April 27, 1954 (22nd Parliament, 1st Session)

PC

William Gourlay Blair

Progressive Conservative

Mr. W. G. Blair (Lanark):

Mr. Speaker, the recent budget brought down by the Minister of Finance (Mr. Abbott) some three weeks ago has given considerable time for analysis. One disappointing feature was the fact that there was no tendency revealed to offer assistance to depressed areas.
In former debates in this house I have placed before the house the position of industries in the Ottawa valley and the effect of unemployment, particularly in my own constituency. The Ottawa valley has been known for years as the centre of the textile industry and in that area there is probably the largest concentration of this industry in all Canada. Many mills are closed down through lack of orders, and in the area of Carleton Place and Almonte there are 700 persons unemployed. The greater proportion of these are textile workers. In the month of March last there was paid out in unemployment insurance a total of $40,000. Owing to the fact that steady jobs were not obtainable unemployment insurance has been of marked assistance during a most difficult period.
As opposed to the textile industry it has been argued that the industry has overexpanded; it is not efficient; and has not kept up to date in manufacturing methods. But one very important fact has been entirely ignored, and that is the defence aspect. On former occasions I have placed the position of the Canadian textile industry before this house, but in all fairness to the industry I feel an answer should be given to the arguments which have been presented against it.
Let us first take the question of overexpansion. The industry now supplies less per Canadian than it did before the war, but the per capita share of the domestic market, which has supplied the imports, has almost doubled. There were five per cent more looms and seven per cent more spindles in factories in Canada in 1951 than in 1939. However, it

is to be noted that our population during that period has increased by 24 per cent. It is not true that textile mills have otherwise expanded. It is quite easy to understand the difference between labour costs in Britain and Canada, but it does not fully explain the increase in the United States imports. It is difficult to understand why such an argument can be used in reference to an industry which never at any time had more than approximately 70 per cent of the domestic market.
I would point out that in the period from 1935 to 1939 just prior to the last war Canadian mills supplied 73 per cent of all fabrics which were used on the domestic market. This has now dwindled down to 51 per cent. The domestic market for textile goods is greater than it was in 1939, yet the Canadian industry has a smaller percentage of domestic sales than it ever secured prior to 1939. If the industry over the last three years had been able to retain the former percentage of its domestic sales it would still be in a sound position and could recover its costs and make a profit.
In regard to the charges of inefficiency, I would again point out that this industry since the end of world war II has spent something like $450 million in modern equipment with the object of bringing production in the industry to a high point of efficiency.
It is also charged that the industry has not kept up to date in the use of various fibres. Fabric producers inform me that they are prepared to make goods of any form of fibre, and will produce fabrics of rayon, nylon, or wool, either alone or in mixtures of two or more fabrics, if there is a demand by the Canadian public for such goods.
In spite of the fact that all efforts have been made to produce an effective industry, it is becoming increasingly apparent that our industrialists find it impossible to compete with goods made in overseas countries because our wages are two or three times higher than their wages. In so far as competition from the United States is concerned, distress prices can be established giving a fictitious price, but which have the object and purpose of undermining our Canadian customs structure. It is nonsense to believe that under present conditions Canadian industry can meet price competitions from abroad. No amount of efficiency in industry can cure such a situation. It is only natural that in countries of comparatively low wages goods can be processed and placed on our market to sell more cheaply than our own domestic production.
In so far as wages are concerned, to meet foreign competition would mean a serious reduction in our own wages. Reductions in
The Budget-Mr. Blair wages would mean that the Canadian public would not be able to purchase in the amounts to which they have been accustomed. It is due to our buying power that our standard of living has progressed to the point where it now stands. Unemployed workers are unemployed customers, and unemployed customers will mean that more goods will be left unbought, resulting in piled up surpluses or, on the other hand, more unemployment.
On March 4 I asked the Minister of Labour (Mr. Gregg) to state the policy, if any, the department has considered for the re-employment of textile workers in areas of closed factories throughout Canada. In reply the minister said, and I quote:
When any worker applies to his nearest employment service office for employment, a full record is taken of his work experience, and this information is available in matching men with jobs not only in the immediate locality, but in Canada as a whole. This means that when employment opportunities develop in other industries and those applying for work have suitable qualification, the applicants are referred to them. This applies to alternative employment opportunities which develop in their own immediate areas, or to those which become available in other areas, if suitable workers are not available locally.
In view of the minister's answer regarding unemployment, it is interesting to study the results of a survey conducted in a depressed textile area in New England. This research was conducted by the bureau of business and economic research of Northeastern University of Boston. The object of the survey made a year ago was to find out the position of displaced textile workers. Workers over 45 years of age were having a particularly hard time in finding new jobs. Eighty per cent were drawing unemployment insurance. The majority of the re-employed were earning less than before, and many had been downgraded from skilled to unskilled qualification with a loss of seniority, and very little chance for advancement. Diversification had helped, but new industries are filling jobs with newcomers in the labour market instead of displaced textile workers. Of the first some 156 workers checked, only 5 per cent found jobs in new industries.
In one area in New Hampshire, a town with one mill and 1,500 population, the closing of the mill made idle 200 workers. Some workers were re-employed in a leather products firm which moved into the mill building. Two years after the shut-down a third of the 200 laid off from the woollen mill were still out of work. For the other two-thirds who got jobs, the average period of employment was about five months. Thirty per cent got textile jobs elsewhere, some as far as 64 miles from home; 50 per cent took jobs in a leather products company with downgrading and less pay, and 20 per cent got a variety of other jobs.

The Budget-Mr. Blair The problem of unemployment in the textile industry is serious, and the continuing maintenance of the textile industry under adverse conditions is extremely difficult.
If Canadian textile manufacturers are to maintain their position in the domestic market, there should be full realization of their attempt to do so in competition with other countries with lower wage standards and cheaper production costs. The present adverse conditions in which this industry finds itself cannot be entirely overcome by improving the efficiency of production. As I pointed out, they have spent $450 million to improve efficiency and to lower costs. It is becoming apparent that if these mills could retain their pre-war share of the domestic market, it would lessen their difficulties because production and volume are necessary to make business a profitable operation.
I again bring the position of this important industry to the attention of the government. I am fully aware of the desirability of exploring all possibilities and channels of international trade. When I spoke on this question earlier in the session, as reported at page 402 of Hansard, I stated:
I do not believe it is advantageous to the economy of this nation nor do I advocate a high protective tariff policy for this or any other industry, because such a device can only provide stability for an uneconomic unit at unwarranted high cost to the Canadian consumer of the products which the industry produces.
At that time I suggested that a study be made of the duty on all fabrics coming into Canada. The textile industry is not the only industry which today finds itself in difficulties with regard to foreign imports. A careful analysis should be made of Canadian industry, and this analysis should take into account the consumption level of the domestic market, price structures, production capacity and, most important of all, the element of defence.
There are many manufacturers in Canada who do not worry about foreign competition, but they are worried about foreign industries using the Canadian market as a sales outlet for distress goods. There is little protection against foreign goods offered in Canada below the competitive price here or in the country of their origin. Countries exporting to Canada do this to avoid disturbing their own home market. Textiles, stoves and refrigerators have been principally affected.
As far as tariffs are concerned, they should not be so low as to cause failures of efficiently operated Canadian businesses, nor so high that inefficient producers could still remain in business. If such an approach could be made to the problem of Canadian manufacturers, then it could be reasoned what industries should be protected, the amount of their
rMr. Blair.]
protection, and the position of other industries which are not entitled to any protection at all.
I suggest, Mr. Speaker, that a board consisting of trade officials, and research and efficiency experts would be an advantage. Such a board could make inquiry into the causes of failure, or of inability to meet competition of certain industries, and make recommendations to increase efficiency or suggest certain changes in trade agreements which would enable such industries to manufacture in a competitive market.
I now approach the problem of another type of industry which has been manufacturing in Canada for many years. This industry was developed in early years by Canadian manufacturers and, according to the requirements of that time, was confined principally to the making of stoves. Since that time the industry has kept up to date in all modern developments in heating and has expanded in various factories throughout Canada. Employment dropped by 26 per cent and business prices are down 17 per cent since last year. Canadian manufacturers in this line

and I include refrigerators-are supplying less than half the domestic market in Canada. The position of our Canadian dollar has had its effect because it now commands up to 3 per cent premium. When United States money had a 10 per cent premium it acted as a protection for the Canadian manufacturer.
In the year 1952 the United States exported 2-7 per cent of the total production of gas ranges in that country. Production is much greater in the United States than it is in Canada, for in the same year manufacturers there produced 38 units for every one sold by Canadian manufacturers in Canada. Another 2 per cent of the United States production would destroy any further business of the Canadian manufacturer in this line. At present, merchandise of this type is coming into Canada at prices which are very low even in the United States. Apparently it is the practice for United States manufacturers to sell several carloads to a distributor in that country at a low price. This low price is the one which is used for duty purposes in Canada for single carloads or when selling to large retailers or distributors in Canada.
Canadian manufacturers are looking for a fair market value to be used for duty purposes. If that could be obtained, Canadian manufacturers could carry on and would not find the competition too severe from merchandise which is coming in at prices which are very low even in the United States. The valuation for duty is the crux of the matter. In order to meet competition, Canadian manufacturers would favour a method

in which the value for duty would be the fair market value of similar goods sold for home consumption under fully competitive conditions averaged over a six-months' period in the country of origin.
Gas ranges averages show that imports received over 80 per cent of the market, and the same percentage would hold good for oil space heaters. The Canadian manufacturer is at another disadvantage in that manufacturers in the United States can spread their die and tool costs over large quantities of a model on account of the large market. In Canada where the market is about a tenth as large as that in the United States, the die and tool costs are high. This situation is shown in the fact that in 1952 2,085,385 gas ranges were sold on the United States market while 55,407 were sold on the Canadian market. Therefore it can be appreciated that unit costs of Canadian manufacturers would be much higher. It only requires a small percentage of United States production of gas ranges sold at low prices in the Canadian market to flood our market and embarrass our Canadian manufacturers.
It is to be noted that due to the building of natural gas pipe lines across Canada natural gas will be available to Canadians at low prices. Unless some relief is given to Canadian manufacturers in this line, very little of the market for gas ranges will be available. Some change will have to be made in customs regulations to place them in a competitive position. At present the United States stove manufacturer is able to sell at prices in Canada that have made heavy inroads in the Canadian market. As in the case of textiles, we should again consider the element of defence. Plants of the type I have mentioned engaged in the manufacture of stoves, etc., are well equipped for the fabrication of steel. If it were necessary these same plants could convert rapidly to the production of defence material.
There would seem to be no plan to deal with unemployment. The Minister of Trade and Commerce (Mr. Howe) told a delegation that if they lived in a depressed area they should move to another area where they could get work. The Minister of Labour stated in answer to a question I asked regarding unemployed textile workers that the federal government was willing to co-operate with provincial governments regarding the location of new industries. The present unemployment stems from federal government policies. In the Ottawa valley, where there has been a concentration of textile factories, there should be an all-out effort to place new industries. Conditions are ideal for
The Budget-Mr. Blair manufacturing in this area, and this should be considered in conjunction with a policy of decentralization.
So far as meeting competition is concerned, taxes add to the cost of production and our industry is again placed at an unfair disadvantage. Not only the industry suffers but unemployment is created. High corporation taxes will obstruct industrial growth and industry will not find it profitable to take risks. Excessive taxes do not permit sufficient earnings for industries to expand. The buying power of the nation shrinks resulting in unemployment and the further curtailing of industrial expansion. Increased consumer buying power would stimulate industrial expansion and create more jobs which would be available to those who are unemployed at the present time. Steps taken towards lowering the taxation against production costs in industry would help our industries meet competition not only in the domestic field but also in the export market.
It is to be regretted that there is no mention of economy in the budget. Every year the government finds that the Canadian taxpayer must produce more money. In 1952-53they required $4-6 billion. In 1953-54
they required $4-9 billion and again there was an upward move to $5 billion in 1954-55. I point this out in view of the fact that defence expenditures will be down $126 million. Last summer we were given to understand that taxes would be reduced in accordance with defence expenditures, but instead of being reduced $126 million they are actually down about a third of that, or $40 million. Taxes can defeat their own ends, and if they are levied at too high a rate they can decrease production and expansion in industry and in the end produce less revenue than somewhat lower taxes. Certainly the corporation tax at 49 per cent leaves little room either for industrial expansion or to meet foreign competition.
I am concerned about the surplus of farm products in the United States. The grand total is over $2-7 billion in value. Included in the list are dairy surpluses, $382 million; vegetable oils, $235 million; wool, $62 million; and grains, $1-91 billion. Under their present program part of the surplus could be used as a strategic reserve. The dairy surplus is held in the form of butter, cheese and dried milk, but even if they retain part of the surplus as a strategic reserve the rest will be sacrificed, and there are indications that it will be disposed of at a loss.
It has already been proposed to get rid of some of this surplus by greater sales to foreign countries at market prices which are
4178 HOUSE OF
The Budget-Mr. Knight below United States prices. In so far as the Canadian dairy farmer is concerned, there is no likelihood nor possibility of the export of their products to the United States. This again brings up the question of the British market. The Canadian dairy farmer is already under severe competition from edible oils. The only market of which the dairy farmer is assured is the domestic market, and even this is under competition. Lack of suitable markets will mean uncertainty in the industry which will be reflected in lack of buying power for the products of Canadian industry.
At six o'clock the house took recess.

Topic:   THE BUDGET
Subtopic:   ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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