1949-03-17

Mr. Real Caoueite (Pontiac):: Mr. Speaker, we were shocked to learn this morning of the dreadful fire which broke out last night at Rouyn, a city in the constituency I have the honour to represent in this house.
Fortunately, the anxiety of the citizens was not heightened by any loss of life.
Many families have not only sustained severe losses but are now homeless. At noon, I was informed that losses will total well over a million dollars.
May I, Mr. Speaker, tender my deepest sympathy to all the victims of this disaster, be they landlords or tenants, and may I also congratulate the dauntless firemen and citizens of Rouyn who now have the fire entirely under control.
(Text):



NATIONAL DEFENCE


Hon. Brooke Claxton (Minister of National Defence):: Yesterday the hon. member for Rosetown-Biggar (Mr. Coldwell) asked a question about civil defence, having regard to proposals put forward in the Ontario legislature by the attorney general. The hon. member for Broadview (Mr. Church) has given notice of an inquiry of the ministry as to the same matter. I am glad to make a brief statement in reply to both questions.
Some time ago Major General F. F. Worthington was appointed civil defence adviser. As such he has been working with the various federal departments and agencies that might be concerned, and has visited the United States, Great Britain, and other countries, to bring our information up to date as to what is being done or proposed in those countries.
The vast extent of Canada and the nature of the problems involved in civil defence make it clear that suitable safeguards require close working arrangements among the various
agencies of government, federal, provincial and municipal, as well as transportation and communication services, and national and local organizations. Moreover, many of the matters relating to civil defence fall within the ordinary jurisdiction of the provinces and municipalities of Canada, which are responsible for municipal services such as fire fighting.
On my instruction Major General Worthington visited all the provinces, and at each place saw either the premier or a member of the cabinet, at which time arrangements were discussed in a general way. I should like to say that all provinces showed a most co-operative attitude. These preliminary discussions are being followed up.
In considering civil defence, it is apparent that one of the actions which would be desirable would be that the couplings and attachments of fire equipment be standardized as far as possible. While some progress has been made, I am informed that there are no less than two hundred types of 2J-inch fire hose coupling having either different threads or outside diameter which would make it impossible, or at least more difficult, for the fire equipment of one locality to be used in another. This is an objective which could be attained only over a period of time by the provinces agreeing on certain standards and working towards them. Clearly it is in the general interest of the people in the various parts of Canada that fire equipment be capable of being used in neighbouring municipalities.
Beyond these general discussions, no arrangements have yet been made with any of the provinces. Until today I had not seen the legislation proposed by the Ontario legislature. Of course I have not made and do not make any comment on that measure.



NATIONAL TRADE-MARK APPLICATION TO COMMODITIES    REGULATIONS AS TO TRUE DESCRIPTIONS

Right Hon. C. D. Howe (Minister of Trade and Commerce) moved: the first reading of Bill No. 83 (from the Senate) respecting the application of the national trade-mark to commodities and respecting the true descrip. tion of commodities.
Motion agreed to and bill read the first time.

Questions QUESTIONS
(Questions answered orally are indicated by an asterisk.)



* CANADIAN ARMY


Mr. Harkness:: As of February 15, 1949, how many Canadian army personnel have been qualified as parachutists (a) of the P.P.C.L.I.; (b) of other units?


Brooke Claxton: As is well known, it is not the practice here or in the United Kingdom to give the strength and other detailed information about individual units of the armed forces. If the information were to be given about one unit, there would be no reason for withholding it about others, and thus the entire battle order and fighting strength, which are matters any prospective enemy would take a great deal of trouble to find out, would be disclosed. Even though individual figures may not have any immediate significance, the fact that some were given and others withheld would give information or create ground for speculation.
Changes in the strength or locations of individual units might have the utmost significance. It may be interesting to observe that in the soviet union the giving of such information as is sought here is a crime punishable by ten to twenty years in prison. Few figures could be given which would be of greater interest to the only possible aggressor than the information sought in answer to these two questions.
Accordingly it is not in the public interest to give this or similar information in reply to this and the next question. However, I shall be glad to give the hon. member the information for his own private use, if he wants it.


Douglas Scott Harkness: I must protest against the refusal of the minister to answer these questions. I doubt very much the validity of the arguments that he has advanced.


Mr. Speaker:: Order. The hon. member has had an answer to his question.


Mr. Graydon:: The minister made a speech.



CANADIAN ARMY BRIGADE GROUP

Douglas Scott Harkness: What was the strength of the active force Canadian army brigade group as of February 15, 1949, or nearest date to that for which returns have been made?


Some hon. Members:: Answered.


Some hon. Members:: No.


Mr. Speaker:: Answered by the answer to the previous question.



HOUSING


Mr. Williams:: 1.	Were any cookstoves purchased with federal treasury funds for tenant use in the wartime houses built in Ajax by Wartime Housing? If so, how
many?
2.	How much did these cookstoves cost?
3.	What is the total amount of money collected from the tenants as (a) rent; (b) purchase of these stoves?


Mr. Winters:: 1.	Yes; 573 cookstoves were purchased for tenant use in wartime houses built in Ajax by Wartime Housing.
2.	The cost of the cookstoves laid down in Ajax and installed was aproximately $21,201. It is estimated that maintenance cost a total of $13,000, or an average of about $4 per stove per annum. Interest at 3 per cent on the capital involved over the period amounts to $2,544.05.
3.	Total amount of money collected from tenants as (a) rent, $28,915.75; (b) purchase, $7,018.50.



*HONG KONG VETERANS


Mr. Brooks:: 1.	What action has been taken by the Department of National Defence with reference to the representations of the Hong Kong veterans for Pacific pay, as contained in their brief presented to the Veterans Affairs committee June 17. 1948, and forwarded by the committee to the Minister of National Defence for consideration?
2.	If no action has been taken as yet, will favourable consideration be given to the representations of these veterans?


Brooke Claxton: The question of giving Pacific pay to the members of the Hong Kong forces has been under consideration for some time. Under P.C. 3593 of May 17, 1945, authority was granted for the payment of "Japanese campaign pay" to members of the Canadian army Pacific forces, effective June 1, 1945, and to begin from the date of departure from Canada. The main reason for this provision was that our forces would be acting in close association with the forces of the United States, which had a different pay structure from ours, and which, unlike the Canadian pay structure, made express provision for foreign service pay. The order did not cover Canadians who had fought in the Pacific, including the Hong Kong force, the Kiska force and members of the R.C.A.F. and others who had taken part in the active operations in the Pacific.
However, representations were received from members of parliament and others that members of the Hong Kong force who had suffered so much should receive the same entitlement as members of the Canadian army Pacific forces. This has led the government

to consider the matter on different occasions and in the light of difficulties which favourable action might create. Generally speaking it is a good rule that no pay provision should be made retroactive so as to include a class that had not been covered. The circumstances here, however, were so different that it was felt that others could not properly regard this as opening the way for other retroactive adjustments.	.
In principle the matter was decided by the government some time ago, and I am glad to be able to announce now that the terms of the original order will be extended so as to make members of the Hong Kong forces eligible for Pacific pay until two months after return of such members to Canada.


Mr. Gray  don:@: Another victory for George Drew.



HOUSING


Mr. Church:: Under the Housing Act, 1944. how many applications tor housing space has the Central Mortgage Corporation received in the city of Toronto from (a) war veterans; (b) civilians?


Mr. Winters:: This question does not indicate the dates for which the information is required, but in conversation I had with the hon. member he stated that he wished it from January 1, 1947. On that basis the answer to the question is as follows:
Under the housing act, 1944, number of applications received for rental housing in Toronto from January 1, 1947, to March 31, 1948: (a) 1,784; (b) nil; April 1, 1948, to February 28, 1949: (a) 1,094, (b) 4.



CIVIL SERVICE


Mr. Richard (Ottawa East):: 1.	What is the cause of the delay on the part of the civil service commission in completing the unit survey of the inside service of the Post Office Department promised at the end of the war?
2.	When was it started?
3.	How many investigators are employed on this survey?
4.	How many employees are affected?


Mr. Gibson (Hamilton West):: 1.	The progress of the work has been hampered by changes in the investigating staff of the civil service commission.
2.	Unit surveys were first permitted after the end of the war in 1947. The first official request received for a unit survey was in 1948, and in that year unit surveys were commenced.
3.	One, at present, but in the past three years there have been several investigators on this work at different times.
Questions
4.	1,068 employees have been or will be interviewed in the course of these surveys.


Mr. Coldwell:: 1.	Have unit surveys leading to reclassification of civil service positions been undertaken in the Post Office Department since 1946?
2.	If so, how many surveys have been completed, and how many are yet to be completed?


Mr. Gibson (Hamilton West):: 1.	Yes.
2.	Three unit surveys in the postal service at Ottawa have been completed and five are still to be carried out.
Outside of Ottawa one unit survey review has been completed and 171 unit survey reviews are to be undertaken.
It may be noted that 582 reclassifications in the postal service at Ottawa and 1,019 reclassifications in the postal service outside of Ottawa have been granted since 1946.



ALUMINUM

Mr. Knowles:: 1.	What was the total quantity of aluminum in all forms exported from Canada in (a) 1944; (b) 1945; (c) 1946; (d) 194?; (e) 1948?
2.	What is the total quantity of aluminum in all forms which it is anticipated will be exported from Canada in 1949?
3.	Of such quantities, what portion was produced or will be produced by facilities in Canada and/or in British Guiana on which the government allowed 100 per cent depreciation during world war II?
4.	To what extent is the Aluminum Company of Canada now making use of aluminum producing facilities in Canada and British Guiana on which the company was allowed 100 per cent depreciation during world war II?
5.	To what extent is use now being made of the Aluminum Company of Canada's power facilities at Shipshaw on which the company was allowed 60 per cent depreciation during world war II?
6.	What are the current prices of aluminum, domestic and export?


Mr. Mcllrailh:: 1. Canadian exports of aluminum during the calendar years 1944 to 1948:
		Aluminum	Aluminum
		bars,	rods, sheets.
Aluminum	blocks, ingots	circlesscrap	and blooms	and platesYear	Cwt.	Cwt.	Cwt.1944	
36,040	5,904,532	62,4851945	
130,335	7,645,729	37,8211946	
129,155	3,746,717	48,9771947	
216,035	4,274,317	77,9671948	
456,794	6,542,154	123,3642.	No information.	3.	Information not	available.	4.	Information not	available.	5.	Information not	available.	
6. The price of aluminum ingot is 15J cents a lb. delivered at the works of any firm in Canada. The export price is also 15J cents a lb. f.a.s.

Questions



INCOME TAX


Mr. Church:: 1.	What action is being taken to collect arrears of income tax in the Niagara river border from commuters who work in the United States?
2.	What demands for immediate payment have been made for income tax arrears?
3.	What is being done regarding arrears of income tax owing by the members of the Niagara frontier commuters association in these matters?


Mr. McCann:: 1.	Taxpayers who are residents of Canada hut receive income as a result of services rendered in the United States are taxable under the Canadian law but are allowed to offset against Canadian tax payable any taxes paid to the United States on income derived from sources therein. The collection action involved is to forward an assessment notice and two collection letters within a specified period unless payment or arrangements for payment are made in the interval. If payment is not received or arrangements made, further collection action as provided by the Income Tax Act is considered and, if deemed advisable, applied.
2.	Demands for immediate payment have been made only in those cases where the taxpayer had omitted to communicate with the district income tax office and to arrange for settlement of his outstanding taxes. Even at this stage, should the taxpayer make a suggestion regarding payment, it would be given consideration by the department and the demand lifted if the proposal is considered reasonable.
3.	Members of Niagara frontier commuters association are taxable if residents of Canada, and they are treated in a similar manner to other Canadian taxpayers who may have fallen in arrears in respect of their obligations.



NATIONAL HOUSING ACT


Mr. Wright:: 1.	Have any contracts been entered into by the government with firms or manufacturers under section 15 of the National Housing Act, 1944?
2.	If so, what are the names of such firms and the amounts paid to each?
3.	If not, what are the reasons for not implementing this section of the act?


Mr. Winters:: 1.	No.
2.	Answered by No. 1.
3.	The continued scarcity of certain building materials, particularly plumbing and heating equipment and other materials of which steel is a component part, has made it inadvisable to encourage the use of the facilities of section 15 of the act. This section authorizes guarantees to manufacturers of

plumbing and heating equipment or other component parts of houses provided that such equipment is sold by the manufacturer concerned for installation in rural or farm homes. It is expected that when the materials situation does warrant it, this section will help to stimulate an active farm home modernization program. While no projects have yet materialized under section 15, discussions did take place during 1948 with one large manufacturer with a view to the mass production of a prefabricated plumbing unit especially planned for installation in farm houses already constructed but without modern water and plumbing systems. The unit is designed to be set in a common wall between the kitchen and bathroom. The company has been advised of the information required in submitting an application.



CENTRAL MORTGAGE AND HOUSING CORPORATION


Mr. Benidickson:: 1.	Who is the part-time representative of Central Mortgage and Housing Corporation at Dryden, Ontario (as referred to in Hansard, page 1327)?
2.	When was he engaged?
3.	What remuneration does he receive?
4.	What persons recommended him for employment in this capacity?


Mr. Winters:: 1.	Mr. R. J. Hawke, Dryden, Ontario.
2.	Mr. Hawke's appointment was effective January 1, 1949.
3.	This information is not available from government records.
4.	This information is not available from government records.



NATIONAL PARKS


Mr. Bowerman:: 1.	What was the cost of the clearing of the 11-6 miles of road in the Prince Albert national park during 1948?
2.	What construction firm, if any, did this work?
3.	What was the cost to the government of this clearing?
4.	Was there any management fee paid for this work? If so, how much?


Mr. MacKinnon:: The improvement work on Waskesiu highway in Prince Albert national park in 1948 was done by the W. C. Wells Construction Company, Limited, Saskatoon, Saskatchewan, on a cost-plus-fixed-fee basis. Altogether 28-75 miles (including the 11-6 miles), were cleared, 17-30 miles were stumped and grubbed, and debris was burned along 13-90 miles. The cost of clearing, stumping, grubbing and burning was $45,720, exclusive of the management fee. The management fee paid for the clearing, stumping, grubbing

and burning work was $2,780. Expenses of clearing were not kept separate from expenses of grubbing and burning.



CANADIAN NATIONAL RAILWAYS


Mr. Lennard:: How many ex-employees on pension from the Canadian National Railways are receiving the minimum pension of $300 per year?


Mr. Chevrier:: The number of retired
employees of the Canadian National Railways who were in receipt of the minimum pension of $300 per year was 2,798 at February 28, 1949.



UNEMPLOYMENT INSURANCE COMMISSION


Mr. Knowles:: 1.	How many labour-management committees are operating in Canada?
2.	What arrangements for labour-management cooperation obtain in the unemployment insurance commission?
3.	Is there any special grievance procedure?
4.	Is any recognition given to organizations of employees? If so, what is the nature of such recognition?


Mr. Cote (Verdun):: 1.	The Department of Labour encourages the establishment of labour-management production committees in Canadian industry, and, as at March 15, 1949, had a record of 608 such committees in operation.
2.	Associations of employees have been organized and are maintained on a national as well as a local basis, and employees are free to join those of their choice.
3.	The unemployment insurance commission sets up appeal boards to hear grievances, on which boards employees concerned have direct representation through their respective associations.
4.	Unemployment insurance commission recognizes all organizations of its employees and meets their national officers as and when requested.



UNEMPLOYMENT INSURANCE COMMISSION-EMPLOYEES

Mr. Knowles:: 1.	What is the total number of persons employed by the unemployment insurance commission?
2.	How many are employed at the head office in Ottawa?
3.	How many are employed in each region?
4.	In each case, how many of these employees are permanent?


Mr. Cole (Verdun):: 1.	6,934 regular employees (including 1,783 permanent) and 410 casual employees.
2.	356 regular employees (including 103 permanent) and 34 casual employees.
Questions
3. Maritime-635	regular employees (including 160 permanent) and 27 casual employees.
Quebec-1,881 regular employees (including 332 permanent) and 78 casual employees.
Ontario-2,008 regular employees (including 581 permanent) and 120 casual employees.
Prairie-1,226 regular employees (including 366 permanent) and 27 casual employees.
Pacific-828 regular employees (including 241 permanent) and 124 casual employees.
4.	See answers to questions 1, 2 and 3 above.
(All figures quoted are as at February 28, 1949.)



STRAIT OF CANSO BRIDGE

Mr. Isnor:: 1.	Will the proposed strait of Canso bridge provide for railway lines?
2.	If so (a) will the Canadian National Railways be asked to relocate their lines; (b) will new railway terminals be constructed; (c) what time, if any, will be saved in passenger train service; (d) what is the estimated railway grade across the bridge; (e) what is the grade on the Nova Scotia approach; (f) what is the grade on the Cape Breton approach?
3.	What is the estimated miles of reconstruction of the Canadian National Railways on both the Nova Scotia mainland and the Cape Breton side?


Mr. Chevrier:: 1.	Yes.
2.	(a) Yes. (b) Canadian National Railways advise that the construction of new railway terminals will not be necessary, (c) 50 minutes, (d) zero, (e) 0-8 per cent, (f) 10 per cent.
3.	On Nova Scotia mainland-20 0 miles; on Cape Breton Island-10 miles.



QUESTIONS PASSED AS ORDERS FOR RETURNS


UNEMPLOYMENT


Mr. McCullough (Assiniboia):: 1.	Under the government shelf of pubic works program, has the government worked out a per employee cost formula, which would provide employment for an employee on the job, and off the site?
2.	If so, on what basis is the formula arrived at?
3.	For how many people, and for what length of employment, could the government provide work under the present allocation of funds for that purpose?
4.	Is this program contingent upon co-operation of the provinces, cities, or local communities?



QUEBEC-MONTREAL SHIP CHANNEL

Mr. Church:: 1.	What was the cost of the steamship channel between Quebec and Montreal to make this river navigable for all kinds of ocean marine traffic since its inception to date for (a) capital; (b) annual maintenance including dredging, aids to navigation, and all other maintenance charges herein, per annum?

Orders for Returns
2.	Who paid the estimated total cost of these capital national improvements for marine purposes, and also for maintenance, and what was the grand total cost of this very necessary and important national work for Canada?


Lionel Chevrier: The second part of this question is almost impossible to answer. However, I have the answer to paragraph (a) of part 1, and to the part having to do with annual maintenance including dredging. To that extent I should like to make this an order for return, now tabled.



WHEAT BOARD-DELIVERIES FROM ONTARIO AND QUEBEC  EXPORTS, PRICES, ETC.

Mr. Beniley:: 1.	In each of the following crop years: 1943-44, 1944-45, 1945-46, 1946-47, 1947-48 and 1948-49 did the wheat board accept deliveries, handle or in any way exercise control, and to what extent and in what manner, of the wheat produced for sale in the provinces of Ontario and Quebec?
2.	In each of the above noted crop years, was any of such wheat exported under (a) the Anglo-Canadian wheat agreement; (b) as class II wheat?
3.	If so, was it dealt with by the wheat board in the same manner as wheat from the western division?
4.	If not, how was it dealt with?
5.	In each of those crop years, what was the final average price received by the growers in Ontario and Quebec?



HOUSING


Mr. Nowlan:: 1.	Has the firm of W. E. Mackie, Limited, been employed by any department or agency of the dominion government to render services in connection with wartime houses erected at Pictou, N.S.?
2.	If so, what was the nature of the services to be rendered by such firm?
3.	Were tenders called for?
4.	Have the services been completed?
5.	How much has been paid the said firm in connection with the said services?
6.	How much is still owing the said firm for such services?



NUMBER OF PERSONS 60 YEARS OF AGE AND OVER IN CANADA AND NEWFOUNDLAND

Mr. Knowles:: 1.	What is the total number of persons 70 years of age and over (a) males; (b) females, in each province of Canada, according to figures for 1948 or latest available date? What are the same totals for Newfoundland?
2.	What is the total number of persons 65 years of age and over but not yet 70 (a) males; (b) females, in each province of Canada, according to figures for 1948 or latest available date? What are the same totals for Newfoundland?
3.	What is the total number of persons 60 years of age and over but not yet 65 (a) males; (b) females, in each province of Canada, according to figures for 1948 or latest available date? What are the same totals for Newfoundland?


Mr. Mcllraith:: Return tabled.



NATIONAL DEFENCE


Mr. Probe:: 1.	In what buildings owned or leased by the Department of National Defence or containing military stores of any kind have fires occurred since January 1, 1945?
2.	What was the amount of damage in each of the above fires (a) to building; (b) to stores; (c) to any other property?
3.	What was the date of each of the above fires, and what was the date of the last audit of stores preceding the fire, in each case?



CIVIL SERVICE-WAR VETERANS

Mr. McKay:: 1.	What is the number of (a) male; (b) female civil servants employed by the federal government as of December 31, 1948?
2.	How many of these federal government employees are veterans of either world war I or world war II?



CIVIL SERVICE-SASKATCHEWAN

Mr. McKay:: 1.	How many federal civil service employees are there at present in the province of Saskatchewan?
2.	How many federal civil servants in the province of Saskatchewan are receiving salaries (a) less than $1,000; (b) $1,000-$1,400; (c) $1,400-$1,800; (d) over $1,800?



TELEPHONES


Hon. Colin Gibson (Secretary of State):: Mr. Speaker, on February 21 the hon. member for Winnipeg North (Mr. Stewart) asked a question and at that time the Prime Minister promised that a reply would be brought down in the form of a return. The question is reported in Hansard at page 722. I would request that it be passed as an order for return, now tabled.



PROVISION FOR MORNING SITTINGS UNTIL CERTAIN


Right Hon. L. S. St. Laurent (Prime Minister) moved:: That on and after Friday, March 18, 1949, until the following resolutions and the legislation based thereon be disposed of by this house, viz.: (a) the resolution for a measure to provide for the continuation of certain orders and regulations of the governor in council for a limited period during the national emergency arising out of the war; (b) the resolution for a measure to amend the Agricultural Products Act to extend the operation of the act for a period of one year; (c) the resolution to amend the Canadian Commercial Corporation Act to provide authority for advances to the corporation by way of loan out of the consolidated revenue fund and to extend the time of operation of the act; (d) the resolution for a measure to provide for the

continuance in force of the Foreign Exchange Control Act until sixty days after the commencement of the first session of parliament commencing in the year 1951; the house shall meet at 11 o'clock in the morning of each sitting day and that in addition to the usual intermission at 6 o'clock there shall also be an intermission every day from 1 to 3 o'clock p.m.; and further that on Saturday, March 26, 1949, the house shall meet at 11 o'clock a.m. and the order of business and procedure shall be the same as on Friday, March 25, 1949.
He said: Mr. Speaker, the reasons for this motion are the same as I gave for the motion I put before the house on March 11, to give priority to these resolutions and the legislation based thereon. The present legislation with respect to the matters described in paragraphs (a), (c) and (d) would expire on the 27th of March if not extended by parliament before that date. The legislation described in paragraph (b), the Agricultural Products Act, would expire on March 31 if not extended before that date.
Hon. members will realize that all the steps required for these resolutions and the legislation based thereon provide many opportunities for debate. On each one there is opportunity for debate on the motion that you, sir, leave the chair. There is opportunity for debate in committee after you leave the chair. There is opportunity for debate on the second reading of the bill, in committee of the whole when the bill is being considered clause by clause, and on the third reading of the bill. There are four of these measures, and I indicated it might be desirable to consider a fifth, namely, the consolidation of the bonuses or supplementary payments being made to mail carriers on a contract basis. As one can see, there would be some twenty or more opportunities for debate.
The debate on one subject was begun on Monday and has been continued ever since, but as yet, we have gone through only one of the five stages provided for by each of these resolutions. On Friday last when making the motion I stated that the government believed it to be its duty to make every possible effort to have these measures considered by parliament and disposed of so that they would not expire by mere lapse of time, and that each member would have an opportunity of taking his responsibility in respect thereto and expressing his views in this house.
The motion now before the house would add some twenty-two hours to the time available after today for further consideration of these matters. The time available otherwise would amount to thirty-nine hours; by this motion we are adding something more than fifty per cent to the time available for the
House of Commons
consideration of these measures. I recommend to the house this further effort to deal with matters which are evidently of great interest, whatever one's view about them may be. I believe the provision of this additional time will be a demonstration that the members of this house do intend to discharge their responsibilities in regard to these matters.
Hon. members will see that this motion is drafted in such a way that it will no longer be operative if these resolutions and the legislation based thereon are disposed of before present legislation expires; the effect of the motion will disappear and we shall return to the standing orders. Under these conditions I trust that it will be the feeling of all members of the house that this order should be made.


Mr. George A. Drew (Leader of ihe Opposition):: Mr. Speaker, it is not my intention to oppose the resolution. In indicating support of this proposal to increase the time available for discussion of the subject matters referred to, I think it should be clearly understood that there is a way in which any possibility of delay could have been avoided from the outset, and can be avoided now.
The Prime Minister has said that whether or not one favours these measures, they are regarded by the members as matters of some importance. The main point at issue is not the measure that is contemplated, but the way it is done. The main point at issue is whether we are to act as a parliament and deal with legislation by bills properly presented, or whether we are to carry forward these dictatorial orders.


Some hon. Members:: Hear, hear.


Mr. Speaker:: Order. I would request that the leader of the opposition make his remarks relevant to the motion.


George Alexander Drew: I cannot imagine anything more relevant to the motion than the question how the government can easily save time, which is the main consideration in this motion. The government can save time by dealing with this matter in the proper parliamentary way instead of pretending that there is still a war on in Canada, or a war emergency. The members of this party have indicated clearly an expeditious procedure for dealing with this matter, and the arguments that have been put forward are directed to dealing with these matters in an orderly way. I take the opportunity on this motion to emphasize once again the fact that if this government really believe in each of these measures being dealt with in the proper way, they should introduce bills indicating the ground upon which

House of Commons
they ask for extension in each case; they should not attempt to make a blanket provision, based entirely on the existence of a general emergency, which, if it is supported by this house, practically means the suspension of our constitution.


Mr. M. J. Coldwell (Roseiown-Biggar):: We
intend to support this resolution, Mr. Speaker, because we believe, whether the leader of the opposition (Mr. Drew) is right or wrong, these matters are of such great importance that they must be dealt with before the date of expiry of the acts referred to.


An hon. Member:: Right or wrong.


Major James William Coldwell: Not right or wrong-this parliament can safeguard the interests of the Canadian people. After all, it is not my friends in the official opposition who are to determine whether something is right or wrong; it is the majority in this house.
My criticism of what the government has done is on an entirely different basis. Parliament should have been called earlier. We should have had more time in which to deal with the address in reply to the speech from the throne, the entry of Newfoundland into confederation, and the measures here referred to-and they are important. The measure with respect to control that we have been discussing for the past few days is of paramount importance to many people in Canada, particularly those who are affected by the control of rent. The prolonged opposition to a suggestion of this kind does not, in my opinion, reflect much credit upon the House of Commons.
I wish therefore to say that we are supporting this motion, but we are criticizing the government on the ground that parliament should have been called earlier in order that we might have had more time in which to deal with these important measures.


Mr. Speaker:: Is it the pleasure of the house to adopt the motion?


Louis Stephen St-Laurent: Mr. Speaker, I wish to make a short reply to this further lesson on propriety of procedure in this house which the new leader of the Progressive Conservative party has been dinning into our ears ever since the beginning of the session.
I would remind the followers of the new leader of their attitude only two years ago when they were pounding their desks just as vigorously in applause of the remarks of one who was suggesting that in dealing with this kind of legislation we should follow the procedure which was followed in the British House of Commons. That we did last year by bringing in a bill with a schedule of I'Mr. Drew.]
orders attached to it. Then hon. members opposite complained because there were fifty-seven orders and there were not to be fifty-seven times five opportunities for obstructive filibustering debate.
This year, as last year, though it was not necessarily the best one, we followed the procedure that was recommended by hon. members on the other side because we hoped that by that means the merits of matters would be considered and we would have done with this waste of time in futile discussions about procedure. I have attended meetings of other deliberative bodies and have seen just the same tactics adopted and the same waste of time by those who were obstructing consideration of the real merits of issues. I do not need to tell this house from what quarter those tactics came. Here in this house we took ten days on the proposal for the union of Newfoundland with Canada. Hon. gentlemen on the other side asserted in the most formal terms that there was nothing they desired more than the union of Newfoundland with Canada, but they said that the procedure was wrong. This parliament, about the respect of whose privileges and authority they have been clamouring ever since we came back here on January 26, was not competent to deal with the problem. It could not be dealt with, according to my hon. friends opposite, until this parliament had obtained Mr. Duplessis' permission. For three days now these hon. gentlemen have been asserting that they are not opposed to the continuation of rent control, and that they are not opposed to the continuation of steel control. But, they say, the procedure is not the one that should have been adopted; instead of twenty opportunities for filibustering debates, they argued, we should have given them four times twelve more opportunities for it. Their leader says now: If you want this legislation to pass, just put it in the way that I, in my omniscience, tell you is the proper way.


Mr. Fraser:: A Gilbert and Sullivan opera.


Louis Stephen St-Laurent: This parliament had known how to deal with legislation in a proper way for a long time-


George Alexander Drew: Before you were Prime Minister.


Louis Stephen St-Laurent: -before the hon. member for Carleton came here, and I think it will know how to deal with legislation in a proper way for a long time after he ceases to come here.


Mr. A. L. Smith (Calgary West):: Mr. Speaker,-


Some hon. Members:: Order. Sit down.


Mr. Speaker:: Order. The hon. member knows that the debate is closed.


Arthur Leroy Smith: No.


Mr. Speaker:: The debate is closed.


Arthur Leroy Smith: Well, I was merely going to say-


Mr. Speaker:: Order. Is it the pleasure of the house to adopt the motion?


Gordon Graydon: On a question of privilege, Mr. Speaker; it is well established in the rules-


Some hon. Members:: A waste of time.


Mr. Speaker:: Order.


Gordon Graydon: I understand the temperature on the other side is very high, and I shall make allowances for it.


An hon. Member:: What about lowering it?


Mr. Speaker:: I hope that hon. members on both sides of the house will co-operate with the Speaker. Is the hon. member rising on a point of order?


Gordon Graydon: On a question of privilege.


Mr. Cole (Verdun):: State it.


Gordon Graydon: Mr. Speaker will no doubt ask me in due course to do that. It has been a well-established practice in this house that when the Prime Minister, or anyone else who moves a motion, rises to reply and close the debate, the Speaker cautions the house that if he speaks the debate will be closed. For that reason I suggest that the hon. member for Calgary West, or any other hon. member, is in order in discussing the motion after the Prime Minister concludes.


Mr. Speaker:: Order.


Mr. Casselman:: The noise is coming from the other side of the house.


Mr. Speaker:: I would remind the hon. member for Peel that after the leader of the opposition and the leader of the C.C.F. party had spoken, no other member rose and I put the motion to the house.


Some hon. Members:: No.


Some hon. Members:: Yes, he did.


Mr. Speaker:: Order. I rose and put the question to the house.


Some hon. Members:: No.


Mr. Speaker:: Order. Then the Prime Minister rose to answer. The hon. member knows perfectly well that when the Prime Minister rose to speak on the motion in reply to the leader of the opposition he was closing the debate. The debate is closed. Is it the pleasure of the house to adopt the motion?


Some hon. Members:: No.


Some hon. Members:: Yes.


[Stage Direction]
Motion agreed to.
Inquiries of the Ministry DAIRY INDUSTRY FLOOR PRICE ON BUTTER 58 CENTS
On the orders of the day:
Mr. G. A. Cruickshank (Fraser Valley):: I should like to direct a question to the Minister of Agriculture. Has the government made any decision on a floor price for butter? If so, when will he be in a position to make a statement?


Right Hon. J. G. Gardiner (Minister of Agriculture):: During the last three or four days I have had telegrams from most of the dairy organizations across Canada suggesting that the floor price on butter be made fifty-eight cents for the next year, as had been done for this year. That matter was considered by the government today, and a decision arrived at to maintain the floor at fifty-eight cents for the coming year.



QUESTION AS TO BUTTER OFFERED TO DAIRY PRODUCTS BOARD

[Stage Direction]
On the orders of the day:
Mr. R. E. Drope (Northumberland, Oni.):: Mr. Speaker, I should like to ask a question of the Minister of Agriculture, having to do with butter. Has any butter been tendered to the dairy products board, now that it has reached the floor price? Further, what information is necessary to satisfy the board that the butter cannot be sold to the trade?


James Garfield Gardiner: I do not know that I can answer the first part of the question by a direct yes or no. Inquiries have been made of the dairy products board as to whether they would be prepared to take delivery of carloads of butter from different points. But so far as I know none has been actually offered. Inquiries have been made as to the terms under which butter would be taken.
In reply to the second part of the question, as to what information is necessary: In view of the fact that the price has not been established at fifty-eight cents on the market- there may have been some No. 1 butter sold at fifty-eight cents, although I am not certain about it-there is so far no set-up, for the system under which it would be taken. But generally speaking the system will be that if no one else will pay fifty-eight cents for butter on the Canadian market, the government will take delivery of it.



REQUEST FOR SUBSIDY ON BUTTER FAT AND MILK

[Stage Direction]
On the orders of the day:
Mr. E. B. McKay (Weyburn):: I wish to direct a question to the Minister of Agriculture, a copy of which I have sent him. In view of the serious drop in butter prices, and
1560	HOUSE OF
Inquiries of the Ministry the chaotic state of the market, will the government give immediate consideration to the paying of a subsidy of five cents a pound for butter fat and two cents a quart for milk production, so as to assure the country of an adequate supply of both these commodities?


James Garfield Gardiner: As was indicated by my answer to the hon. member for Fraser Valley, the government did consider the question which has been raised by the proposal of the hon. member for Weyburn, and decided it on the grounds that were submitted to us by the dairy organizations across Canada, namely, that the proper way to deal with the matter was to have a floor price for the product.



REQUISITIONING TO FULFIL UNITED


[Stage Direction]
On the orders of the day:
Mr. G. J. Tusiin (Prince Edward-Lennox):: I should like to direct a question to the Minister of Agriculture. For several months the dairy products branch of the Department of Agriculture has been reporting a considerable decrease in the production of cheese over the corresponding period last year. Has any consideration been given to the requisitioning of cheese during the coming year in order to fulfil our contract with the United Kingdom?


James Garfield Gardiner: The production of cheese is on the increase at the present time as compared with last year. The position some weeks ago may have been different, but at the present time production is on the increase. I did announce earlier in the session that the government has no intention of requisitioning cheese this year.



INDIAN AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. G. H. Castleden (Yorkton):: I should like to direct a question to the Minister of Mines and Resources. Has any decision yet been made with regard to the setting up of the claims commission, or the re-establishment of the joint committee on Indian affairs as recommended for this session of parliament?


James Angus MacKinnon: The answer to the first question is that no decision has yet been arrived at. I have nothing to add to the answer I gave two or three days ago to a question similar to the hon. member's second question. At the present time the bill is before the


Department of Justice. When it comes back I purpose recommending to my colleagues that the committee be re-established and the bill referred to it.



VEGETABLE OILS


[Stage Direction]
On the orders of the day:
Mr. C. E. Desmond (Kent, Onl.k I should like to direct a question to the Minister of Trade and Commerce. Can the minister say what is the quantity of foreign vegetable oil in Canada at the moment, or the amount about to be imported?
Clarence Decatur Howe: I am afraid I cannot do that; I have no knowledge of the minds of the importers. I do not know what they intend to do.



EMIGRATION


[Stage Direction]
On the orders of the day:
Mr. J. G. Diefenbaker (Lake Centre):: I wish to direct a question to the Minister of Mines and Resources, of which I have given him notice. It arises out of a question I asked on February 24 last as to the number of Canadians by birth or naturalization who had left Canada to make their homes in the United States, month by month, since January 1, 1947. According to the answer, that information was not available and could be secured only from the United States authorities. I now ask the minister whether he is in a position to give an answer to the question, since he has secured the information from the United States.


James Angus MacKinnon: The hon. member gave me notice of his question. During the year 1947 some 23,467 persons went to the United States, and in 1948, 24,788.



VETERANS AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. T. A. Kidd (Kingston City):: I should like to direct a question to the Minister of Veterans Affairs. It has reference to the veterans who are at present attending university and the request submitted by the national council of student veterans. When can the veterans who are at present attending university expect an announcement regarding their application for assistance?


Hon. Millon F. Gregg (Minister of Veterans Affairs):: With several of my colleagues I had the pleasure last Saturday of meeting the delegation of the national council of student veterans. At that time I undertook to write to them at an early day with regard to the representations made. When consideration of the matter has been completed, I shall be glad to comment on this question.



CORPS OF CANADIAN FIRE FIGHTERS

[Stage Direction]
On the orders of the day:
Mr. Arthur Williams (Ontario):: I should like to direct a question to the Minister of Veterans Affairs. The other day he promised to make a statement about student veterans. When he makes that statement will he at the same time make one with regard to the corps of Canadian fire fighters, who hope that they will get some benefit as well?


Milton Fowler Gregg: I shall look into the question, Mr. Speaker.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. G. R. Pearlces (Nanaimo):: Mr. Speaker, I should like to ask a question of the Minister of National Defence. Will the provisions respecting the extension of Pacific pay now be made available to the other Canadian units who served in the Pacific?


Brooke Claxton: No. That has been given consideration, and a definite decision has been made against it. There is no entitlement whatever.



UNITED KINGDOM


[Stage Direction]
On the orders of the day:
Mr. Frederic Dorion (Charlevoix-Saguenay):: I should like to direct a question to the Minister of Finance. Is it true that Sir Norman Brook is here in Ottawa for the purpose of requesting from the government the granting of another loan to Great Britain, or an extension to the credit already granted to that country?


Hon. Douglas Abbott (Minister of Finance):: The answer is no.



ST. PATRICK'S DAY QUESTION AS TO ADJOURNMENT AT SIX O'CLOCK

[Stage Direction]
On the orders of the day:
Thomas Langton Church: I should like to ask a question of the Prime Minister. Will the house meet this evening? This is St. Patrick's day.
Inquiries of the Ministry


Louis Stephen St-Laurent: Present indications are that the house will meet tonight. The statement I made yesterday was that if we made sufficient progress to entitle us to feel that it was not necessary to work this evening, consideration could be given to adjournment. But I do not think that progress has been made.


Mr. Daniel Mclvor (Fort William):: Mr. Speaker, rising to a question of privilege,
I am sure we are grateful to the leader of the opposition (Mr. Drew)-


An hon. Member:: For what?


Daniel (Dan) McIvor: -for allowing the house to see the superiority of the Irish blood in the Prime Minister, especially on St. Patrick's day.



INQUIRIES FOR RETURNS


[Stage Direction]
On the orders of the day:
Mr. Douglas G. Ross (St. Paul's):: I should like to ask a question of the Secretary of State. When may I expect the return for which an order was passed on February 9, over a month ago?


Colin William George Gibson: shall look into the matter. I did make inquiries before, and I understand that answers have been received from some departments but not from all.



VETERANS LAND ACT


[Stage Direction]
On the orders of the day:
Arthur Leroy Smith: Mr. Speaker, I should like to ask a question of the Minister of Veterans Affairs. Some time ago I asked a question and it was made an order for return. He was good enough to assure me that he would endeavour to get the return. The inclement weather and the sanitary conditions are difficult, and I am being pressed for an answer. Will the minister do the best he can?


Milton Fowler Gregg: Mr. Speaker, I shall bring down that return as soon as possible. Some of the material for it had to be secured from the west. However, as soon as it is obtained the return will be tabled.



PUBLIC BUILDINGS


[Stage Direction]
On the orders of the day:
Mr.  W. Chester S. McLure@Queens: should like to ask a question of the Minister of Public Works. How many properties in
1562	HOUSE OF
Inquiries of the Ministry the area appropriated for the site of the new dominion building at Charlottetown, Prince Edward Island, have been appraised and paid for?


Some hon. Members:: Order paper.


Mr. Speaker:: I would ask the hon. member to place his question on the order paper.



QUESTION OF USE OF PUBLIC ADDRESS SYSTEM

[Stage Direction]
On the orders of the day:
George Alexander Cruickshank: should like to ask a question of the appropriate minister. Has any attention been paid to the question of having in this chamber some system of amplification of the voice by means of loud speakers? If it can be done in British Columbia, surely it can be done in this capital city.



PUBLIC ACCOUNTS


[Stage Direction]
On the orders of the day:
George Alexander Drew: I should like to ask a question of the Prime Minister. When may we expect the public accounts committee to be called?


Louis Stephen St-Laurent: The public accounts committee, Mr. Speaker, has been set up. Any member can require this committee to be called for the purpose of organization. I think the date of its first meeting should be a matter arranged among the whips.


George Alexander Drew: The chairman has not yet been named, and until that is done the members cannot call the committee. We want it called as soon as possible.


Louis Stephen St-Laurent: The standing orders in that regard are the same as they have been for a great many years. Heretofore it has been found possible to have the committees organized without there being any intervention from the Prime Minister. The whips get together and arrange for the meeting.


Arza Clair Casselman: No.


Louis Stephen St-Laurent: The hon. member for Grenville-Dundas says no. I do not know how it was arranged in past years, because I never took any part in bringing them together. But my understanding was that the whips arranged the membership of the committees and then they arranged to have a notice published calling the meeting. The leader of the opposition says there is no chairman; but there cannot be a chairman until there is a meeting. There have been meetings in the past for the purpose of appointing chairmen.


Arza Clair Casselman: I say to the Prime Minister it is the duty of the government to call the meeting for organization of the committees.


Louis Stephen St-Laurent: In my view as to the duties of the government I differ from my hon. friend. These are committees of the house, not committees of the government.


Mr. Donald M. Fleming (Eglinton):: As one
of the members of the public accounts committee and one who wishes to see it called together, may I say to the Prime Minister that it has been the practice in the past for the leader of the house to arrange for the organization meetings of all standing committees.


Some hon. Members:: Order.


Louis Stephen St-Laurent: I have no doubt the hon. member may have that impression, but that has not been the practice.


Donald Methuen Fleming: May I say to the Prime
Minister-


Mr. Speaker:: Order. The hon. member must not engage in debate. If he wishes to ask a question, he must put it briefly.


Donald Methuen Fleming: Then if I must put a question, I shall put it in this way:	Is not the Prime
Minister aware that at every previous session of this parliament the organization meetings of all committees of the house were called by the Right Hon. Ian Mackenzie?


Some hon. Members:: Order.


Mr. Speaker:: The hon. member knows very well that the purpose of a question is not to give information to the house but to obtain information from the ministry.


Donald Methuen Fleming: I am not giving the house information. I am giving information to the Prime Minister.


Gordon Graydon: The government should quit stalling.



FOREIGN EXCHANGE CONTROL ACT


Douglas Charles Abbott: that the house go into committee to consider the following resolution:
That it is expedient to present a measure to provide for the continuance in force of the Foreign Exchange Control Act until sixty days after the commencement of the first session of parliament commencing in the year 1951.
He said: Mr. Speaker, the bill which this resolution seeks leave to introduce is a bill which provides merely for the extension of the Foreign Exchange Control Act, adopted by this house in 1946, for a further two-year

1S63
period. No doubt the house will recall that, when the original measure was introduced in and passed by this house, it contained no limitation as to time. In another place, however, an amendment was offered, and was accepted by the government, providing that the act would lapse sixty days after the commencement of the first session of parliament in the year 1949. That amendment was agreed to by the house, and the termination provision is incorporated in section 73 of the present act.
The effect of this new bill, when it is enacted, will be to postpone the termination date for a period expiring sixty days after the commencement of the first session of parliament in the year 1951; in other words, an effective extension of some two years. Otherwise the provisions of the present Foreign Exchange Control Act are to be left unchanged. The normal British constitutional procedure, under which acts of parliament remain in force until they are repealed by parliament, has a good deal to recommend it; but in view of the legislative history which I have outlined, the government felt the same practice should be followed here, and that a measure should be introduced extending the provisions of the act for a further period. The idea behind the time limit was, of course, to ensure that the measure would come up for review after a specified interval, and parliament would have the opportunity of determining at that time whether the legislation should be continued as being necessary and desirable.
As the Prime Minister (Mr. St. Laurent) has indicated, we have nearly reached the end of the time when the existing measure will expire, and parliament must now review the situation and determine whether or not the provisions of the present act should be extended, whether or not it is desirable and necessary to continue this act. Speaking for the government, I may say that I have no hesitation in stating that, in view of prevailing conditions in the field of trade and commerce, and currency conditions throughout the world, we would not feel justified in suggesting to parliament that it is no longer necessary to exercise control over Canada's foreign exchange transactions.
When this measure was originally introduced it was recognized, of course, that the world outlook was very uncertain, and that Canada was in a very exposed position. It was recognized that we were particularly vulnerable to the impact of conditions originating abroad both because of the great importance of our foreign trade, and on account of our normal dependence on exports to the United Kingdom and certain other European countries, whose economies had been pretty seriously weakened by the war,
Foreign Exchange Control to pay for a very large proportion of our imports from the United States. The second factor exposing us to influences abroad was, and continues to be, our very large international indebtedness, particularly to the United States. Those were the main conditions which led the government to seek power to continue under legislative authority the operation of the exchange control which had originally been enforced at the very outbreak of the war.
The experience of the past two years has,
I think, served to confirm and reinforce the views which were then held, and adopted by this house, regarding the necessity of a measure of this kind. If anything, I think it is fair to say that we under-estimated the international economic difficulties of the post-war period, and the length of time and the degree of effort that would be required to overcome the distortions of war, and get the world back on its feet. The international flow of goods between the western hemisphere and Europe has been maintained, as the house is only too well aware, largely by extraordinary measures, such as credits extended by the United States and ourselves, and is now dependent to a very important extent on grants and loans from the United States government under ECA. The impact on Canada of these payment difficulties experienced by our customers was, as I have indicated, recognized in the debate which took place on this measure about two and a half years ago, but I think it has been realized much more clearly in the time which has since elapsed.
I do not suppose that the members of the house need to be reminded of the sharp decline which took place in our exchange reserves in 1947, or of the measures which the government found it necessary to take at that time to restore the situation. In the course of 1947 our official reserves of gold and United States dollars diminished from $1,250 million to approximately $500 million in the middle of November, and to a low of $461 million by the middle of December, 1947. A combination of two factors was mainly responsible for that fall in our reserves. The first, of course, was the unexpectedly slow rate of European recovery which led to a very much more rapid utilization of the Canadian loan to the United Kingdom than had originally been anticipated, and secondly, the very high level of prosperity and capital development in Canada which led to an unprecedented flow of imports from the United States, and the virtual elimination of the surplus in our current account balance of payments.
I am sure that members on all sides of the house will have noted with satisfaction the
1564	HOUSE OF
Foreign Exchange Control great improvement which has taken place in our exchange position in the year which has just passed, 1948. As the facts regarding the record of our exchange transactions during the year have recently been made public in the annual report of the foreign exchange control board, which was tabled a few days ago, I think that in my remarks today I only need to refer to a few of the highlights.
Our official gold and United States dollar reserves rose from $502 million at the beginning of the year to $998 million at the end of the year. In this improvement of $496 million the sum of $150 million was not earned, but represents the proceeds of a loan on a bond issue which we sold to three American insurance companies last summer.
I am not going to suggest for a moment, of course, that all the credit for this improvement in our exchange position is due to government policies, but I do assert that those policies, both negative and positive, which were adopted to deal with our exchange difficulties, have been highly successful, and that the major part of the improvement which has taken place has been due to the adoption of those policies.
I referred a moment ago to negative and positive policies. The negative policies, of course, as the house appreciates, have been the import controls and the travel restrictions, which have resulted in a substantial curtailment of purchases in the United States, and of travel in that country. I think even more emphasis should be placed on the positive measures, including encouragement of exports to the United States under the direction of my colleague, the Minister of Trade and Commerce (Mr. Howe), the development of Canadian tourist income with the valuable assistance of the Canadian co-operation project of the American moving picture industry, and the assistance to the gold mining industry. On the trade side, members of the house will be aware that we managed to reduce our merchandise trade deficit with the United States from $918 million in 1947 to only $284 million in 1948.
That, I think, was a truly remarkable achievement; and it is particularly gratifying to note that of this improvement of some $634 million as much as $465 million was due to increased exports to the United States and only $169 million to reduction of imports from that country. Percentagewise the increase in our exports to the United States was no less than 44 per cent; and notwithstanding the increasingly severe restrictions imposed against certain of our exports by a good many other foreign countries, the total value of our exports to all countries was higher in 1948 than in 1947, to be exact $3,110 million in 1948 as compared with $2,812


million in 1947, or an over-all increase of nearly 11 per cent. In this respect I may say our experience differed from that of the United States. The exports of that country to the world as a whole fell from over $15-3 billion in 1947 to about $12-6 billion in 1948, a decrease of nearly 18 per cent.
As I have said, o'Ur reserves of gold and United States dollars at the end of 1948 amounted to approximately $1 billion. That sounds like a pretty large figure, but in relation to our needs it is less than we had before the outbreak of war. At that time, that is to say in 1939, Canada had gold and United States dollar reserves amounting to approximately $400 million. In comparing the present figure of approximately $1 billion one must also bear in mind the very great increase that has taken place since that time in commodity prices, and also the very considerable increase which has occurred in the physical volume of our international trade and all other transactions against which reserves of this kind are held. One method of conveying these factors would be this. In 1939 our reserves were $400 million and our total imports $750 million; in other words we held reserves sufficient to pay for over six months' imports. We now hold reserves of approximately $1 billion and are importing at the rate of about $2,600 million, so as a consequence our reserves are sufficient to pay for somewhat less than five months' imports.
But perhaps the chief characteristic of the present situation as it affects our exchange arrangements is the uncertainty which surrounds the international trade outlook. Hon. members are well aware, of course, of our continued dependence upon United Kingdom and other western European markets to take some of our main export products and to provide us with exchange with which we can satisfy and pay for our imports from the United States. Notwithstanding the shift in imports to the United States I indicated a moment ago, which took place last year, the group of countries consisting of the United Kingdom and the rest of the sterling area and other countries participating in the European recovery program took 42 per cent of our exports in 1948.


Mr. Macdonnell (Muskoka-Ontario):: If the
minister would permit a question, how much of that was made up of money derived directly or indirectly from the United States?


Douglas Charles Abbott: I could not give that offhand, but speaking from memory I think during 1948 payments made from ERP funds for exports to western European countries were probably somewhere between three and four hundred million dollars. I want to reserve

the right to check that figure, but I think it is approximately correct. We have no indication, of course, as to the exact amount which may be used by any particular European country out of ERP funds, because we have no control over the application of the funds they may receive from ECA.


Mr. Jackman:: Would the minister have the figures for 1947?


Douglas Charles Abbott: In 1947 there was no assistance from ECA funds, of course. The assistance was largely out of our own credits, the exact figure as to which I cannot give the hon. member. But speaking from memory again I think it was somewhere between four and five hundred million dollars in that year.


Mr. Cockeram:: Will the minister be able to get those figures for us?


Douglas Charles Abbott: Foreign Exchange Control exchange, and we claim sole credit for the beneficial results which the Canadian people have experienced from the change in the exchange rates made in July, 1946.
Mr. Speaker, that change in exchange rates is now being criticized by a good many of my hon. friends on the opposite side of the chamber. It is held up by some as a prime example of what is described as economic lunacy. The air is thick with all kinds of dire forebodings of the grim consequences which will befall as a result of it, if they have not already happened, by the obstinate decision of the government to stick to this decision which was made in July, 1946. I have not a doubt in the world but what some of my hon. friends opposite will have something to say along these lines. I hope they will take advantage of this debate to inform the house and the country of their views on this very important question.
In that connection, I want first to remind the house that when the exchange rate was changed in July, 1946, that move was hailed with satisfaction by virtually every section of the country without regard to party affiliation. Even the newspapers which have since been most critical of the government's action in that regard joined in the chorus of approval. The house might be interested if I were to read an extract from an editorial which appeared in the Globe and Mail of July 8, 1946. It was headed, "A one hundred cent dollar," and this is what the editorial writer of that journal said on that date, two days after the action to which I have referred:
It is our opinion that had there been a free play of exchange, our dollar would have returned to parity with the United States dollar long ago. It was designedly kept at ninety cents for several reasons, not least among them the protection of our future competitive trading position. It is, therefore, somewhat silly for some quarters to attempt to make political capital of the government's action as a "masterstroke" of economic strategy.


Harry Rutherford Jackman: Ha, ha.


Douglas Charles Abbott: My hon. friend from Rosedale laughs.
The return to parity must be read as an accurate indication of the impact of United States conditions on our economic structure. The change was forced on us by the inflationary trend within the United States.
Mr. Speaker, that is fairly characteristic of the editorial comment which appeared in the press of Canada at that time.
I have some diffidence in quoting anything that may have been said by the leader of the opposition, who, I understand, is now very critical of the action the government took at that time, because I am quite sure one could quote something in the opposite sense. I

should like to point out that on this point, too, his consistent record of inconsistency remains unbroken. I am sure my hon. friend will not mind if I refer at this time to a subject which I know is very close to his heart, namely, the dominion-provincial conference of 1945. If hon. members will take the trouble to look up page 33 of the printed booklet entitled, Dominion-Provincial Conference (1945), Submissions by the Government of the Province of Ontario, which was issued in January, 1946, they will find the following:


An hon. Member:: What are you trying to do, spike his guns?


Douglas Charles Abbott: No, I would not try to do that. The following is the quotation to which I referred in this booklet issued by the province of Ontario:
The foreign exchange control board of Canada was created by an order of the Minister of Finance on September 15, 1939, authorized under the provisions of the War Measures Act. The board has power to fix the rates at which foreign exchange, in such currencies as the board may designate, can be purchased or sold. The buying rate of eleven per cent and the selling rate of ten per cent established on United States currency on September 16, 1939, have remained constant during the war.
In these circumstances, it is urged that the dominion government make available to provincial and municipal governments the foreign exchange required to meet their external obligations at parity of exchange. To obtain this agreement, the provinces and municipalities should accept a ruling whereby future provincial and municipal borrowing would be restricted to Canadian currency.


George Alexander Drew: Mr. Speaker, I would point out that that in no way suggests the course that was followed, but merely points out the situation that obtained so far as the municipalities were concerned.


Douglas Charles Abbott: I have no doubt that my hon. friend will avail himself of every opportunity of making a speech-


The Acting Speaker (Mr. Golding):: Order. I must request that when the hon. leader of the opposition rises to address a question to anyone who has the floor, he address the Chair.


George Alexander Drew: I opened my remarks with the term, "Mr. Speaker."


Douglas Charles Abbott: As I was saying, I do not think my friend was asking a question; he was making another speech.


George Alexander Drew: I was correcting you.


Douglas Charles Abbott: If my hon. friend will listen, he will hear a little more about his position back in 1946. The then premier of Ontario, the hon. leader of the opposition (Mr. Drew), as I have indicated, urged the dominion government to make available to provin-

cial and municipal bodies at parity the necessary foreign exchange to meet their borrowings. This proposal was repeated at the plenary session of the conference on April 29, 1946, only seven weeks before the restoration to parity. This proposal will be found in the proceedings of the dominion-provincial conference of that date. I have not searched the record exhaustively, but I think I am right in saying that the premier of Ontario was alone in putting forward that proposal.
The leader of the opposition, Mr. Speaker, has at great length made it clear that all his actions at the dominion-provincial conference were based upon considerations of high principle and not merely upon a desire to get more money for his own province. The claim which he put forward for parity of exchange to which I have just referred must, of course, be based on some principle. I wonder what that principle might be? Could it possibly be that the principle which the premier of Ontario had in mind on the 29th of April, 1946, was that parity with the United States dollar was the proper exchange rate for the Canadian dollar? Offhand, I cannot think of any other logical principle, unless he was trying to secure a special privilege for his own province. I therefore find it difficult to understand, and I shall be interested in his explanation, why at the same time he would believe that the decision of the government of Canada which was made on July 5, 1946, was based on what he euphemistically described as economic lunacy.


Harry Rutherford Jackman: Not even interested.


Douglas Charles Abbott: I gather from the press
accounts of some of the recent statements made by the leader of the opposition that it is his policy and the policy of his party to restore the quotation of the Canadian dollar to what he describes as a realistic level. In fact, there is a plank in the platform of his party to that effect. It seems that is what my hon. friend had in mind when he told the press on February 24 that was what he proposed to do, if and when he got the chance.
"Realistic" is one of those nice words which have a pleasant sound and a very favourable emotional appeal. It can be used very conveniently to conceal a lack of concrete thought or any definite views as to just what should be done. I am sure my hon. friend had no intention of doing that. The leader of the opposition and those who sit around him will, I hope, during the course of this debate give a full exposition of the reasons which led them to the conclusion that the present exchange rate is not realistic. I shall listen to those reasons with a great deal of interest.
Foreign Exchange Control I am sure they will not confine their exposition to a mere assertion, but will let the house have an explanation of the criteria which they believe should be applied in order to achieve the realistic rate.
Sometimes it looks and sounds as though the only thing some of them have in mind when they talk about a "realistic" exchange rate is one which will result in a substantially higher price for gold in Canada. Let me say this at once. We all appreciate that the government's decision to raise the exchange value of the Canadian dollar by ten per cent in July, 1946, had the effect of reducing the price of gold in Canada from $38.50 to $35 an ounce; and it is true that that reduction in price came at a very difficult time for the gold-mining industry, which was faced with rising costs and reduced profit margins. But I want to say this. So far as this government is concerned, the main economic policies of the country-those policies like the exchange rate policy which affect the well-being and the standard of living of the people of Canada-are not going to be determined to suit the convenience of any single economic interest, whether that interest is the gold-mining industry, the stock promoters, the wheat farmers, the manufacturers or any other single group. The main economic policies of this government are going to be determined in the light of the interests of the community as a whole, and not those of any single group.
Having said that, Mr. Speaker, let me say this. The gold mining industry has, naturally, just as much claim to consideration as has any other group in this country; and the government and this house have recognized that claim in tangible form. The gold-mining industry, as everybody knows, tends to have a normal cycle of prosperity which is exactly opposite to that of most industries. When business conditions are active and there is an upward pressure on prices, costs go up while the price of their product, gold, does not do so. On the other hand, it frequently happens that, when other businesses are depressed, the costs of gold production go down, and since the price remains the same the margin of profit is of necessity increased. All of that is of course the logic of a monetary system which is based on gold. However, it is cold comfort to the gold-mining industry, at a time when other industries are very profitable and it is not, to think back to the days when the situation was reversed. Consequently last year the government recommended and this parliament approved a measure under which each gold mine is compensated for part of the increase in its costs of production above a certain level. Thanks

Foreign Exchange Control to these bonus payments and to some improvement in the labour supply, I am glad to be able to report a very considerable improvement in the industry last year and an increase in total production of something like fifteen per cent.
I feel sure that hon. mfembers generally will share our gratification over this improvement in an industry which has been going through an extremely difficult period, which means so much to the prosperity and to the development of the great northern areas of this country, which has made such an important contribution to our national strength in the past, and which will, in my judgment, continue to do so in the future.
I have had estimates made, and I am informed that these special assistance payments to the gold-mining industry will amount to about $10,250,000 in respect of production during 1948, the first year of operations under the program. It is perhaps interesting to note that this works out at approximately $3.26 per ounce on each ounce of gold produced from the straight gold mines; that is to say, excluding any produced as a by-product of base metal mines, which is not eligible for assistance under the plan. In other words, our gold-mining industry proper, taken as a whole, is now receiving, from gold production, revenues which work out at about $38.26 per ounce, or very close indeed to the same price they received before the change in the exchange rate. Of course the marginal mines, the higher-cost mines, are receiving a substantially higher price.


Mr. Knowles:: Has the minister any figures on that?


Douglas Charles Abbott: I have not a breakdown here, but in due course they will be available for the different sections of the industry.


Stanley Howard Knowles: That would mean that the average would be higher than $38.26.


Douglas Charles Abbott: No, that is not right.


The Acting Speaker (Mr. Golding):: Order.


Douglas Charles Abbott: The point I have been making is that the marginal mines and the new producers are getting what the measure was intended to give them, namely, a greater measure of assistance; and that the older, well-established, low-cost mines did not get as high a proportion. I believe it is fair to say that more marginal mines have been kept going, more northern communities have been sustained, and the gold-mining industry as a whole is better off under the present arrangements than they would be with the Canadian exchange rate at a level which would have resulted in a price of $38.50 per ounce for everybody, which might have been the case, without these bonus payments. I think that
	-
these truths are being recognized by an increasing number of persons in the industry and in the communities which are dependent upon it.
I think perhaps I have said enough, for the present at any rate, to deal with this particular approach to a "realistic" exchange rate. But maybe th.at is not what my hon. friends have in mind. If not, I have no doubt that they will tell us what, if anything, they do have in mind, so that the house and the country are not obliged to guess. I wonder if they have in mind that the exchange rate should be one which would enable us to compete in foreign markets and avoid running a deficit in our current account balance of payments? That would be a perfectly legitimate and logical basis on which to found a realistic exchange rate. May I say this. The last thing the government wants to do is to take a rigid attitude towards exchange rate questions, and considerations of the type I have just mentioned are worthy of the closest attention. But that cannot be what my hon. friends mean-not, at any rate, if they really consider the present rate of exchange unrealistic. For what is the present position? The present position is of course that at the prevailing rate of exchange the competitive capacity of this country makes the Canadian dollar one of the strongest currencies in the world, and no amount of calamity howling can possibly change that position.
In 1948, as I have indicated, we sold abroad $3,110 million worth of goods, 10-6 per cent more than in 1947 and 33 per cent more than in 1946. In that year we increased our exports to the most competitive market in the world, the United States, by over 44 per cent and to a total of over a billion and a half dollars. Does anyone really believe that we could have achieved these remarkable results with an exchange rate which was over-valued and unrealistic?


Mr. Blackmore:: Will the minister permit a question?


Douglas Charles Abbott: Gladly.


John Horne Blackmore: Was the minister referring to the year 1946-47?


Douglas Charles Abbott: I am referring to 1948. I have no doubt that some of my hon. friends will want to remind us that Canada got into exchange difficulties in 1947, and that it was necessary for the government and parliament to take certain action, including import and travel restrictions to which I have referred, in order to improve our position. This is true, of course. But let me remind the house that even in 1947 we did not have a deficit in our over-all balance of payments on current account. On the contrary, we had a

surplus-excluding exports of goods financed by official relief contributions-amounting to $50 million. Our exchange difficulties arose, as I have indicated on other occasions, because some of our principal customers were not able to pay us in cash for all our exports, and in what I contend was a self-interested effort to aid their recovery we extended large amounts of credit to them. In 1948 we achieved an over-all balance of payments- excluding relief shipments-in excess of $450 million, an improvement of over $400 million, a record figure for a peacetime year. That compares with $50 million in 1947 and $350 million in 1946. It is true that some of this surplus was achieved as a result of import and travel restrictions to which I have referred and which the government is pledged to remove as soon as possible. But even without these restrictions we would undoubtedly have had a very substantial over-all current account surplus. Some relaxations have been made in these restrictions, but the restrictions have been maintained to the extent that they have for the same reason that the drawings on the foreign credits, which were extended, have been limited because it has been necessary to build up our exchange reserves to levels which will give us greater independence of action in the uncertain days which lie ahead of us.
Now, Mr. Speaker, in the light of our export position and our over-all balance of payments position, are my hon. friends really prepared to maintain that the present official quotation of the Canadian dollar is not realistic? These factors would seem to me to lead to the conclusion, if anything, that the present exchange rate of our currency is too low, and that the Canadian dollar should be appreciated. I know that some of my hon. friends opposite will say that the favourable results we achieved in our trading position in 1948 were partly due to the special grants and loans given to some of our European customers by the United States government under the European recovery plan, and that had it not been for these grants to Europe the picture might have been quite different so far as our exports are concerned. Let me say here, Mr. Speaker, that in my opinion the action taken by the United States government in initiating the European recovery program last April represents one of the most statesmanlike and farsighted actions of national policy that the world has ever seen. I think it is fair to say that the future history of the civilized world, which includes Canadian history, might well have been quite different if our great and strong neighbour had not decided to lend this further and magnificent 29087-99a
Foreign Exchange Control assistance to the recovery of the western world.
The exact impact of that assistance on Canada in 1948 is not directly ascertainable, as one can only guess what would have happened to our exports in the absence of this special financing of Europe by the ECA. However, for purposes of the question which I am discussing, let us take it for granted that the availability of ECA funds was an important factor in enabling western European countries to maintain their purchases in Canada in 1948. I accept it. Well, what inferences can and should one draw from that assumption? Should the house draw the inference that the Canadian dollar is not quoted at a realistic level? Well, such an inference, it seems to me, would surely be unwarranted. After all, there is nothing in the ECA legislation which forces recipients of this financial assistance to spend their money in Canada. They spend money in Canada because they get good value for their money here, which means that at the prevailing rate of exchange for the Canadian dollar they get at least as much for their money in Canada as they do anywhere else. In other words, Mr. Speaker, we are able to compete in world markets. And if there is any better definition than that of a realistic rate of exchange I hope that before this debate is over one of my hon. friends opposite will give me that definition.
Perhaps the inference some of my hon. friends want the house to draw from the fact that our European customers are financing part of their purchases in Canada with ECA funds is that world trade rests on unstable and uncertain foundations. If that is their inference I heartily agree with them, but I cannot agree with them if they draw from that the conclusion that we should devalue the Canadian dollar. I ask them in what way they think that it is going to restore balance to the dollar account of the United Kingdom and other war-damaged countries, and help them to maintain their purchases in Canada by taking such action. These countries are in need of special dollar assistance for the obvious reason that they are not able to obtain enough dollars through exports of goods and services to meet their dollar requirements. Notwithstanding the special financial assistance given to them through ECA, they have cut down on their imports from dollar countries in an attempt to balance their account. Canadian exports have of course been affected by these restrictions, and the government is greatly concerned with the problem and is seeking, in conjunction with other countries, for an alleviation of the situation; but the Canadian exporters who are affected by this situation will, I know,

Foreign Exchange Control agree with me when I say that their difficulties do not arise because their prices are too high -a situation which might be corrected of course by a change in the exchange rate- but because the foreign countries simply will not make dollars available for certain goods; and the lowering of the Canadian exchange rate could do nothing to correct that situation. On the contrary it would aggravate it.
The trouble of course lies, as I have said, in the inability in present circumstances of the United Kingdom and certain other overseas countries to earn enough dollars to pay for the goods we would like to ship to them and they would like to have from us. A depreciation of the Canadian dollar would make it more difficult for them to earn dollars here to spend on our exports, and a moment's reflection will show the accuracy of that statement. One would think that it would be pretty obvious, but it does not seem as clear as it should be to some people.
I was struck by the statement made by the leader of the opposition at a press conference a week or so ago when he was quoted as saying that the Canadian dollar should be devalued to a realistic level. Then he went on to say this, according to the newspaper quotation:
. . . primarily today on the necessity of increasing British imports to this country as a means of maintaining our overseas trade.
That is a most desirable thing to do, but the action which my hon. friend appeared to be advocating would have exactly the opposite effect, and I hope that when he speaks he will explain to the house and to the country just how the depreciation of the Canadian dollar by say 10 per cent would help the export of British goods to Canada. It would have this effect: a British manufactured article which costs now $100 would then cost $110. Does he suggest that that increase in terms of Canadian dollars would help the United Kingdom to sell more in this market? One of the main reasons why they are unable to sell as much as they wish to is that their costs are now too high, and they find it difficult to compete with domestic prices. Of course it is true that devaluation or depreciation, which has been suggested, would result in the price of United States imports increasing. But who, under present conditions, does the house think is in a better competitive position to cope with the increased Canadian dollar cost of imports that would result from the depreciation of our dollar-the British exporter who is already finding difficulty in competing here at the prevailing exchange rate, or the United States exporter?
I hope I have said enough to make it clear that depreciation of the Canadian dollar is,


in the opinion of the Canadian government, no answer at all to the difficult world trade situation which is developing. It is no answer because it does not strike at the root of the trouble which is, I repeat, the difficulty experienced by the United Kingdom and other overseas countries in exporting enough goods to pay for their purchases in this country; and far from helping the situation the action some hon. members opposite appear to have in their mind would, as I have said before, aggravate it and worsen the lot of these exporters.
I think I have demonstrated conclusively that if you apply the normal tests of competitive capacity, that is ability to compete on the world market and ability to produce an equilibrium in our international payments, the present exchange rate is, to say the least, realistic. Some people may say: "Very well, but you are not saying anything about capital movements." I am going to deal with the question now. I will deal with it not because I really believe that our exchange rate on the dollar should be determined by considerations relating to capital movement, but because 1 want to analyse all that there may be in the case put forward by some of my hon. friends, and particularly the hon. member for York South (Mr. Cockeram). The case they try to make, as I understand it, is that up to the time the government took the decision to appreciate the Canadian dollar in July, 1946, there was a considerable inflow of capital from the United States and that this inflow came abruptly to an end when parity of exchange with the United States dollar was established in July of that year. In other words, it is said that the American investors were willing to put their money in Canada only if they were able to buy the necessary dollars at a 10 per cent discount, but not if they had to pay par, presumably because they regarded par as an unrealistic rate. And that argument is further developed, that the cessation of capital inflow deprived Canadian industry of a much-needed source of venture capital which would help develop the economic resources of the country. No American capitalist, the argument runs, would be sufficiently misguided to put money into a country foolish enough to try to maintain an artificial exchange rate by means of a system of exchange control. I hope my hon. friends will agree that that is a fair statement of the argument that is made. If they do not, then I should be only too glad to quote from statements of those who are like-minded, made along similar lines, but in much less temperate language.
Now, let us look at the facts. One fact is that there has, in recent years, been a decline in net American purchases of outstanding

Canadian securities. I emphasize the word "outstanding." This is the only fact that my hon. friends opposite appear to see. A second fact is that in 1944, 1945 and the first half of 1946-that is, before the change in exchange rate-the great bulk of Canadian securities purchased by American investors consisted of dominion, provincial and municipal government bonds. In the period mentioned, net sales to American investors of securities in these classifications amounted to $275 million or 72 per cent of the total. A third fact is that the decline which occurred in net American purchases of outstanding securities in recent years has been much more important in the case of government securities than in the case of industrial securities.
What is the significance of these three facts? Even if one assumes that the decline in American buying of outstanding securities was largely influenced by the change in the exchange rate rather than by the reduction which occurred in the public offerings of government of Canada securities, or by other causes, the main significance of the decline is that this indirect form of government borrowing in the United States came to an end.
Well, to take the words which my colleague the Minister of Justice (Mr. Garson) used yesterday-"So what?" Does anyone opposite actually think the government should offer its securities to American investors at cut rates, for 90-cent dollars? Is it not more advantageous if the government wishes to borrow in the United States, for it to borrow directly as we did when we put out the $150 million in the New York market, the fifteen-year issue of last summer at 3 per cent-and the terms, incidentally, which are much better for the government and for the people of Canada than those involved in the other indirect type of borrowing to which I have referred, terms which could not be bettered by any other country in the world.
It is quite likely that the restoration of the Canadian dollar to parity did cause certain American investors, who had bought Cana-dian-dollar security in the belief that the Canadian dollar was bound to go back to par, to reduce their purchases and in some cases liquidate their holdings and take profits. They had indeed made the speculative profit which they had anticipated.
What conclusions should one draw from this regarding the proper exchange rate policy for Canada? I put this question: Should we maintain a continuously undervalued exchange rate so that American investors who wish to take a position here will at all times expect that the value of the Canadian dollar is going to be increased?
Foreign Exchange Control If you keep this up long enough the Canadian dollar will not have any value at all. It will disappear altogether.
I hardly think my hon. friends can be recommending that course. But it is precisely these anticipations regarding future changes in the exchange rate which seem to play an important part in determining the attitudes of some non-resident investors toward outstanding Canadian securities.
In this connection it should be noted that, during a large part of the time which has elapsed between January 1946 and the present time, American investors who wished to purchase Canadian domestic securities have been able to get the Canadian dollars through the unofficial market at about the same 10 per cent discount as prevailed before the exchange rate was changed.
I have stressed the fact that the bulk of the net American purchases of outstanding Canadian securities, when this type of capital inflow was at its height, consisted in the purchase of government securities, and that the great bulk of the decline in net American purchases which has occurred in recent years has been concentrated in that particular class of security.
From this fact we are invited to draw the conclusion that there has been no real increase in American investment in Canada in recent years. And that is simply not true. The real investment of American capital in Canadian industry has gone on increasing year by year. I am not referring now to the purchase of outstanding securities but to the bricks and mortar type of investment in which the non-resident investor brings skill and know-how and makes a direct contribution to the development of the economic resources of the country.
Hon. members will find some interesting figures in this connection in the report of the foreign exchange control board tabled only a few days ago, showing the fresh inflow of funds into Canada from the United States for direct investment by years since 1945. These figures are as follows:
1945	
$17	million1946	
41	million1947	
48	million1948	
68	million
The year of the change was 1946. It is clear from those figures that fresh risk capital has been flowing into Canada on a massive scale from the United States, not for purposes of speculation but to participate in the economic and industrial development of this country. And that is the kind of foreign investment we want.


Alan Cockeram: Has the minister the figures showing where that risk capital is? Can he tell us that later on?

Foreign Exchange Control


Douglas Charles Abbott: When we are discussing the report of the foreign exchange control board a breakdown could be given. I was about to say that the change in the exchange rate and the existence of exchange control have not prevented this inflow from increasing year by year. As I have said, we welcome this type of inflow, and we know that our American friends feel assured, from their experience of the past, that they will get fair treatment in Canada, or they would not be prepared to risk their capital in those amounts.
I hope that those who have had, and have conveyed to others, the impression that American capital was now shunning this country will find some comfort in the facts I have given, and will not repeat this type of statement.


Mr. Hackett:: Has the minister available the total inflow of American capital in the period, let us say, from five years preceding the war?


Douglas Charles Abbott: I have not those figures here, but I have no doubt they are available. I shall take note of the hon. member's point and see that they are made available to him. The great bulk of it, as I said a moment ago, was in the purchase of outstanding Canadian government securities, whether dominion, provincial or municipal. The great bulk of investment immediately prior to the war was in that type of security, and not so much in the industrial type of security.
Perhaps I have said enough now about the capital movements aspect of our international transactions to refute the notion that this reflects the maintenance of an unrealistic exchange rate. We do not need to offer the Canadian dollar at bargain-basement prices to attract desirable capital investment to this country. It is quite possible that we might be able to attract some speculative in-and-out investments by doing so, but I can assure you that this government is not going to base its exchange policy upon that type of Canadian investment.
There is one other reason, as invalid as the rest, which is sometimes given for considering the present exchange rate as unrealistic. That is the existence of this so-called unofficial market for Canadian dollars in New York in which the Canadian dollar is currently quoted at a discount of 6| to 7 per cent. In the press conference to which I have already referred, the leader of the opposition (Mr. Drew) apparently indicated that the unofficial market rate was the yardstick which in his judgment could be taken in determining where exchange should be pegged. From that, I gather he thinks that represents a realistic quotation of the Canadian dollar.

I should like to look at that proposal for a moment. First, no resident of Canada ever has occasion to acquire foreign exchange through the unofficial market at the discount prevailing there. All the foreign exchange bought by Canadians is bought at official rates. Foreigners receiving payment in Canadian dollars from Canadians in payment of imports, in payment of current services of all types, in payment of interest and dividends, in payment of freights and the like, can convert these Canadian dollars into foreign exchange at the official rates of exchange. There are, however, a few types of payments to non-residents, representing capital items, which we are not prepared to convert into foreign exchange at the official rates. For example, an American holding a security maturing in Canada can, and does, receive the face value of that security payable in Canadian dollars, and he will come into Canadian dollars as a result of the maturity of that security which we are not prepared to provide exchange for out of our official reserves. The various types of payment of this kind and their magnitude are described in detail in the report of the foreign exchange control board. I shall not weary the house by reviewing them here, but non-residents who come into possession of Canadian dollars which they are hot able to convert into United States dollars at the official rate may have some use for them in Canada; for instance, they may purchase another security here. If they have not, they are free to sell them to some other non-resident, to some other American, who may have some use for the dollars, at a price which is determined between them. It is transactions of that type whmh take place in the unofficial market.
Since the Canadian dollars acquired there are limited in the uses to which they can be put in Canada, being restricted, broadly speaking, to investment and tourist expenditures, the quotation need not be the same as the official rate. But to say that this narrow, restricted market, this market for a dollar which is only good for a few relatively unimportant purposes, gives a more realistic appraisal of the value of the Canadian dollar is, in my judgment, pure fantasy. I am prepared to leave it to the house and to the country to form their own judgment as to what constitutes the more representative and realistic rate, the rate at which Canadians were able in 1948 to obtain foreign exchange to pay for $2,600 million worth of imports, $275 million worth of freight and shipping charges, over $400 million worth of other current expenditures abroad, and at which non-resident investors were able to obtain foreign exchange in the amount of $325 million for income earned in Canada, a total of

some $3,600 million, or the rate at which a few non-residents transferred to other nonresidents some scores of millions of Canadian dollars. I am prepared to leave it to the judgment of the house and the country as to which is the more realistic rate.
I have come to the end of what I have to say about exchange rates. I have tried to examine, as carefully as I could, all the grounds which I have seen put forward for dissatisfaction with the present rates, and in the present circumstances I can And no basis for believing that the present rate is unrealistic or that it should be altered. The Canadian dollar was appreciated in 1946 very largely because we saw a marked increase in prices originating in the United States. It was realized that Canada would inevitably be affected by this, but we did not want to add to the cost of our imports, with pervasive effects throughout the whole cost of living and the cost of doing business, a further ten per cent which could be avoided through changing the exchange rate. The price developments which have taken place since 1946 have shown how well founded our expectations were, and have provided the most complete justification for the action which we took. If any hon. member believes that the cost of living in this country is too low, I hope he will get up and say so. The government, at any rate, is not prepared to add to that cost of living and the cost of doing business by depreciating the Canadian dollar.
Perhaps I can bring that issue home to every hon. member of the house, and to every household in this country, if I put it in these terms. The government sees no justification for and is not prepared to recommend an action at this time which would have the effect of imposing an additional 10 per cent tariff, or even a 7 per cent tariff, against the importation of any and all goods from any and all countries. That is what would be the effect of restoring the Canadian dollar to the wartime 90 cent basis or, alternatively, fixing it at the rate which has recently prevailed in the unofficial market. Let those who argue for the devaluation or depreciation of the Canadian dollar be frank in explaining to the Canadian people just what it will mean to their cost of living and their cost of doing business.
The moral, Mr. Speaker, of all that I have said is that there is no real alternative to the action which is now recommended to the house. I look on this as, in a sense, a measure of national defence. In the face of all the uncertainties now surrounding international trade, this country cannot afford to give up the economic defences which foreign exchange control provides because, as I have said on other occasions, a nation which loses its
Foreign Exchange Control exchange reserves loses its independence. More than ever we need to ensure, in the words of the preamble to the Foreign Exchange Control Act, that Canada's foreign exchange resources are made available to meet the needs of Canada as a whole, that they are used to promote trade and other normal cur- _ rent transactions with other countries, and not dissipated through disadvantageous exports of capital from Canada, or for other purposes disadvantageous to Canada as a whole.
Two years from now, Mr. Speaker, parliament will again have an opportunity of reviewing the situation and determining whether, in its wisdom and in the light of the then existing circumstances, it is still necessary to continue exchange control to protect the public interest.


James MacKerras Macdonnell: Mr. Speaker, I rise with hesitation, and almost with apology, because it seems to me that the Minister of Finance (Mr. Abbott) has not only made his own speech but he has tried to make in advance all the speeches that we might make on this side of the house.
I do not know whether or not we should be very grateful to him for that. Perhaps time will tell.
I was interested in one thing. I listened carefully to the minister, and as far as I could discover he did not say a single word to suggest that he regretted the need for these controls, that they were things we should be trying to get away from. It seemed to me he fully bore out the suggestion which my leader has made from time to time that the hon. gentlemen opposite have become control minded, or emergency minded, and it is a permanent state of mind.


Douglas Charles Abbott: I have said it so often on other occasions that 1 did not think I needed to say it again.


James MacKerras Macdonnell: I
listened to him carefully, and it was all along that line. I do not propose to follow the minister into many of the details that he has given us, first of all because he has given us so many. Some of them will need careful study, but I wish to mention one or two things in passing. As one listened to the minister's picture of our position in Canada, really I pinched myself and I said, "Have we actually any difficulties of any kind?" The minister made one or two references at the beginning to the fact that there were difficulties in the background, but from then on it seemed to me that he became so intoxicated with the wonderful figures which were the result of the wonderful policy which the government has pursued that a stranger

Foreign Exchange Control listening to him could easily have said, "These people have no troubles of any kind". Of course the minister will agree that we have great trouble, and that our export trade is in great danger. If he does not agree I shall have something to quote later on from the Minister of Agriculture (Mr. Gardiner), who seems to have doubts about the matter.
I shall refer to one or two of the figures that the minister gave. I am not going back to dwell at any length on the cataract of United States exchange which we lost between July, 1946, and November, 1947. I just want to correct the minister on one small point. They were not quite as farseeing, not quite as all-wise as he suggested, because in reading the report of the Bank of Canada for the year following, which I suppose would be the beginning of 1947, we find that the actual reason which very largely stimulated the action taken by the government was their belief that the course of prices in the United States would be very different from what it was. They thought it was going up for a while and then coming down, and that by the course they took we would be able to take the low road and meet United States prices on their way down. Unfortunately that did not happen.
One other point I wish to refer to in the minister's speech is rather important. When we in this party spoke about this more than a year ago and were troubled about the course that had been taken, we said "Of course if the Marshall plan comes in with hundreds of millions of dollars in 1948, that may save you from the consequences of your own acts." The Marshall plan has come in; but I was rather surprised at the figures the minister gave. He pointed out an improvement of $496 million, less a loan of $150 million of which he advised us, which would leave an improvement of $346 million. Then the minister said he thought the amount of United States dollars that had found its way to us through European purchases was some three or four hundred million. My own idea of the figure was that it was very much larger, though I suppose we can get the exact amount later on. My idea was that it was greater by some hundreds of millions.


Douglas Charles Abbott: No.


Clarence Decatur Howe: You are confusing authorizations with shipments.


James MacKerras Macdonnell: The
other evening the Minister of Trade and Commerce (Mr. Howe) told us he did not know where the money came from at all, so we will not take him as an authority at the moment. But I could not help thinking that when he was building elevators-I understand 
the minister built very good elevators-he knew perfectly well where the man for whom he was building was going to get the money, and I suggest that he show the same assiduity in serving the people of Canada.


Clarence Decatur Howe: That is not a very bright remark.


James MacKerras Macdonnell: Well, it is a fact. Often facts are dull and unpalatable.
Now I should like to make some comments on this resolution. We are now asked to continue the measure passed three years ago. I recall the debates at that time and the tremendous efforts we made to have some flexibility introduced into this legislation. I remember the utter refusal on the part of the government. It was whole hog or none. They had to be "thorough"; there must be no flexibility of any kind. And when I see the government coming along three years later and asking us to approve this thing exactly as is, I must confess to my surprise. It seems to me there is an intellectual bankruptcy over there. Surely they should be able to suggest something except that for another two years we are going to follow the same unfortunate course which has brought us to the point where, as the hon. member for Digby-Annapolis-Kings (Mr. Nowlan) says, we have the sterling area with an iron curtain or a curtain of some kind having the dollar mark on one side and the pound mark on the other, and we are drifting more and more into the position that we can have no satisfactory trade with it. I am sure the hon. gentlemen to my left who come in the main from the western plains know what that means, unless some solution is found. It really seems to me-and I try to use moderate language, as you are perhaps aware, Mr. Speaker-that in a sense it is almost an act of effrontery for the government to come now and just ask us to continue for two more years this measure, with all its imperfections, which was imposed upon us three years ago.
It was said of the Bourbon kings that they learned nothing and forgot nothing. Well, as far as this measure is concerned I think we might say the government has learned nothing. I do hope they can forget something, however, because I am sure they have a lot of things they would like to forget. To put it differently, in medical language we are being offered the mixture as before; no change, just the mixture as before. It was a bad dose three years ago, and it is an even worse dose today. Of course it would not have been so bad if the legislation had been used only for the purposes for which it was intended; but we remember that in 1947 it was found that various things could

be done by it and through it that were never dreamed of at the time it was passed. On June 17, 1946, Mr. Ilsley, in introducing the measure, said:
We have no intention of using this exchange control legislation to restrict anything but certain types of capital movement.
But we all remember that in 1947 it was used indirectly to limit the movement of goods. At that time the minister with great mental agility propounded an interesting theory. He said the statement I just read was not an undertaking. I think the minister said it was just a statement, or a statement of intention. That was very interesting to me, because as I read it and as I think anyone else would read it, it was a clear undertaking by the then Minister of Finance, which was departed from in the year following.
First of all I wish to refer to one or two of the details of this act we are asked to continue. In speaking of it on August 7, 1946, the hon. member for Saint John-Albert (Mr. Hazen) referred to two of the sections. I shall be very brief, but I should like to refer to those two sections also, because it is just as well to remind ourselves of the powers given in this act.
It provides by section 31 that no person in Canada shall assign or deliver to a non-resident any property situated in Canada or elsewhere, and no person residing in Canada can give any property to a nonresident without a permit from the board.
It provides by section 49 that the board can prohibit any person from exercising any control over his own property, whenever it sees fit.
Of course the minister will say that these powers are just put there in order to meet a remote contingency. The minister might even say, as he told the hon. member for Calgary West (Mr. Smith), that the resolution which was enacted by radio by the minister in November of 1947-


Douglas Charles Abbott: It was not enacted by radio.


James MacKerras Macdonnell: That is my statement; enacted by radio.


Douglas Charles Abbott: I am contradicting it.


James MacKerras Macdonnell: The
minister said it was not really a law at all, that nobody needed to obey it. But unfortunately, as the hon. member for Calgary West pointed out to him, even though it was not a law it was something on which the government authorities were acting, because they had impounded certain goods belonging to a client of the hon. member for Calgary West. So we will leave the minister to decide the question, when a law is not a law.
Now I want to come to what I consider to be the main point for consideration; that is 29087-100
Foreign Exchange Control the basis underlying this act. I quote very briefly from the preamble to the act itself:
. . . whereas it is desirable to provide means for achieving orderly exchange arrangements and in general discharging the obligations of Canada as a member of the international monetary fund . . .
I suggest, Mr. Speaker, that the government has taken that agreement entered into at that time and approved by us, and has just sat down and accepted that and allowed a kind of paralysing rigidity to settle down upon them for these three years. Now, when the results are beginning to appear, when our trade with western Europe is in danger of being strangled, the government is coming along and asking for a continuation of this legislation. Let me point out that in the Bretton Woods agreement itself there was no such contemplation. Article 1, subsection (iv), says the purpose, among other things, is-
To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.
I ask where there is any indication that the government have taken that part of the agreement seriously, where there is any suggestion of any kind that they are proceeding to the elimination of foreign exchange restrictions. All we have had is the minister telling us of the great things they have done in the past, making no suggestion that there should be any alteration of any kind. Yet, as I said a moment ago, there is in western Europe a situation which I would call alarming, and in using that word I think I am making an understatement.
Of course the international monetary fund got off to a bad start. It allowed the nations to write their own ticket in regard to the value of their exchanges, and I think they have been to blame for allowing the thing to go on without alteration. We know France and Italy have more or less kicked over the traces, but in the main the situation has been allowed to continue. The officials of the international monetary fund are aware of the danger and difficulty. In a report by the international monetary fund, dated April 30, 1948, this appears at page 21:
The fund agreement makes it clear that the provisions for the regulation of exchange rates are not intended to impose upon the fund the duty of perpetuating in the name of stability exchange rates which have lost touch with economic realities.
I propose to say something more about that because here you have the officials of the international monetary fund stating very emphatically the need for realism; yet there is not a sign that the governments back home who give these representatives their instructions are interesting themselves in this matter at all.
1576	HOUSE OF
Foreign Exchange Control
For a long time, Mr. Speaker, the evils of this situation were obscured. I know quite well, and probably the minister would say it if I did not say it, that for some time business in this country had the feeling that it was good to have exchange rates pegged. It meant the risk was taken out of business. It meant the government took the risk. This was true of the banks as well as of business people who should have known better. They should have realized that this was a dream world in which they were living because its rigidity, which seemed to be working pleasantly for the moment, was going to produce exactly the sort of evils that it has. The minister said not a single word about remedying any of these evils. I ask the minister whether the government is satisfied with the situation in western Europe? Are they prepared to sit by and let this paralysing rigidity continue?


Douglas Charles Abbott: It cannot be remedied by changing the Canadian exchange rate.


James MacKerras Macdonnell: Never mind, let me make my speech. As I was saying, the minister made no mention of this in his speech.


John Horne Blackmore: Will the hon. member permit a question?


James MacKerras Macdonnell: Yes, certainly.


John Horne Blackmore: Would the hon. member mind telling the house, in the course of his remarks, whether he regards this rigidity as a cause or an effect?


James MacKerras Macdonnell: It is
like a lot of other things, both a cause and an effect. I will come to that later. The idea that a fixed exchange rate was going to be a pleasant thing is beginning to change. The situation in western Europe has awakened our people. They know now that the danger is a very serious one. The Minister of Agriculture (Mr. Gardiner) knows it is serious. Last December he said so to the people in London, and I should like to quote two or three sentences from what he said. This appeared in the Montreal Star on December 17, 1948.
Hon. J. G. Gardiner, Canada's agriculture minister, said today that Canada's hopes of long-term, large-scale food agreements with the United Kingdom were "dashed to the ground" by currency difficulties.
The minister continued:
I am convinced that the world is not in any state of mind where it can be expected to agree that the manipulation of any system or systems of currency is going to be allowed to interfere with the will of those who have empty stomachs when it is preventing their purchasing surpluses of food and distributing them.


Later, he said:
There is no plan for exchange of British cars or steel products for Canadian food although Britain gives Russia tinplate for fish.
Although Canadian production was increased largely during the war when Britain was in urgent need, British negotiators now propose imports from Canada similar to those of pre-war days.
It might be a good thing for everybody if they would close down united nations meetings long enough to permit some of the United Kingdom and the United States experts to get together and settle some basis on which dollars and sterling can be converted to allow nations like Canada to produce food to feed the starving millions and distribute it.
The Minister of Agriculture is a practical man; he knows that these difficulties exist.
What is the situation in western Europe? We all know what it is. Our trade is shrinking to the point where it is dubious whether we are going to be able to sell any of our agricultural products. Do not let anyone imagine that even the most miraculous discoveries of oil in Alberta or equally miraculous discoveries of ore in Labrador are going to solve our problem, even if they were so miraculous that they solved the payment problem in the United States. Nevertheless, unless this problem of exporting our food products to Europe is solved, you will have an economic revolution on your hands because you would have the western provinces with three or four times too many people growing food. So far as I know, the Minister of Finance made no reference to that. The Minister of Agriculture knows about it. Why would he not? He is a farmer.
What is the story in Britain? We know the story. In Britain and in western Europe you have this ironical situation. North America is sending them aid in a manner that has never before been equalled by any nation in peacetime in the economic field. What are they doing? How are they using these materials? I am not exactly blaming them, I am blaming the situation; but they are using them in order to make themselves better able to cease trading with us. They are using them so as to be better able to develop trade in the sterling area. I am glad to be able to tell the minister who smiles somewhat cynically-


Douglas Charles Abbott: No, I was not smiling cynically.


James MacKerras Macdonnell: -that the realization is beginning to take hold that when you have unreal exchanges you begin to suffer. In the sterling area they are beginning to find that out. The thing is rolling back on them. This is one of the things that give me some hope.
In the meantime, what does Cripps say?- whose mind is brooding over our affairs, as

Churchill said. Cripps has said that if we want to sell more to Britain we shall have to buy more from Britain, and that is all right. In the meantime, however, so far as we can make out Britain is busy selling in eastern Europe goods which could be sold here. Electrical machinery, which could be used in this country, is going to eastern Europe. The unreality is being perpetuated there in a real way.
Let me read briefly two extracts from the New York Times. The first article is dated February 6 and it indicates the fantastic-no other word will describe it-situation which has arisen in Europe by perpetuating the principle in this act which we are asked to renew. The government are not taking cognizance of it. They are not taking steps to meet it. They are just permitting things to roll along, and they are not rolling very well. This article is headed, "Exchange Deals hit U.S. Industry." The text reads as follows:
"Bargain currency deals" and indirect transshipment of merchandise are creating major inflationary problems for American industries which depend upon several important raw material imports, according to authoritative trade quarters here.
Then, later, it says this:
Traders and importers cited the unrealistic "official" exchange rates for certain foreign currencies, including the British pound sterling, as being chiefly to blame for the conditions which have arisen.
At this point, let me say that when we think about exchange rates we should not think only in terms of the United States dollar and the Canadian dollar. There are many other exchanges that affect this country. It seems to me the minister had very little to say about them.


Douglas Charles Abbott: If the hon. member wants to be fair, let him say what responsibility I have for the exchange rates in other countries.


James MacKerras Macdonnell: I am going to tell him. We intend to put the responsibility squarely where it belongs. I continue with the quotation:
While Britain has taken steps to prevent exchange abuses, it was held no secret that sizable amounts of pounds sterling are available in nearly all major world markets at substantial discounts from the pegged rate. It was asserted that traders willing and able to buy with such "bargain" pounds are consistently able to outbid United States importers competing for supplies with pounds at $4.03.
That is a nice state of affairs when you consider that these very same people of the United States are the ones who are making the mare go at the present time. I read further from this quotation-the further we go the more fantastic and involved it becomes:
Another aspect of the situation was said to be the willingness of foreign traders and speculators to pay
Foreign Exchange Control more for goods than trade conditions justify in order to convert currency into commodities.
The same conditions were held to apply to other currencies and to be aggravated by multiple rates of exchange, black market discounts and other evidences of over-valued currency which have induced hoarding of stable non-perishable merchandise in many parts of the world.
I have one further quotation from the same newspaper on March 6. This is entitled "Variety of sterling valuations recalls Schacht's trade moneys". Let us remember that that estimable gentleman is the man to whom we owe these delightful controls, because he was the man who started them. I quote briefly from this article as follows:
Since the pound sterling ceased nearly two years ago to be freely convertible into the world's other moneys, the value of the pound in international trade keeps taking on greater resemblance to the intricately devised multiples of German international money spawned during the thirties under the economic inspiration of Dr. Hjalmar Schacht in Germany's frantic pre-war "export-or-die" campaign.


Mr. Stewart (Winnipeg North):: Would the hon. member mind telling me the source of that quotation?


James MacKerras Macdonnell: It is
the New York Times of March 6.


Alistair McLeod Stewart: An editorial?


James MacKerras Macdonnell: No. It
is an article written by a man called Paul Heffernan.


Harry Rutherford Jackman: A very good writer.


James MacKerras Macdonnell: One
of the results of this is that Britain is beginning to price itself out of our markets. That is coming more rapidly than we like to think. You have also another fantastic situation which is in great danger of arising, where the sterling area will deal with other countries in the sterling area on a level of prices above the rest of the world. That is something which is, as I say, making the thing fantastic. I should like to read a short extract from the last report of the chairman of the foreign exchange control board, in which he refers to this sterling situation. I read from page 5:
The prices at which commodities are exchanged in such bilateral deals are frequently considerably higher than those prevailing for similar goods outside the protected trading area. Moreover, the discriminatory restrictions imposed on dollar expenditures keep out competition from the western hemisphere while the special financial arrangements referred to encourage trade within the area. In these circumstances trade within the area takes place in many cases on the basis of higher prices than those prevailing outside the area. It is easier for countries within the protected area to buy from each other than from dollar countries because they are better supplied with each other's currencies than

Foreign Exchange Control with dollars, and It is more profitable for the individual producer in any country within the area to export to another country within the area than to dollar countries because better prices are frequently available.
I again ask this question. Facing the situation that the governor of the bank describes there, have we anything to offer? Has the government nothing to say to us except to ask us again to continue the paralysing influence of this act that was passed two years ago? Surely it is fair to say that we have now a new situation. I mean, it is a new situation by reason of the fact that we are faced with this grave dislocation of our trade with western Europe. Some people will say -with a certain amount of truth-and I come now to the question that was asked a few minutes ago-that this dislocation exists because trade has got all snarled up, because we have not been able to reach multilateral trade as we had hoped, and that we have other difficulties. In a measure that is true. On the other hand, I think it is equally true to say that one of the things holding back trade is this matter of unreal exchanges. One of the things that give me hope is that inside the sterling area they are beginning to find that out. I think it is a case of action and reaction. I would suggest that our action is hurting us in two ways. First of all it is hurting us with regard to European trade.
Next I want to take up a point that the Minister of Finance made. He pooh-poohed the idea that we are suffering anything by reason of the loss of American investment. I am aware of what he says, namely, that money is coming up here for bricks and mortar. As I understand it, they do a kind of complicated deal with the foreign exchange control board. If you are an American wanting to come up here to invest, apparently you go in a humble manner to the board and say, I want to spend $5 million, let us say. Then you make a deal, and the board says: If you will buy $2,500,000 at our rate, then we will allow you to buy $2,500,000 at the so-called free rate or whatever you wish to call it. In other words, the board recognizes that rate in an extremely real manner. Although the minister laughed at it and pooh-poohed it, nevertheless his creature, his own board, recognizes that rate, and a great many of the transactions take place under it.
Now I want to deal with what the minister said. He rather sneered at people who merely want to invest money. He prefers bricks and mortar to money. In a way I do also. But let us remember this fact. Ever since the year 1608 this country has been in need of outside investment. We have always needed outside investment. Anyone who does not face that situation is just not looking at the facts.

The second thing I wish to point out is that as long as we have this situation where people put their money in and have it impounded, then we shall have a brake on investment. Although the minister did not say it-he may believe it but he certainly abstained from saying it-what we should aim at as our objective is to get back to the situation we had in the past where people could bring money here and take it out. It was a most useful cushion in the 1920's. It has been a useful cushion again and again to have Americans ready to come in here and invest their money. That we are not suffering now is possible merely because for the moment we have continuing huge government expenditure, high employment and so on. The time will likely come-and it may be nearer than anyone wants to think-when we shall want all the American investment we can get, and it will be available if we are strong enough to get to the situation where we can do away with these rigid exchanges. I am not going to suggest that it be done tonight, but I have a suggestion nevertheless.
There is another thing we should bear in mind. I am sure the minister has not enjoyed the comments that have been made from time to time with regard to him as the author of austerity. Having been brought up as a Presbyterian I am a great believer in austerity, but I think it should take more convenient forms.


Douglas Charles Abbott: Oatmeal or something like that.


James MacKerras Macdonnell: I was
going to say that there is only one way in which we shall ever escape from periodical spasms of austerity and that is to get back to the point where our dollar is free, where Americans can invest here and take their money out, and where we get away from this miserable business of having a kind of Star Chamber. I say that with respect; I do not want to criticize the men who do it. Nevertheless we have a Star Chamber where any American who wants to bring money in here must go and make a deal.


Douglas Charles Abbott: No. I know my hon. friend wants to be fair. He has not to go to the board and make a deal. An American is free to come into Canada at any time he wants to invest American dollars in Canada. If he wishes to avail himself of the facilities of this unofficial market, then the extent to which he uses Canadian dollars acquired in the unofficial market is subject to approval by the foreign exchange control board. I imagine my hon. friend would want to make that clear.


James MacKerras Macdonnell: I go
back to what I said before. I do not think the minister has corrected me. I said that if

an American wants to come here and wants to invest a substantial amount of money, and does not want to buy it all at the fixed rate, he must go and make a deal.


Mr.   Abfcoii@: They can take their own money into the country.


James MacKerras Macdonnell: Nevertheless what I said stands. The minister did not correct me before and does not correct me now. I repeat that in spite of this, and because they know it is good business, the board has been compelled in effect to recognize this free rate in the United States. They have not done that for fun. They have had to do it.


Douglas Charles Abbott: Nobody has ever disputed the fact that they recognized it existed.


James MacKerras Macdonnell: You
take part in it. You participate in its operation through the deals that take place. Of course you do. Why, it is only a figure of speech to say that you do not. What I am suggesting is that for three years we have had a kind of paralysing inflexibility, paralysing rigidity, and that there is no suggestion of any change. I shall make a suggestion as to a change which certain sensible people have thought was not so bad. At the present time the only right we have, if we want to change the value of the dollar, is to say that we will make it ninety-five cents or ninety-three cents or whatever you like. Why should not there be a range within which it might swing? Why should we not call on Bretton Woods or the international monetary fund and say, they can change the agreement; the agreement can be changed. Why should we not have an arrangement of flexibility whereby the government might say, we are going to support the dollar at ninety cents? We shall let it swing from where it is to ninety cents. That I suggest would be the way of getting a realistic value of our dollar. If, with that provision, it stayed at 100 cents, that is all right; that is the value. But at the present time nobody knows whether that is the value or not. The only evidence we have is that that is not the value in the only free market-in the United States.
Incidentally, if the fund took that forward step, it seems to me that it might encourage other countries to come forward and try to make at least a beginning, instead of this barren resolution which just says, let us go on for two years more as we are, and have everything getting worse and worse.


Mr. Harris (Danforih):: We would be honest, anyway.


James MacKerras Macdonnell: Yes; but my point is that things are bad and in
Foreign Exchange Control all probability they are going to get worse unless we can get people to come around the council table and try to deal with this thing in a sensible way.
I think we who are helping to stake Britain should talk very plainly to her. I hope no one will question my feeling of admiration for that great country when I say that, but nevertheless we have to be realistic about these things. At the present time we have a situation which is absolutely fantastic, whereby we and the United States are busy staking Britain and they are busy trying to organize themselves so that they can do as little business with us as possible. In the face of that, what does the government do? They offer us the mixture which is before us, but it is a very noxious drug.


Douglas Charles Abbott: I wish my hon. friend would demonstrate how a change in our exchange rate would help the situation.


James MacKerras Macdonnell: I am
suggesting that at the present time, with a lot of other people, we are enmeshed in unrealistic exchange rates. I gave some illustration of the pound this afternoon. I am suggesting that one of the useful features of Bretton Woods was that people could be brought around the council table. We should try very hard not only to get our own exchange rate realistic, but what is just as important, other people's as well, because exchange rates work two ways. This thing need not be as hopeless as the minister suggests by shaking his head, by which he means that we cannot do anything about it. I believe we can do something about it. The thing is not as hopeless as all that. The Americans are being utterly realistic about this in the economic co-operation act under which they are making the advances we know of which are without precedent in the history of the world, as the London Economist pointed out, without precedent in peacetime in the history of the world. Nevertheless they are realistic, and they have the right-and I should think it is a right which they will avail themselves of-to ask people who are participating in the benefits of their fund to come and discuss their exchange rates with the international monetary fund. What does that mean? I think that the Americans who, as I say, are keeping western Europe going, are going to be realistic about this. They are not going to let this thing go on to the point where after three or four years, all that they succeed in doing is to set up a situation which makes it impossible for them to trade with the sterling area. I say that the Americans have the right to do that. The international monetary fund is the medium which they

Foreign Exchange Control have chosen for this. They reserve to themselves the right to call in the beneficiary nations to discuss it in that way.
I have tried to outline what I think should be done. We in this party are not going to accept this resolution as is. We are not going to vote for this foreign exchange act as is, which has the effect of continuing the present rigidity. We believe that the time has come when our government and other governments as well-we can only speak for ourselves-should take steps to move toward realism, and therefore I move the following amendment, seconded by the hon. member for Grenville-Dundas (Mr. Casselman):
That Mr. Speaker do not now leave the chair but that it be resolved that:
1.	The Canadian dollar should be allowed to seek its true economic level within the limits imposed by the Bretton Woods agreement; and
2.	It is expedient to present a measure to provide for the continuance in force of foreign exchange control with necessary modifications for not more than one year to permit representations to be made to the international monetary fund with a view to obtaining such modifications in its regulations as will permit an orderly revaluation of currencies to bring them to realistic levels and thus make the further continuation of foreign exchange control unnecessary.


Douglas Charles Abbott: I cannot lay the same claim to an expert knowledge of the rules of procedure as my hon. friend, the leader of the opposition, but this is a resolution which precedes a money bill. I suggest to Your Honour that it is a resolution which can only be introduced or amended by a member of the privy council upon the usual message from His Excellency the Governor General. I do not wish to interrupt the debate at this point, but I make that objection to the introduction of an amendment. Your Honour will no doubt consider it and give a ruling in due course.


Major James William Coldwell: was going to say very much the same thing in that respect as the Minister of Finance-


Some hon. Members:: Oh, oh.


Gordon Graydon: The more we are together.


Major James William Coldwell: -because I have a vivid recollection of what happened two years ago when we attempted to move an almost identical resolution on the same stage of the control measure, and it was ruled out of order. Consequently I think I have a right to say so, without being held up to ridicule by Progressive Conservatives who are making parliament a farce.


Some hon. Members:: Oh, oh.


Major James William Coldwell: May I tell my hon. friends that there are more ways of destroying democracies and democratic institutions than by burning a reichstag.


George Alexander Drew: That is right, and you have found it.


Major James William Coldwell: That is what some hon. members are trying to do, destroy it by destroying confidence in the institution which our forefathers have built up. I have been in this house for thirteen years and I have never seen an exhibition like some we have witnessed lately since I have been here.


Some hon. Members:: Oh, oh.


Mr. Speaker:: Order. May I ask hon. members not to interrupt the hon. member who has the floor. If any hon. member believes that the hon. member is out of order he should rise and address himself to the Speaker.


Major James William Coldwell: I was just going to add that I agree with the member of the Canadian press who described the scenes in this house this session the other day as comparable with behaviour in a beer garden. I feel it is about time someone said something about it in this house.
I should like to say something about the measure now before us. This is a very important one, from the point of view of Canada's economy. As has been said by both the Minister of Finance (Mr. Abbott) and the hon. member for Muskoka-Ontario (Mr. Macdonnell), Canada's economic situation is vulnerable when viewed in the light of world conditions at the present time; and any government or parliament which fails to protect our country in the present circumstances is in my opinion derelict in its duty.
Consequently I believe the attention of the house should be directed to the resolution, and the proposals lying behind it. May I say to my hon. friends of the government and of the official opposition that there is one thing which people everywhere are coming more and more to realize, and that is that unrestricted private or free enterprise is no longer a policy any government can follow. More and more, by the circumstances and the evolution of history and society, governments are forced more and more to protect their people and to direct the economy of their various countries. That is particularly true I believe in the international field at the present time.
I have noticed that again and again hon. gentlemen who have objected to control measures before the house in the past few days have risen in their places when the orders of the day have been called and asked the government to do this or that to protect various parts of our economy, and various interests in that economy. More and more we are going to be driven to the point where governments have to give attention to the

economic relationships in the domestic field as well as our economic relationships with other nations of the world.
To say that the emergency following the war has passed is, I suggest, particularly unrealistic. We have only to look around the world today to realize that in almost every field of human endeavour, in almost every one of our relationships, emergencies exist. And in this House of Commons, ever since we met on January 26, day by day some phase of one or other of these emergencies has been brought to the attention of the house by individual private members and by the government itself-and by the official opposition as well, incidentally.
Consequently a measure of this description which has a tremendous bearing upon our economic relationships with other countries must receive the consideration of parliament at this time. And whether we agree with all the implications of this policy, whether we agree or not with the manner in which it has been operated, the fundamental principle behind the proposal must be endorsed and accepted by the House of Commons, if we are to protect our economy in the situation in which we find ourselves at the present time.
I should like to go on from there after supper, if I may ask to call it six o'clock.


Mr. Speaker:: Before leaving the chair I should like to answer the point of order put forward by the Minister of Finance (Mr. Abbott). I declare this amendment out of order, because it purports to make a declaration-


Mr. Fulton:: Mr. Speaker, before you state your ruling-


Some hon. Members:: Sit down.


Edmund Davie Fulton: Before you state your ruling-


Mr. Speaker:: Order.


Edmund Davie Fulton: Before you state your ruling would you hear further argument on the point of order?


Mr. Speaker:: Order.


Edmund Davie Fulton: Would you hear further argument?


Mr. Speaker:: The hon. member is asking me before I proceed with my ruling to hear further argument. I must tell him that I have already started to give my ruling.


Arza Clair Casselman: And you should give an opportunity for argument.


Mr. Speaker:: Order. I declare the amendment out of order, because it purports to make a declaration which can only be moved as an amendment to the second reading of a bill. Hon. members will recall that I did
Privilege-Mr. Drew
the same thing last session, when I declared a similar amendment out of order moved for the same purpose.


James MacKerras Macdonnell: Would Your Honour indicate whether there is any special part of the resolution which you consider out of order,-whether your judgment is based upon some special part.


Mr. Speaker:: The hon. member knows that the ruling of Mr. Speaker is not debatable. I have given my ruling, that the amendment is out of order.


James MacKerras Macdonnell: I was
not going to debate it. I would ask Your Honour if you would indicate whether there was some special feature of it which you found to be out of order.


Douglas Charles Abbott: The whole resolution.


Mr. Speaker:: What I have said to the house gives my reason for declaring it out of order. I would call the hon. member's attention to citation 755 in the second edition of Beauchesne, which states:
It is also competent to a member who desires to place on record any special reasons for not agreeing to the second reading of a bill, to move as an amendment to the question, a resolution declaratory of some principle adverse to, or differing from, the principles, policy or provisions of the bill.
As I said a moment ago, I made the same ruling during the last session of parliament, and it has been made at different times by my predecessors. There are therefore many precedents.


James MacKerras Macdonnell: understand correctly, Your Honour is not now saying that this resolution will be out of order if introduced subsequently on second reading.


Mr. Croll:: He did not say that at all.



PRIVILEGE


[Stage Direction]
"EVENING citizen"
George Alexander Drew: Mr. Speaker, before the house rises for dinner recess I rise to a point of very great privilege, so far as the members of this house are concerned. In the afternoon edition of the Evening Citizen there is a statement in regard to income tax exemptions. It makes the bold statement that certain things will be given, and states-
Single men are to be exempted up to $1,000 in income, married men up to $2,000. A man with two children gets $100 for each child and therefore will be exempted for $2,200.
The figure of $2,200 is chosen because the bureau of statistics reports on January 1, 1949, that the average weekly income of the Canadian worker in all manufacturing industry is $42.16 a week. This

Foreign Exchange Control
works out to $2,192.32 per year, in other words just about $2,200. Thousands of civil servants are at just about that level or below it.
I place this before the house, as it is exactly the sort of thing which called for action by the House of Commons in Great Britain some time last year, and should certainly be dealt with by the House of Commons here.


Douglas Charles Abbott: Mr. Speaker, my hon. friend has not been here very long. If he had he would probably realize that this is a popular pastime which goes on for about a week or ten days before the budget, where people speculate-sometimes shrewdly and sometimes not too shrewdly-as to what the budget will contain.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at seven-thirty o'clock.


[Stage Direction]
The house resumed consideration of the motion of the Minister of Finance (Mr. Abbott) that the house go into committee to consider the following resolution:
That it is expedient to present a measure to provide for the continuance in force of the Foreign Exchange Control Act until sixty days after the commencement of the first session of parliament commencing in the year 1951.
Major James William Coldwell: Mr. Speaker, I was saying before the supper hour that I thought that any government must take steps to protect the economy of this country in the face of the difficulties which now confront the world, and bearing in mind particularly that the Canadian situation has been made more difficult because of the historic pattern of our trade in the past. For years we were in the very happy position in normal times of being able to sell almost everything that we wished to sell to the United Kingdom and western Europe, and with the dollars we earned we were able to buy in the United States almost everything that we wished to buy. The result was that this triangular trade benefited Canada considerably in the past, but today it makes our situation peculiarly difficult.
Great Britain and the western European countries, the Netherlands, Belgium, and other nations, have lost much of the income they once received from overseas. That, of course, is more particularly true of Great Britain, who liquidated so many of her over-

seas investments in order to meet the obligations of our common war. It is quite true that over the past year and a half the exchange situation has greatly improved as far as Canada is concerned. I think, however, that to some extent that is an improvement at the expense of our own Canadian people, and that we should be wary lest our people suffer further. What I have in mind is that because of the restrictions that the government imposed in regard to imports from the United States, and because the government insisted we were under obligation, because of the Geneva agreement although some of us did not agree with that point of view, to. exercise non-discrimination, we had to put the same impediments against the inflow of goods from the United Kingdom and other countries as we did upon those from the United States.
Then, too, as soon as the war ended there was a great deal of pressure for protection by certain Canadian manufacturers. At any rate, the government removed some of the advantages that Great Britain had enjoyed during the war by reimposing certain tariffs that were in the interests of the textile industry, the glass industry, and other industries in our country that had arisen behind policies in the nature of protective tariffs. To my mind, the continuance of such policies will be serious for the farmers of Canada, because after all we can produce vast quantities of food in Canada, and unless we can find permanent markets for the great surpluses we produce, surpluses which would be surpluses even if our own people were fed adequately, then agriculture in this country faces a very difficult future indeed.
Therefore I say to the government that, while we believe that the exercise of control over foreign exchange is essential at this time, nevertheless we believe that there are other factors which the government should take into consideration in dealing with these problems. We have increased our exports to the United States, but I think that most people will agree that the United States market for Canadian goods has always been a very uncertain one. There have been times when they were prepared to take quantities of certain classes of goods from us, and then from time to time, when they found that they could themselves produce the goods that they were taking from us, we lost those markets. We have seen these fluctuations ever since I have been in the country, now some forty years.
Then there is also the peculiar situation in the United States that no one seems to know what is going to happen internally to their economy. Like our own economy, it is buoyed

up at the moment by these tremendous expenditures, we will call them, though in reality they are exports of tremendous quantities of goods abroad, thus maintaining a very high level of employment in that country. Lately, however, we have seen a somewhat sharp drop in certain prices in the United States. There is considerable unemployment and we have seen certain classes of farm commodities drop in price. In our own country we have had similar and quite spectacular drops. I mentioned the other day that on the speculative market a year or so ago rye was selling for around $4, but when I looked at the paper the other night I saw that it was down to below $1.20. It is the same thing with barley; it has fluctuated widely. Where you have the kind of economy that is subject to great fluctuations there is grave danger. That will be particularly the case if we are tied up completely to the United States. Therefore I think that, while the increase in our exports to the United States, and the lowering of our imports from the United States, have improved our dollar position, nevertheless there are dangers in connection with what has occurred during the past year or so. I say therefore that we have to look to the principal customers whom we have had in the past.
I noted this afternoon the criticism that the hon. member for Muskoka-Ontario (Mr. Macdonnell) made of the British trading so largely in the sterling area, entering into bilateral agreements, and so on. We have to bear in mind that what they are actually doing is what we should be doing. They are more or less digging into the markets which were their natural, reliable and normal markets before the war. They are endeavouring to protect themselves in that regard as well as to prevent the loss of those dollars which they need badly in the dollar area, and of which they are short at the present time. Indeed, while we may take steps of the description of those that are now being considered under this foreign exchange control measure, it seems to me that the final solution of our problems, as well as of the problems of the world, lies more and more in co-operation on the widest possible basis, and with the largest possible group of nations across the world.
At the moment I confess that I cannot see any immediate hope for a return to wider trade relationships than we know now. We see all of the European countries endeavouring to rebuild their own economies, to produce more and more goods for export, and unless we in our country can receive more and more of the goods that they can export, then we cannot export goods to them. I want
Foreign Exchange Control to emphasize again that the old pattern of trade, which benefited Canada so greatly, has disappeared. Our overseas customers, and particularly the United Kingdom with her vast overseas investments, had a steady flow of goods under that pattern of trade, which brought in the dollars with which she could make payment to us from time to time; and those dollars have disappeared because the investments which gave rise to them have disappeared as far as the British are concerned.
It strikes me that what the British are actually doing at the present time is endeavouring to protect themselves in the future against a further loss of trade, and to build up in their island, with their great population, an export trade that will enable them to obtain the raw materials and the foodstuffs that are vital to the existence of their country.
While we may be critical of some of the things they have done because they may react against our own country at the moment, I think it is understandable why they are doing them. The point I am making is that we should endeavour to be realistic, too, where tariff barriers or trade barriers of any description prevent goods coming into our country from overseas that could be used to buy goods here which we could export and must export if we are to remain prosperous, because we produce them in quantities too great to be used within our own country. So I say we have to consider more than both the exchange and other factors in the situation.
This afternoon I heard the hon. member for Muskoka-Ontario (Mr. Macdonnell) suggest that we should let the dollar find its own level. The Minister of Finance (Mr. Abbott) answered that previously when he asked what is that level. If we take the market referred to as the free market, that level is not very much below the rate at which the foreign exchange control board exchanges our currency for that of the United States. But it seems to me that with a fluctuating Canadian dollar, a dollar that might be depreciated- 1 think it was suggested last session that we should allow the Canadian dollar to depreciate as much as thirty per cent-if the Canadian dollar depreciated ten per cent the cost of living for the mass of the people of this country would probably increase by more than ten per cent. We are so dependent upon the United States for many of our raw materials and many foodstuffs; and anything which tends to depreciate our dollar means that we must find more Canadian funds with which to purchase United States currency in order to buy American goods, and the cost of living here would increase proportionately. Consequently I believe that suggestion would benefit relatively few people in this country.

Foreign Exchange Control I am free to admit that it might benefit certain speculative interests. It might benefit some of the gold-mining interests in the country, though I would point out that already the government has made considerable concessions to that industry in order to assist it. So, since the depreciation of our dollar would be done only at the expense of sacrificing our agriculture. and the standard of living of our people, I think the suggestion is thoroughly unsound and I would oppose it on those grounds. We remember very well that back in the twenties there were considerable investments in our country coming from the United States, but when things got a bit tough not only did the banks in our own country withdraw loans but there was some flight of United States capital as well. I would not be inclined to suggest to the minister or to the government that they should follow the example of what was done in the twenties. We must bear in mind that the twenties were followed by the thirties, and we all remember what happened at that time, when we allowed our own dollar to remain tied to the gold standard and how that affected primary producers all over this country.
I do not propose to prolong this discussion, Mr. Speaker, because I think the principal debate should be on second reading of the bill, when we know exactly what is before us. I did want to say, however, that I believe no government in any country, in the circumstances now existing all over the world, can do other than exercise a considerable amount of economic control in order to protect its own nationals, its own domestic economy and indeed its international trade. That, I take it, is the purpose of the resolution before us at the present time; and because we believe that to be the purpose we are going to support it when the vote is taken.


Mr. Victor Quelch (Acadia):: At the outset of my remarks, Mr. Speaker, I want to say that I find myself pretty well in agreement with the stand taken by the Minister of Finance (Mr. Abbott) on the question of exchange and the valuation of the dollar. I think the price level in Canada compares very favourably with the price levels in other countries. I would say to the minister, however, that if a situation develops such as we had in the thirties, when the prices of agricultural products fell to a low level and we had great difficulty competing with other countries whose currency was depreciated considerably below the dollar, then the primary producers of this country would be justified in demanding that the dollar be depreciated also. That situation has not
arisen, however, and we hope it does not recur. On the other hand, if the government were prepared to stabilize the prices of agricultural products, then of course agriculture would no longer be concerned with the level at which the dollar might be maintained on the international market.
The international situation today I think demonstrates the need for continuation of the foreign exchange control board. On the one hand there is the ever-present danger of an adverse balance of payments with the United States. On the other hand there is the danger of losing essential markets in Europe owing to the shortage of dollars. I am going to confine my remarks mainly to the second of these points. I notice the measure is intended to continue the board for only two years. I am satisfied that it will be necessary to continue the operations of the foreign exchange control board for a far longer period than that. Both the problems I mentioned are being aggravated at the present time, I think, by the operation of the Bret-ton Woods agreement and the non-discrimination clauses in the Geneva trade agreement. That trade agreement has not passed this house, but I understand the government has signed it and that we are actually operating under it. On several occasions I have explained why we are opposed to certain policies under the Bretton Woods agreement, so I am not going to take any time to deal with that matter this evening except to mention it later on in regard to one or two other matters. However, today we are operating under those agreements whether we like them or not, and certainly as long as we continue to do so there will be a very real need for continuation of the operation of the foreign exchange control board. Even if those agreements were replaced by others which would operate for the benefit and advantage of all trading nations, I am convinced there would still be a need for a foreign exchange control board, though no doubt in that case controls would be exercised mainly for the purpose of trading to the greatest extent possible with those nations which would balance their trade with us.
This does not mean for one moment that we in this group endorse everything that has been done by the foreign exchange control board. Many things have been brought to my attention that have seemed indefensible, though I quite realize that if those matters were investigated it might be found that while they appeared inadvisable there were grounds that really justified the action taken by the board. I have had several matters referred to me which I have taken up with the board.

On each occasion I was given every consideration, as was the question I raised.
Both the problems I have mentioned, that is the adverse balance of trade with the United States and the shrinking of our markets in Europe, are the logical outcome of certain policies carried out under the Bretton Woods agreement. I say that because so long as the exporting nations have the right to demand payment in their own currency instead of accepting the goods of other nations in return, I think there is bound to be trouble. In fact, I would say that as long as that situation exists we will have trouble in maintaining a balance of trade with European countries. That is what is happening today. True, our trade surplus with Europe is today apparently being reduced, but not so much by an increase in imports from those countries as by a reduction in exports from Canada to them.
The 1948 report of the foreign exchange control board makes this quite clear. At the bottom of page 14 of that report it is stated:
However, If allowance is made for the rise in both export and import prices in 1948 it is apparent that though there was an appreciable rise in the volume of imports into Canada from these countries the contraction in the volume of our exports was the more important factor in reducing our trade surplus.
In the middle of the next page it is stated:
Nearly every appreciable decrease in our exports to sterling area and other ERP countries can be traced to a change in import policy on the part of the foreign government concerned.
I point out that if nations were unable to obtain dollars with which to buy our goods, in order to avoid a greater deficit they were forced to reduce imports from this country. They had no other alternative. It is also interesting to note that that action was advised by the international monetary fund. In the report of the fund for 1948, on page 12, I find that European nations were advised that they should reduce their imports from the western area and try to increase their imports from Asia and Africa. Referring to Asia and Africa, the report says this:
These areas might also be further developed as alternative sources for certain European imports and this would diminish European demands for imports from the western hemisphere.
I have heard some people become quite critical regarding Britain's action in buying from other nations instead of buying from Canada. In fact, the Minister of Agriculture (Mr. Gardiner) seemed to be rather critical. Britain, however, has no alternative if we demand payment in dollars. Britain has not got the dollars and we will not supply her with the dollars because we have curtailed our imports from that country. As long as
Foreign Exchange Control we continue a policy of that kind we are forcing Britain to trade elsewhere because she has not the dollars to trade with us.


John Horne Blackmore: We are forcing them into it.


Victor Quelch: The report of the foreign exchange control board expresses regret that a greater balance was not restored by increased exports from Europe to Canada. At the bottom of page 15 the report states:
There is, therefore, reason for some concern that these countries did not export more to us, particularly in view of the fact that the net effect of the government of Canada's import restrictions enforced during 1948 was to encourage imports from overseas countries. Notwithstanding the improvement noted, only eighteen per cent of our imports came from the United Kingdom and other sterling area countries in 1948, compared to twenty-nine per cent before the war.
It is all very well to express regret that Europe did not export more goods to us, but two countries are involved. Europe cannot export more goods to us unless we are prepared to buy them.
I noticed that Mr. W. G. Coventry, the British trade commissioner, speaking before the Canadian Federation of Agriculture at Saskatoon, stated that there would be a permanent market for a large volume of surplus Canadian farm products in the United Kingdom when British exports to Canada reach $500 million annually. It was for this reason, Mr. Speaker, that we opposed the Bretton Woods agreement. At that time, we prophesied that a policy of that kind with regard to our exports of Europe would be bound to fail because those countries would not be in a position to pay for them with dollars.
I should like to refer to a statement in the report of the foreign exchange control board which I think puts this whole problem in a nutshell. First, of all, I should like to quote this statement, then briefly analyse it. It is to be found on pages 6 and 7 and I will read first from page 6:
If efforts on the part of the sterling area and ERP countries in the direction of greater exports to dollar countries are inadequate or fail to solve their dollar problem, then it may be expected that these countries will continue to place special restrictions on imports from dollar countries. The countries whose exports are affected by these restrictions will be confronted with the choice of finding some alternative use, at home or in other foreign markets, for the goods previously exported to the dollar-short countries or making special arrangements in an effort to retain these markets. These arrangements could involve the provision of the exports without payment in foreign exchange, through the extension of grants or credits, or special deals in which the exporting country agreed to use the proceeds of its exports to take more goods from its dollar-short customers even though these goods were higher in price than had to be paid elsewhere. To ir ake room

Foreign Exchange Control for these relatively high-priced imports it would be necessary to impose discriminatory import restrictions.
I wish to deal with two or three of the alternatives given in that statement. The statement is made that:
The countries whose exports are affected by these restrictions will be confronted with the choice of finding some alternative use, at home-
Mr. Speaker, I think that is a very important point. On most questions of trade, it is a matter of getting two countries to agree, but here is a suggestion that if we are not able to export goods we should try to find ways and means of utilizing some of these goods in the home market. It is solely within the power of this government to deal with that matter. I would suggest that many of the goods we are trying to. export today could very well be utilized in Canada. After all, we have a tremendous potential market in this country if we would only develop it. Therefore, as the first step in dealing with this problem, I would suggest that the government take action to increase the purchasing power of the people in the lower income brackets to at least the point where they can have a decent standard of living; at least, to the point where they could purchase the agricultural products we have in abundance.
I would point out that that is not only the answer to finding a market for goods we cannot export, but it would be just as important if we were able to export goods and bring back goods in return, because if we bring back goods in return for our exports the same difficulty will apply. It will be difficult for us to find markets for our imports. The international monetary fund stressed that problem on page 13 of the report:
A high level of demand in the western hemisphere will be a necessary condition for increasing exports to this region. A further relaxation of tariffs and import quotas in the western hemisphere countries applicable to primary commodities as well as to manufactured goods would be helpful in encouraging the necessary increase and redirection of world trade. But recognition of these considerations should not obscure the fact that Europe's need to increase its exports to the western hemisphere arises not only from the exceptional circumstances of the transitional period but also from more enduring changes in the world economic structure.
In other words, Mr. Speaker, we are making a grave mistake if we look upon this as a merely temporary condition. We can trace the origination of this condition back to the year 1913. It was aggravated by two wars, but even if there had been no wars we would have had to face this question in the very near future. I think the government, therefore, ought to take heed of the recommendation that was made by the federation of agriculture regarding the allocation of food.
I think the suggestion was put forward by

Professor Hope, who is the economic adviser to the federation of agriculture. I understand the proposal is an extension of the old food-stamp plan. I remember when the food-stamp plan was first introduced in the United States, whereby surplus food could be sold to people in low-income groups at a fraction of its cost. The Christian Science Monitor pointed out that it was an adaptation of Mr. Douglas' social credit idea.
I do not care what you call it. I think it would be a good way to dispose of large quantities of agricultural products that are surplus. Perhaps I might just quote Professor Hope with regard to the way this plan might operate. I quote from the Alberta wheat pool budget of February 11, 1949 as follows:
Reducing farm production during a depression simply causes scarcity of food and increases the misery of unemployed and the low income groups of consumers. Therefore the only correct and sound solution under such circumstances is to maintain or restore to a decent level consumer purchasing power for food.
This statement was made by Dr. E. C. Hope, economist with the Canadian federation of agriculture in an address to the annual convention held at Saskatoon last week.
Dr. Hope said that, should we run into a major depression, no price support program for agriculture could last if it depended merely upon withdrawing supplies from the market by a government agency. Creating artificial scarcity, he said, is just aping industry. He suggested first a large scale useful public works program to maintain employment at reasonable levels, and second, a food allotment plan similar to the one established in the United States.
Under the United States food allotment plan a family can purchase for forty per cent of its monthly income a food coupon book which will buy sufficient food each month for an adequate diet. Each month or so the government calculates how much it costs to provide an adequate diet for different sized families. If the cost is $60 for a family of four, and the declared monthly income of that family is $100, a coupon book with a food value of $60 can be purchased by that family for $40. If the family income is only $80 the book can be bought for $32. If the family income is $150 a month or over it will not pay to purchase the coupon book. The difference between the $60 value of the coupon book and the cash paid by the family for the same is provided by the federal treasury.
A program of this sort, said Dr. Hope, would mean that every family would be guaranteed an adequate diet regardless of income. In times of depression and unemployment this would increase the demand for food because the people with low incomes would be able to bid for food against the people with higher incomes.
American economists have estimated that had such a plan been in operation in the United States during the 1930's, prices for farm products would have been maintained close to ninety per cent of their calculated parity level without any other price support program.
So I suggest to the government that it might be worth while thoroughly to investigate that plan as a means to helping maintain a demand for our own production and the imports we bring into this country, because that problem is going to grow steadily as time

goes on. Once these nations that are getting on their feet are in the position not only to pay for their imports by their exports but in addition to start to pay back their loans in goods, how are we to maintain in this country markets for those goods? There is only one way, and that is by taking steps to increase purchasing power to the point where it can pay for those goods.


John Horne Blackmore: We might just as well do
it first as last.


Mr. Irvine:: Is the scheme in the nature of a subsidy?


Victor Quelch: It is paid out of the federal treasury. Professor Hope does not say how it is to be financed. So long as this government is in power, it is its responsibility. I do not intend to suggest how to finance it. We have our own views as to how it should be done. Certainly it should not be done by increased taxation. If there is a lack of effective demand in the country and you are going to try to eliminate that lack of demand by increasing taxation to expand purchasing power you are going to get nowhere. The government would no doubt do it by borrowing from the chartered banks. We would suggest that it be done through the Bank of Canada. This paragraph goes on to say:
These arrangements could involve the provision of the exports without payment in foreign exchange, through the extension of grants or credits, or special deals in which the exporting country agreed to use the proceeds of its exports to take more goods . . .
Well, Mr. Speaker, it might be done as the board suggests, by making gifts to countries, but I am not advocating that, unless the country is in a state where it cannot possibly carry on without that help. It might be done by loans, but I am not suggesting that it be done in that way if that country is in a position to pay by exports of goods. I am suggesting that the logical way in which to deal with that program is this. Instead of insisting on payment in dollars, we should be willing to accept sterling from the country, that is a blocked credit. Then with that blocked credit we could buy from Britain the goods we require. That is of course a straight bilateral deal; but that could very easily be put on a multilateral basis by establishing an international exchange so that blocked credits held in one country could be traded for the blocked credits held in another. It would be multilateral trade on a goods basis instead of on a dollar basis. It is interesting to note that the London chamber of commerce of England, the members of which are not the type of crack-pots the Minister of Agriculture was talking about when he was in England, but who are a bunch of hardheaded businessmen, men who probably have
Foreign Exchange Control a greater understanding of international trade than has any other body of men in the world, are suggesting a system of that kind.
I should like to quote briefly from "A Twentieth Century Economic System", a system endorsed by the London chamber of commerce. Referring to the matter with which I have just dealt, it states:
The above is a simple example of bilateral trade, but multilateral trade could be provided for by the exchange controls of the participating nations having representatives at an international exchange where blocked credits in one country could be exchanged for those in another at the conventionally fixed exchange rates: the primary responsibility for establishing a contra account, by importing from the country to which a sale had been made, would remain with the exporting country. If it did not wish to do so that would be its affair and not that of the importing country, which would have done its part by establishing the necessary credit. The importing country would be entitled to cancel the credit, under a statute of limitations, if it were not used within seven years. The principle is that with which we are ail familiar in internal trading: if you have a credit with a shop, you cannot take it out in cash but you clear it when you take goods.
It is interesting to recall that when Professor Keynes brought forward his white paper he suggested it might be wise to institute a statute of limitations; that is to say, where nations pile up credits in other countries, and refuse to accept goods in return, that over a period of time those credits might be cancelled. I would say that would probably be the greatest stimulus to getting countries exporting goods to take payment in goods; because if they do not take payment in goods, after that period of time they would get nothing and they would no longer have the power to demand that payment be made in dollars.
Under a system of that kind I think we would be able to greatly expand both our exports to Europe and our imports from that continent. To complete this paragraph:
To make room for these relatively high-priced imports it would be necessary to impose discriminatory import restrictions.
I have never been able to understand why the price of goods coming in from Britain should be so high. It has always amused me because our friends to our right, the C.C.F., are always extremely critical about price levels in this country and emphatic about the need for controls. Yet here you have a socialist country in which prices are far higher than prices in this country. Why? I have heard it said-and I do not know whether it is correct; I would not like to say that it is correct-that the social services in that country are being maintained by countries paying Britain these high prices, and that the countries that are buying goods from Britain are in reality paying for those services. There may be something in that;

Foreign Exchange Control because the countries who buy these goods pay high prices. The food in England is subsidized and therefore the people there get food at a lower rate. But when we get goods from England we must pay exorbitant prices. For many years I have bought goods that were made in England. Goods that I used to be able to buy quite reasonably-for instance, shirts like the one I have on-could be bought for $3. Now one must pay anywhere from $6.50 to $10 for the same shirt.
I have a nephew who was in the navy. He was in Ottawa last year and he bought a suit of clothes and an overcoat which cost him around $75. He said that if he had bought that suit and coat in England they would have cost him $120. He was going right back to England, yet he bought that suit and overcoat in Ottawa. Why? I think that is something which needs explaining and investigation, because if Britain is keeping her price levels so high that she cannot compete with other countries, then of course she has to accept a certain amount of responsibility for that situation. But even if for some reason or other Britain cannot keep her prices down we are faced with these alternatives. Suppose we make a gift. If we make a gift, we lose the goods of which we make the gift. If we make a loan, we stand a good chance of never being repaid, because the history of international loans has never been a happy one. If we make a loan, we are likely to lose that loan. If, on the other hand, we export goods to Britain and bring goods back, even at a high price, we could very well subsidize those goods which we bring back into this country to bring them down to the price level of Canada. We did that during wartime and again in order to maintain the price ceiling in this country. We imported goods, subsidized them, and sold them at the price level in this country. Surely, if we could carry out a policy of that kind in war, it could be done in peacetime.
The minister might say, well if the British price is 10 per cent higher, then it will cost us 10 per cent. In other words, we would be getting back at least 90 per cent of the value of our export. If we make a gift we get nothing. If we make a loan we are in danger of losing it all. At least we would get paid for 90 per cent of the exports we sent to that country. I am suggesting that it would be good business to import goods, even if we have to pay 10 per cent more than we should, subsidize them, and sell them at the current price in this country. It would be good business because it would help to maintain our production at a high level, and in the long run I do not think there is any doubt that we would benefit by business of that kind. I am 
hoping that eventually Britain will find it possible to bring her price levels down.


John Horne Blackmore: The minister would call that discrimination in favour of Britain.


Victor Quelch: I notice that the report does mention this question of discrimination. It says:
To make room for these relatively high-priced imports it would be necessary to impose discriminatory import restrictions.
Well, if we have signed an agreement that outlaws action of that kind, an action that is necessary to keep our economy in a state of flux, the quicker we get out of it the better.
I would say it is evident that the shortage of dollars in Europe is not going to be solved in the near future. I know that many people were hopeful that ERP would solve the shortage of dollars, and by 1952 Europe would be on its feet and in a position to pay for imports from the west with dollars. Well, anybody who has read the interim report of the organization for European economic recovery will realize that there is very little chance of that, or that by 1952 Europe will be in that happy position. I read the report through. I hold in my hand a summary of the report made by the London Economist, dated January 1949, and it puts it far better than I can put it; therefore I shall read what the Economist has to say regarding this report. It is as follows:
It is in discussing the nineteen nations' estimate of their future trade that the officials of the OEEC have most firmly dispelled the idea that a complete solution can be found by 1952. In the first place, the governments themselves have produced estimates which leave a deficit of a billion dollars, largely with the western hemisphere, in western Europe's trading account for 1952. But the interim report questions whether the nations can achieve the scale of exports they have proposed. For instance, to reach the target for exports of $12 billion in 1952, the nations would need among other things to increase their exports to South America by $1 billion above the present level, a step which would seem to entail capturing half the United States' South American markets. Similarly, the increased exports to the United States itself would need to rise to $2-1 billion compared with $1-5 billion sent there in 1938. It is true that the United States is buying more abroad-50 per cent more in 1948 than in 1938-but western Europe's share in American imports has fallen from 23 per cent to 13 per cent. All in all the report concludes that it is impossible to put the level of visible and invisible exports in 1952 above $10 billion, and the deficit is likely to be nearer $3 billion than $1 billion. And even this revised figure demands prodigious efforts-an increase of 40 per cent above the present level of visible exports and the turning of an invisible deficit of $750 million in 1947 into a favourable balance of $1,300 million in 1952.
In concluding the summary the Economist had this to say:
It has often been insisted in these columns that
there were two elements in the dollar shortage_a
European problem and an American problem. This

Is now clear for all the world to see. If Europe, after doing what it can, will still have a deficit of $3 billion, somebody will have a surplus of $3 billion. The one cannot be removed without the other. Certainly the debtors cannot, by taking thought and drawing up plans, remove their deficit unless the creditors will also take thought-and perhaps even draw up plans-about their surplus. The next stage should be a Marshall plan for the creditors.
Perhaps that may sound rather humorous, but I believe there is a lot of sound thought behind the suggestion. That is the point we emphasized time and again during the discussion of the Bretton Woods agreement in this house. We emphasized the point time and again that balancing international trade was the responsibility of two nations. It was the responsibility of the creditor nation just as much as it was the responsibility of the debtor nation, because unless the creditor nation was willing to accept goods in payment the debt could not be paid.
In view of the fact that we are told it is probable that these European nations will still face a deficit of around $3 billion by 1952, it is high time that greater consideration was given to dealing with this problem. As I say, the London Economist emphasizes the need for a Marshall plan for the creditor nations. By the time that the present one has run out in 1952, the production of all European nations will probably have reached approximately their maximum output, and then we must organize our own internal economy to such a degree that we shall be willing to accept the goods that these countries are anxious to send to us. That being so, it is quite evident that the real problem is still ahead. We think we have quite a large problem on our hands at the present time, a problem that unfortunately we have looked upon as a temporary one; but now we realize that it will be a problem that will be with us for many years, and therefore we should look to the future and take steps to deal with it.


John Horne Blackmore: I wonder whether the government realizes that.


Victor Quelch: Because, if I remember
rightly, by 1952 Britain is supposed to start paying off the loan to Canada, and many of these other loans to European countries will then become due. Then those nations will not only have to pay for our exports to them with their exports, but they will have to start paying either the interest or the capital on the loans which had been made to them. It is quite obvious that they are not going to be able to pay it in dollars because, according to the report, they will not be able to pay for their imports with dollars. How are they possibly going to be able to pay dollars on our loans? If we are really sincere in sug-
Foreign Exchange Control gesting that the debt should be paid, then the quicker we realize it can only be paid in goods the better; otherwise it will be merely a repetition of what happened after the first war, when every nation except Finland had to default on its war debts. That is not because they were not willing to pay those war debts in goods, but because creditor nations were not willing to accept payment in goods. Hence those debtor nations were forced to default.
I have tried to stress the fact that when anyone analyzes the situation he finds he really has a national problem to solve. It is the problem of maintaining the purchasing power of the people internally at a level high enough to buy imports which will be brought back in exchange for exports. Some people seem to think you can solve a small problem more quickly by making it larger. In other words, they think that because you cannot solve a problem on a national basis you will be able to solve it if you put it on the international basis. I would say that any effort to deal with that type of problem on an international basis would simply aggravate it greatly.


Alan Cockeram: Mr. Speaker, this afternoon the Minister of Finance (Mr. Abbott) made a speech which I thought was possibly as frank as any speech he has made on the question of the activities of the foreign exchange control board. I well remember that when in 1947 he brought down his budget he gave us a glowing account of the United States exchange situation as he thought it was at that time. I recall *pointing out to him that he had on hand, at the then rate of expenditure, only enough United States funds to last until about November of that year, or a period of about five months.
I noticed that when speaking this afternoon he said that at the present time, at the present rate of expenditure, the foreign exchange control board has about five months' supply of United States funds on hand. The minister made some reference to the newspaper articles which appeared at the time our money was placed at parity with that of the United States, especially one which appeared in the Globe and Mail praising the government's attitude for having brought our money up to parity. In my opinion there can be no question that at that time the minister stated that one of the reasons for parity action was to stop inflation in Canada, and there can be no question about it that since our money was put back to par with the United States we in Canada have seen inflation run wild.
I also remember in that debate asking the minister about the flow of capital into

Foreign Exchange Control Canada, and talking about risk capital and other kinds of capital which would come in to develop industries in this country. If I remember correctly, he did not want to see any money for bricks and mortar coming into this country.


Douglas Charles Abbott: My hon. friend is quite wrong. Mr. Cockeram: I do not think I am.


Douglas Charles Abbott: I know you are.


Alan Cockeram: Certainly the minister gave me the brush-off at that time.


Douglas Charles Abbott: No; I wanted no quick speculative capital in here.


Alan Cockeram: And I am pretty sure you did not want the kind I had mentioned.


Douglas Charles Abbott: My hon. friend is wrong.


Alan Cockeram: However, that is immaterial. Times have changed. Now we see the minister trying to build up the thought in this country that there is a considerable amount of American money coming in.
However there is in Canada, I believe, considerable concern as to the effect the maintenance of the artificial value of our Canadian dollar is having not only upon the inflow of capital into this country, which will be used for purposes of development, but also in respect of the loss of our export trade.
I was going to repeat something the hon. member for Acadia (Mr. Quelch) said, when he referred to page 6 of the report of the foreign exchange control board. However, I shall leave that out for the moment. I would, however, like to read from page 10 of the report of that foreign exchange control board for 1948, where it states:
The most important change in Canada's commodity trade in 1948 was in the geographical distribution of our exports. The destination in Canadian commodity exports in pre-war and in recent years has been as follows:
I shall exclude the United States figures, although they show that the average from 1935 to 1939, as compared with the 1948 figure, is in the nature of an increase of 13 per cent. However, in those areas in which our great export market is to be found, the market which we as Canadians must maintain if we are going to be a prosperous country-and I am referring to the British isles and the sterling area as a whole-there is shown a very marked decrease. This is more particularly emphasized when one considers that in the 1935-39 period commodity and farm prices were lower than as indicated in the 1948 export figures.
We find that in the 1935-39 period we exported to the United Kingdom 37 per cent 
of our exports, whereas in 1948, in spite of the increased costs of all supplies sold to the British isles, we were down to 23 per cent. In the total sterling area and ERP countries we decreased our exports from 63 per cent in the 1935-39 period to 50 per cent in 1948, or a reduction of practically one-third. And this notwithstanding the fact that in the earlier period prices were much lower.
To me, as one who thinks of the future prosperity of Canada, those figures are most significant. They should give reason for thought to everyone who wants to see our farmers have a market for their goods and our factories a market for their manufactured articles. These figures prove that we have lost a certain amount of trade in the last few years. In spite of the glowing remarks this afternoon by the minister concerning the tremendous dollar volume of trade, it does seem to me that in the last year or so this government, seeing our market slipping away from us, might certainly have given consideration to a barter deal, if you like- some kind of deal. And in this I believe I am following up what was said by the hon. member for Acadia whereby under such an arrangement we in this country would have bought steel, electrical equipment, coal and many other commodities from the British isles, commodities which they have exported to countries behind the iron curtain, with which they have made trade agreements running up to ten-year periods, and supplies of which there has been a shortage in Canada.
We now find ourselves in the position where, with the exception of the wheat agreement, we have only three short-term agreements left with the British isles. I say this situation can be traced to the policy of the government in having placed a fictitious value on the Canadian dollar. It is true that this afternoon the minister said that, by placing our dollar at a 10 per cent discount, purchases from the United Kingdom would have been 10 per cent higher in cost. At the same time, in view of the circumstances, it would have been of much greater advantage to Canada if the British had had 10 per cent greater purchasing power with their pound, and such a condition would have been more beneficial to us.
I consider the recent report of the foreign exchange control board, that for the year 1948, is evidence of the fact that this supposedly non-political board, which parliament is asked to continue in office for a further two years, is aware of the adverse effect of the artificial value of our dollar.
What they are trying to do in this report is to allay the growing concern of the Canadian people by presenting only a part of the

facts so far as the inflow of capital from the United States is concerned. In its report for the year 1948 the foreign exchange control board, in its reference to the inflow of capital from the United States, has confined its report to capital for investment in Canadian properties or business and the increase in book value of United States direct investments in Canada. This method of conveying a false impression to this parliament and to the country is not in accordance with the known facts as to the inflow and outflow of capital, and is a departure which can be justified only on the ground of political expediency.
In the reports to the Minister of Finance (Mr. Abbott) of the foreign exchange control board in the past, this parliament and the Canadian people were given a true picture which included not only capital coming to the country for direct investment in plants, but as well the net result of sales and purchases of securities between Canada and other countries. In the report of the foreign exchange control board under date of March 1, 1946, the facts in connection with the movement of capital were dealt with in this way, and I refer to pages 27 and 28 of the report dealing with capital inflows:
In the later years of the war, the inflow of capital to Canada from the United States became an important source of exchange. The inflow took the form mainly of the purchase of securities by United States investors.
That is what the minister stated this afternoon.
The movement first become marked in 1943 when gross sales of outstanding securities for United States dollars amounted to nearly $200 million, or almost twice the total in 1942. While there was some falling off in 1944, the total for the year still exceeded $100 million, and in 1945 rose again to more than $200 million.
That report, with all of the facts in connection with the inflow of capital, was put out in 1946 four months before the parity action of the government when Canada established an artificial value of our dollar. In this connection I might say that the report of the Bank of Canada this year is in an unprecedented form completely different from what it has been in previous years. It does seem to me that the powers that be in the Bank of Canada have tried to make this report more difficult to understand than it was before. There was a true report in 1946 of all facts in connection with the inflow of capital, four months before the parity action of the government. The foreign exchange control board report for 1948, dealing with the inflow of capital, does not follow the practice followed in the past of giving all the facts, but rather confines itself to capital inflow for direct investment purposes in Canadian properties or business, and
Foreign Exchange Control then reaches an all-time high for political reports when it states as follows on page 22:
It is apparent from the above table that the factors which operated to reduce the purchase of publicly issued Canadian securities by United States investors in recent years have not acted as a deterrent to the provision of very large amounts of risk capital for direct investment in Canadian business.
You will notice that in the Bank of Canada's report they do not tell us how much of this money was brought into Canada for, as they say, direct investment in Canadian business. In other words, they do not break it down to tell us what kind of business this money was invested in in Canada. In this connection the Minister of Finance stated this afternoon that there was no difficulty in bringing in a great deal of money from the United States, but I recall very well that last spring a man from Texas wanted to bring in $10 million for oil development in Alberta. I went to see Mr. Graham Towers and Mr. Donald Gordon of the Bank of Canada, and as far as I know I explained the circumstances and the situation as to this man bringing in this large sum of United States funds. I arranged for an interview for him with these officials whereby any difficulties that appeared on the surface might be overcome, and this large sum of money brought in for development in the west.
As a result of the interviews that were had at a later date with the officials of the Bank of Canada, this man from Texas decided that Canada was not a safe place to bring his money because the restrictions that were placed on him were so great that he could not take the chance. We lost that opportunity to get a very large sum of money for development purposes.
The paragraph which I have just read from the 1948 report of the foreign exchange control board states that risk capital from the United States has not been retarded in coming into Canada by reason of the dollar parity. It certainly is retarded by reason of the dollar parity, and it is retarded to a greater degree by the restrictions that are placed on money brought into Canada by the bureaucrats of the Bank of Canada and the foreign exchange control board. The figures given in the report are misleading, and they do not take into account the great forward movement of the development which can be expected in Canada with the influx of risk capital directed to this country where there is a chance of reward for those people who send their money into the country. Everyone familiar with this type of capital knows that it has dried up through recent years in comparison with what it would have been without government interference. The summary under the report of capital influx is, in my opinion, very misleading.

Foreign Exchange Control
I stated that two years ago the minister did not wish risk capital, or that kind of money to be brought into Canada.


Douglas Charles Abbott: May I tell my hon. friend that he is quite wrong on that. If he will look up the record he will see that what I am saying is true.


Alan Cockeram: The minister says I am quite wrong. I certainly do not think I am wrong. Just now I was talking about bricks and mortar, and now I am talking about risk capital. I remember that at that time the minister certainly did not desire risk capital-


Douglas Charles Abbott: All I did not desire was this quick speculative in-and-out money. Look up the record.


Alan Cockeram: The minister can gloss things over as he likes, but I think if he goes through the record he will see that he did not wish this type of money, which today we call risk money, to come into Canada to develop the country. I advise the minister to read history; I want to tell him to read the history of the development of the United States, the South American states, South Africa, the Dutch East Indies, Australia and Canada. He will find out where the money came from for the original opening up and development of those countries. It was risk capital which came from continental Europe to a very great extent, and in later years money from the United States. Therefore when the minister states that he does not want to see risk capital come into the country-


Douglas Charles Abbott: He has never said any such thing.


Alan Cockeram: You have your idea of what you said and I have mine.


Douglas Charles Abbott: My hon. friend is making an assertion, and I want him to quote what I said. I challenge him to quote what I said.


Some hon. Members:: Address the Chair.


Alan Cockeram: You can make your reply later on. You know quite well-


Douglas Charles Abbott: My challenge is there. My hon. friend knows perfectly well that I never said any such thing.


Alan Cockeram: I have no doubt in my own nind as to what the minister said two years ago. He may be able to turn it around; he is a smart lawyer and he can do as he likes with language, as he did with me a short time ago when he spoke about personal interest in matters brought before this house. But that sort of thing does not worry me at all. I say the minister did state at that time that he did not wish that kind of money in Canada.


Douglas Charles Abbott: I rise to a question of privilege. I challenge my hon. friend to point to any place in Hansard where I made any such statement; and unless he is prepared to quote Hansard I ask him to withdraw.


Alan Cockeram: That is not a point of privilege at all; the minister is making a speech.


Douglas Charles Abbott: Of course it is a question of privilege.


Some hon. Members:: Withdraw.


Alan Cockeram: Why should I withdraw? I certainly do not intend to withdraw. You can take a jump in the lake. Perhaps the minister will let me get on and not interrupt me any more. I say I am correct in that statement; but I shall come back to the minister later on. In 1946, when existing conditions were recorded in a straight, factual manner-I am now talking about this political report of the foreign exchange control board-we had a net capital inflow on the sale and purchase of securities of $134-6 million for all countries, and a favourable balance with the United States of $170-2 million. In 1947 we had an outflow of capital from Canada amounting to about $18 million, in spite of the figures that appear in the report of the foreign exchange control board. That report does not show this result, but it is shown by the figures of the bureau of statistics. In the first eleven months of 1948 the outflow of capital amounted to $17-6 million. Yet the minister talks, as he did very glibly this afternoon, of all the risk money coming into Canada. When we get into committee I think he should produce figures to show just how he arrives at that conclusion, and just how much of that money was put into bricks and mortar.
Here is the case of a board acting under power and authority delegated by this parliament, and this resolution asks that we delegate that power for a further period of two years. The minister gave no reasonable statement as to why a period of two years was selected, but it does seem to me this board has just dug itself in and proposes to stay dug in. Instead of the one-year period they have had up to the present, they now ask for two years and sixty days so they can be sure of their jobs for an extended period of time. The foreign exchange control board submit to this parliament, through the Minister of Finance, a report prepared from a political angle by a supposedly non-political board in order to justify its actions in the past; and I say that without reservation. As one who has been interested in the question of exchange for some years, who as a young man came back from the first war and served in New York in the foreign exchange branch of one of the Canadian banks, I think I know a little about exchange. At a later date I shall

have something to say about the size of the staff required to carry out the work of this board. I do submit, Mr. Speaker, that the the political complexion of the 1948 report of the foreign exchange control board is something that goes far beyond any powers ever conferred upon that board or ever intended to be exercised by the board at the time parliament established it in the first place.
There is one other aspect of this report which transcends even the injection of politics, and which in effect strikes at the very root of our parliamentary system of government. I refer to what is apparently becoming a practice in this country of boards and commissions, acting under powers delegated by parliament, actually laying down government policy. This is one of those boards. Very often you see Donald Gordon or Graham Towers or somebody else making speeches that should be made by the minister in this house, just as we find officials of the Department of Finance going around making speeches about things which later become government policy. It would not surprise one if the article in this evening's Citizen about a budget leak is not a true statement.
The objections I have raised already to this report indicate in no uncertain terms the bureaucratic domination of the government by the foreign exchange control board. The report of the Bank of Canada for 1948 is another glaring example. It is in a form entirely different from the reports of other years. I remember saying two years ago that the report of the foreign exchange control board was made up in such a way that, while it may not have been intended to actually deceive members of parliament, it did get them all muddled up so they could not find anything at all in it. This inroad of bureaucratic domination, which is becoming more evident all the time, calls for this parliament to exercise its responsibility to the Canadian people and call a halt to the powers given this department and this government.
This afternoon the minister said something in reference to the gold bonus. I had not intended to touch on that subject at all. I think the minister well knows that the gold mining industry has no desire to be a bonused industry in Canada. In the past they have fought their own battles, and the troubles with which they have been beset during the last few years have been brought upon them by the actions of this government. I am sure the Minister of Trade and Commerce (Mr. Howe) knows as well as I do that when this government needed gold during the war, before the United States came in, he was one of the ministers who approached the gold mining people and asked them to
Foreign Exchange Control produce to the very maximum. The industry responded to the request he made and saved Canada's finances at that time, but at great expense to itself mining companies mined their higher grade ores and as a result paid taxes on fictitious profits as they did not carry on the development work they are now called upon to undertake.
While we are on the subject of gold-and it all comes under this exchange regulation- the minister has stated many times in the past that there is no free market for gold the world over. I would like to show him a couple of letters that I have, one from Denmark and the other from another country, asking for quotations on gold, to be paid for in United States dollars on the presentation of documentary evidence to a Canadian bank. So there is a market for this gold at higher prices than the gold mines are receiving today, and I think the minister might at least take cognizance of that fact. I realize, Mr. Speaker, that this foreign exchange control bill is now on the books and that it has a few days to run. I think the minister should explain to us why he needs that additional year-two years all told. He should explain why Mr. Towers, Mr. Rasminsky and these other high officials in the foreign exchange control board believe they should have two years instead of the one year. After all, this is an election year.


Mr. Mitchell:: How do you know?


Alan Cockeram: The appearances are all there. A bonus has been declared to the poor fellows from Hong Kong who should have had that money a long time ago. However, Mr. Speaker, when this measure comes up for second reading I shall have more to say.


David Arnold Croll: Mr. Speaker, I quite agree with the hon. member who has just sat down that the Minister of Finance (Mr. Abbott) did a superb job in presenting the case for the government. As a matter of fact, he went a little bit too far and presented an even better case for the opposition than any of them have been able to present. Then he took the occasion to kick it full of holes, so much so that I thought the member for Muskoka-Ontario (Mr. Macdonnell) would throw his notes out of the window.
It will delight the house to know there is a member from Toronto who does not agree with the other members from Toronto as to what should be done about gold mines. It is crystal clear that devaluation of the Canadian dollar, or whatever you wish to call it, has become a plank in the platform of the party opposite. The party would adopt that favourite if somewhat clumsy description used by hon. members up until today, "to let the

Foreign Exchange Control dollar find its own level", as if they were not talking at all about a standard of values but rather about a septic tank. Today, the term used was, "the true economic level". I see from a report of an interview with the leader of the opposition, dated last Friday, the term he uses is "an honest level". This much we can say, that from the suggestions made by the opposition this afternoon one would gather that the remedy is ^n automatic, selfadjusting, Drew's patent dollar. My own opinion is that, if he were fortunate enough to secure office, after he had been in office about three or four years these dollars would have about as much value as Bennett's buggies.
He asserts that the Progressive Conservative party says that is the way they want it. If they ever succeed, it will mean a good deal to a number of chosen people in Toronto. It will mean joy in the brokerage rooms, but it will mean hardship in the kitchens.


An hon. Member:: And work in the mines.


David Arnold Croll: Since the kitchens outnumber the board rooms about a thousand to one, I suggest that in a democracy they are far more important.
There are two possible explanations for our friend's espousal of the present policy. I assume it is honestly advanced as a solution of a difficult problem, the existence of which no one denies; that is one thing. If, on the other hand, it is cynically advanced to satisfy those who give to their party its greatest political support, then that is another matter entirely. If it is honestly advanced, the kindest thing I can say for it at the present time is that they are not thinking this problem through. If it is cynically advanced, there are in the dictionary no words I could possibly use to apply to that particular policy.
I think we can sum up the effect of the policy by saying it will increase the price of both gold and oranges. As everyone in this house knows or should know, a few very powerful people in this country, particularly in my own province, are in the gold-selling business and, as a useful sideline, they run political parties. As everyone also knows, a great many people in this country, undoubtedly the majority of the people in this country, are in the orange-buying line, particularly if they have young children to feed. If you balance the effect of this policy, you will see it means greater wealth for those citizens who happen to be in the gold-producing business and heavier budgets for those citizens who happen to be buying oranges and imports from the United States.
I do not suggest for a moment that these two groups of citizens do not overlap. Gold

miners and their supporters, their political spokesmen, also have children and they do buy oranges. I think a word of commendation may be due to them for their willingness to pay an additional ten per cent or whatever it may be for the oranges that come from the United States, provided that they get an additional ten per cent or whatever it might be for the fine ounce of their gold. In the political language of some of my friends opposite, this is known as equality of sacrifice.
Our friends might say that may be a very narrow view of the matter; it may even be a distorted view. A dollar that was officially worth perhaps ninety cents in United States funds, would help not only the gold mining boys on Bay Street and St. James Street-


An hon. Member:: You are on Bay Street yourself.


David Arnold Croll: -they say it would help a lot of other people in the export business. It would enable Canadians to compete with their United States rivals because Canadians could offer their products at ten per cent, or whatever percentage it turned out to be, cheaper. They could undersell the United States competitor and they would pay their operating costs in the depreciated Canadian dollars, including of course what has already been pointed out to this house, the big item of labour costs. There would be no suggestion of a compensatory rise in wages so that the worker's family could meet the increased price of oranges, coal and other imported goods they need. That would ruin everything; after all, a company executive would also be confronted with higher coal costs and higher prices for oranges. So it would be a matter of equality of sacrifice and share and share alike.
It would seem that this is the proper place to mention the small point of percentage of income required for living costs. I think that what we have failed to grasp up till now-and, Mr. Speaker, it cannot be denied -is that when you impoverish the Canadian dollar you impoverish the Canadian worker and the Canadian farmer.
Let us examine for a moment this idea of Canadian competition. At first it sounds highly attractive. With a ninety-cent dollar we could step into the markets of the world and undersell the Americans who would have to quote in one-hundred-cent dollars. At least, we could do that in cases where the Canadian firm was independent, or where the Canadian producer was not forbidden by his head office to export, or where the American head office had figured it would be good business to shift its export operations to the Canadian subsidiary. There we are with Canadian-

produced goods entering world markets with a ten per cent price advantage over American goods.
I am sure that by now members of this house are beginning to murmur to themselves that the competition is not entirely American. There is British, Scandinavian and Swiss competition; and what is more, on top of all that we are beginning to get a little bit of Japanese and German competition. That is all quite true; I shall deal with it in just a moment, and explain why the result of other competition makes still more questionable the proposition put forward by the opposition.
For the moment, let us adhere to the American competition which is, after all, the big competition in the free markets of the world.
We would have, let us say, something like a ten per cent advantage over our American competitors; but for almost everything we export, for the raw materials that form the bulk of our sales abroad, there is a world price set daily on the commodity markets in New York, or established by private negotiations between the big producers and the big consumers. These world prices are established in American dollars which are, after all, the world currency. Let me ask my friend for an honest answer to this question: Would that price in American dollars for, say, copper or lead or newsprint, be affected one whit by the process of devaluing our dollar? Or would it simply mean that the Canadian producers of these commodities would get a higher profit in terms of Canadian dollars, provided their wage rates stayed down, despite the higher living costs which devaluation would impose upon the wage earners?
Then, to meet the objections that have been raised by the champions of the debased dollar, let us turn to the exporters of Canadian manufactured goods for whom the hon. member for York South (Mr. Cockeram) attempted to say a few words. They are having a hard time of it today. Let us consider their case as sympathetically as we can. They are pioneering for Canada as a world trader in new and distant fields. Will the ninety-cent dollar help them to market their finished goods against their competitors not only from the United States but from every other industrialized country in the world?
I ask the house this question: Will it help them to sell Coleman lamps in South Africa, or Moffat stoves in Bolivia, or O'Keefe's beer in Pakistan, to mention only three of our major exporters and to keep it as close to home as possible for gentlemen opposite? Of course the answer is no. The trouble with ninety per cent of the markets which would
Foreign Exchange Control normally be open to Canadian producers of finished goods is not a shortage of cash but a shortage of the right kind of cash. It would not matter particularly to importers in most countries if they could get a bargain in terms, of Canadian dollars as against American dollars. They have not either kind of dollars and they simply could not buy on dollar terms. One after another Great Britain, Sweden, South Africa and Mexico have run out of dollars, any kind of dollars, and so they have closed their doors to imports of goods for which the sellers required payment in dollars. This, as my friends well know or should know but refuse to admit, is our dilemma today as a trading nation, as a nation which must trade abroad to maintain prosperity. If any problem surmounts party lines, I think this one does. But what have my friends to offer? Have they any sort of solution? So far, they have not suggested a solution.


Mr. Manross:: Have you?


David Arnold Croll: We have.


Frank Exton Lennard: What is it?


David Arnold Croll: Keep the government in office. If my friends opposite have a solution to offer, it certainly would not be the cheap-dollar solution so glibly advanced by the gentlemen in the opposition today and so glaringly designed merely to increase the wealth of those who have a surfeit of wealth at the expense of those who face a weekly problem with the food budgets of their families.


Frank Exton Lennard: The same old stuff.


David Arnold Croll: It is worth while perhaps to note-


Harry Rutherford Jackman: You will get elected.


David Arnold Croll: While you are around, I will not get licked, and you know that too well.


Harry Rutherford Jackman: I said you will get elected if you keep on talking like that.


David Arnold Croll: I wish the hon. member would stop mumbling.


Frank Exton Lennard: There was no mumbling about it.


Mr. Deputy Speaker:: Order.


David Arnold Croll: Did the hon. member say that I would be elected?


Harry Rutherford Jackman: Yes.


David Arnold Croll: I start to shake in my boots. I do not trust his judgment. But I thank him just the same.
It is worth while to note that those whom hon. members opposite claim to champion-
1596	HOUSE OF
Foreign Exchange Control the exporters themselves-have not to my knowledge leaped forward with a demand that our dollar, as my friends so inaptly put it, "be allowed to find its own level." When I say exporters, you will realize that I mean not those dealers in essential raw products to whom a devalued dollar would mean an automatic increase in price; I mean those others who send their finished or processed goods abroad to compete in the open market against similar goods from other countries, on the bases of price, quality and Canadian standards of fair dealing.
These estimable firms have an active organization called the Canadian exporters association. They have a first-class trade paper known as the Canadian Exporter. I have yet to learn, Mr. Speaker, that either this organization or its trade paper has endorsed the devaluation which our friends across the way are advancing as the salvation of these very exporters. They have not done so, in spite of the fact that in a handful of dollar markets, and just a handful, and I can name them, Venezuela, Panama, Haiti, the Dominican Kepublic, Cuba, devaluation might help. Their trade paper, which takes a realistic approach, has not argued for devaluation, as have the Bay Street gold miners, which, to put it as kindly as I know how, will never advocate a policy, or force a policy upon its spokesmen, if that policy runs counter to the interest of those who own the mines.
This is one of those occasions, Mr. Speaker, when I wish that parliamentary practice permitted an hon. member on this side of the house to borrow a weapon with which our democratic processes equip our opponents.
I wish it were possible somehow to move a vote of non-confidence in the sincerity of His Majesty's loyal opposition, and to apply it specifically to the single issue of devaluation, which up to the present time is the solitary plank which has miraculously been suspended in mid-air over the site where we should have expected a finished platform to arise long before this time.


Mr. Rodney Adamson (York West):: It is
rather amusing, Mr. Speaker, to hear the statements of the recent speaker, and it was particularly amusing to hear him quote the opinions of certain industries in Canada. His whole speech can be judged by an example of what he has just said. He mentioned specifically the Coleman lamp company, the Moffat stove company, and one other company, and said that they were happy about the policy of the foreign exchange control board and of the government. As it happens, Mr. Speaker, I hold in my hand a letter from the export manager of the Coleman lamp


company, and I shall quote just one paragraph from it:
We believe that the export trade of the whole world, but particularly also of Canada, is greatly hampered by the many regulations to which our monetary system is subjected. Personally, I can only hope that in the not too distant future the policy of the Canadian government will change in this respect.
Again this afternoon, Mr. Speaker, the Minister of Finance (Mr. Abbott) played the game of the clever fox leading the hounds astray. This afternoon the Minister of Finance discussed the problem of dollar depreciation. The problem is not depreciation; it is convertibility. That is the main problem which is being accentuated by the action of the present administration. We have not got a convertible currency. Let me emphasize, Mr. Speaker, that it is a convertible currency that we need. Until we get a convertible currency we are going to be hamstrung by the actions of others and the actions of our own administration.
I want to go back briefly because I supported the Bretton Woods agreement. I supported it on December 6, 1945, at page 3075 of Hansard, in these terms:
There is, however, the method by which the parity of exchanges shall be fixed, and that appears in article 20, section 4. It merely states that each country shall settle its own parity of its own exchange. That is to me, Mr. Speaker, the crux of the whole question-the method of arriving at parity or of arriving at the currency exchange value in gold of the various members of the agreement. At the present time the huge majority of currencies have a fictitiously high value in terms of the United States dollar, in terms of gold and in terms of the Canadian dollar.


William Irvine: Who is the hon. gentleman
quoting?


Agar Rodney Adamson: I am quoting what I said in 1945 on the Bretton Woods agreement.


An hon. Member:: A real authority.


Agar Rodney Adamson: I continued:
We in Canada are dependent upon a stable exchange. Probably we are more dependent upon stable rates of exchange than any other country in the world at the present time. We are in the focal point, situated between the sterling bloc and the gold exchange currency of the United States ... If we as a small country cannot come to some arrangement by which our currency and our trade is not at the behest of the great trading nations which can control managed currencies, and which, because of their great wealth, can jockey with international currencies to our disadvantage; if we as a longterm exporting country cannot be sure that we trade with a currency which is convertible, exchangeable and stable, our future is extremely dark.
We are now in that serious position which I foresaw in 1945. There was no question of devaluation. There was the question that our currency should be exchangeable and it was my hope at that time that the Canadian

dollar, through the operation of the Bretton Woods agreement, would be an exchangeable currency. Unfortunately, because of the fictitiously high value placed on currencies by the various members of the agreement, the Bretton Woods agreement has failed to work and the international monetary fund is more abused than honoured. Until the condition obtains where we can exchange our currency freely into the currencies of all nations we are going to be faced by an ever-constricting world market. I say that, Mr. Speaker, despite the fact that our exports last year were the greatest in Canadian history.
I want to mention one thing which I think shows what the policy of the British government is likely to be. I shall quote Sir Hubert Henderson, who is the president of the Royal Economic Society. In the current issue of the Economic Journal he has this to say about the British position with regard to currency and discrimination:
I submit, then, that for correcting a huge maladjustment in the balance of payments, such as still confronts Great Britain, counter inflationary financial measures, though helpful, cannot suffice, and that exchange-rate variations might be harmful. It is essential to keep down the volume of our import purchases as effectively as we now do by means of import restrictions. And not only to keep down their total volume but, more particularly, that part of them that comes from what we call hard-currency sources. The principle of non-discrimination does not fit a world in which the whole international balance of payments has been upset.
What does that mean? It means simply this, that the policy of the United Kingdom, the policy of the London School of Economics, which is the socialist school of Sir Stafford Cripps, is going to follow a discriminatory policy against the hard-currency countries. In other words, we are going to be discriminated against in Canada because we are a hard-currency country. There it is, ia black and white, from the highest authority in England.
This government-and any government of Canada-is going to have to face that problem. We are, I think, going to say "Our United Kingdom exports are stopped", or else we are going to have to arrange some methods by which our currency is exchangeable into United Kingdom currency. That is the problem facing the government at the present time. I say in all respect it is the problem which they have brought on themselves by their action of tying our dollar rigidly to the American dollar.
The report of the foreign exchange control board is most illuminating. The paragraph quoted this afternoon by the hon. member for Muskoka-Ontario (Mr. Macdonnell) is pure Schachtism, in the very essence; it is the same policy as followed by Germany prior
Foreign Exchange Control to the last war; it is the same policy of having a number of currencies and offering them at fictitious prices for various purposes, and it will have exactly the same result.
There is in this report a section at page 25 which I consider extremely illuminating. It sets out the problem in these words:
Until recently there was little occasion for Canadian exporters to seek to export on terms other than those specified above.
And that is a reference to the original terms of the foreign exchange control board. It continues:
With the growing severity of import restrictions imposed by many countries, however, an increasing number of cases have arisen where Canadian exporters find it impossible to sell goods on the prescribed terms of payment. In these cases alternative proposals for payment are sometimes made by foreign buyers; and where they are acceptable to the Canadian exporters the board has indicated its readiness to consider applications for the necessary permits. The following appear to be the main types of case which warrant consideration.
The first case is merely a case where extended time credit is asked. But the second case-and this I suggest is the real admission of failure of the foreign exchange control board-is this:
Exports to previously established markets for payment in blocked foreign currency, i.e., foreign currencies which are not freely convertible into United States dollars or sterling. In these cases, the exporter must of course be prepared to assume the risks involved of being unable to convert the foreign currency into Canadian dollars for an indeterminate period.
If that means anything, it means a free exchange. It is an advocacy of free exchange, allowing the exporter to sell in a foreign country and in a foreign currency, that foreign currency, under our present system, not being convertible into Canadian dollars. My first quarrel with the foreign exchange control board under its present set-up is that some machinery should be made available for the conversion of that foreign currency into Canadian dollars, and that machinery should be left in the hands of the exporters and the chartered banks. The next, and again a very significant admission, is found in section 4:
Exports to be paid for by the acceptance of goods of equivalent value.
If that means anything, it is straight and absolute barter. Receiving goods of an equivalent value is a definition for barter. Here, in the report of the foreign exchange control board, we have an advocacy of, first of all, free exchange, and secondly of barter. I assure you that those are important and serious considerations.
I believe there is a way out which we can take to overcome the blocked currencies of the various countries with which we find it
15S3

Foreign Exchange Control so difficult to trade; and I shall come to that in a moment. However, this afternoon the Minister of Finance (Mr. Abbott) emphasized, and rightly, the difficulty of trading with countries which exercise this same vicious foreign exchange control. He was quite right.
Last June when speaking in the house I mentioned that the total number of permutations and combinations, if every country had a barter deal with every other country, including all the countries of Europe and South America, was about 326 barter deals. Last June there were actually 156 barter deals already consummated between those countries. That is economic chaos. That is the condition in which we are forced to trade, and no one emphasizes more than I do the seriousness of that condition.
But under the present system of making our dollar almost the hardest currency in the world to get, we are excluding ourselves from every hope of becoming a factor in the external trade of those countries.
What are the methods by which we can overcome the trade barriers erected against us? What can we do in order to increase foreign tradq? What can we do to prevent ourselves suffering from the most gigantic squeeze play in international history? Our prices are right and our products are good. Our exporting firms have great ability. Our financial institutions have been world traders for generations. It seems to me, Mr. Speaker, that we should allow a great deal more latitude to these institutions to work out their own deals. We should give a great deal more authority to the foreign exchange departments of the chartered banks to deal with individual firms in Canada and individual firms elsewhere in order to work out their own deals.
I realize that the foreign exchange control board is moving in that direction, but under this control measure to have to go through a government agency is always a stultifying control, and a restriction on the freeness of trade. No matter what the control is, it is always a restrictive control.
Coming to the position of our gold and dollar reserves, I spoke about this before, but today the latest figures available show that the total Canadian authorization for Marshall-plan purposes is $671 million. Deduct that from our holdings of foreign exchange and gold, and you will see that our situation today is an extremely perilous one. The Minister of Finance (Mr. Abbott) has no reasons at all for complacency or satisfaction over the situation. As a matter of fact, had it not been for the Marshall plan offshore purchases in Canada, our gold and hard currency situation would be desperate. That it is not due to

a very far-seeing and extremely generous act by the former secretary of state of the United States, General Marshall, and by the present administration of that country.
Of these purchases of $671 million some $246 million are wheat and $58 million are wheat flour. If, as is extremely likely, wheat is declared surplus in the United States, on that basis half of our Marshall plan purchases will be immediately cut off, and I submit that with a cut of $300 million in Marshall-plan purchases our exchange and dollar situation will be extremely critical even if the purchases of base metals and other Marshall-plan offshore purchases continue. Entirely apart from our trading position, entirely apart from our situation with regard to the United States Marshall-plan purchases, we have two alternatives. We can either take steps now to rectify the situation or we can continue, and no matter what happens we shall be subject to an economic squeeze which we shall find it impossible to overcome.
Two things are happening today. Our historic European market is being closed off, partly by force and, I submit, partly by design. We are becoming ever more dependent for our exports on the United States market. I assure this house that, with the enormous productivity of the United States, immediately there is a surplus of goods and a surplus of materials in the United States our exports to the United States will fall off just as Niagara Falls drops over the brink. That may happen a great deal more quickly than anyone in the house thinks. Therefore we are faced with a barter economy being closed against us, and a market in the United States subject to the tremendous possibilities of production creating surpluses in that country and shutting us off from that market, in all manufactured goods.
What are the alternatives which we might follow? We might, and I believe we should, endeavour to make the Canadian dollar a convertible currency. What do I mean by "convertible currency"? Every currency must have some common denominator to which it is related. The historic common denominator to which all currency is related is, of course, gold. Today the operation of the gold standard is impossible. There is no currency in the world, with the possible exception of the Swiss franc, which could stand fixed convertibility into gold. When I say no currency I mean the United States dollar as well.
If the United States offered to sell United States gold for $35 an ounce and let their own nationals buy it, the hoard at Fort Knox would not last very long. Therefore, Mr. Speaker, we must arrange some tie, some convertibility between the Canadian dollar

Foreign Exchange Control and gold; and the obvious, classical machinery, which was used by Great Britain all through the last century and until the gold standard was established, was the free bullion or free gold market, call it what you will. On this market you could buy or sell bullion at a price agreed upon between the buyer and the seller; and that is the only way you can get the true value of any currency in terms of gold, what people are prepared to pay for it, not what any government may say it is worth. It is a question of what it will sell for in the open market under the law of supply and demand; that is the true value of any currency.
I suggest that the first thing we should do is to go to the international monetary fund and tell them very definitely that we are suffering through the operation of the present economic system, and ask for the establishment of a free gold market in Canada. I have in my hand a letter from a United States economist who today has given me permission to use it. He is Mr. Henry Hazlitt, who writes an article for Newsweek, and who is one of the foremost advisers to American business. I quote one paragraph:
I heartily approve of your proposal that Canada should re-establish a free gold market.
It could not do so, of course, without meeting the strongest possible opposition from the international monetary fund, the British government, and from our own. But if the Canadian government maintained sufficient courage and clearsightedness to go ahead, nevertheless, the American government would soon have to follow suit and the fund, the British government and every other government that is now trying to combine inflation with exchange control would have to readjust its thinking, and the first step, at least, would have been taken toward the return to a real international gold standard.
Now I want to say a word as to one of the other advantages of convertibility into gold. Your purchaser of Canadian goods would have an opportunity to exchange his own currency in terms of gold in order to buy Canadian dollars, because the market would be open. Admittedly many countries would find their currencies extremely low when they came to purchase gold; nevertheless they would be able to purchase it and effect a trading transaction, which they are unable to do at the present time. What about the Canadian exporter? Exactly the same principle would apply; he would be able to offer his goods in terms of a foreign currency, and would be able to exchange that foreign currency into Canadian dollars in terms of gold at will. The classic trading pattern, call it old-fashioned if you like, is not going to return easily; but the present restricted, controlled and impossible trading position can cause us nothing but the most severe headaches in the very near future.
As to the policy of devaluation, I have always said that vis-a-vis the United States 29087-101
we are in a strong position. Our economy is strong. The reason it is strong has nothing to do with this government, however. Our economy is strong in comparison with the United States simply because the United States is becoming a have-not country. It is running out of many basic raw materials and becoming more and more dependent upon Canada for those materials. They find themselves dependent upon us particularly for many of the base metals, for newsprint and many other things. On that account I would have no fear at all that if we took this action our dollar would sell at a great discount. Our dollar would be freely convertible, and free convertibility is an essential to any currency. We hear that if our dollar went to a discount of ten per cent, coal would cost more. Well, Mr. Speaker, in 1936 I paid $8 a ton for coal. Today I am paying $18 for the same coal, or 125 per cent more than I paid at the time these agreements were made. That is a very serious matter; but for anyone to say that a discount of ten per cent would cripple this country is sheer nonsense. We have withstood shocking advances in the prices of many commodities such as coal and oil. These are the chances we have to take. There is no safe, easy way of walking through the valley without running any danger. That is not the way the world is constituted. There is the way of this government, which is leading us directly into a chaotic impasse. On the other hand we can take courageous action now and see that the essential quality of free convertibility into gold is restored to our dollar.


Mr. E. G. Hansell (Macleod):: Mr. Speaker, I shall not take a great deal of the time of the house, but I would like an opportunity of saying a few words on a matter which to me and to certain sections of my constituency is important. In prefacing my remarks, I might say that I have always had the best relationship with the various ministers of the crown. I must say that when I have presented cases to them from time to time they have served me well. I hope that I have as happy relations with their successors after the next election.


William Irvine: We will treat you well.


Ernest George Hansell: I do not know who will take their places, but I will be here to face whoever do. While I commend the present ministers of the crown, I must say that there are two departments that I regard as particularly tough. One is the Department of Finance, the minister of which is sponsoring this bill, and the other is the Department of National Revenue, which rudely lays its hands upon the taxpayer.
In dealing with most ministers of the crown, I find they look over my case and

Foreign Exchange Control say, "Now, Mr. Hansell, I believe we might be able to handle that through section so and so, subsection so and so, clause so and so." Somehow or other the legislation written for the Department of Finance and the Department of National Revenue has no section so and so, subsection so and so, clause so and so through which they can creep to accommodate us. Their legislation is sewn up so tightly that when you present them with a case the reply you receive is a rather cold one. It reads something like this: We beg to advise you that section so and so, subsection so and so, and clause so and so states this. We wish we could do more for you. Yours sincerely.
I should like to say a word about the austerity program under which the country appears to be still labouring. It came upon us so suddenly that the Minister of Finance must take some responsibility for failing to keep his finger on the pulse of the nation's financial welfare. If I were about to drive my car down a hill having a gravelled road, what would I say? I would say, "Now, IJansell, just a moment; this is a gravel road and it is a rather steep hill. You had better put on your brakes a little and take your foot off the gas." I would anticipate what might happen. I would know something about the road that I was going to take. Evidently the government either did not know the route they were taking or did not know the dangers of the road they were traveling. Something must have happened because suddenly, out of a blue sky, the austerity program was thrown upon us under the controls which the government have, and which we have permitted them to have.
I do say, Mr. Speaker, that the government should have known before the nation got into such serious difficulties with other countries, particularly the United States, and should have put the brakes on a little sooner instead of plunging them on suddenly and giving the nation such a jolt. I say, Mr. Speaker, that the Minister of Finance should warn the country, if it is possible, that he expects something to happen. I have in mind the small business concerns and a few large business concerns that are capitalized with millions of dollars. These concerns receive a jolt at such times, but perhaps they can stand it. They have capital reserves and they have certain business administration, directorates and so forth that have steered these concerns over the rocks in days gone by.
The small businessman who has invested five thousand, ten thousand, or up to $50,000 in some business in a small community cannot stand it. These announcements that have been made in the past have well-nigh wrecked this type of business concern. I suppose some
LMr. Hansell.I

of them have had to go into bankruptcy. I recall having to take up on one occasion a case concerning a very small woollen mill. A few people had invested money in the mill and then quota restrictions were placed on woollen goods. It made it difficult for this small concern, but there was nothing that could be done about it. It was a matter coming under the Department of Finance and there were no holes to crawl through. The legislation was sewn up tightly.
I go along a road and I see a beautiful new building with a large sign "Hudson Cars". I stop to buy a little gasoline, perhaps, but I see no Hudson cars. The owner has a tale of woe about being a small businessman who took the agency for these Hudson cars. He put his money into the building, expecting that when the war was over he would be able to do a good business selling these cars. Suddenly, he finds he cannot get any cars. He might have had the agency for another car, but he chose Hudson and suddenly finds he cannot get any cars. Surely, there should have been some warning to protect these small business concerns.
I know that next Tuesday night the budget will be presented. It is anyone's guess as to what may be in the budget. The minister is going to adjust the hangman's noose around the poor taxpayer. I do not know whether he will make it a little tighter, but it is expected he will let it out a notch or two. I do trust that the minister will be able that night to make some announcement that will alleviate the distress in which small business concerns find themselves because of the austerity program. Surely the government must play fair with small business. It is only reasonable. I know that the minister cannot answer at the present time in this debate, but I think he should be able to give the country some lead so that small industries may know what is in store for them in the future.


Arthur Leroy Smith: Mr. Speaker, my contribution will also be brief. I was much interested in the speech made by the member for Spadina (Mr. Croll) because I approach this matter, as I am sure he did, as a very amateurish amateur. I promise you I will not speak about gold. The member for Spadina read a speech about gold. There again we have something in common, because neither of us knows anything about the gold problem. I admit that. He demonstrated it. That is the only difference between us.
He accomplished something more. If he had set out to give a speech which would be a prize example of demagogic, forensic effort, he succeeded exceedingly well. I almost cried when I thought of the poor child in his home in Toronto who, when he got his orange, found that it had a piece bitten out of it by

these nabobs on that street in Toronto on which the hon. member practises; I just forget the name of it, but I am told that it is Bay street. Then I see the rich men, these nabobs, putting away their ounces of gold, bringing them out and tallying them up every week. Then he went so far as to say, or clearly to imply in this demagogic talk of his, that an effort was being made by certain persons in authority in matters of business and finance to do a certain thing; that the object of those persons was-to use an expression that I hear quite often in this house from the socialists to my left-to keep poor people in a state of enslavement. Frankly, one needs great patience to listen to that kind of argument, because surely the answer must be obvious. If the rich are to get richer they must do so by selling to somebody; and if we enslave and impoverish our buyers, then the rich man cannot get richer. He also will get depressed.


Mr. Young:: Then you will have your depression.


Park Manross: That is what you are hoping for.


Rodney Young: That is what you are asking for.


Arthur Leroy Smith: I do not intend to reply to that; because to suggest that I am working for a depression is so utterly silly as to be completely unworthy of an answer from me at this time.
I intend to. make a reference to the speech made by the minister, and I am asking him to correct me if I misunderstood the effect of his remarks. He said that the devaluation of the dollar meant a higher cost of living to everyone in Canada. I think I am correct so far. Then he went on; and I think he will admit that, if that be true, an increase in the value of our dollar therefore must have the opposite effect.


Douglas Charles Abbott: It might have.


Arthur Leroy Smith: You cannot have it both ways, can you? Then he went on to say that from a realistic view our dollar, on account of the business we carried on, was in fact probably worth more than par. I think I am correct in saying that. If from a realistic standpoint our dollar is worth more than par, and if that fact in turn will decrease the cost of living, why in the world do we not let it go to its proper level, its real value more than par, and therefore cheapen the cost of living for the people who live in this country?
In my amateurish way I intend to relate this problem of dollars to an economic effort about which I know at least a little bit. I
29087-101i
Foreign Exchange Control refer to the oil business in Alberta. I undertake, Mr. Speaker, to show that relationship quite clearly; and having met your displeasure last evening I warned myself that I must not stray from the subject we have before us. Those fields-because instead of one there are now at least nine of them-are today producing approximately fifty-three thousand barrels of oil per day. At $3 a barrel, which is a minimum price that I am using, that means $150,000 per day to this country in terms of American dollars, because these fields are supplying a necessity which formerly was supplied by the United States, the South American and other countries. In that way we are saving for ourselves at least that much per day through the fields we now have as they are developed at the present time.
I speak of these oil fields for two reasons. The first is the effect of their development- and I hope it will be rapid-in connection with our economic situation. But I refer to them for another reason, and events may prove that this is the greater one. We all know that during the last war, aside from the directly killing instruments, oil was something upon which the war was fought. In fact the situation in this continent became so critical that the United States government built a pipe line right across the Rocky mountains from Norman Wells as it is now called-it used to be called Fort Norman- on the Mackenzie river, right across to Whitehorse. Tremendous sums of money were expended and the refineries were built. It is not there any more. As a matter of fact, it has been moved down to Edmonton. This move was, in my opinion, one of the finest pieces of engineering that we have known in this country for a long time. The increase in this output was dealt with by, I believe, the first vice-president of the Chase National Bank in New York, when he was speaking either here or in Toronto. He gave us some idea of what that development might be, and he used this figure. To develop that area to the point where it will be producing not forty thousand barrels per day, as it was when he spoke, but four hundred thousand barrels per day, as it seems it is easily capable of doing, the cost would be one billion dollars.
One billion dollars is a tremendous amount of money. One billion is a tremendous amount of anything. Certainly I cannot visualize it. I think the most of anything that I have ever seen was at practically the last roundup which was held in western Canada, in which I had a part; and by a part, I mean astride a horse. I had a part in that way. I saw about eleven thousand cattle at one time, which is the most of anything I have ever

Foreign Exchange Control seen at one time. I cannot therefore visualize this billion dollars. But I do know that we cannot get that money in the Dominion of Canada.


Clarence Decatur Howe: Why?


Arthur Leroy Smith: Because it is not here. The other day we read about the Imperial Oil selling its interests in the International Company for $80 billion.


An hon. Member:: No, $80 million.


Arthur Leroy Smith: I can confuse these amounts in the way the Minister of Agriculture did the other night when he was tossing them about.


James Garfield Gardiner: I usually have them right.


Arthur Leroy Smith: It is $80 million, of which $30 million is being spent at the present time to build the 485-mile pipe line from the fields to Regina.
In answer to the point made a moment ago by the Minister of Trade and Commerce, I want to give the net figures as to the inflow and outflow of capital in Canada. Let me tell him that in 1947, in the capital formation of eleven oil companies, they got 48 per cent from external operations; 37 per cent was borrowed; 13 per cent was preferred stock; and 2 per cent was by sale of common stock.
What have we been doing with respect to capital in Canada from 1945 on? These figures are in millions. At least I shall get them right this time. In 1945, the United Kingdom, minus 33-5; the United States, plus 222-1; and other countries, plus 2-4. The plus means the influx of capital into this country. In 1946, the United Kingdom, minus 35-4; the United States, plus 170-2; other countries, minus -2. In 1947, the United Kingdom, minus 9-1; the United States, minus 10-5; and other countries, plus 1-6. In eleven months of 1948, the United Kingdom, minus 1-3; the United States, minus 16-6; and other countries, plus -7. The over-all picture is this: for 1945, plus 191; 1946, plus 134-6;
1947,	minus 18; and for the eleven months of
1948,	minus 17-2. I am unable to make the fine distinction between the brick and mortar money, and the investment money in top securities, which was made by the minister; but, sir, I have given you the over-all picture.
If you will look at page 22, table 9, of the foreign exchange control board report you will find tfae situation set out in the first column, which shows only the inflow of funds. I have taken the outflow and have given you the net position after that has been done. The point I am making is that never at any time has it been more important that we

should have an inflow of capital, certainly in connection with the one industry which I have just named, than now. I confess that somebody may very well say that in the province in which I live we are having an inflow of capital in connection with this same industry. That is quite true; but having regard to the general picture, it is only in driblets so to speak, as compared with the total amount which will be necessary to make that complete development there.
The house might be interested in just a few facts which have emerged in the last two or three weeks since the hon. member for Calgary East (Mr. Harkness) spoke with respect to it. There is a field out there which was discovered a couple of weeks ago. By that I mean that the bit penetrated the oilbearing formation. In drilling an oil well, if you have a decent porosity, which means these interstices in the rock or in the sand, which will hold the oil, in conjunction with the gas, you are all right. We used to think that if we could find a yard, three feet, or better still two yards or so of that stratum, then we really had found something. And you have that situation, not exactly that, but quite a great deal more than that, in the oilbearing zones in the Turner valley; but in the last Calgary paper which I saw, which was three or four days old, in this new field at Schoepp, which is the field that is now called the golden spike field, they found oil in one oil-bearing stratum which is 232 feet thick. It was that thickness when they discovered it, and there was no water underneath. I mention that to show the immensity of the possibilities which are there. I also mention the Redwater field, which was discovered within the past year, and which is today producing more oil than the Turner valley field at the present time. I mention these things to show what is there and what the development may mean both economically and, as I said a moment ago, in connection with the hemispheric or continental defence.
We must have an influx of capital, and that must flow in as easily as it possibly can. I am not in a position to follow, nor do I intend to try to follow, the ramifications of just what deflation of so many cents would mean. I have not sufficient understanding- perhaps I am not clever enough to follow the gyrations of the experts who deal with matters of that kind. But I remember what happened to the pound and to the dollar after the first war. Let me admit at once that I know the destruction in Europe today is infinitely greater than it was at that time, and that there was no destruction on this continent after either war. But nevertheless

there was very considerable destruction in Europe at that time. I do not remember the exact figures, but in New York the British pound went down to $3.70 or $3.50. I am told I am wrong; it is $2.75. The point I am making is that it was a substantial depreciation. For a time I think our dollar went down as low as seventy-five cents. At that time there were no restrictions. Governments were not placing fictitious values on their money. Within six months after selling at these lows, both the pound and the Canadian dollar sold at a premium in New York.
I am not arguing that the two cases are entirely parallel. Conditions change and they are different after the last war from what they were after the first one.
Then, again, in my amateurish way let me say that the sooner we can let our dollar find its level, the better. According to the Minister of Finance (Mr. Abbott), there would be an increase rather than a decrease in its value. Why do we not let it go there and, in the trade and markets of the world, find its own value? I do not know whether that means a devaluation or an evaluation-and frankly, as a simple person trying to get along, I don't care very much. But I do know this, that no country yet has successfully, either by law or by edict, or anything of that kind, fixed a currency at a given value without ultimately ending up in chaos. The story of all the European countries after the last war proves that completely. Not in one case did any of them emerge from the difficulties they were in by this effort to blow up their balloon with respect to the value of their own currency.
Some experts may find fault with what I have said, but I give it to you as the judgment of one whose sight is not clouded by the intricacies of these experts, a simple person who knows that a dollar is worth only what it will buy, whether it be in oranges, about which the hon. member for Spadina (Mr. Croll) cried, or an ounce of gold from someone's gold mine.
It is now twenty-five minutes past ten, Mr. Speaker, and I close with this appeal on behalf of the oil industry-a selfish appeal, if you like. But in the oil industry you cannot be selfish about as big a thing as that. If allowed to grow, that industry will some day supply the dominion. And that is not all. We all know that in the search for oil it has been shown that Alberta is practically underlaid with gas. That is not only the history in other fields; it has been completely proven in Alberta. Gas is there in tremendous quanti-
Foreign Exchange Control ties. Only recently a commission has been endeavouring to find the extent of the reserves. The amount runs up into so many trillions of feet that I just cannot follow it. However, I do know that it is something immense, something that has never been heard of in Canada before, and shows signs of outstripping those tremendous fields in the state of Texas.
And so the oil developed with the gas. The value is not only in the fuel made available. Chemists tell us that many things can be made from it, including plastics-although they may not meet the competition of plastics made in other ways and in conformity with the great advances made in chemistry.
But let me tell the house one little thing. Up on the Willingdon line, which is east and then north of Edmonton, a couple of small local oil companies joined together to do one thing. They met Mr. Richie Donald, whom the Minister of Trade and Commerce (Mr. Howe) knows very well, and who I know is one of the great chemists in Canada. He wanted two things. First he wanted to find salt. He wanted a hole which, if bored, would show a salt and produce natural gas. He had another condition, that it must be beside a railway track. That was done.
He was asked how much salt he wanted, and he said it should be at least six feet thick. A friend of mine, who was in charge, of putting down that hole, got his gas-of course he knew it was there. But he did not find six feet of salt; he found a thousand feet of pure salt. And salt, with natural gas, I am told by the chemists, forms the basis of many different products. That is an outgrowth of the business of finding oil.
I should have said that the usual price for heat anywhere in Canada to produce a ton of refined salt is somewhere between $6 and $8. In their refining process the price of producing that salt is exactly 75 cents per ton. That, of course, will overcome a great deal of difficulty in connection with freight rates.
On motion of Mr. Smith (Calgary West) the debate was adjourned.



BUSINESS OF THE HOUSE

Mr. Fournier (Hull):: Tomorrow we will continue with this resolution, and take up resolution No. 7, national emergency powers; and then resolution No. 5, agricultural products; and resolution No. 8.
At ten-thirty the house adjourned, without question put, pursuant to the order of the house passed on March 14, 1949.

Friday, March 18, 1949