Eric William KIERANS

KIERANS, The Hon. Eric William, P.C., O.C., B.A., LL.D.

Personal Data

Party
Liberal
Constituency
Duvernay (Quebec)
Birth Date
February 2, 1914
Deceased Date
May 10, 2004
Website
http://en.wikipedia.org/wiki/Eric_Kierans
PARLINFO
http://www.parl.gc.ca/parlinfo/Files/Parliamentarian.aspx?Item=b12fe3d4-0116-4a37-9593-42ddcdaf8346&Language=E&Section=ALL
Profession
economist, professor

Parliamentary Career

June 25, 1968 - September 1, 1972
LIB
  Duvernay (Quebec)
  • Postmaster General (July 6, 1968 - April 28, 1971)
  • Minister of Communications (April 1, 1969 - April 28, 1971)

Most Recent Speeches (Page 5 of 197)


September 9, 1971

Mr. Kierans:

There is just one other matter I would like to point out. The whole theory of economics depends on the fact that young people can work their way into an economy, find the savings, establish themselves and then go on to grow. The whole tax policy has worked against young people breaking into any kind of industry for their own account and virtually the only option left open to university graduates is to work either in bureaucracies 24171-66J

Employment Support Bill

that are public or bureaucracies that are private. If we have any money left over, we can use that to stimulate the economy by increasing the standard of living for the old people. They also will spend it here. They did not have all of the advantages in raising their families that we presently have for our young people.

Topic:   GOVERNMENT ORDERS
Subtopic:   EMPLOYMENT SUPPORT BILL
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September 9, 1971

Hon. Eric W. Kierans (Duvernay):

Mr. Speaker, I want to deal at some length with the over-all thrust of the recent measures undertaken by the United States, and probably less with the immediate response we have made in this bill because it is the over-all thrust that can cause the greatest harm to the Canadian economy.

I think we have forgotten in responding that the impact of the surtax will not fall mainly on exporters, because of course the over-all and very pervasive result of such a switch in policy by the United States is that it will have an impact on gross national income inside Canada. We may, by retaining some of our export markets, alleviate some of the impact on particular exporters, but this does not alleviate the more pervasive effects that fall upon retailers, wholesalers, construction people, farmers, and other people in every aspect of their livelihoods.

There is another aspect to the response. I think that we can liken the 10 per cent surtax in its effects as being somewhat of the same nature as if Canada, of its own volition and in the interests of creating a more effective manufacturing industry at home, had decided on a policy to reduce the tariff protection. This has led, as many will admit, to an inefficient industry-inefficient by the size of the market, which is no fault of anybody engaged therein, but inefficient also because it has attracted capital and new firms into the country as a result of this protection thus creating too many firms in a small market. There are, generally speaking, too many plants which, on an internationally competitive level, are inefficient as to skill, cost and wage structure.

A diminution of exports does not mean a reduction in the capacity that already exists in Canada. The capacity is still there and a great deal of it is going to turn inward. It is going to turn inward in order to grasp a greater share of the market within its own industry. While we agree that in a normal situation this would be a good policy and would feel it really has to be done, I would hesitate to think that the government of Canada is in effect subsidizing some of those firms within an industry to carry on this kind of competition and is not treating all equally. In other words, a firm with more than 20 per cent of export markets would now find itself being subsidized to a considerable extent to maintain its labour. That labour could be used to turn out goods, some of which are for export and some of which will endeavour by a variety of competitive means to capture a part of the domestic market from firms without that advantage. So it seems to me, Mr. Speaker, that we have a great many problems here in deciding that, as a government, we will take up two-thirds of the ransom, in effect, which the President of the United States is asking of the Canadian people in order to maintain entry into U.S. markets.

I think in order to assess not only this policy but all of our future policies, because this is certainly not going to be sufficient and the government does not claim that it is, we have to realize what the problem is that is facing the

[Mr. Nowlan.l

DEBATES_______________________September 9, 1971

United States. Last year they had a deficiency of $11 billion in their balance of payments. Their outflows, of course, are well known to everyone. One of these is the cost of their vast military operations not only in Viet Nam but the maintenance of forces in Europe to maintain the defence of that continent and other forces throughout the world. Another cost is their determination at whatever price to their economy-and now they are going to pass some of this on to the rest of the world-to maintain the lead in technology. Vast sums are being expended on all types of technological endeavours, whether sending astronauts to the moon, exploring Mars or proposing SST's which even they find difficult to finance in the last analysis. All this has placed a great burden on their balance of payments.

Another cost is their foreign aid program, some of which has been reduced. A cost which has benefited Canadian manufacturers, not the most efficient in the world, is the inflation within the American economy which has led to the upward evaluation of their dollar to somewhere between 6 per cent and 10 per cent beyond that of other countries. Canadians have been able to get under this and export a great deal of manufactured goods as have, most noticeably, the Japanese and the Germans.

There has been a great outflow on manufacturing account which is not normal to the American economy. There is a perennial and basic outflow for resources and money to buy resources. The Americans have a great many resources but in many areas do not favour developing them in order to keep them as the foundation of their eventual security.

Topic:   GOVERNMENT ORDERS
Subtopic:   EMPLOYMENT SUPPORT BILL
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September 9, 1971

Mr. Kierans:

We have to consider rationing and saving them. We have to realize that the demand for them is not going to disappear because they are the one factor that is declining in the world and on which everybody's growth depends, including the Japanese, the Americans and the Germans. Our resources improve with age and become more scarce and valuable with time. Why are we in such haste to throw them all out without any taxes and without any return in profits when we do not own them?

Topic:   GOVERNMENT ORDERS
Subtopic:   EMPLOYMENT SUPPORT BILL
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September 9, 1971

Mr. Kierans:

Either we do that or we demand that a greater quantity or portion of them are processed and further converted within Canada in order to provide the employment that processing and converting entails.

We have to stimulate this economy with more than just this rescue operation for the firms that are in the forefront. We have to stimulate it with tax cuts, not tax cuts as the Americans are doing and as we have given to corporations over the years, but tax cuts to those in the low income groups who will spend it today on things that are made in Canada such as food, housing, shelter of all kinds and clothing.

Topic:   GOVERNMENT ORDERS
Subtopic:   EMPLOYMENT SUPPORT BILL
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September 9, 1971

Mr. Kierans:

So, they are expanding across the world,

seeking to own, control and most of all, to import resources wherever they can be obtained.

A further cost of this outflow has been their capital outflows to buy up industries and resources in other nations. Can they reverse this, the outflow of the manufacturing account? Of all of them, I think this is the only one that they can reverse. To some extent, I think they have slowed down the export of capital for the purpose of acquiring additional firms. Basically, I do not think that they really want to do it.

So, Mr. Speaker, they will not slow down the outflows for resources. They can cut foreign aid, but only slightly because their prestige is at stake. They will not cut the funds expended on military forces across the world or for space and technology because their power is at stake. Now, we find that the most advanced nation in the world has suddenly brought down a series of directives which in effect mean that all the money they have spent on their very high technology has not yielded the kind of growth that will employ all their people. They have had to admit that according to their ratings even such lowly industries as shoes and textiles have to be protected in order to maintain employment. Most important nations usually feel that they should get out of shoes and textiles in order that the developing nations should be able to expand if we really mean to trade with them.

September 9, 1971

We are faced with a series of measures, one of which is the 10 per cent surtax. Another is an investment allowance on American capital equipment which will not be affected by this policy because there will be a double disadvantage to Canadian manufacturers of machinery for export-a 10 per cent surtax of which we can pay two-thirds but an additional 10 per cent allowance is granted by the American government for the purchase of machinery made in the United States by American companies. So, we have that both ways. We have a 20 per cent disadvantage and, as Mr. Nixon proposed today, a domestic international sales corporation-a kind of funny juxtaposition of words-which takes profit corporations and allows them to create subsidiaries responsible only to the parent company which can handle exports. All profits shall accrue to the subsidiary, and as long as it does not pass them back to the parent company there is no tax whatsoever and the parent can use the wholly owned subsidiary to expand across the world.

One wonders what kind of capitalism we are getting into when you can use this kind of corporation to avoid paying taxes on profits that are made. The special categories set up by the government are precisely for that type of thing. This is not a case of skilled lawyers skimming through laws and finding loopholes. The government has deliberately set this up. When we find these corporations that can avoid taxes, obviously avoid making any contribution in profits and, eventually, avoid dividends to the people who own the parent, we are getting further and further removed, not from the concept of capitalism, but from the concept of capitalists, from the concept that there should be capitalists within the capitalist system.

What has happened here? Why has the United States undertaken these measures? Well, since the Bretton-Woods conference, a system has developed that we might call the gold exchange standard. As this has been worked out, it means that this was a gold exchange standard linked to one key currency, and that all the currencies of the world adjusted their values to that of the American dollar. There was no other standard to be used. It was the judgment of international markets that this should be the basis of relative values. When the other currencies of the world were pursuing their own, national objectives- and Canada was one of them-as I say when the other 100 nations whose currencies were valued in terms of the American dollar were pursuing their own national objectives, the American dollar was the key currency. In other words, it was the residual currency. So it came about that every nation in the world began to emphasize exports. Germany, relieved of the responsibility of a large share in its own defence costs or bearing a very little share of its own defence burden, spent its funds in order to further its exports. Japan, relieved of or unwilling to accept a great portion of the burden of defence in the Far East and also unwilling to engage in social security measures and in measures for the improvement of its own environment, pursued a national objective of employment and exports at any cost. We in Canada, of course, were pursuing with single minded vigour the

Employment Support Bill

bogey of inflation. We were able to contain inflation better than the Americans could and we, therefore, also increased our exports into that country.

While every other country was having a very good time, the United States was the residual nation which bore the crunch and the burden of its own policies. It was unwilling to give up all the policies I have mentioned. This was compounding its problems. It was also having to accept the imports of other nations. Finally, within the last several months, nations which began to realize that the Americans could not accept the enormous burden compounded the problem by saying, "We do not want the key currency anymore; we will take gold." In other words, these countries were saying to the Americans, "You had better tighten your own economy and change your own objectives, decrease your foreign aid and decrease your expenditures for defence of the western world. You had better reduce these in order that you might be able to pay us in gold." At this point the link cracked.

I am not very optimistic that the surtax exemption will be granted. I do not think the surtax will come off for a considerable period. There is going to be a great deal of negotiation and renegotiation and wheeling and dealing before the nations of the western world come to some over-all understanding. If, for any reason, Canada should be given an exemption, after the history of 1963, 1965 and 1968, I think the people of Canada will want to know what was the price of that exemption. Did we agree that our dollar should be $1.02 U.S., or did we agree to expand oil, energy, mineral resource and metal mining exports to the United States? And, if the surtax were to come off, what would happen?

After all, the United States has not solved its basic problem, the problem that its productivity has been lagging behind that of most of the world, and particularly that of Japan and Germany. They will not know whether they have resolved this problem until after the 90 days are up or until after some sort of permanent, stable arrangements are made between the American government, the labour movement and business generally in the United States. If these arrangements are not made, it is obvious that the Germans, the Japanese and perhaps even the Canadians could continue, without the surtax, to pile up balance of payment surpluses at the expense of the American economy. Again, we should be back where we started from.

What is the United States saying to Canada in particular by imposing the 10 per cent surtax? When they impose the surtax just on manufactured goods they are saying, "We do not want your manufactured goods but we will take all your oil and gas and all the metal mine exports that you can give us. There is no tax on those commodities and we will take them." They say we will take them because as Schultz said, "Out of every dollar we give to you we get 71 cents back." What are they saying to Canada when they say that they are going to give to American corporations in the United States an investment allowance to apply to new capital equipment that they buy, on condition that that equipment is built

September 9, 1971

Employment Support Bill

in the United States and nowhere else. They are saying to us, "We do not want any of the output of your machinery and equipment factories." What are they saying with their DISC program, the Domestic International Sales Corporation program? They are saying, "We want you to take our manufactured exports." They are also saying, on the other hand, "We will take the exports of your resources. We will take all the resources that you can give to us." And what does this add up to?

I have seen this mentioned in many newspapers recently. It adds up to the following: that you can have growth in Canada because, "If our economy expands," says the United States, "we will require more resources and you will have more growth." Well, if we have growth and an expansion in our resource industries that outweighs the decline in our manufacturing output, I suppose you could say that we will have a net increase in our gross national product. But, do we then have a net increase in employment? The answer is no. Will we get a net increase in taxes? Again, the answer is no. We tax firms in the oil and gas industry on less than 6 per cent of their profits. We tax manufacturing firms, on the average, on 63 per cent of their profits. In the metal mining industry, we tax firms, on the average, on only 13 per cent of their profits after you add up all the accelerated depreciation, depletion allowances and other privileges. So, we could have growth in the economy with a decline in employment. We could have growth with a decline in tax revenue and we could have growth, really, with a decline in the division of profits that takes place in the oil and gas industry; because, given its concentration and the way dividends go, there would be an outflow. Our dollar value, similarly, could remain exactly the same. We could substitute $1 billion worth of oil and gas exports for $1 billion worth of manufactured exports and the pressure on the dollar would remain high; but the effect within the economy could be virtually disastrous.

I remember all the debates when I came to this House in 1968. At that time we were shipping approximately

450.000 barrels of oil a day to the United States. Today we are shipping approximately 800,000 barrels. Next year, within a very few months, it will be an average of

900.000 barrels. That is growth in our gross national product, but how many more jobs are involved in that? How much more taxes are involved and how much more profits really accrue to Canadian owners? When we are pursuing growth, we have to examine very carefully the components of that growth in order to find out exactly what kind of growth we are having here in Canada. More important, if our manufacturing industries begin to weaken, that is bad enough. This year the government is attempting to reduce the loss in production, but the longer this stays on and the longer the other measures stay on, we lose something more than the accumulated production. We lose something else, the capacity to produce and the capacity to have a strong and viable manufacturing industry that can support research, technology and its own expansion. All of that deteriorates. It

withers away and when we have got rid of all our resources, the country is left high and dry.

This House has to very carefully examine what exactly are Canada's objectives. What do we want to be and what is our number one objective? I think that every citizen in the country will agree that our number one objective is employment. We must get rid of this perennial high rate of unemployment that has been with us, not just since this government, but has existed with very low bottoms and very swift upturns perennially. We have to make it clear that employment is our primary objective.

Growth is fine, but growth is secondary if it does not bring about an increase in employment. What does that mean? It means that all of our economic policies must concentrate not only on manufacturing, but on renewable resources such as pulp and paper, fish, wheat, barley and grains. All of these resources are renewable. We must take a very close look at the nonrenewable resources. When we look at our tax policy, we see that all of the tax advantages are given to the nonrenewable resources.

Topic:   GOVERNMENT ORDERS
Subtopic:   EMPLOYMENT SUPPORT BILL
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