished in full, but it has been accomplished in very large part. I shall have more to say on this point later. It i3 to be remembered this was a basis only for negotiation and represented undoubtedly a maximum demand. The note represented the proposals which were to be the subject of negotiation. Then (d):
(d) The reduction of the existing rates of duty by the United States on a number of partly or wholly manufactured products of Canada, including some processed natural products and certain products in which hydroelectric power comprises an important element in the cost of production.

Canada-UjS. Trade Agreement
That objective has been, secured in the agreement reached by the present administration. Then (e):
(e) The reduction of the existing rates of duty by Canada on a number of natural and partly or wholly manufactured products of the United States.
That was Canada's concession to the United States as proposed by my right hon. friend opposite. We have followed him again in that, and have made concessions in accordance with this particular clause. This ends the part of the note dealing with the basis of negotiations. The note goes on to say:
In view of the declared policy of the governments of the United States and Canada to improve existing trade relations, and of the progress already made in both countries in the necessary preparatory studies, there would appear to be no barrier to the immediate initiation of negotiations and their speedy conclusion.
That was on November 14, 1934. Remember that the general elections in Canada did not take place until the month of October, 1935, nearly one year after, but my right hon. friend through his minister in the United States said to the government of the United States in the month of November, 1934:
In view of the declared policy of the governments of the United States and Canada to improve existing trade relations, and of the progress already made in both countries in the necessary preparatory studies, there would appear to be no barrier to the immediate initiation of negotiations and their speedy conclusion.
I agree with that statement. I do not think there should have been any barrier to immediate negotiations and to their speedy conclusion. But why did that barrier come into existence? There can be only one answer, and that is that my right hon. friend himself did not proceed with the negotiations as he should have proceeded with them, and would have proceeded with them, had he been anxious to effect an agreement.
How did the United States government receive the proposals of my right hon. friend? I shall not read the entire note from the Secretary of State of the United States to the Canadian minister, but I shall quote from it. It is dated Washington, December 7, 1934, and makes clear that the United States shared the view expressed by the then Canadian government that it should be possible to make an agreement in a short time. It indicates in order that there might be no mistake as to how far the United States might be able to go, one additional point which the United States government felt they should bring to the immediate attention of my right hon. friend before they negotiated further. We

shall see later how my right hon. friend viewed the point thus raised. The note is signed by the Secretary of State, Mr. Cordell Hull:
I have given careful consideration to your note. I fully subscribe to the views which you express in regard to the importance to each of our countries of its trade with the other, and I am happy to note the willingness of your government to undertake negotiations looking to an increase in trade in both directions. It is not necessary to comment in detail on your statements respecting the balance of payments as between our countries. As you are aware, international balances are settled on many fronts, and it would be a serious setback to world trade if countries undertook to achieve balances with individual countries.
This would seem to indicate that my right hon. friend had been seeking an agreement on a balance of trade as between the United States and Canada alone. That may account for some delay in the negotiations. Obviously the view expressed by Mr. Hull is the correct one, and the only correct one, namely, that in international exchange trade balances are settled, not on one front, but on many fronts. Mr. Hull goes on to say:
I believe that a point has now been reached when an exchange of views on this subject with Canada should be undertaken, and I am, therefore, gratified, to learn that your government is of the same mind. Whatever the desirability of the freest possible exchange of natural products, and indeed other products, between the United States and Canada as an ultimate goal, the United States government must in any negotiations undertaken at this time restrict itself to measures authorized by the Trade Agreements Act, 1934, of which I enclose a copy.
The outline which you suggest as a possible basis for discussions has been noted. You mention several specific products upon which your government proposes to seek reductions in existing rates of duty in this country. In communicating to you the willingness of the government of the United States to enter upon negotiations with your government looking to a trade agreement calculated to increase trade in both directions. I must, of course, make it clear that in advance of negotiations this government can not make any commitment as to whether it will be possible to agree to a reduction in the rates of duty on particular products, each of which must be carefully studied in the light of existing economic conditions before any decision can be reached. This is the procedure which has been adopted and followed in connection with the trade agreement negotiations with other governments. Correspondingly, it is understood that your government will wish to give the same study to individual products upon which this government may request reductions in the Canadian rates of duty.
I suggest that to the proposed outline of discussions there be added the question of methods determining the value of merchandise for duty purposes in either country, a matter which I consider of importance in the proposed negotiations.

Canada-US. Trade Agreement
In that communication the Secretary of State of the United States made it perfectly clear that there was one clause in the proposed basis of negotiation, as put forward by my right hon. friend, to which the United States could not agree in its entirety, namely, that they should give to the extent that was indicated a reduction of duty on certain specific commodities. They were prepared, however, to take into account existing conditions and circumstances and to see how far they could go in the matter. They stressed also the importance of including in the discussion the method of determining the value of merchandise for duty purposes, the administration of customs laws, artificial restrictions upon imports, and powers taken by the governor in council with respect to customs regulations which were particularly objectionable to the United States, as they had been to other countries.
How did my right hon. friend proceed from that stage? The following is the reply which was sent on January 4, 1935:
I have the honour to acknowledge your note of the 27th December, 1934, in which you advise me of the willingness of your government to enter upon negotiations with the government of Canada looking to a trade agreement calculated to increase trade between our two countries, and to assure you that my government, who have noted the suggestion that the question of methods of determining the value of merchandise for duty purposes be added to the proposed bases for discussion set forth in my note of the 14th November, are ready to commence negotiations immediately with a view to the conclusion of a commercial agreement with the government of the United States of America.
That was the situation on January 4, 1935, before the previous parliament had held its last session. I submit that at that time my right hon. friend knew entirely the framework within which the agreement was to be made, how far it would be possible for him to go, and if he was prepared to carry on negotiations, about how far it would be possible for the United States to go. But have we a record of any further communications? Nothing further was given to this parliament or to the country until we were in the midst of a general election. Over and over again during the last session we asked my right hon. friend what progress he was making in the negotiations. We sought to discuss tariff matters; resolutions were introduced favouring reductions in the duties on farm implements, on machinery for mining and on the instruments of production in the other basic industries such as fishing, lumbering and the like. Each time a resolution of the kind was introduced my right h'on. friend asked us to allow it to be dropped, not to proceed further
with it because it might prejudice his negotiations with the United States. In that way we were prevented from discussing the matter throughout the session. Until after parliament was dissolved no word of any agreement was forthcoming. No doubt when my right hon. friend speaks he will give us the reasons for all these delays. What I want to ask is this: Why did my right hon. friend find it necessary to wait until the country was in the midst of a general election to publish the document setting out the basis of negotiation? The correspondence was handed out to the press by my right hon. friend in the month of September.

Topic:   CANADA-UNITED1 STATES TRADE AGREEMENT PROPOSED APPROVAL SUBJECT TO LEGISLATION MAKING PROVISIONS EFFECTIVE
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