1952-06-17

HOUSE OF COMMONS DEBATES


[Stage Direction]
BEING THE 94™ SESSION FOR THE PERIOD 1867-1952

[Stage Direction]
Tuesday, June 17, 1952


Right Hon. L. S. St. Laurent (Prime Minister):: Mr. Speaker, I should like to take the rather unusual course of giving notice orally of a motion I propose to have placed on the order paper in my name. The motion reads as follows:
That the subject of a pension plan for members of parliament after long service based on contributions by all members be referred to the standing committee on banking and commerce.
From time to time over the last few years the question of making some contributory pension provision for members of parliament has been discussed among members of all parties. It was felt that a pension plan would be in the public interest if it removed, to some degree, the feeling that a long period of service in the House of Commons necessarily prevents many members from making adequate provision for their later years, particularly as there have been conspicuous cases of former members left in a position of great hardship.
A plan suggested by a group of private members is that contributions would be made by all members on the same scale as those required under the Civil Service Superannuation Act. The benefits in this case would be at rates and subject to conditions designed to make and keep the pension plan actuarially sound,
I was approached by a number of members and asked whether the government would be prepared to sponsor such a pension plan. My attitude was that, in a matter which concerned all political parties and the position of parliament generally, I would not be prepared to ask my colleagues to take any initiative unless I was in a position to say that the leaders of all parties opposite felt that the establishment of a long service pension plan was something which was not merely in the present interest of members of parliament themselves, but was also in the public interest, because it would help to make it possible to attract well qualified men and women to parliament, and particularly to encourage those with experience in parliament to remain in public life.
I have consulted the leader of the opposition and the leaders of the C.C.F. group and the Social Credit group and I am authorized by each one of them to state that he considers such a pension plan would be a contribution to the strengthening of our parliamentary institutions.
Since the matter is of equal interest to members of all parties, the government felt that rather than bring in a bill with specific terms it would be preferable to ask the banking and commerce committee to consider the subject matter and to make such recommendations for legislation as commended themselves to the committee after a study of the pension plans already in existence in a number of commonwealth countries and the United States and the plan under discussion by a number of members of this house.
Of course, any bill would have to be preceded by a resolution and the necessary constitutional recommendation to the house from the Governor General; but I can say now that a proposal reasonable in itself and which all parties felt was genuinely in the public interest would not be apt to encounter objections from the government.


Mr. Browne (St. John's West):: Would this apply to the Senate as well as the House of Commons?


Louis Stephen St-Laurent: The government is not recommending any specific plan; it is referring the matter to the banking and commerce committee of the House of Commons.



APPROVAL OF REPORT OF CIVIL SERVICE COMMISSION RESPECTING CERTAIN EMPLOYEES

Hon. F. G. Bradley (Secretary of Stale) moved:: That the report of the civil service commission respecting certain employees of the House of Commons tabled on June 11, 1952, be approved.


[Stage Direction]
Motion agreed to.


[Stage Direction]
Bill No. 338, for the relief of Marie Jacqueline Michelle Major Valiquette.-Mr. Winkler.
Bill No. 339, for the relief of May Clara Taylor Di Biasio.-Mr. Winkler.
Bill No. 340, for the relief of Regina Joan Lee Mills.-Mr. Winkler.
Bill No. 341, for the relief of Violette Chartrand Fairon.-Mr. Winkler.
[Stage Direction]
NATO-European Defence Community
Bill	No.	342,	for	the	relief	of Doreen
Elizabeth Lawton Batty.-Mr. Winkler.
Bill	No.	343,	fcr	the	relief	of Norma
Meldrum Drysdale McGown.-Mr. Winkler.
Bill No. 344, for the relief of Jean Elizabeth Wood Jackson.-Mr. Winkler.
Bid No. 345, for the relief of Louisa Ryan Heke.-Mr. Winkler.


Hon. Hugues Lapointe (Minister of Veterans Affairs) moved: the second reading of Bill No. 334, to amend the Army Benevolent Fund Act, 1947.


Mr. Brooks:: Will this bill go to the special committee on veterans affairs?


Hugues Lapointe: Yes, it is the intention to refer it as soon as second reading has taken place.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the special committee on veterans affairs.


Hon. L. B. Pearson (Secretary of State for External Affairs) moved:: Tnat It is expedient that the houses of parliament <j8 approve the protocol to the North Atlantic treaty, signed at Paris on May 27, 1952, extending the guarantees of article 5 of the treaty to the European defence community, and that this house do approve the same.
He said: Mr. Speaker, as I reported to the house on May 27, representatives of the member countries of the North Atlantic Treaty Organization signed on that day in Paris a protocol which extended to the newly formed European defence community the guarantees under article 5 of the North Atlantic treaty. It is this protocol which is of immediate concern to us today and for which I am to ask the approval of parliament. I submit that possibly no more important subject will be discussed by the house during this session than the one which we are considering today. The protocol has already appeared as an appendix to Hansard and I am sure all hon. members are familiar with it. Article I of the protocol reads as follows:
An armed attack (i) on the territory of any of the members of the European defence community in Europe or in the area described in article 6 Ii) of the North Atlantic treaty, or (ii) on the forces, vessels or aircraft of the European defence community when in the area described in article 6 (ii) of the said treaty, shall be considered an attack

against all the parties to the North Atlantic treaty, within the meaning of article 5 of the said treaty, and article 5 shall apply accordingly.
Article II of the protocol reads as follows:
The present protocol shall enter into force as soon as each of the parties has notified the government of the United States of America of its acceptance and the council of the European defence community has notified the North Atlantic council of the entry into force of the treaty setting up the European defence community . . .
At the beginning I should like to emphasize that whatever action is taken by the government in respect of ratification of this protocol, the protocol does not come into effect until it is ratified by all the members of the North Atlantic Treaty Organization. Therefore even if action were taken at an early date by the government of Canada the protocol itself would not be effective until it had been ratified by all the members and until the European defence community treaty was also in effect.
The reason that we are asking for consideration of this matter now at the end of this session is to make sure that, if the protocol commends itself to the house, we will not be in the position of holding up its coming into effect. I believe that if the protocol commends itself to parliament and if the government decides to ratify it, it might be desirable to postpone the deposit of our ratification for a time until we see how other governments, possibly even more immediately concerned than we are, act with regard to it.
It is true that the acceptance and the coming into effect of this protocol do extend the obligations which Canada has undertaken under the North Atlantic treaty to the Federal Republic of Germany. That of course is a very important development indeed. As hon. members know, the proposed European defence community includes only one member which is not already a signatory to the North Atlantic treaty, and that is the Federal Republic of Germany. But though the protocol does represent an extension of our obligations, I suggest that the extension is more theoretical than real because in the North Atlantic treaty there is an article, article 6, which provides that the guarantee of mutual assistance shall come into effect when an armed attack is made on the forces, the vessels or the aircraft of any of the parties when in or over these territories or any other area in Europe in which occupation forces of any of the parties were stationed on the date when the treaty came into effect.
That means that we are already under obligation to come to the assistance of the NATO forces stationed in Western Germany. If this protocol comes into effect it will extend that obligation from an attack on forces of occupation in Germany to an attack on

Western Germany itself. It is a further step, and I think a valuable step, in the development and the reaffirmation of collective security and collective action which is the best preventive of war in the present circumstances. I think the hon. members of the house, in view of the importance of this matter, would wish me to set this protocol and its implications, especially its implications for Canada, in the wider framework of a statement which I shall keep as short as possible on the European situation with special reference to Germany.
It is, I am sure, clear to all of us that over the continent of Europe today hangs the threat of aggression the driving force of which is a compound of Russian imperialism and communist ideology. Even with that threat facing us, it is not easy to banish memories of the appalling results of German armed might in the service of a totalitarian regime. There are few European countries today in which the material and spiritual wounds of the second world war have had time to heal completely.
National economies, which with the help of the Marshall plan and other assistance have been gradually returning to something like normal conditions after the destruction of war, have had once more to shoulder the added burden of large-scale rearmament. It is heartening, therefore, Mr. Speaker, to see that in spite of these trials of the body and spirit men have been, found who realize that the battles of the past should not determine the policy of the future and who realize also the urgent necessity of uniting Europe- of uniting Europe for peace on the only basis on which this can be done.
I need hardly remind the house that in any scheme for European, integration the position of Germany is of central importance. This is abundantly evident from the efforts which have been made and are still being made by the western nations to secure the support- and by the Soviet bloc to secure the submission-of the Germans. Germany lies in the very heart of Europe and it is not surprising that western policy in general, and indeed United States policy in particular, regards German participation as essential to the effective defence of Europe. This I suggest should be the easier now that the long feud between France and Germany has lost much of its reality in a world where the important divisions are no longer inter-European-and the old-fashioned balance of power concepts are based on larger than national considerations.
So, the nations of Europe which are still free to choose-and they are not all free to 55704-209J
NATO-European Defence Community choose-are realizing, in spite of neutralist sentiment in certain countries and certain quarters, how important it is for their survival that they unite as Europeans in the face of this common menace and common danger. This process of European integration seems often painfully slow to those of us who watch it from across the Atlantic ocean. To the Europeans themselves I often suspect it must seem immoderately hasty.
It is not my purpose to recount all of the steps taken in recent years toward the unification of Europe. They are well known to all of us but it is perhaps not always realized that there have been so many. Because the urgent necessity of avoiding a third world war has filled the minds of free men, particularly in North America, we have underestimated the enormous strides which have been taken in the last few years towards the solution of complex European problems, many of which have persisted throughout generations.
This progress has been made in spite of deep-rooted, understandable nationalist feelings and traditions and serious political difficulties such as the legitimate desire of some nations to retain their economic and political association with countries outside Europe. It follows, I think, from these considerations that the integration of Europe will be a gradual process achieved through the creation of supranational authorities with limited but definite powers in certain specific fields-such as the coal and steel authority under the Schuman plan and the Benelux convention. This functional approach has proved to be more acceptable to the nations concerned than the theoretical approach of those who want to establish a formal federation at once. European unity then, I suggest, must grow and not be imposed. It must be a voluntary and constructive union-not anything like a shotgun marriage.
The European defence community treaty by associating the Federal Republic of Germany with the defence of Europe is one far-reaching step toward this more closely integrated Europe. The E.D.C. treaty, like the Schuman plan, is the result of a bold idea for the solution of a major European problem- the return of Germany to the community of free and democratic nations. It takes its place in a complex of agreements all of which show this same trend toward Europeans coming together.
As so often in the past, it was on this occasion the keen and imaginative political intelligence of the French leaders which gave birth to many of the ideas which have helped to create this more closely united Europe.
3310	HOUSE OF
NATO-European Defence Community Nobody would deny that at the present time the necessities of defence and economic recovery are the most compelling incentives toward this unity; but beyond the community of interests in military and economic matters there are amongst these free European states a common culture and common traditions which cannot be overlooked by a group of nations for which individual and moral values are at least as important as material ones.
Germany then as I see it is the key to the solution of these European problems1. Because of her geographical location and the size and the industry of her population, Germany- even a divided Germany-is likely to be a vital factor for better or for worse in European politics for many years to come. The events of a few weeks ago in Paris and Bonn, and the repercussion of these events in points as far distant as Berlin and Tokyo, have outlined the importance which the communist world attaches to what is often referred to in the press and elsewhere as the struggle for Germany. Two blows in that struggle were struck for the west in Bonn and Paris on May 26 and May 27 last.
The first of these blows was the signing on May 26 in Bonn by the foreign ministers of the United Kingdom, the United States and France on the one hand, and by the chancellor of the Federal Republic of Germany on the other, of an agreement which comprised a convention on relations between the three powers and the Federal Republic of Germany, three related conventions and a number of accompanying instruments.
Hon. members will, I am sure, agree that it is not necessary for me to explain in detail all these various documents, some of which are highly technical and all of which have now been made public. But I would like to say a few things on the convention and the general rules which we know familiarly as the peace contract with the Federal Republic of Germany.
These contractual agreements which were freely negotiated and not imposed replace the occupation statute; they abolish the allied high commission, and they bring the Federal Republic of Germany into the family of free nations. They provide for the stationing of foreign forces in Germany to assist in the defence of the west and for the reservation by the former occupying powers of their rights in Berlin and over matters affecting Germany as a whole, in particular the problems of unification and the eventual peace treaty which of course are not solved by this peace contract. These restrictions on the complete freedom of the Federal Republic of Germany were made necessary by the peculiar nature of the problem of according to the federal


republic rights over its external and domestic affairs while preserving the means of conducting negotiations with the Soviet union on German unification and on the final peace settlement. Article 4, section 4, of the peace contract is important and I would like to read it and one or two of the other more important sections.
Article 4 reads:
The federal republic will participate in the European defence community in order to contribute to the common defence of the free world.
Article 5 provides for the proclamation by the three western powers of a state of emergency in the federal republic, should the federal republic and the European defence community be unable to deal with the situation which is created by an attack on the federal republic or Berlin, subversion of the liberal democratic basic order, a serious disturbance of public order or a grave threat of any of these events.
Article 7 is very important. Its first section states the agreement of the three powers and the federal republic that the essential aim of their common policy is a peace settlement for the whole of Germany, freely negotiated between Germany and her former enemies. It also defers all frontier questions to an eventual peace settlement. In the light of the recent Soviet notes on unification and a peace treaty, I need hardly underline the capital importance of these declarations. If the intention of this article, which I have just read, is that a unified Germany will have the rights and be bound by the obligations conferred on the federal republic by this agreement and by the European defence community treaty, then this article is in effect the expression of a hope that a unified Germany would continue to throw in its lot with the west.
I am aware that sceptics will point out that in the event of unification and peace treaty discussions, there will be a new partner to any agreement, namely the Soviet union, which would not necessarily-that I know is an understatement-subscribe to the present accords. Moreover, an all-German government would not be the same as the government of the federal republic at the present time and might, therefore, insist that the contractual agreements would have to be re-negotiated. This important possibility, which is very much in our minds, is perhaps foreshadowed by article 10 which provides for the review of the terms of the convention on relations and the related conventions:
(a) upon the request of any of (the signatory states), in the event of the unification of Germany or the creation of a European federation; or

(b) upon the occurrence of any other event which all of the signatory states recognize to be of a similarly fundamental character.
So much, Mr. Speaker, for the peace contract. The second important event, as I have already indicated, was the signing in Paris on May 27 of the treaty establishing a European defence community. By the provisions of this treaty the governments of France, Italy, Belgium, The Netherlands, Luxembourg and the Federal Republic of Germany have agreed to set up a European army, purely defensive in character, which will be under the operational command of the North Atlantic Treaty Organization commander. Within the framework of the North Atlantic treaty, this new treaty seeks to ensure the security of the states which have signed it. I do not intend today to go into detail about the European defence community arrangements, because I know they will be familiar to most hon. members as they have already been made public.
The signing of these two sets of agreements is, I think, a tribute to the sense of political reality and the spirit of reasonable compromise shown by the statesmen and their expert advisers, who have brought the negotiations to a successful conclusion after many months of difficult and delicate discussions. It would, however, be rash to express any easy optimism on the final results, merely because these arrangements have been signed. Both the agreements I have mentioned will have to be ratified by the governments whose representatives signed them, and the road to ratification may not be a short or an easy one. There is as yet no European army except on paper, and there are stiff political struggles ahead both on the international plane and within the countries which are members of the European defence community, before these arrangements will be of any effect on the international plane. The activities of the Soviet union and its communist agents in other countries on the subject of Germany and the recent agreements bear witness by their scope and violence to the growing strength of western defence, and the impression this strength and unity has already made, as well as to the vital importance which the Soviet union attaches to the coming into effect of these arrangements.
There has been, as hon. members know, a lively exchange of diplomatic notes between the Soviet government and the governments of the United States, the United Kingdom and France. In their first note on March 10 of this year, the Russians put forward a draft peace treaty which was obviously designed to appeal to all shades of opinion in Germany, and to delay the conclusion of the contractual
17. 1952	3311
NATO-European Defence Community agreements and the European defence community treaty. That latter design, of course, was not achieved. These Russian proposals concerned reunification, the withdrawal of occupying forces, the rehabilitation of ex-nazis -many of whom are now joining the Eastern German army-the abolition of all trade restrictions on Germany, the granting to Germany of national-not international- defence forces, and the granting to Germany of permission to produce armaments on a large scale. In other words, in these Russian proposals there was something for nearly every German. On the other hand, under the same proposals, the reunified Germany was not to be free to enter into alliances, and its territory was not to include the former German territories east of the Oder-Neisse line. Finally, a four-power conference was to meet at once to settle all these questions.
In their replies to these Soviet proposals the three western governments have taken what I think to be the sensible line, that while the door must not be shut on negotiations with the Soviet union on this matter, there can be no question of a four-power conference-of which the allies already have had some unhappy experiences-until the Soviet proposals have been subjected to searching inquiry and until their real meaning can be ascertained. With this in mind the three governments have concentrated, in dealing with this problem, on the basic question of free elections throughout Germany, and the consequent formation of an all-German government, free both before and after the peace treaty to enter into associations compatible with the principles and purposes of the United Nations. The insistence of the three western powers, in dealing with these, and subsequent Russian proposals, has been on unity with freedom and peace with security. I believe that is a sound attitude to adopt.
Nevertheless, no matter how insincere the Soviet proposals may seem to us, they have a dangerous appeal to German nationalism since they appear on the surface to offer a definite program of unification which cannot fail to attract Germans to whom unification, I suppose, stands above almost everything else at the present time. For this reason, I venture to express the hope that too much time will not elapse between the receipt of Soviet notes on Germany and the dispatch of the western replies. The longer the interval, the greater the chances which the Soviet proposals, however specious they are, will have to work on public opinion in Germany and elsewhere. I think it would be unwise-I am sure the house will agree with this statement-and indeed unnecessary to allow the Soviet union to win propaganda
3312	HOUSE OF
NATO-European Defence Community victories in this field. I think the west should also be prepared to counter Soviet offers in a positive way and not spend too much effort on pointing out the hollowness and the insincerity of those offers.
To most Germans the desire for unification goes extremely deep, and it is a desire that is going to be achieved by one means or another. But I believe that more and more Germans will realize that a neutral Germany would be in grave danger of becoming an enlarged East Germany, and that their best hope for an eventual peaceful unification of their country lies in the integration of the federal republic and ultimately of all Germany with the western defence system. This grave step, however-and it is a grave step- may seem to many observers to involve risks and to involve also the protracted division of Germany. There is no doubt that in lining up behind this policy we are taking a calculated risk, to use that somewhat shopworn but still serviceable phrase.
What are the alternatives to it? Should we suspend any consideration of Germany's association with the west? Should we suspend such things as the European defence treaty and this peace contract until a scheme for unification and a peace treaty has been worked out with the Russians and their friends, on the basis they have put forward, which includes a national German army, the pardoning of all nazis, and German neutrality, with all foreign troops withdrawn-the Russian troops presumably to Poland and at least some of the western troops presumably across the Atlantic. Should we support that proposal as an alternative to the proposals which we have before us today? That alternative has commanded some support in circles which are certainly not allied with communism. Quite apart from the danger of a neutral Germany, with complete control of its own forces and rearming in its own way without restriction, and quite apart from the danger of that kind of Germany working with the east, if we followed that course it would also wreck the patient and intelligent work of the North Atlantic countries and the Adenauer government, and it would lay Germany open to uncertainty, confusion and, I suggest, danger.
The policy now proposed frees Germany but includes her in the European system. Her rearmament will be defensive and international; and I hope that both this defensive and this international character of German rearmament will be stressed. I hope also that our policy of rearmament within the European defence community will not be taken to mean that we are going to be inflexible in our approach to the larger and ultimate problem of a unified Germany with a peace treaty

to which the U.S.S.R. must subscribe, because inflexibility and negotiation in matters of this kind are incompatible. The western aim has been-and should, I suggest, continue to be-a slackening of world tension followed by a reasoned, calm and firm endeavour to end the cold war. Our hope remains, as it must, that eventually we may enter upon an era of peace for which men everywhere so ardently long; and they include millions of men in the Soviet union itself.
The agreements signed at Bonn and Paris and the western replies to the Soviet notes have shown the Soviet union that the period of fear is over and that the west now stands firm against the encroachments of the police state.
There will be difficulties ahead, especially during the period when ratification is being discussed. But it should not be beyond the capacity of western statesmen to overcome those difficulties. I believe that there is now a real prospect of'European integration not merely on a continental basis but within the developing North Atlantic community-a community which is not designed to be exclusive in character or to replace the United Nations but rather to ensure that the magnificent vision of the United Nations is not destroyed from within.
I am not blind-nor do I think any of us are-to the danger of a restored and a rearmed Germany, but I believe that within the European defence community this restoration and this rearmament can be brought to serve not the ends of totalitarian aggression-* which it has served in the past-but the ends of peace in Europe and in the world. It is in that hope, Mr. Speaker, that I submit for the approval of this house the North Atlantic treaty protocol which is before us.


Mr. Gordon Graydon (Peel):: Mr. Speaker, with what the minister said a few moments ago with respect to the vital importance of the debate in which we are now engaged I am in entire agreement. There have been few issues with which this parliament has had to deal which have required as much study and have given as much anxiety and concern as has this problem of our ratification of the present NATO protocol. It is proper that Canadians should give every possible consideration and study to this matter. In a sense we are at a turning point in history because these agreements, which are of such a complicated and multiple character, have an important bearing upon what happens not only in Europe but in other parts of the world in the days that lie ahead.
I must say that as I am speaking now I have a feeling of heavier responsibility with respect to the position taken in connection with this protocol than I have had on almost

any other occasion on which I have spoken in this House of Commons. This matter cannot be approached from the point of view that we are dealing with an unimportant subject matter. This parliament is the first to make its voice heard not only within the four corners of this chamber but across Canada and the world with respect to this new approach in connection with European peace and stability. Because we are the first to deal with this matter, it becomes of the utmost importance to approach it with the calmest kind of judgment and the best common sense that we can summon to our command. In our approach to the NATO protocol we must remember that within the confines of Germany herself Canadian troops are stationed at the present time. For that reason the situation is of vital interest to the people of Canada.
As you know, Mr. Speaker, I have always been one of those who have leaned very heavily toward the idea of Canada speaking with a united voice as far as possible where great international issues are concerned. On this occasion I hope that we shall be able to follow that kind of policy and to show the world that we are united on this very important matter.
Without any further delay I want to indicate in the first instance that the official opposition, the Progressive Conservative party, supports the government stand on the NATO protocol and will give it full support in the house. Having said that, I want to make what I hope will be some pointed observations respecting the situation which surrounds the ratification procedure and the substance of the proposals themselves.
Perhaps hon. members have received with the compliments of the Secretary of State for External Affairs (Mr. Pearson) a rather thick booklet of 328 pages-at least I have received one-issued as a message from the President of the United States. In this booklet is contained in compact form information that is available to any country, and for that reason Canada has taken proper advantage of the message itself. Within those 328 pages will be found the convention on the relations between the three powers and the Federal Republic of Germany, signed at Bonn, May 26, 1952, together with related documents which are of a highly technical nature.
I mention this to raise a matter that I have raised before in this house. We have in parliament a standing committee on external affairs. I am not attempting to be unduly critical of the fact that in this instance this
NATO-European Defence Community protocol and the related agreements, complicated as they are, are not to be sent to the external affairs committee for detailed consideration. I know it is getting toward t'ne end of a very busy session; I know that perhaps the atmosphere and the mood of the house generally may not be conducive to the kind of study that might normally be made of very complicated documents such as these. But I do think that our system of dealing with peace treaties and protocols of this kind is open to very serious criticism. If our external affairs committee is to function in its full sense then these are the subjects with which that committee should be dealing.
When the Japanese peace treaty was approved by parliament I brought the question before the house; I bring the question up again. I do it, not so much to seek this remedy at this time as to call upon the government to adopt a new, a more up to date and modernized approach to the procedure that parliament is to use when approving and ratifying international agreements and treaties in the future. Under a change of the rules, or under whatever may be necessary to effect it, it should be possible to see that when we have a resolution such as this, where there is no opportunity in committee of the whole to question the minister or to find out the facts, and where it is almost a question of "yes" or "no" and pro forma speeches made by those on this side of the house and by the minister, it is sent to the committee on external affairs. To deal with it otherwise is not good enough when it comes to educating and informing the Canadian people of just what these vast commitments mean to them in their everyday lives.
It seems to me that we cannot afford at any time to take any steps other than those which will give the fullest information to the people of Canada on- these agreements. It is not enough to say that the Canadian people should read Hansard and that this knowledge should be in their possession. Perhaps that is true, but we in parliament ought to be able to dissect, to analyse and to place that analysis before the Canadian people so that from the questions and answers that come out in committee they may be able to assess for themselves just exactly where this country stands with respect to the various commitments under these agreements.
These agreements commit Canada very heavily. We are not objecting to them, nor do the Canadian people object to them, but I can say now that having in mind the far future, perhaps even the immediate future, when it becomes a question of Canadian

NATO-European Defence Community public opinion being behind many of these things, we ought to take time by the forelock and make sure that as far as this parliament is concerned there is no jot or tittle of evidence with respect to these agreements that is not made abundantly clear to the Canadian people as a whole. I think that ought to commend itself as a policy to every member of the House of Commons.
In making that suggestion I believe we ought to remember the mistakes that we have made in the past, and we ought to benefit by those mistakes and go forward in the new era with a new procedure in these international matters. It has always occurred to me that in the house we give great attention to and focus great concern on many domestic matters, but on questions of international gatherings we do not show the same concern. Make no mistake about it, there are over 100 conferences to which Canadians go. There are many matters discussed in these conferences and decisions arrived at by the representatives of this country which hardly ever see the light of day except to those in the parliament of Canada who may be interested in these technical international topics.
I think the time has come when in view of the major part that Canada is taking in international affairs parliament and the people of Canada must be given a freer and fuller and more abundant opportunity of seeing exactly what we are doing in every phase of world activity today. That I think is something that we ought to consider at this time as being important.
I wish now, if I may, to deal with the protocol and its relevant circumstances. I was interested in the minister's approach to the problem and the issues which this protocol arouses. In the main I think I can say that we agree with most of the comments and observations which he made. In taking our position, or in assessing the position that Canada should take on the NATO protocol, I think we have to consider that there are some lessons that we may learn from similar events that have occurred in other parts of the globe.
I am satisfied that any evidence of hesitancy, any suggestion of delay, anything that looks as though this country or the free powers were taking a little more time in some of these deliberations than normally might be the case, always impresses those who are looking for chinks in our armour and a sense of indifference on the part of the free front. I have no doubt in my mind that we would not have had a crossing of the 38th parallel in Korea had those behind the iron and bamboo curtains been told in no uncertain

terms that if that crossing was made or if aggression of that kind occurred there would be a certain rallying of the free powers to see that it was stopped. But instead of that there was hesitancy, there was uncertainty, there was a somewhat chaotic approach to that particular section of the Orient. It was an invitation which was accepted by the Soviet and those who were under its direct or indirect control to take the step that they did.
I have always looked upon the Berlin blockade as being a test set up by the Soviet to find out whether we were united to the extent that we said we were. I have always felt that if we had not met that test as we did, if we had not called the bluff of the Soviet in Berlin, we would be faced with almost chaotic, if not dangerous, conditions in Europe far beyond the conditions which we now face, dangerous though they may be.
I think those are lessons that we in this parliament should consider because they will go a long way to educating us as to how we must deal with the people in the Kremlin who have control of Soviet policy. I have had a humble experience, but it has been broadening, in attending international conferences from time to time. I have formed the inevitable conclusion, which I think I must apply to the present protocol, that the Soviet is not really anxious for agreement, that it is not really anxious for the settlement of issues because any agreement and any settlement means that imperial communism cannot thrive or grow to best advantage. It thrives and has its most fertile ground in those conditions where people cannot reach agreement, where people are differing in their view, where there is uncertainty and chaos.
I have felt, and I think many of those who have attended international conferences have felt, that after all the Soviet is taking the position which perhaps it is expected it would, that if the people do not think that it pays them to settle, then it is pretty hard to get them into an agreement of any kind. The most difficult person with whom to form an agreement is the man who thinks it would not pay him to make an agreement. I think this is at the root of much of the western difficulty with the Soviet in the effort to settle international disputes generally.
If we are going to continue the discussions which started some years ago, when an attempt was made, and a very earnest attempt, by the western powers to arrive at a peace treaty for a unified Germany, I would remind the house that while the Soviet talks long and loud about the desirability of having another big four conference, those of us-I fancy this would include most members of the house-

who have read the history of those days just after the last war will realize that many insurmountable difficulties were encountered by the free powers at the time in trying to arrive at an agreement for unifying, and making peace with, Germany as a whole. We realize that they did not want a peace treaty. What they want now is another opportunity to come before the world with the deceptive idea that they are trying to find a settlement of world issues. They want a new and important forum from which they can pour forth their propaganda in an effort to divide and distract the opinions of the peoples in democracies generally.
I have no doubt that with those experiences before them the United States, Britain and France have hesitated, as they should hesitate, to give the Soviet another opportunity of spreading across the world that kind of talk and that kind of deception under the guise of wanting another German peace treaty. I think in this country we ought to be careful in taking any stand that would indicate that we have any hesitancy. That is one reason why we have been supporting so fully the government's position with respect to this NATO protocol.
I know it may be said that in a sense this country is putting the cart before the horse by dealing with this matter before the agreement between the occupying powers and Germany may have been concluded and before the European defence community agreement may have been ratified. That may be; but I believe that in view of the fact that parliament is about to prorogue shortly we ought not to be in the position of adding fuel to a fire that seems to have been kindled in certain parts of Europe and elsewhere by even those who perhaps mean well but whose position I think is wrongly taken at this time.
For that reason I think it would be a black eye to Canada to delay in any way our ratification, particularly in view of the fact that parliament may not meet for many months to come. I am quite sure that we would not want to come back to a special session to deal with this matter alone. I think perhaps in dealing with the question of the ratification of this NATO proposal we have to bear in mind one particular thing; that is the importance I think of our first of all having unity among the free powers and, secondly, indicating to that part of the world which is behind the iron curtain that we have that unity and that we have the strength necessary to carry out our defence of the peace at this time.
First of all it is important that we have unity. Second, it is important that our unity be supported by strength. Viscount Alexander
NATO-European Defence Community of Tunis, whom I regard as one of the great military men and statesmen of the free world today, a man who has the faculty of being able to put his points of view in simple, clear and understandable terms, has come about as close as possible to the position which I think the parliament of Canada should take with respect to the NATO protocol. In yesterday's newspapers a report appeared of what defence minister Earl Alexander of Britain had to say at Seoul in Korea. He dealt first with the question of whether or not he believed a third world war was in the offing. The report reads as follows:
Of the possibility of another major war Alexander said at a press conference:	"No, no . . . We are
no nearer to it than a little while ago. There is only one way to prevent it. That's for the United Nations to get together and resist aggression and let the other side know that's what they're doing.''
From these few words I think this country might very well take its policy with respect to this and other matters having to do with the very important question of the peace of the world today. With regard to the situation in East and West Germany, it is very interesting indeed to hear the Soviets, with their honeyed words, attempting to attract the German people at this time, but in the Potsdam declaration, which was one of the basic documents in respect of proposals for peace and the unification of Germany, one finds certain words which I think go to the root of some of the difficulties with which NATO and the occupying forces in Europe are faced at this critical time. Among other things the Potsdam declaration contained the following:
So far as is practicable there shall be uniformity of treatment of the German population throughout Germany.
In other words, pending a peace treaty to unify the country there was to be similarity and uniformity of treatment of all Germans. But that did not happen and because it did not happen the Soviets must bear a very heavy responsibility so far as the present situation is concerned. While the occupation troops of the three occupying powers were attempting to carry out the policy of the Potsdam declaration in West Germany the Soviets were at the same time re-arming East Germany. It is all very well to say that they were not arming in divisions or in ordinary troop formations but they were arming in a more subtle and deceptive way. They were arming under the guise of creating security police or constabulary in that part of the world.
In addition, not only were they doing that but they were also attempting to cement into East Germany the most insidious network of communism in all its political, social and economic forms. Was that treating Germany uniformly in accordance with the Potsdam
3316	HOUSE OF
NATO-European Defence Community declaration? Of course not. The result is that the present situation has been aggravated by virtue of such action. I might also say with respect to East Germany, which is the Soviet area of occupation, that all through this period of jelling, if you like to call it that, when East and West Germany were becoming almost separate entities for the reasons I have just mentioned, it has been more difficult to bring about unification of the two countries. It seems to me that is a rather unfortunate situation but it perhaps was inevitable because of the line drawn between two worlds, so to speak, cutting through Germany itself. In that connection I was interested to see what the Soviets have now offered the German people. As the minister said a few minutes ago, a Soviet union note of March 10 called for a four-power conference to draft a German treaty. That in itself would seem enough to put us suspiciously on guard against falling into any new scheme for calling a four-power conference. The Soviets do not call for four-power conferences either for the purpose of helping us or to settle outstanding issues. They have another reason for suggesting four-power conferences, and I think that in itself should cause us to stop, look and listen.
They have called for an all-German government expressing the will of the German people, and they attach a draft treaty to their note. The minister mentioned the treaty a few moments ago and I shall not attempt to elaborate upon it at the moment because he has done so quite fully. However, it does appear on the face of it as though it is the last straw thrown out by the Soviets not only for the purpose of getting the Germans into their camp but to see if they cannot disturb the minds of people in Germany and elsewhere. Under their draft treaty Germany is to be a unified state. The occupying forces are to be withdrawn inside of one year from the date of signature of the treaty, but while they suggest that the occupation forces should be withdrawn nowhere is there any provision for the withdrawal of Soviet Russia's fifth column forces from any corner of East or West Germany.
It is all very well to talk about withdrawing occupation troops but, as the minister said, while our troops might withdraw across the Atlantic in some instances and the Soviet troops might withdraw into Poland, the troops of ideological communism will commence their offensive the minute the other troops have left. After all the dealings we have had with communist Russia in the past, if we are innocent enough to believe that Russia is going to leave Germany alone under the guise of a unified independent Germany, then I say that we are far more 

gullible as a people, as a parliament and as a government than I thought we ever could be. That is the important factor that we cannot disregard at this time. One of the things that struck me about the eleven clauses of the Russian draft treaty is that they call of course for the rehabilitation of nazism in Germany. That is what it means because it not only gives the right to those nazi generals, colonels and others who took part in the nazi movement an opportunity now to militarily rehabilitate themselves; but after all the things that the Soviets have said up and down the highways and byways of the world about nazism and the resurgence of nazism, then in this kind of declaration and this kind of draft treaty they reverse themselves and seek the very thing which they have condemned all through these years. That indicates the hollowness of the ring that this kind of treaty really has.
May I say this when we are speaking about nazi resurgence? Do not forget that after the downfall of the Kaiser in 1918 there were something like 40,000 officers of the then German army still in Germany. As opposed to 40,000 there are now, I am reliably informed, 400,000 officers who formerly served with Hitler. Those are the things that should of course put us on guard.
It seems to me that the American approach, the American answer to the Russian note on the draft treaty was a fair one. They went back again to the position taken by the United Nations where the United Nations indicated that a commission under the United Nations should be set up to ascertain whether it is possible to have free elections in both East and West Germany. That seems to me to answer the question whether the matter should be proceeded with so far as an all-out unification of Germany is concerned. Up to the present time the stumbling block has been the Soviets. They have refused to allow an independent commission to make a survey in East Germany. Why? Because they know what will be found. They know ahead of time what is there. They know that there is a network of sovietism and communism saddled now upon East Germany. They are not taking any chance on somebody coming in and seeing what is being done there. They are going to see to it that they stick out for a unified Germany on another basis, and I am suspicious that the other basis means a unified Germany under a united Soviet empire.
That is the thing which disturbs me but still at the moment the words and phraseology have an appeal. Words, Mr. Speaker, are one thing, but the background of the people who have uttered them is another. We know

the background and for that reason I think our suspicions at this time are well founded.
Now I want to say that of course there is no use attempting to gainsay the fact that there are risks and dangers in connection with the course that is being taken; but on balance-balancing the risks on one side and the dangers on the other with the fact that we are now pushing up very close to the fringe of danger, the border of the Soviet empire itself, with all the implications that may have-I for one believe that it is better for us to have the dividing line at the Elbe if we cannot get it farther east and include East Germany at this time. The hope is that East Germany will some day become part of a unified Germany and be friendly with us, but at this stage it is better to have the dividing line between that part of the iron curtain and ourselves at the Elbe rather than at the Rhine or somewhere farther west.
That is a risk that must be taken but I am wondering, Mr. Speaker, whether the risk is as great as perhaps some people believe it to be. The Soviets have run a gigantic bluff since the end of the last war. They have not been so courageous when it came right down to a critical point. They have always been pretty good at having somebody friendly with them do the dirty work-whether it was Korea, Indo-China, or some other country. The Soviets themselves have been pretty careful not to get their fingers burnt in something that might be close to a hot war. I am satisfied that the dangers have been somewhat overestimated. I am one of those who believe, and I think the minister agrees with me because he said this not so long ago, that a very intensive cold war will foe waged. It may go on for three, four, five or six months but in the end it seems to me it will collapse and that we shall come out of this if we simply hold our heads and hew closely to the line that we have taken-and show these people behind the iron curtain that we mean business; that we do not mean war but that we mean that everybody in the world from now on is going to 'keep the peace or else'. I think we have got to take the position that after all peace is what we want and we are prepared to defend that peace to the last ditch.
I want to say this too. There is no reason why this country or any other country should be necessarily provocative. I think that if there is anything which would be a great sin for us now it would be if we were unduly provocative. People who are following a charted course towards peace have no need to provoke anybody. All we want to do in the free world is to mind our own business and to ask other people to mind theirs. In 55704-210J
17, 1952	3317
NATO-European Defence Community that spirit we hope there will grow up an era of better understanding between the east and the west.
In connection with a divided Germany from a German point of view their attitude is readily understood. They are Germans and they are proud of it. The nationalistic feeling in that country is of course one that we must take into consideration. Until East and West Germany come together again there will always be that pull or that desire to be together-and that is only natural. Nevertheless if we were to say to West Germany: Well, we are going to leave you now to work out your own solutions with East Germany as a unified nation, I have no doubt, Mr. Speaker, that would only mean throwing West Germany to the wolves. In view of the critical international position I do not think that this country or any other country would want to have anything of that kind done. If we do not do our best to bring West Germany into the North Atlantic Treaty Organization I am satisfied that not only would it have a serious effect on the German people but there would be incalculable consequences for the other units of the North Atlantic Treaty Organization in Europe and elsewhere.
Do not let us mistake this. While great stress is laid upon the strength of other nations within the North Atlantic community, and there are very strong nations within that community, let us recall that West Germany with her population of nearly 50 million is now in the position of being almost the top nation in strength in that community. Her position with respect to industrialization, and her general economic position, of course are not always fully known. True, she has taken on a very heavy burden for defence under the North Atlantic protocol. We must remember that today West Germany's exports, according to the latest figures I have received, have increased no less than sixfold within the last three years. Her ecoriomy is now by way of being the healthiest in all Europe. Some economists have indicated that she is today on a par with or better than either Britain or France economically. In any event, she is in a preferred competitive position.
Three years of intense rebuilding have brought her a larger productive capacity industrially than she had before the war. I am told that she is 50 per cent above the pre-war level, and that has been achieved by an increase of 18 per cent in 1951 alone, which is to be followed by an estimated 15 per cent in the present year. All this indicates, I believe, that the position of West
3318	HOUSE OF
NATO-European Defence Community Germany is one which must be assessed in relation to her great strength and her vital importance, if I may say so, to the success of the North Atlantic Treaty Organization in the defence of Europe. I only wanted to mention the West German situation as a further buttressing of the support that we intend to give to this protocol itself.
I should like to make one or two references, if I may, to our own situation with respect to the revival of West Germany. A few minutes ago I mentioned that she had undertaken, under the NATO obligation, a heavy burden with respect to financing defence. Nevertheless, it does give Germany the opportunity, as one British newspaper said, of rebuilding her army at bargain prices. It is likely that United States money will go into that, and only maintenance charges will be made against the Federal Republic of West Germany. The resurgence of West Germany economically, of course, will have repercussions in many parts of the world. It is a risk which Canada takes herself. West Germany is now selling goods to the extent of $4 billion annually. After having seen the devastation of Germany following the last war, one wonders at the skill, imagination and initiative of that great people in being able to come back as they have. Not very long ago the London Economist indicated that West Germany would shortly be making a bid for the position of the third greatest trading nation in the world, following the United States and Great Britain. This means increased competition for us all. The competition which Germany will be able to provide under the North Atlantic treaty set-up, and on her own, is something that we ought to carefully consider.
These remarks and observations are not being made to weaken in any way the support that Canada may give to the admission of Germany to this protocol, but for the simple reason of seeing to it that we in Canada learn the full facts while the matter is under consideration, rather than learning about them at a later date. I think it is important that when the minister makes his reply he give the house some information as to what Canadians may expect concerning bilateral trade agreements, for instance, that may now be in effect between the Federal German Republic and East Germany. Whatever may be the outcome of our arrangements, and the arrangements with other nations, to bring West Germany into the fold of the North Atlantic Treaty Organization, we have to face one physical fact, and that is that you have a border between East and West Germany on both sides of which are German people; on both sides are people whose family


connections and business connections are well known. Perhaps on one side you have a balance of industry as against a balance of agriculture and rural communities on the other. We must remember that is not the ordinary kind of border; that is not the kind of border between two nations who have been traditionally opposed to each other. I believe, therefore, that we ought to be told by the government just what trade relationships exist between East and West Germany, and whether or not those are going to be continued if this ratification takes place.
Do not forget there is a very big market for German production in Russia, in the east and in China. For that reason I believe it is important that we know where the production of West Germany is going in the days that lie ahead. I believe it is also important, too, so to arrange our set-up in bringing West Germany in that we show them that they are on our side, that we aid them economically and that they do not have to depend on trading to the east for their sustenance and for carrying the burdens of NATO. Moreover, I think the government ought to indicate what safeguards there are. This is not meant as a reflection upon the West German people; far from it. But if that frontier between East and West Germany is to be a fluid kind of frontier, then of course the question of strategic materials coming from the free world to positions behind the iron curtain becomes a very important factor to this and other countries. I have no doubt that problem will be solved, and that it will not cause any grave complications in our relationships with West Germany or West Germany's relationships with NATO in general.
I think it is important, while we are dealing with these matters, that we have a clear conception of the practical implications of all these commitments that Canada undertakes. With the consent of parliament and with the consent of the Canadian people-let us not make any mistake about that-we are building up for Canada a huge area of commitments abroad. Frankly I may say that I do not know what else we can do if we are to try to see that peace is maintained and preserved in our time. It is a risk and it is a great burden financially; but it is a burden and a risk that were not imposed upon us by ourselves; we had no choice in the matter. We must bear that fact in mind. We have moved from one commitment internationally to another until we now have a network of obligations that is of a vast character; it is by far the most extensive and intensive network of obligations and commitments internationally that Canada has ever had, and much more than she ever dreamed of fifteen

years ago; but then we did not dream that we would have the kind of world to live in that we have today. Because of that fact these commitments of course have become necessary.
The last point I want to make in connection with these commitments and obligations is this. This government and we in this parliament will make a grievous error-the results of which will be reflected upon them and upon us and upon the Canadian people in general-if, while this vast network is being instituted and established, they and we do not tell the people of Canada exactly what we are doing, why we are doing it and what would be the alternative if we refused to do it. Those are the things that are bothering the public today. Those are the things about which the public may perhaps be less informed than we in parliament could make them. Therein, in my opinion, lie the germs of certain dangers in this country which may become greater as the period of intense activity is prolonged. We may as well face, frankly and openly, the fact that our resources of perseverance, resolution and determination are going to be called upon to an extent beyond anything the people of this country have ever experienced before, in order to carry on during this critical time of what we call the cold war.
I have said before, and I say it again, that it is difficult for democratic governments and parliaments when they are trying to superimpose, upon a normal basis of the peacetime economy, a vast defence preparedness program costing not millions but billions of dollars annually, to do it without that support which during war is known as wartime mass psychology. That is something which, thank God, we have not in Canada today. Having in mind those two important features, I think our present situation calls for a greater measure of taking into the complete confidence of the government and of parliament Canadians in every walk of life and calls for telling them in plain, unvarnished, understandable language exactly what is being done, why we are doing it, the cost to each one of them in the process, and the alternatives that we would face were a different policy to be pursued by this country in its quest and search for peace.
Mr. Speaker, I am convinced we have a heavy responsibility with respect to our international affairs. I think the situation has become more critical than ever of recent times. At this vital stage of the proceedings when we, and those powers associated with us, are trying with every bit of diplomatic skill which can be summoned to their aid to see whether the ship of peace cannot be
NATO-European Defence Community kept sailing in untroubled waters, I hope that we in this parliament, regardless of where we sit, will take our responsibilities seriously to the point where we will back up those who are with us, without too much carping criticism of those in other lands who are trying to carry the heavy burden and responsibility of saving the peace. So far as it is possible, let us try to march together, arm in arm, in measured tread, not towards war but towards a great adventure, that of saving the peace of the world in our time.


Mr. M. J. Coldwell (Roselown-Biggar):: Mr. Speaker, I suppose that anyone who rises to discuss this protocol and the implications attached to it must be conscious of some responsibility. In introducing the resolution approving of the protocol this morning, the minister said that this was probably the most important matter which would come before the house at this session or at this time. I agree with him in that respect. I would say that I think it is the most gravely important matter that we have had before parliament this session or that we are likely to have before parliament for a considerable time.
I want to say at once that, in view of the world situation, defence agreements among the anti-totalitarian nations of the world are essential. I noted that the minister said- and in this I think he was expressing a word of caution-that the ratification of the protocol would not be followed immediately by its deposit with the United States government, as is required. In other words, to that extent Canada will follow a wait-and-see policy. Personally I think that procedure is wise. This protocol in effect extends our obligations under the North Atlantic treaty. It brings into the North Atlantic Treaty Organization, as it were, under the European defence plan, contingents of troops and other forces which will be raised in Western Germany. As the minister pointed out, the protocol states:
The present protocol shall remain in force for so long as the North Atlantic treaty and the treaty setting up the European defence community remain in force and the parties to the latter treaty continue to give, in respect of themselves and the European defence forces, guarantees to the parties to the North Atlantic treaty equivalent to the guarantees contained in the present protocol.
In other words, the defence forces which are mentioned as included in this protocol are, as the minister stated, in existence only on paper as yet. But it is an important consideration when we are discussing the protocol.
May I just remark in passing, Mr. Speaker, something that I have remarked before, namely that we are today considering what the minister says-and in this I agree with him-is probably the most important document that will come before this parliament
3320	HOUSE OF
NATO-European Defence Community this session. And yet when we look around the house we see a slim attendance. At the moment there are 33 members occupying seats. When the spokesman for the official opposition began his speech there were not many more, and there were not many more when the minister himself was on his feet introducing the resolution and discussing what he himself says is one of the most important documents to come before this parliament.
As the hon. member for Peel (Mr. Clraydon) said, and as the minister himself said, this matter has arisen a short time after the appalling results of German armed might under nazi leadership had been understood and felt by the people of Europe and of the world. It was only seven years ago last month that the war ended in the surrender of Germany to the allied nations. I agree that seven years later the nazi militarists are still a danger both in Western Germany and in the eastern zone. In fact, one of the remarkable statements that have come out of the Soviet union was the statement that they were prepared to see a united Germany with a German army officered, indeed fashioned, by officers who officered the nazi army under Hitler. That I think is a very revealing statement that we of the western nations cannot overlook.
Any proposal for the rearmament of Germany does involve grave risks to the rest of the world, and we would be completely opposed to any suggested rearmament of Germany which might be considered to be in the nature of a separate or independent rearmament of Germany. The only manner in which German troops can possibly be integrated into the European defence community, as we see it, is as a part of the forces of the community and under the control of the western democratic countries through their general staff and through their high officers. I say that is the only manner in which we should as a country consent to any proposal for the rearmament of Germany. But having said that, we have to consider the proposed ratification of this protocol in Canada in the light of the political atmosphere in western Europe, and when that is viewed in its proper perspective one realizes that the proposal to ratify at the moment, before the situation in western Europe has been clarified, may be, in the words of the minister on another occasion, both premature and unwise.
Our people want peace. Indeed the people of all the nations want peace, and consequently we should ask ourselves whether the ratification of this protocol and the subsequent acceptance of the proposed peace treaty with Germany does really make for 

peace in the world. Recently we have seen powerful political parties in western Europe *

and indeed within the last week the government of France, one of the countries occupying a very vital position in connection with European defence-urging that before ratification of this protocol and the acceptance of the peace treaty, a further attempt at a settlement of the German problem should be made in the hope that understanding may lead to removal of this fear of war which overhangs the people of Europe at the present time.
One of the questions we have to ask ourselves is, does the ratification of this protocol at the present time improve the possibilities of reaching such an understanding, or does it actually make understanding more difficult? Before we approve of this protocol in this house we must satisfy ourselves as to the answer to that question. The minister said that the road to ratification of the peace treaty will be difficult and it will be dangerous.
I think the Russians have won something of a propaganda victory in the last four or five months. Their proposals are obviously unacceptable to us in the democratic countries, but when these proposals were made did the western allies make counterproposals that were in any way likely to be equally acceptable to Western Germany, or was their reply somewhat inept? I am inclined to think that their reply was inept- and someone suggests that that is an understatement. We have the best cause in the world, and we have done the worst propaganda job in connection with it. We have always allowed the Russians to take the initiative, and indeed they are taking the initiative today in connection with germ warfare in another field when we might, when they made the charge, have taken the initiative and asked for a meeting by the security council of the United Nations where that question could have been examined. Now the Russians have proposed it, and again we lose the battle of propaganda, and I think we to some extent lost out in connection with proposals for the solution of the German problem.
What then is the situation in western Europe? Mr. Speaker, since it is one o'clock may I discuss that phase of what I am going to say when the house resumes after lunch.
At one o'clock the house took recess.
The house resumed at three o'clock.


Major James William Coldwell: Mr. Speaker, when I was speaking this morning I perhaps was a little

unfair to members of the house when I said that there were only 33 in their seats. That was the number present, but I was not aware that several important committees were sitting. Something like 60 per cent of the members of the house are on those committees. Consequently I should like to put the matter right because I do not like to be unfair to my colleagues.
At the conclusion of my remarks this morning I said that I thought we had to consider the state of public opinion in the NATO countries generally and particularly those in western Europe, as well as some of those which may not be included in the NATO organization. First, we have to pay some attention to the state of public opinion in Germany because if we ratify and deposit this protocol and it is followed by the signing or ratification of a peace treaty we want to be sure that we have achieved something of a permanent nature.
I have been following the reports emanating from Bonn and other places with a good deal of interest and also with some misgiving. For example, I notice that last week the treaty system that will rearm a sovereign West Germany within the framework of the Atlantic alliance has been challenged in the courts as to the right of the government to enter into such an agreement. We have been told that there is in Germany a steady increase in public support to induce the chancellor, Mr. Adenauer, in the words of his minister for all-German affairs, and I quote:
To demonstrate the government's willingness to take the responsibility for the reunification of Germany.
In other words, the feeling is growing in Germany, and I believe it is a majority opinion, that prior to anything else in the way of rearmament or otherwise being done, the reunification of Germany should be considered an essential factor. As a matter of fact the German chancellor is faced with something of a rebellion in his own party, as is indicated to some extent by the quotation I have just made.
The social democratic party, which is the strongest opposition in that country, is certainly opposed to these steps being taken until the unification of Germany has been discussed and indeed until free elections have been achieved.
Not only is there misgiving and grave opposition to what is being done in Germany; we find a somewhat similar situation in France. The French government is not a socialist government; it is a coalition government. We read in a dispatch from Paris in the New York Times of Thursday, June 12,
NATO-European Defence Community that the French cabinet instructed its foreign minister, Mr. Schuman, to urge an early conference between the Soviet union and the big three western powers. That was to be confined to two questions: first, the conditions of a free election in Germany, and the circumstances under which the unification of Germany would be effective. Although it has not been confirmed, it was assumed that the note from the British foreign secretary, Mr. Anthony Eden, favoured a four-power conference in reply to the latest Soviet note. According to this news dispatch from Paris, Mr. Schuman was urged to support that view if Mr. Eden expressed it. As I say, the reference to Mr. Eden was not confirmed from London.
The same dispatch in the New York Times says that there is a strong feeling among officials in France that no government should risk appearing reluctant to negotiate with the Soviet union in view of the fear in Europe of greater tension as a result of the signature of the treaties linking West Germany with the western coalition. It goes on to say that even Mr. Schuman pointed out recently that there would be time to negotiate before the treaties were ratified and that there is a disposition in France to put off ratification to perhaps the end of the year and to press for negotiations with the Soviet union again this summer. It adds that ratification by the French parliament might well be vitally affected by the belief or lack of belief that the western powers had made a genuine effort to discuss the German problem with Moscow.
I think all this underlines something that the minister of external affairs said this morning. He said that if this house ratifies the protocol, at the conclusion of this debate the instrument will not be deposited with the United States but will be held until there has been a clarification of the general position in western Europe. I think that that is a wise provision. In fact, had the minister not said that this morning I would have been inclined -in fact I would have done it-to move an amendment to delete the last part of the resolution before us and to substitute words to that effect. In view of the statement made by the minister of external affairs I believe that the moving of such an amendment is unnecessary because the instrument will not be deposited until there has been a further clarification of the position overseas. So much for the French situation at the present time. The dispatch to which I have referred, and a similar one by Drew Middleton from Bonn appeared in the Sunday New York Times of June 15, indicate the same kind of French and German opinion.
Then we have had recent statements made in Great Britain. At the moment I am looking
3322	HOUSE OF
NATO-European Defence Community at a most comprehensive statement issued by the British Labour party, which after all in the recent elections last October polled the largest popular vote and may within a measurable period of time once more become the government of the United Kingdom. The British Labour party issued a statement on April 30 which does not reject, as we do not reject, the possibility of conditional German rearmament, but in confirming its agreement on this point it lays down certain conditions which I should like to place on the record. They are four in number and may be summarized as follows:
(a)	No effective German rearmament so long as the Atlantic forces in Europe are not well organized and equipped.
(b)	Western nations other than Germany-in particular France-to be given priority for deliveries of American arms.
(c)	The integration of German troops in an international army.
(d)	No German rearmament so long as the Germans themselves do not wish to rearm.
I think the latter is a very important proviso because if we are going to have successful integration and support of German troops under an international army of defence then the German people must support what is being done or it will fail. More than a year ago Mr. Clement Attlee, who it will be remembered was at that time prime minister of Great Britain, had already referred to the first three of these conditions, and I understand that the fourth was recently attached after a long discussion at the national executive meeting of the Labour party of Britain.
I have a longer statement which I do not intend to read now because I may not have time but which underlines and elucidates the position taken, the four points that they made, and particularly their support for the demand of France for greater aid from the United States. The official statement of the social democratic party in Germany is also something of which I think we should take some cognizance. The party's policy was stated on the 27th of April by its vice-chairman, Erich Ollenhauer, and was reported as follows:
(a)	Ollenhauer pleaded for priority to be given to the Soviet proposals for German reunion and a German peace treaty, and for all other questions to be postponed until a coherent effort had been made to reach four-power agreement on Germany.
(b)	The first object of German foreign policy, he said, should be to test the sincerity of these Russian proposals.
As a matter of fact I think there is an obligation on all of us to test the sincerity of these proposals. In our hearts we may believe them to be insincere but we are engaged in a cold war, a war of words, a war of ideas, and we have to make it abundantly clear that we have tested the sincerity of all proposals emanating from the


other side before we reject them if we are to obtain support for our cause throughout the world. It goes on:
This could be done by proving whether or not there were genuine possibilities of free all-German elections. Should such possibilities not exist, every German must be satisfied that every possible effort had been made by the western powers and the Federal German Republic.
(c)	The signing of the contractual agreements, and the integration of West Germany in the defence system would at least make German reunion more difficult and might prevent it altogether. German participation in a European army could scarcely be interpreted as a friendly gesture by the Soviet union. The whole present conception of European integration was, moreover, basically false.
(d)	Instead, the western powers should give the Soviet union a "timetable" for negotiations on German unity. This would prevent deliberate attempts to protract four-power talks and so sabotage western plans. Such questions as the Oder-Neisse line should not be brought up for a moment; they would only prejudice chances of arranging all-German elections. No alternative western policy should be applied to Germany until it was clear that such elections could not be held.
Apparently that is the official position of the official opposition party in Germany which, with the increased support it has received in the country over the last number of months, may within the next thirteen or fourteen months when the federal elections are due become the government of Germany in any event, and if elections are held sooner might become the government much earlier.
I think we should also pay some attention to the Scandinavian countries which are not a part of NATO, though in association with it. The international secretary of the Swedish social democratic party, Kaj Bjorh, in an article which he has written, has this to say:
(a) The question of German rearmament should be postponed if possible until the question of German unity is solved. Otherwise an extremely dangerous explosive situation will develop in the centre of Europe. This recommendation is in line with the German social democrats' present policy even though that policy has partly a different motivation.
I would comment here that the Swedish foreign minister, Osten Unden, made a proposal in the United Nations that the four big powers should take up negotiations on the question of free elections throughout Germany and report back to the United Nations within one month. This proposal was made last winter during the interval between the Rome and Lisbon meetings of the North Atlantic Treaty Organization. One could continue to quote not only the social democrats but the other party which is associated with Adenauer. They are the free democrats who are in a coalition with the Christian democratic union party in Germany. Dr. Karl Pfleiderer of the free democrats has expressed his doubt as to the wisdom of implementing the treaties in a hurry. He actually assailed

Dr. Adenauer for having told the bundestag that the treaties must be ratified soon to suit the convenience of the United States. Here is a direct quote from Dr. Pfleiderer:
I do not know whether the West German government realizes that public opinion disagrees with it. We are indignant about this attempt to link one of the weightiest decisions on our future with the election campaign in a foreign state.
He was referring to the election in the United States. Many Europeans believe that the haste and pressure coming from the United States is to some extent due to the political situation in that country. I might add that I have seen several articles lately in which it has been indicated that the democratic parties of western Europe are quite alarmed at the choice of General MacArthur as keynoter at the Republican national convention. They fear the election of Mr. Taft on that account, perhaps unfairly, but nevertheless there have been some outspoken comments regarding that particular matter. Dr. Pfleiderer goes on to say that the Germans wanted every aspect of reunification explored thoroughly before the treaties were ratified. He added that "the Germans want reunification and peace, not war".
One could go on with a number of similar statements. I think our own position has been pretty well stated in the official statement which the C.C.F. national executive released to the press on May 25. I should like to put it on the record. It reads as follows:
The C.C.F. regrets that the governments of the United States, the United Kingdom and Western Germany are persisting in their determination to sign the German peace pact at this time. The signing of this pact may well mean an end to all hopes for the unification of Germany and, therefore, enables the communists to exploit German nationalism for their own ends. Furthermore, the evidence is clear that large sections of the German people, probably the majority, are opposed to it and it is doubtful whether the pact will be ratified even by the present Bonn parliament.
The national executive of the C.C.F. fully supports the position taken by the national executive of the British Labour party and other socialist parties in Europe. We urge the governments concerned to reconsider even at this late date. An attempt must be made first at four-power negotiations for the unification of Germany and for free elections. To refuse even to attempt such negotiations is to bear the responsibility for the permanent division of Germany. Sooner or later this will almo:t certainly alienate the support of the people even in Western Germany and may well make'the whole scheme of west European integration a hollow shell. In any event, such a final act as a peace pact should not be pushed through against the will of the people of Western Germany. It should, therefore, wait until new elections have been held there, in which the German people may declare themselves on an issue which means so much to their future and to the future of peace.
I think the note I would like to emphasize in that statement is the note that is struck
NATO-European Defence Community in statements from all the western European democratic parties-that we must beware lest the haste that has been shown plays directly into the hands of the communists in western Europe. If we try to force on western Europe policies that will not be supported by the vast majority of the people of western European countries, we are playing directly into the hands of Russia and the communist parties of both eastern and western Europe.
I repeat again that such rearmament or, shall I say, such co-operation in the defence of western Europe as may be desirable and must be achieved should be on the basis of the integration of such German forces as are necessary under the allied general staff divorced from a German general staff, and as far as possible under the leadership of the western, democratic nations. Unless that is done we shall be building up in Western Germany an armed force-and this I am certain is what France really feels-which one day may co-operate with the force that is being raised and has been raised in Eastern Germany; and once again France, Europe and the world generally will be faced with the accomplished fact of a strong German army threatening the peace of Europe and of the world.
We are on the horns of a dilemma, it is true, because we are threatened with aggression across the world from behind the iron curtain. I know they profess they are defending peace and are desirous of maintaining the peace of the world, but I wish I could see more evidence of their desire to co-operate with the peace-loving peoples of the world to bring about in the world conditions which will lay the foundations of permanent peace.
This morning, the hon. member for Peel (Mr. Graydon) in discussing German rearmament pointed out something which I know is in the minds of many people, and that is the tremendous improvement in the industrial and economic situation in that country. Indeed that is largely due to the fact that they have not had to dissipate their efforts in raising armies, building air forces and navies, and to provide armaments for the forces they raise. As long as that condition continues they are of course at an advantage and we are at a disadvantage. To some extent I think that the idea of allowing Germany to engage in the production of arms-indeed not only allowing her but pressing her to do so-may be motivated in some quarters from the point of view that it will relieve other industrial nations to some extent in that field and at the same time cause Germany to engage

NATO-European Defence Community in the production of armaments to the disadvantage of the industrial production which has proceeded apace in that country over the last few years.
I welcome the statement made by the minister this morning that the instrument of ratification will not be deposited until there has been some clarification in the European countries, and particularly in the countries associated with us in the North Atlantic Treaty Organization. I think it is vital that that should be the case. Indeed, I suppose the Secretary of State for External Affairs presses for the ratification of this protocol today, towards the end of the present session, because possibly parliament will not meet again until sometime after Christmas or if we meet before then it will be very late in the fall of the year. We do not anticipate that meeting but it would be some months away and consequently I suppose he desires the expression of ratification by this parliament in order that when other nations, and a sufficient number of them, are ready to deposit their instruments of ratification Canada will be in a position to deposit with them.
I do not think we should be the first to deposit. I do not think that we should be the first to deposit largely because we are a North American nation. I think in this respect we should let our European friends come to decisions and give a lead in the deposit of the instruments of ratification. As I understand it, what we are doing is ratifying a protocol, an instrument, which may or may not be deposited at Washington, and it will only be deposited when we feel that the conditions among the nations associated with us in the North Atlantic Treaty Organization permit us to do so without any reservation and indeed without taking the first step.
I think, Mr. Speaker, that I have said all I wanted to say on the matter. We hope this will promote confidence and peaceful negotiation in Europe. We approach the problem with some misgiving in that regard because we realize as other democratic people realize, particularly those in western Europe, that the proposals may deepen the gulf that separates the west from the east and may make it still more difficult to arrive at an international understanding and the foundations of world peace. I think no one questions the necessity, as long as the situation in Europe and indeed across the world remains as it is, of organizing our forces to resist totalitarianism-totalitarianism in any form-in order that we may preserve the freedoms that we value and protect the freely elected parliamentary institutions under which we live.


Mr. Solon E. Low (Peace River):: Mr. Speaker, it is not my intention to take too much time this afternoon in the discussion of the protocol that is before us but I do feel that it is essential that I say something on behalf of the group which I lead in this house.
I have followed with great interest the statement that was made this morning by the Secretary of State for External Affairs (Mr. Pearson) and the speeches that have been made by the hon. member for Peel (Mr. Graydon) and the hon. member for Rosetown-Biggar (Mr. Coldwell). While I find myself in agreement with much that has been said I feel also that there are warnings that have to be uttered, and it is my intention to utter one or two of those warnings in the course of the few minutes that I shall speak this afternoon.
In making his statement this morning the minister stressed the importance of the protocol. I believe he said that it was, if not the most important, one of the most important matters to come before parliament at this session. He also stressed the gravity of the world situation. I can quite understand the anxiety any minister would feel about finding, if possible, a balance of power arrangement or treaty under which peace could best be assured, or at least under which we would have the very best chance to beat back any aggressor who might wish to take the chance of attacking us; that is understandable. When one does take a thorough look at the whole world situation, it is a situation that fills one with disquietude and anxiety, so every effort will have to be made to see to it that the western nations are made strong so that they can have some feeling of security. I am the last person in the world who would want to say or do anything that would jeopardize our chance of making the nations of the world strong or of jeopardizing the chances for peace, so I hope I will be able to be moderate in all that I say today, realizing as I do my responsibility as a member of this house.
In his opening statement the minister said that the protocol under discussion does indeed extend Canada's obligations under the North Atlantic treaty. If we ratify this protocol, then our guarantees given under the North Atlantic treaty are extended not only to the armies, the air force, the navy of Western Germany, but also to the territory of the Republic of Germany. In my judgment this makes the protocol one of extreme importance. I believe that today Germany occupies the most dangerous, and at the same time the most potentially explosive position in the world. For months past I think the world has realized that. While the focus of world attention has been on Korea and the Far

East, world students have consistently told us to keep an eye on western Europe, particularly Germany. That being so, Mr. Speaker, any decision which involves Canada in obligations or guarantees towards Germany is a decision which ought not to be made hastily, and certainly not without the fullest possible measure of inquiry into every detail of our undertaking as well as into all the implications of that undertaking.
I feel sure the minister must know that neither the timing of his resolution nor the form in which it is presented before us now permits of the thorough investigation and discussion by members of parliament which such a gravely important document requires. One is led to ask, of course, why the protocol was not referred to the external affairs committee. I realize that it has not been in existence very long, but I believe it has been in existence long enough to allow it to have been presented to that committee for thorough discussion and investigation. I believe that one could be excused for asking why, at the present time, there is no opportunity to consider the protocol in the committee of the whole, where by a process of question and answer the members of the house could ascertain just what we are doing and at the same time let the people of Canada know exactly the type of contract to which we are binding them.
The form of the resolution which places the protocol before the house today does not permit of that kind of discussion. I think it is a pity. I am asking in all seriousness why it was not introduced in a different form. Surely, that could have been done. We would at least have had the satisfaction, when we had completed the discussion, of feeling that we had found out all that there was to be found out in the course of our questions and answers. Only then would we be in possession of sufficient knowledge to enable us to make a choice as to whether or not we would commit Canada to the protocol.
The minister says that he believes, dangerous as the situation may be after we have committed ourselves to the protocol, that under the circumstances it is the best preventive of war. The minister, of course, is in possession of a lot more information than are the. members of the house. He has the advantage of advisers who doubtless are ready to advise him on that particular score, but we in the house are not in the possession of these things. It seems to me that before we do commit ourselves to such a proposition as the protocol we ought to know a great deal more about it.
Much has been said today, Mr. Speaker, about the rearmament of Germany. I want to say a word on that topic. To my mind
NATO-European Defence Community the rearmament of Germany is fraught with the gravest possible consequences to the whole world. Under the present circumstances it may be necessary to rearm the German people if we are to prevent war with the Soviet bloc. On the surface, it does appear to be so, but what will be the long-range result of rearming the German people? That is a question to which I think we ought to give the most careful consideration.
I have always felt that the defeat of German arms in world war II did not put an end to that country's ambitions, and consequently Germany will try it again. Of that I am sincerely convinced, and particularly if the western powers continue to insist upon terms in peace treaties which impose upon Germany such things as trade restrictions and the gold standards which are involved in the mostfavoured-nation trade clauses and in Bretton Woods. I think everyone who has read anything at all during the past few months must have come to the conclusion that Germany has made a most remarkable recovery since the end of the war. I know that when I travelled in Germany in 1948, even that soon after the close of the war, there was evidence everywhere of recovery. Labour was at peace. There where no strikes. The people had an inclination to get down to hard work without complaints. Everywhere there was determination to bring Germany back just as quickly as possible to a position of strength.
Down through the Ruhr valley, where a few months before those seas of smoke stacks had been without smoke, in 1948 they were belching smoke and the whole area was a hive of activity. In recent months there have been reports in various publications, notably a February issue of Life magazine, containing the whole story of the remarkable recovery of Germany. These publications have carried detailed stories about what has been happening in Germany. I want to say right here, Mr. Speaker, that these reports have tilled me with foreboding, because as soon as Germany brings herself back to a position of real strength in her industrial capacity, such as she had during the war, then the rest of the world has to begin to fear, particularly under the type of trading arrangements that we have been following in the past few decades. In one way I am glad to see Germany coming back and making the remarkable recovery that she is making. But, Mr. Speaker, it looks to me as though the recovery of Germany is going to complicate matters now. I say that with sincerity, and I believe the minister realizes that it is so.
It does seem insane for us to take a position of restriction in trade treaties and in such things as Bretton Woods, and to be imposing these things upon a conquered
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NATO-European Defence Community country at a time like this when the world is in desperate need of goods of all kinds. Surely we should welcome the effort of any country to go all-out in order to produce goods and services for the people of the world. That is particularly so now when 1,200 million people in this world go to bed hungry almost every night of the year and when those 1,200 million people in what we call the underprivileged an underdeveloped areas of the world are looking to the west for assistance by way of the things that we can produce and send to them.
It looks to me as though we should welcome the efforts of countries like Germany to produce all-out and to make their production available to the world. If we are ever going to convince Germany and other countries of this world that their productive enterprise is welcome, that we must give encouragement everywhere to all-out production and to see that that production is distributed equitably throughout the world it is necessary for us to institute a new idea of decent treatment between peoples and nations. We cannot do it by imposing upon them restrictive trade treaties. I am just afraid, Mr. Speaker, that that is one of the things involved in this whole question of Germany.
We are today talking about the peace treaty, the unification of Germany and rearmament in relation to this protocol. I want to impress upon the members of this house that if the rearmament of Germany is to be accomplished without grave danger to the rest of the world, it will have to be done under a relationship that will bring home to the people of Germany the idea that the western powers are going to treat them decently, and that they will be given a decent opportunity to produce and to distribute the goods that they can produce so that the peoples of the world can have them. Unless that is done, we are just going to push such countries as Germany right back into the position in which they were prior to world war II when they felt that they simply had to break out and resort to arms in an effort to breathe.
I am just as satisfied as I am that I stand here of the fact that one of the reasons why Germany went to war in 1939 was that she felt she simply could not continue to operate under the restrictions in trade which were being imposed on her. I am not trying to excuse for one moment what Germany did. I have always been prepared to join with those who set out to put down aggression and any unwarranted armed conflict of any kind anywhere. I think we must learn to understand; and to understand, it is necessary for us to get at the root of 

things. In my judgment, one of the things that are complicating the present European situation is the fear that Germany will once again dominate the whole of Europe in the matter of productive potential, particularly in industry.
The United States and other countries of the world have been sending into Europe large sums of money and large gifts of equipment, material and food to help those countries to bring themselves back and to get into a position in which they can take care of their own needs. Now that the United States and the other "have" countries have at least partially accomplished their objective, they then turn right around, put up high tariffs and impose trade restrictions upon them so that they cannot get rid of their goods. What kind of a paradoxical situation is that, Mr. Speaker? It is that paradox which must be solved if we are ever to achieve peace in this world. Surely in a world of potential abundance it is unthinkable to allow want, frustration, deprivation and fear of the future to continue to exist amongst at least half the population of the world. I mention that matter because it is involved in this whole question of what to do about Germany in the future.
I agree with the hon. member for Rose-town-Biggar when he said that rearmament of Germany must be carried on under the strictest possible supervision. I do not know how long that supervision can last. That is one of the imponderables. At the present time it would be quite possible to see that what German troops are raised, armed and equipped should be officered by North Atlantic Treaty Organization officers; but that does not mean to say that they will be able to continue to officer them and to control them in the years ahead. We do not know for how long that will be possible. So, Mr. Speaker, what I said earlier I must emphasize once more, namely that we should not rush into the ratification of a protocol of this nature until we have given it much more study than we have been able to give it thus far. There are too many dangers involved.
In the course of his speech this morning, the minister laid some emphasis on the development of a united Europe. In the course of his statement he mentioned the functional integration of Europe; that is, he stressed the functional approach rather than the formal federation approach. I would be much more impressed by the minister's statement wherein he said European unity-that is, the full integration of Europe-should grow and not be imposed, if the facts of history did not definitely indicate that the integration is being forced and has actually been planned and forced for many years.

Anybody who has a knowledge of the facts of history must realize that the present sordid world situation did not just happen. It did not. These things do not just happen. These things that make up the present sordid world situation are the results of policies of men. That being so, for the life of me I cannot understand how anybody could possibly say that the integration of Europe is not being forced. It is being forced. War and the fear of war have been used for a long time to force that integration. I have some fairly strong feelings of suspicion about the whole matter. I have watched the moves ever since I was old enough to start to watch them. Back in 1917, Mr. Speaker, we did not worry too much about communism; but when we saw communism rise, we began to worry. And by the way, Mr. Speaker, it rose in Germany; it was cradled in Germany; it was nourished in Germany. The communist cells were developed in Germany and spread elsewhere. When, back in 1917 and 1918, we saw an opportunity of nipping communism in the bud and saw that it was deliberately bypassed, some of us began to wonder what was up. And when we saw it spread from Germany, by way of what I think was a deliberate conspiracy, into Russia, sponsored by German interests and German money, to make possible the revolution, and make possible communist control of Russia, and nothing was done to prevent it-in fact everything was done to enhance the move, Mr. Speaker-some of us were filled with foreboding. We have seen these things develop step by step toward the point where today some say that the only possible cure for it is the full federation of Europe.
I do not know whether that could possibly be a cure. I am quite prepared to admit that balance of power arrangement amongst all the free nations of the world is essential at this time. It may even be that integration of European economies under what the minister is pleased to call the functional approach is necessary. It may be, but, as I said to begin this part of my talk, I would be a whole lot more impressed by the minister's statement if the facts of history did not indicate quite definitely that the integration of Europe is being forced and has been forced and has been planned for a long time. It needs a lot of study and a lot more of consideration than we have been able to give it up to this time.
The minister informed us today that the road to ratification of the peace treaty with Germany and of this protocol itself is likely to be a difficult one. I understand that Canada is the first country to take action on the protocol. That may or may not be true.
NATO-European Defence Community


Lester Bowles Pearson: We have not taken any action yet.


Solon Earl Low: But we are in the process of taking some action now. It is before us for ratification. As I understand it, what we are doing here is putting the seal of approval of the people on it so that at any time it is deposited with the United States of America, and when the other contractees to the North Atlantic Treaty Organization have done likewise, then it becomes a binding contract. Well, we are taking action.
It seems almost a chronic fault, in my judgment, of the Liberal government to want to rush headlong into international commitments, to be the first in the water without knowing how deep the water is or how treacherous the currents may be in the swimming pool. We have made terrible mistakes in the past through such unwise haste. I have often wondered how long this government will make Canada the guinea pig, or the cat's paw to snatch the first hot chestnut out of the fire. How long are they going to continue to make Canada the guinea pig or that cat's paw?
Like the hon. member for Rosetown-Biggar (Mr. Coldwell), I say let us first see what some of these other nations are going to do. Give them the chance to act first. I recall quite well that when the Bretton Woods matter came up in the house in 1945 one of the things which we Social Crediters placed before the house was that Russia had continued to press for that thing with such undue and indecent haste that we were suspicious of it. We said: Let us just take a look and see what Russia is going to do about it before we plunge headlong into it. Let us take a look at what its implications are. You remember, Mr. Speaker, how some of us were called a bunch of fools because we attempted to get those facts before the people, to hold it up long enough to study the whole situation, all the implications of Bretton Woods. I just refresh your memory, Mr. Speaker, that after Russia had succeeded in getting the rest of the nations into it, they backed out and have never come into the scheme. We succeeded in putting a millstone around our necks right here in Canada and so did the other nations that allowed themselves to be imposed upon in the same manner. Therefore I say, let us be pretty careful about how we jump into these things. If the minister insists, of course, that this protocol must be ratified by us quickly and without ample opportunity to inquire into the full meaning and implications of it, then the only thing I can say to him is that he will have to take the dreadful responsibility alone, as without a full knowledge of the facts and
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NATO-European Defence Community possibilities involved in it, I am not in conscience joining my group with him in committing Canada to the extended obligations to which this treaty binds us.
If he feels it is essential that the house put its seal of approval on the protocol now, then I warn him that before Canada deposits her ratification with the United States we must make mighty sure that we know every detail of the obligations the Canadian people will have to assume as a consequence of it; and furthermore, as the hon. member for Peel (Mr. Graydon) expressed himself this morning, the Canadian people ought to be made fully aware of just what they are getting into. With that warning, Mr. Speaker, I shall simply have to throw this responsibility right back on the minister's doorstep, as I do not feel that I can commit my group to the support of it at this time, knowing as little about it as we do.


Mr. G. R. Pearkes (Nanaimo):: I welcome this opportunity to take part briefly in this debate on the resolution which is before the house. In the resolution it is stated that one of the objects is to permit the closer association of the countries of western Europe. It was my privilege last December to attend the Council of Europe in Strasbourg where the whole question of a greater unity of the European countries was discussed at very considerable length.
I was pleased to hear the minister state that he considered the so-called functional approach was more acceptable at the present time. When I was speaking in the house on March 11 of this year in the throne speech debate I also mentioned that I considered the functional approach was the only practical approach to this problem at the present time. Briefly the functional approach is that of the setting up of specialized authorities to ensure European co-operation in certain definite and specific fields in which there is a very definite prospect of a solution being found to specific problems. Opposed to that idea is the rather more speedy solution advanced by certain statesmen in France and Italy for the federal approach. The congressmen from the United States who attended the consultative assembly last year seemed to be rather anxious that the federal approach should be adopted. But my impression, which apparently is the same as that of the Secretary of State for External Affairs, is that the functional approach is the only practical one at the present time, and that we must move slowly in this matter.
The countries of Europe have century-old traditions behind them. They are not all bad; it is not all a question of national
(Mr. Low.]

hatreds. There is much national pride in the development of their national cultures and so forth. It is upon those particular aspects of the gradual development in Europe that emphasis is laid. These countries are hesitant about abandoning all that their forefathers have created. They are proud of their national traditions, and they do not consider the work of their fathers as being that of fools and liars. There is an old quotation that when a land forgets its legends, when it sees fears in the past, it is a sign of its decay. Europe is not decaying at the present time.
The minister went on to refer to Germany as being the key to Europe at the present time. I could not agree more with any statement. I certainly do believe that Germany is the key to Europe at the present time. While I was there I heard many statesmen indicate the importance of German unification being brought about. Statesmen from West Germany repeatedly emphasized the goal of German unification. I heard it said that this was an imperative necessity. But those statesmen of West Germany were not prepared to sacrifice the West German republic to soviet Russia in order to bring about unification. They wanted unification brought about along democratic lines rather than along communist lines. The impression I got was that the statesmen of West Germany would rather wait for proper unification to be brought about through democratic processes than to have unification brought about by the communist approach. As the minister said, Russia could withdraw behind Poland and the occupational forces of the United States, France and Great Britain could be withdrawn behind the Rhine, but that would be paramount to handing over Germany to communism. It would create a vacuum in which communism certainly would flourish.
There is no question about the determination of the Germans to eventually have a unified Germany. I heard evidence that some 10 million or 12 million East Germans had been expelled from their country and sent into West Germany. I shall never forget what one statesman of the West German republic said. He told me that their places had been taken in East Germany by Poles and Mongols. You could feel the pent-up determination of that man to one day see those Poles and Mongols removed from the farms of East Germany and those expellees who were living in West Germany returned to the eastern provinces of their country. We must not be led away by the fact that at the present moment West Germany is anxious to work with the other countries of the North Atlantic treaty, with the western powers, and is prepared to forget

unification. They are anxious for unification, but they want the democratic approach to that unification.
Reference has been made to the growth of trade in West Germany. I saw evidence of the way in which new plants have sprung up all through the Ruhr valley from the rubble of factories which were destroyed. No one travelling in that country can help but be impressed by the resilience of the German people. Those people have to live by trade; they have to find markets in the world in which they can sell their manufactured goods.
Reference was made to the possibility of having free elections in Germany. In my opinion it will be difficult to bring about the unification of Germany until free elections can be held in all parts of Germany and in the various sections of Berlin. Evidence was given before a committee of the United Nations in Paris to the effect that at the present time free elections could not be held in East Germany. It was said that that could not be done until the Russian authorities were prepared to allow the leaders of parties other than the communist party to come into East Germany and announce their policies on the public platform. That cannot be done at the present time. Although there are small groups keeping alive democratic ideas in East Germany, the meetings of those groups must be held in secret or they must come into West Germany or western Berlin in order to discuss these matters.
There are two questions regarding this protocol which I should like to have answered. I notice in article I reference is made to the territory of any of the members of the European defence community in Europe. It then goes on to say that an attack on the territory of any member shall be considered an attack against all the parties to the North Atlantic treaty and require necessary action.
I am rather interested in knowing the position at the present time in respect to Turkey. Turkey is a member of the North Atlantic Treaty Organization, but in the main she is an Asiatic power. Any threat to Turkish territory might well be through an Asiatic approach to that land which is most vulnerable in that direction. We know that for some five hundred years Turkey has exercised dominion over many Arabian countries. We know that there are communist satellite states on her eastern border. Would an attack on Turkey developing from Asia be considered as excluded from the provisions of this protocol, or are we to be committed to going to Turkey's assistance if an attack
NATO-European Defence Community should come through Asia? Are we concerned only with the European portion of Turkey? This article states definitely "in Europe". That is one point which I would ask the minister to clear up.
When the minister was referring to Western Germany and our responsibilities to Western Germany he made no reference to Berlin. Berlin of course is entirely separate from Western Germany. It is in a peculiar situation in that it is surrounded by Russian-occupied zones. I would ask the minister to advise the house what our obligations are with respect to the western sector of Berlin where we have very definite connections but quite different from those with regard to Western Germany. I think it is somewhat ambiguous to leave the situation as it is at the present moment.
There was one other remark in the minister's speech that I wanted to mention. He referred to the reorganization of the German army and the supplying of the German forces with armament which he said was defensive. While the intention may be that the armament should be used defensively I think it would be giving a false impression if the statement were let stand that the Germans were only being allowed to rearm with armament of a purely defensive nature. Otherwise one might consider that the sole armament with which the German forces would be equipped might be anti-aircraft artillery and that sort of thing. From published reports, however, we know that the German component of the European army will have such formations as panzer divisions; and while panzer divisions may be used entirely defensively nobody could possibly say that they are defensive armament. I wanted to raise that point.
I think we must also realize the fact that Germany has no army at the present time and has not had for a period of seven years. Armies cannot be created overnight even though there is a core of officers who saw active service seven years ago. It is going to take some time before a reorganized German army can be ready to take the field or can be effective in any way. Personally I feel that the immediate danger of the next two or three years so far as the possibility of a Russian advance through Europe is concerned outweighs for the time being at least the dangers which might be foreseen in the creation of a German army.
I do not think Germany has any thought of embarking upon another Franco-Pruscian war or of initiating operations against France or any other European country. At the present time her feelings are far more hostile toward Russia than toward any other European
3330	HOUSE OF
NATO-European Defence Community country. Therefore I feel there is no reason for delay in approving this protocol because such delay might be misinterpreted to mean that Canada was not anxious to carry out all her commitments under the North Atlantic Treaty Organization or from the point of view of the general desire to maintain the peace of the world. If we have wise statesmanship over the years I think we can ward off the fear that in the far distant future Germany might have aggressive designs against other European countries.
If we always keep before us the objective of the resolution, namely the ensuring of closer association of the countries of western Europe, then we can avoid that danger. We need not cherish the suspicions that exist at the present time because if there is closer association between the countries of western Europe, which can be brought about by wise statesmanship, the danger of future wars will recede.


William Joseph Browne: Mr. Speaker, sitting here today as one who is not a member of the external affairs committee but as one who is deeply interested in the subject before the house, it seems to me that hon. members are showing great discretion in the discussion of this matter. I wish to support the hon. member for Peel (Mr. Graydon) and the hon. member for Nanaimo (Mr. Pearkes) in the attitude they have taken in favour of the resolution, though I think I can understand the. motives at the back of the minds of the hon. member for Rosetown-Biggar (Mr. Cold-well) and the hon. member for Peace River (Mr. Low) in urging upon the minister that every precaution should be taken to see that we are not the first to deposit ratification. As the old saying goes, be not the last the old coat to take off nor yet the first the new one to put on. They do not want to see us rush to deposit ratification.
I listened to the hon. member for Peace River speak of the fears in his mind of the danger of a reorganized Germany. He was, I think, following somewhat in the footsteps of the hon. member for Rosetown-Biggar, who spoke about the nazis. It seems to me that these hon. members are not cognizant of the great change that has taken place in Western Germany and in Europe generally since the war. Fascism was overthrown not so much by war as by the will of the people concerned. The people did not want fascism. They did not want a tyranny over them. The people in post-war Germany did not want a tyranny over them. We have in both Italy and Germany today Christian democratic governments with which the western nations can easily work in harmony. It is because of


the presence in Germany today of a Christian democratic government with a Christian prime minister that we are being asked to support the resolution.
I think we must recognize that Germany stands in the front line if there is1 any danger from Russia, and I am sure the hon. member for Peace River will recognize that the danger from Russia is greater than the danger from Germany at the present time. I do not think anybody can deny that. We know that the professed aim of the Russian government is world domination, as was the professed aim of Hitler and nazi Germany fifteen years ago. Russia came out of the war far greater and far stronger than Germany ever was. Russia gained far more territory than Hitler ever had in mind to gain. Therefore Russia is the real enemy, and it seems to me that the hon. member, looking at the reality of the situation and recognizing that however distasteful it may be to link up with a former enemy

not only link up but guarantee protection

will see this is the only thing we can do. We have to choose one way or the other. As the hon. member for Nanaimo (Mr. Pearkes) says, we cannot leave the centre of Europe a vacuum. If we do the power of Russia will spread into Germany; and if we permitted German intelligence, manpower and industrial power to be added to the present power of Russia, then Russia would be invincible. If the power of Japan could be added to the power of China and Russia you would have the same situation in the east.
It is fortunate for the western countries that these European countries have the common culture and common traditions about which the Secretary of State for External Affairs (Mr. Pearson) speaks. They have a common Christian culture. It is fortunate for us today, too, that we have both Japan and Germany on the side of the western democracies, adopting the principles that we advocate as the most suitable form of government. Some hon. members may remember that nearly three years ago I said that we should have both Japan and Germany on our side. It is a blessing from the Almighty for which we ought to be thankful that these two nations are on our side and not with the Russians. The nazi government was a pagan government; the Russian government is a pagan government, and therefore, directly opposed to our traditions, the cultural ideas in our western democracies, and to our form of government which comes from respect for the individual, something which does not exist in Russia.
Germany is, as I say, in the first line of defence. If there is to be an attack Germany must meet it. To do so she must

have forces. It is impossible for the Americans, the Canadians and other smaller countries to defend a great country like Germany from the powerful forces which we are told Russia could mobilize in a very short time. As the hon. member for Nanaimo (Mr. Pearkes) has said, there is no German army in existence today. There is really nothing for the hon. member for Peace River (Mr. Low) to fear. What we have to fear is what everybody is fearing; that the Russians may feel they are in a position to attack and conquer. Fortunately the organization that has taken place in the last year or two under the leadership of General Eisenhower and the United Nations seems to have put them off that idea. Let us hope this protocol will be speedily ratified by all the nations so Germany will be reorganized and become part of the common defence of Europe and the western democracies as soon as possible.
Germany has made a remarkable recovery, similar to the recovery made by Japan. It is really remarkable to notice how these two countries have come up from defeat and the results of the severe bombing attacks they received, which practically destroyed a high percentage of their industrial capacity. German industry is now in such a position that people who attended the international trade fair in Toronto the other day were full of admiration for the German exhibit which they said was the best at the show.
What we have to decide today is whether we are going to support Germany entering into the European defence community and joining us in a defence contract against possible communist imperialist aggression. That is the problem in a nutshell, and it seems to me it is very simple. There is only one decision we can make. The hon. member for Peace River and the hon. member for Rosetown-Biggar do not wish us to make the decision right away. They say let us wait; let us see what the other countries are going to do. Well, it is either right or wrong, and it seems to me to be right so the sooner we do it the better. Let us who claim credit for having initiated the North Atlantic Treaty Organization, and all the good things that have come from that organization, go ahead. Why should we hesitate to be the first to approve this protocol?


Mr. J. M. Macdonnell (Greenwood):: Mr. Speaker, I just want to add a brief word.
It seems to me this situation is terribly clear, terribly simple and terribly important. What is the situation? The situation as I see it is that we and other nations have banded ourselves together in the hope that we may still
17, 1952	3331
NATO-European Defence Community have time to become strong enough to deter the Russians from attacking us. Now we are asked to take an action the aim of which I suppose, if you analyse it accurately, is to do the best we can to get Germany on our side rather than the other side. I suppose that if Germany is attacked today we are bound to defend her. We have troops in Germany; our own brigade is there.
Now, let us not fool ourselves that the Germans have come to love us. Of course they have not come to love us. The question is whether West Germany will find it in her interests to be on our side rather than the other side. We know that they hate communism, or we believe that they hate communism; nevertheless those who had to make this decision

Acheson, Eden, and Schuman -did not find it easy, I am sure. They found it terribly difficult, and I think all the evidence shows that. Nevertheless, having calculated1 the risk these men-able men whom we trust-with all the information available decided to take the course which has been decided upon,
We are now asked to authorize our government to go ahead. We are not asking it to rush in tomorrow, but I deprecate more than I can say the idea that we should hang back and let the European countries go first. Where would we be if the United States had done that for the last year or two?
As I said, I do not think we should tell the Secretary of State for External Affairs (Mr. Pearson) that he should rush off and mail this protocol today or do whatever is necessary by way of depositing it, but it seems to me most unfortunate that anything should be said in this house which can be used to show there is hesitation. We are committed now, and the time for hesitation has long gone by as far as I can see. It would seem to me unfortunate beyond words if anything said in this country could be used, as it will be used in Russia, to show that our people are half-hearted, that they have been ready to talk but that when the issue comes they are not ready to act. That can be used in the German bundestag where this is being fought out at the moment.
I have, myself, the greatest admiration for Adenauer. I do not know whether he hates or loves us, but he is a stout fellow trying to get this thing through. He is not having an easy time. It seems to me that any word of hesitation in this house is going to be surely magnified and used by the opponents of this measure in the West German parliament. We are not acting in any spirit of chauvinism; we have had enough war, and we know what it is like. It is not a very thrilling
3332	HOUSE OF
NATO-European Defence Community adventure, and it will be worse the next time; but we are doing our best, and for goodness sake do not let us face both ways.


Mr. Deputy Speaker:: Order. If the minister speaks now, he will close the debate.


Lester Bowles Pearson: Mr. Speaker, I think all hon. members will agree we have had a good discussion which is worthy of the importance of this matter. I have a few words to say in concluding the discussion because I think the house would expect me to try to deal with some of the points that have been raised.
In the first place, Mr. Speaker, I would like to refer to one or two specific points raised by the hon. member for Nanaimo (Mr. Pearkes). He wanted to know what the position of Turkey would be under these NATO guarantees and the European defence community guarantee. He was worried about the use of the word "Europe" in the article of the protocol referring to that guarantee. If he had read a little further in that article he would have seen that the guarantee extends to the territory of any of the members of the European defence community in Europe or an.y area described in article 6(1) of the North Atlantic treaty. That reciprocal guarantee is also in the European defence community treaty.
If he were then to turn to article 6(1) of the North Atlantic treaty, an article which was modified by the admission of Turkey and Greece, he would discover a guarantee in that treaty which now extends to the territory of any of the parties in Europe or North America, to the Algerian departments of France and to the territory of Turkey. Those words were added when Turkey joined the North Atlantic pact, so it is quite clear the guarantee we extend to those countries extends to their whole metropolitan area. The reason the word "Europe" was used in the first place was to exclude from the guarantee the colonial territories of some of the signatory powers.
Then the hon. member wanted to know what the situation was in regard to Berlin, and that is a very important point. I do not think I mentioned this morning that Berlin is not included in the territory covered by the peace contract. There are references, however, to Berlin in the contract and in certain supplementary exchanges which will be found attached to the contract. The interest of the three western powers in Berlin was affirmed in September, 1950, in a tripartite security guarantee which they gave at that time. This guarantee was later reaffirmed at a North Atlantic council meeting, and again on the signature of the European defence


community treaty in Paris on May 27, in the following terms:
They-
That is the three governments.
-therefore reaffirm that they will treat any attack against Berlin from any quarter as an attack upon their forces and themselves.
I believe it is quite clear now that any attack on Berlin from any quarter would call into effect the guarantee so far as the three main guarantors are concerned; that is recognized in the exchanges that have recently taken place.


Solon Earl Low: Is the guarantee limited to the three?


Lester Bowles Pearson: We have accepted ours, of course, under the original treaty. The effect of an attack on the occupying powers in Germany, including Berlin, would be an attack on those powers, so we are included to that extent.


Gordon Graydon: It is not affected by this legislation now?


Lester Bowles Pearson: Any obligation we may have in respect of Berlin, Mr. Speaker, as I understand it, is not affected by this particular peace contract.


Gordon Graydon: Only by the original guarantee.


Lester Bowles Pearson: By the original guarantee, and by our association with the tripartite declaration of 1950.
One other point was raised by the hon. member for Nanaimo. He called my attention to the fact that I had given the impression that the German contingent of the European defence forces would be allowed to use defensive armaments only. If I gave that impression it was wrong because, as he pointed out, the defensive use of weapons is one thing but a defensive weapon is another. The German contingent with the European defence forces, if and when they are constituted, would of course be armed with the same weapons as the other contingents of that army.
If I may revert to some of the more general observations that were made, I should like to say a word first about the very interesting and constructive statement of the hon. member for Peel (Mr. Graydon). He made a plea, which was echoed by other speakers, that we should tell the people what we are doing in connection with foreign affairs, a plea which he has made before in this house and one to which no hon. member would wish to take exception. I agree that we should tell the people what we are doing in matters of this kind which are so important to them and to their destiny. I believe that, by and large,

this government has done its best to make the public aware of not only what it is doing but also why it is trying to do certain things in the field of external relations.
I believe there was an implied criticism, and I am not quarrelling with it, on the part of the member for Peel and more specifically on the part of the member for Peace River (Mr. Low), that a protocol document so important as this, with such far-reaching consequences for peace or war, should have been referred for detailed discussion to the standing committee on external affairs. The hon. member referred to this aspect of the question several times and to the fact that we were now ratifying this protocol. The constitutional position, of course, is clear. Ratification is the action of the government; but it has become the constitutional practice, and it is a good practice, that that executive action of the government should not be discharged until the legislature has had a chance to express its approval or disapproval. What we are doing today is giving the legislature a chance to express its opinion. But with all respect, I do not feel that we are rushing this parliament into approval or disapproval, as the hon. member for Peace River rather indicated.
I have before me the transcript of the hearings of the standing committee on external affairs. In so far as the members of that committee are concerned-and I appreciate that does not include all the membership of the house-there were three meetings this session, at which I was present, which were devoted to a general discussion of international affairs. During that general discussion a good deal of time was devoted to NATO. This protocol which we have before us was also referred to by me in speeches in this house. I mentioned it when I came back from the North Atlantic council meeting in Lisbon, and indeed the whole matter was made public some weeks ago, before we had these hearings in the standing committee on external affairs. An opportunity was given, therefore, at that time for as exhaustive an examination as any member of the standing committee on external affairs desired to make, by addressing questions to me and to the officials of the department who would be familiar with all the details of the agreements. There is certainly no desire on the part of the government, however, to rush parliament into approval or disapproval of this treaty or indeed to rush into executive action if approval is given.
I was quite interested in the concluding observation of the hon. member for Greenwood (Mr. Macdonnell). I agree that we should not necessarily hang back in doing a good deed, if this is a good deed, and that we should certainly do nothing by our inaction
NATO-European Defence Community or our hesitancy-if we feel that this is a good move in principle-to give those who are opposed to it the argument that we are lukewarm and therefore there is no reason for them to be any warmer. Nevertheless I think it is a matter of timing, and that it would be quite appropriate for the government, if the house approves of this protocol, to postpone the deposit of its ratification until we see how the situation works out in other countries which are just as deeply concerned with this matter as we are. If there had been a possibility of considering this matter a month or two from now, a discussion of this protocol at that time might have been more realistic in the light of developments in other parts of the world. I for one would have welcomed the postponement of such a discussion. But, as was pointed out by the hon. member for Rosetown-Biggar (Mr. Coldwell), if we do not take action now we might find ourselves later in the position of being the only member of the North Atlantic Treaty Organization, or the European defence community, which had not taken steps to bring this protocol into effect. I think that is a responsibility no hon. member of this house who favours this protocol would wish to take. So the actual act of ratification-that is the deposit of the instrument of ratification-in accord with appropriate constitutional practice, will be performed by the government in the light of circumstances if this house approves of the protocol itself.
To get back to the speech made by the hon. member for Peel (Mr. Graydon), may I say that he made what to me were some extremely interesting general observations on the line we should follow in respect of the communist attitude toward the German and other related problems. He laid down as a policy, which has been supported in other parts of the house and in other free countries, that we should not be hesitant about a protocol of this kind or about any aspect of policy in resisting communist aggression if we think that is the right policy. As he put it, I think he said we should lay down a line which cannot be crossed with impunity by any communist aggressor. Later in his statement he said we should make sure that everybody is going to keep the peace. In other words, nobody is to be permitted to cross that line. He said it should be made quite clear to a potential aggressor that if he tries to do so he will be met with the necessary strength to throw him back.
I must say that extremely decisive and definite policy has its attractions, but it also has its difficulties and indeed its dangers; because when you start on a policy of that kind-that we must lay down a line and
3334	HOUSE OF
NATO-European Defence Community let a potential aggressor know that if he crosses that line there will be trouble-you are at once faced with an argument as to where that line should be and what exactly would be the type of action to be taken if the aggressor did cross the line, in the event that there is agreement on lines all over the world.
My own feeling, Mr. Speaker, is that while there are vital sectors of the front which if they are attacked must be defended, and where the attack must be met at once by collective and armed resistance, we would be getting ourselves into a great deal of trouble if we tried to extend and define those vital sectors, by agreement at this time, all over the world.
In supporting his view the hon. member for Peel suggested that in recent years we were in danger of falling victim to what he called a gigantic bluff on the part of communist imperialists. I think there is some truth in that suggestion, because naturally an aggressor of that kind would try to bluff in order to get his way inasmuch as it is sometimes cheaper to bluff than it is to fight. At the same time it is bluffing for extremely high stakes; and before we organize armed reaction against what we consider to be bluff, we had better be extremely certain that it is bluff; and we had better be certain in our own minds that, if it is not bluff, it is something we should accept as the gauge of battle. These questions are not easy to solve and they are not always easy even to define.
The hon. member for Peel asked me some questions about Germany's financial contribution to defence under the European defence community treaty. He was also preoccupied, as I am sure we all are, with the trade position between East Germany and West Germany. As to the first question, in the agreements we talked about this morning there are clauses which provide that Germany will make its proper contribution, in financial terms, to western defence; and that contribution at present has been established by agreement with the federal republic at 850 million deutsche marks a month-and that is a substantial figure-which will be provided under a formula which for the time being at least has been determined.


Gordon Graydon: What is that amount in dollars?


Lester Bowles Pearson: It would be something between $2 billion and $3 billion, I think, for the first year. I am not sure of the exact figure.


Gordon Graydon: That is per year?


Lester Bowles Pearson: That would be at the rate of 850 million deutsche marks per month until 

further arrangements have been made for the future. That is to be divided between a contribution for the upkeep of NATO forces on German territory and the building up of German forces for the European defence community.
As to trade questions, since May, 1948, the economic exploitation by the Soviet union of the east zone of Germany has become somewhat less thorough that it was previously, and that area is now developing along the normal lines of a Soviet satellite state. Trade between East Germany and the eastern European countries is increasing. In 1951 some 85 per cent of East Germany's trade was said to be with the Soviet bloc. On May 6 of this year the East and West German authorities signed a new agreement for an exchange of goods to the value of about $25 million. West Germany was to deliver steel, iron, metal products and chemicals in exchange for agricultural products, timber, fuels and textiles.
On the question of strategic materials-and some of these materials would seem to be quite strategic-there is general agreement among the free countries of the world not to export such materials to the U.S.S.R. and its satellites where these might increase the Soviet war potential. But that understanding in the case of a country like Western Germany must be considered in relation to the essential requirements of trade between the two parts of Germany, if West Germany is to remain stable and prosperous. It should also be considered in relation to the provisions of the United States mutual assistance act against the export of certain commodities to communist countries by countries receiving military, financial or economic aid from the United States.


Gordon Graydon: If I may, I should like to ask the minister a question. I am sorry to interrupt him and I do so only because this subject is extremely interesting. From the standpoint of the free powers and from the point of view of trade and the strategic movement of materials, is the border line between East Germany and West Germany now regarded as the line separating the iron curtain countries from the free powers?


Lester Bowles Pearson: I would think it would probably be reasonable to conclude that this sinister but mythical iron curtain lies along the line between East and West Germany, with an island of freedom and democracy in west Berlin.
The hon. member for Peace River (Mr. Low) in his statement made some references to trade and economic questions. He warned

us against the reimposition of trade restrictions on Germany as a result of these agreements. He suggested that one of the reasons -and I do not want to misinterpret what he said-Germany had to break out in aggressive warfare in 1939 was on account of these trade restrictions, and that we should be extremely careful not to reimpose them on Germany at this time. All I have to say in regard to that suggestion, Mr. Speaker, is that if I am correct in my recollection there was no other country in Europe in 1939 which imposed tighter and more exclusive trade restrictions on itself and its neighbours than nazi Germany. I would echo the hope that that kind of trade restriction policy, which is always associated with the name of Herr Schacht, should not be restored or reimposed on Germany or indeed on any other country.
The hon. member for Rosetown-Biggar, who views this protocol and its implications and the developments which surround it with mixed feelings, as indeed I suppose most of us do, felt that in the discussion of these instruments and in the length of time the west has taken to bring them to signature, the Russians have exploited the situation to win a propaganda victory. I am not so sure of that, Mr. Speaker, because I have studied these exchanges, as hon. members have, and at least one Russian note has made it clear beyond doubt to the Germans and to the rest of us that the Russian price of German unity is a restored and rearmed Germany, with few restrictions on the use of its arms, and free except in respect of the right to join the west in a system of collective defence.


Major James William Coldwell: They have played up to the nationalism of the Germans.


Lester Bowles Pearson: They have played up to the nationalism of the Germans, but they have made it quite clear to the Germans that the price of unification is a price that includes not only nationalism but a restriction on the German right to make arrangements with the friendly and democratic west. And far more important than this in unmasking the Russian aims, these Russian notes have made it quite clear to the Germans that the Oder-Neisse boundary remains. That is another price which the Germans would have to pay for the Russian type of unification, whereas in the exchanges between Adenauer and the west on these matters the three western powers have always been careful to make clear that the permanent boundaries of Germany should be among the matters reserved for final consideration and decision at the general peace conference.
The hon. member for Rosetown-Biggar said we should never be reluctant to negotiate
17, 1952	3335
NATO-European Defence Community with the Russians over Germany, or indeed over any other matter; that we on the western side, because we distrust their intentions and doubt their sincerity, should not refuse to discuss Germany with them. Up to a point I find myself in agreement with that position, as indeed I think the foreign ministers of other countries do. But it is one thing to agree to negotiate with the Russians on an agenda which is clear and practical, and which has previously been determined so that if you could not obtain results you could at least break off. It is something else to meet the Russians and to become involved in long propaganda discussions which on the Russian side would be used for the purpose of delaying ratification which I think now is probably the cardinal objective of their foreign policy.


Gordon Graydon: They want to get us on international tanglefoot.


Lester Bowles Pearson: Possibly the western powers are wise in looking with some caution on these invitations to discussions. Nevertheless, having said that I should add as I said before that I hope it will be possible to press ahead with ratification and at the same time not refuse any reasonable and practicable offer for discussion.
The hon. member for Rosetown-Biggar emphasized that there were a great many sections of opinion in Germany and outside Germany who were worried about these agreements, and he felt that we should be very careful not to go ahead with them until we knew what the Germans themselves wished. I agree, but that is what we are trying to find out from now on. We are trying to find out what the Germans, the French, the British and the Americans, and indeed all the peoples concerned, do wish- especially the Germans. That is the purpose for instance of submitting these documents to the West German parliament for ratification.
When we talk about what the Germans wish, all we know now is that the government which is in control of Western Germany as a result of free elections has agreed to this policy, and that all the steps along the road to the signature of these treaties by the West Germans have been taken after discussion with Chancellor Adenauer and his government who do represent at the present time the West German people. If he loses their support and the parliament refuses to ratify these agreements, then everything is off and we have to start all over again. There is nothing that I can see to suggest that these documents have been forced upon a reluctant people, because every single legislature concerned with every single
3338	HOUSE OF
NATO-European Defence Community document has to ratify it, and if one is unable to ratify any single document, then we must try to find a new approach to this vital problem of the association of Germany with western defence.


Gordon Graydon: I understand there are 47 separate ratifications.


Lester Bowles Pearson: There will be a great many, and I think there is not much likelihood of any government being rushed into an action which it does not desire to take as a result of pressure from outside, or indeed pressure from minorities inside.
There is not much more I can add now to what has already been said, Mr. Speaker. I was very interested and impressed by the observations of the hon. member for Greenwood (Mr. Macdonnell) when he said, "We are not entering into this arrangement because we expect the Germans or anybody else to love us as a result of it." We must not fool ourselves in that respect. As a matter of fact, a few years ago a wise editor said: "Don't try to make your neighbour love you; it will only make him uncomfortable. Try to win his respect." I suggest that the best basis for developing the association of North Atlantic countries with Germany is the basis of mutual respect, and I think it is fair to say it is on that basis that these documents, including this protocol, have been negotiated.
I agree that we need not force this situation, but I agree also that we should take advantage of it and this is the time to do so.
The hon. member for Peace River (Mr. Low) said that he would not be able to take the responsibility of approving this protocol because he did not feel that sufficient time had been given to consider it, and that he would leave that responsibility to me. Of course, Mr. Speaker, it is not any personal responsibility of mine; it is the responsibility of the government, and indeed it is the responsibility of parliament to accept or reject this resolution. But if it were my personal responsibility I would be very glad indeed to take it on this occasion because I think that, with all its risks, with all its difficulties, and with all its uncertainties this is a move toward peace, especially peace in Europe, and a peace in a Europe with which will be associated the free democracies across the Atlantic. Therefore if I were forced into that position I would not be reluctant to take this responsibility. But I would not be happy, as a Canadian, to take any responsibility for defeating a move so important, as I see it, to our own safety and to peace as the building up of the European defence community, including those two old opponents, France and Germany, and the association of that community with the strongest deterrent we


now have to prevent aggression, namely the North Atlantic Treaty Organization.
Motion (Mr. Pearson) agreed to.



WAR RISKS INSURANCE


Hon. Alphonse Fournier (for the Minister of Finance) moved: the second reading of Bill No. 336, respecting marine and aviation war risks insurance and reinsurance agreements.


James MacKerras Macdonnell: Is the parliamentary assistant going to make a statement?


Mr. James Sinclair (Parliamentary Assisi-ant to the Minister of Finance):: 
James MacKerras Macdonnell: I understand it was said in the previous debate that the margin in connection with ships was sufficient to pay the losses on property in the United Kingdom.


James Sinclair: War Risks Insurance
a difference between shipping and air transport. If hostilities should break out in Europe and four or five T.C.A. aircraft were there, they could be back in Canada the next morning. However, if Canadian ships were in Europe at the outbreak of hostilities they would be caught in those harbours without any insurance protection.
I think I have covered the principal points raised during the resolution stage. If it is desired I could place this little table from the United Kingdom ministry of transport on Hansard.


Mr. Speaker:: Is it agreed that the parliamentary assistant have permission to place the table on Hansard?


Some hon. Members:: Agreed.


James Sinclair: The table follows:
(Figures supplied by U.K. Ministry of Transport) U.K. Marine War Risk Schemes-World war II
as at Mar. 31/52 (in million pounds) British Foreign
A. Ships	hulls	hulls	TotalPremiums received	
Claims paid or out-	308	188	496standing 	284	137	421Balance + or deficit - ..	+24	+51	+75B.	Cargo (All classes-to and from U.K. including cross voyages)Premiums received	
154Claims paid and outstanding	
118Balance + or deficit - ..	-(-36C.	Total net premium revenue for ship and cargo insurance 4- 111


James MacKerras Macdonnell: Subject to one question I shall raise before I take my seat I think the parliamentary assistant, expanding what the minister said when we were at the resolution stage, has made very clear the need for some measure of this kind. He has explained that in the last war we relied on the facilities of Great Britain, and I think he has made clear the advantages which will accrue from being able to deal with the matter ourselves here at home. He has given certain interesting facts, and in particular has indicated the necessity of a measure of this kind by telling us that the private underwriters are not prepared to bear the risks of war. Of course it is perfectly clear that if war comes we must have immediately available some method of insurance whereby our ships can go to sea. He has given us a satisfactory reference to the attitude of the ship owners. On all that it

seems that what the house has before it is prima facie satisfactory.
My objection to this legislation, and it goes to the whole root of the matter, is that this is not legislation at all but is merely permission to the government to legislate. What I mean is that we just have a couple of omnibus clauses-I will read them in a moment- which give the governor in council the power to do anything in connection with this whole area of our business life. I have tried to examine the corresponding British act. I have tried to follow the British legislation in the time available, and I have here the act of 1939. Subject to what the parliamentary assistant may say later, so far as I can discover their legislation, while it has been amended, is still outstanding; and compared with the measure now before us their act, while it does not go into a great deal of detail, does set out certain rights of the parties with very much more particularity than is the case here.
Indeed, this measure goes beyond what it seems to me we ordinarily find even in measures which give a great deal of power to the government; because I have noticed that the governor in council, in addition to being empowered to do various other things, is empowered in section 4 to define a lot of things. My recollection is that even in legislation which gives a great deal of power to the governor in council the tendency has been to have a pretty broad section defining certain things, which in itself is some safeguard. I shall now read the operative parts of sections 3 and 4, which I think really are the gist of the bill. The other clauses refer to dealing with money that comes into the minister's hands, to audit, to laying copies of agreements before parliament and so on, but the two operative sections are 3 and 4. Section 3 reads as follows:
The minister may enter into an agreement, in such form and containing such terms and conditions as are prescribed by the regulations or otherwise approved by the governor in council, with any person or association of persons for the insurance or reinsurance by him against any or all war risks of (a) aircraft: (b) vessels; or (c) cargo.
I shall not read all of section 4 but it reads in part as follows:
The governor in council may make regulations for carrying the purposes and provisions of this act into effect and, without restricting the generality of the foregoing, may make regulations . . .
And so on. I do not think I need to read the details because I think what I have read gives enough to underline the point I am making, namely that, as I said a moment ago, this is not really legislation at all. It is hardly an exaggeration to say that it merely

says to the governor in council: You go off and make any legislation you like. There are a few definitions of war risks, minister- they had to define him-and certain other things, and then we come to the two sections which, as I say, give the whole power to the governor in council which, practically speaking, means to the minister.
I am not going to labour the point. The point is there and is clear. It seems to me it is a most regrettable kind of legislation, and we are getting a great deal of it. I can understand the attraction of it. It is so easy to draw. I am sure it must be the delight of the draftsmen simply to say that the governor in council can make regulations and give ample power to the ministers. At this rate we will really get our legislation so abbreviated that it can all be put into a clause or two. Therefore, having made this point clearly, although perhaps not as fully as I might have done, I move, seconded by the hon. member for Souris (Mr. Ross):
That this bill be not now read a second time but that the subject matter thereof be referred to the standing committee on banking and commerce.


Mr. Donald M. Fleming (Eglinion):: I
should like to make an observation. It is quite clear from our experience with the reference of legislation to committees that legislation is in better form in most cases when it comes back to the house. Here is one case where a committee is likely to be very helpful in making recommendations as to the kind of legislation that parliament should adopt in a somewhat new field. What has been said by the hon. member for Greenwood (Mr. Macdonnell) is quite sound. After all the bill is an enabling measure. It does very little more than confer powers on the governor in council. We are not in wartime now. We want to provide for situations that, unhappily, may arise unexpectedly, but surely we are not in such a position that we need to pass blank cheque legislation of this kind. I urge the government to give serious consideration to the suggestion embodied in the amendment. I think my colleague has made a most helpful suggestion.


James Sinclair: With respect to the observations made about the legislation conferring great powers on the cabinet to make regulations, if this were the type of bill that applied to the people of Canada by some compulsion such criticism would have some point, but it must be remembered that the bill is drawn up at the request of the ship owners themselves.


James MacKerras Macdonnell: May I ask
a question?
War Risks Insurance


James Sinclair: Yes.


James MacKerras Macdonnell: Will there not be compulsion on ship owners?


James Sinclair: No. Whether or not ship owners decide to join the pool is entirely a matter of decision for them. In the last war there were some ship owners who did not insure. They took a chance, although it was a very big chance. There is no compulsion on the ship owners at all. The Canadian Shipowners Mutual Insurance Company, the bill concerning which is now before the Senate, is a co-operative association to which they may or may not belong according to their desire. If the ship owners find that the government's terms are too onerous they can protest or withdraw. The government certainly does not intend to lose the taxpayers' money under this measure. The British record shows that they will not from that point of view.
The other thing is that stand-by legislation such as this, which is put on the statute books to be ready for use in case of need at the outbreak of hostilities, because of its very nature cannot be very specific. We do not know under what circumstances-we hope never-hostilities may break out. Let me direct the hon. member's attention to one clause. He mentioned the British act of 1939. Section 2 (f) (iii) of the bill covers a ship registered in any country designated by the governor in council, whether or not it is owned, chartered or otherwise controlled by a Canadian. One might say that these are extraordinarily wide powers because we can cover any ship whether or not it is owned or chartered by a Canadian. That is the consequence of the unexpected experience the British had at the outbreak of the last war with respect to the collapse of Norway. With the Norwegian merchant marine on the high seas the British took it over. Some of us can remember Churchill's famous declaration to the British people that if by any chance the island should fall they would fight on in the dominions across the seas, which would also involve such a transfer.
There is certainly no objection whatsoever to the bill going to the banking and commerce committee after second reading when the principle of the bill has been approved. That committee is sitting tomorrow, and we will gladly refer the bill to it.


Mr. George A. Drew (Leader of the Opposition):: Mr. Speaker, would it- not be wise to have this go to the banking and commerce committee so we could have the
3340

War Risks Insurance
advantage of recommendations from that committee before the principle is dealt with? It does not seem to me that anything would be delayed by referring it now to the banking and commerce committee. Many of the questions could be answered very simply by that process.
It has been explained that this bill is actually being presented at the request of the ship owners, and that being the case it would be very easy to place before the committee the recommendations upon which such a bill was prepared. There would be an opportunity to question some of those who are pressing for a bill of this kind.
Before I finish what I have to say I would simply ask, now that the minister is here, if it could not be agreed that this bill be referred to the banking and commerce committee.


Hon. Douglas Abbott (Minister of Finance):: As my hon. friend the leader of the opposition (Mr. Drew) knows, it is a very exceptional move to refer the principle of a bill to the banking and commerce committee. The usual practice is to refer the bill after second reading. The principle of this bill is that the government will provide enabling legislation to permit these clubs or associations of owners to obtain war risk insurance. I see no reason why there should be any departure from the generally accepted rule that the house should decide on the principle of the bill, and I would be quite happy to have it referred to the banking and commerce committee at that stage. However, it is only in the most exceptional circumstances that the house refers the subject matter of a bill to the committee. The government must take the responsibility for bringing in the bill and recommending the principle on which it is based.
I would suggest that unless there is some reason produced now which has not so far been produced, we should give the bill second reading. I understand that my parliamentary assistant has advised the house that we would be very happy to have the details of the bill referred to the banking and commerce committee where the maritime officials and others can appear and explain its provisions.


George Alexander Drew: Before the minister came in the point that had been under discussion was the nature of this bill, not merely in so far as it applies to war risks as a principle, but also the principle of dealing with a measure of this kind by provision for such legislation

by order in council. If it is clearly understood that the only principle that is accepted in giving this bill second reading is the principle of the adoption of a measure dealing with war risk insurance and that the form of the bill both in regard to the actual wording and the method by which it is to be put into effect-that is by order in council or a more complete statutory provision- remains open, there would be no objection to giving it second reading.


Douglas Charles Abbott: The principle of the bill is that we are setting up machinery for war risk insurance. As to how wide the terms are, that is a matter for the banking and commerce committee to consider and make recommendations upon. I should think they would be quite free to do so.


James MacKerras Macdonnell: In the light of the statement by the minister I will withdraw my amendment.


Mr. Speaker:: Is it the pleasure of the house that the amendment be dropped?


Some hon. Members:: Agreed.


Mr. Speaker:: Amendment withdrawn.


[Stage Direction]
Motion agreed to, bill read the second time and referred to the standing committee on banking and commerce.


Douglas Charles Abbott: the second reading of Bill No. 279, to amend the Industrial Development Bank Act.
He said: Perhaps I should make a brief statement with respect to this bill; and before explaining in detail the specific purposes of the bill perhaps it would be helpful if I were first to say a word about the industrial development bank itself and the record of its operations to date.
The house will recall that this bank was established under the authority of the Industrial Development Bank Act, which was passed on August 15, 1944. Section 34 of that act provided for its coming into force by proclamation, and the section empowering the bank to make loans and investments was not proclaimed in force until November 1, 1944. The bank has therefore been operating for a little over seven years..
The purpose parliament had in mind in setting up the bank was to fill what was believed to be a gap in the Canadian financial system. As everyone knows we have a highly efficient banking system, but it is designed primarily to supply short-term commercial

credit rather than credit for a long or even intermediate term. Furthermore, while it is possible for many industrial enterprises to obtain intermediate or long-term credit from other types of financial institutions, such as insurance companies or by floating bond or stock issues in the public market, there are other enterprises which because of their small size or because they have not a long record' of satisfactory earnings or are not well known findj it difficult and unduly expensive if not quite impossible to tap these sources of capital funds.
It was therefore to help fill this gap and make it possible particularly for small and moderate-sized enterprises to obtain funds needed to get under way or to finance expansion, that the bank was set up. To provide it with efficient management, it was established as a subsidiary of the Bank of Canada. It was given an authorized capital of $25 million to be subscribed by the Bank of Canada, and was also given the power to raise further funds up to three times the amount of its capital and reserve by the sale of bonds or debentures either to the Bank of Canada or otherwise.
Its president is the governor of the Bank of Canada, and it has a board of directors and an executive committee of the same membership as the board of directors and executive committee of the Bank of Canada. Its general manager is Mr. S. R. Noble, a former assistant general manager of the Royal Bank of Canada, and a man of long experience in the commercial banking field.
Under the act the bank is given power to extend financial assistance, in the form of loan or guarantee or purchase of stock, bonds or debentures, etc., to persons engaged in, or about to engage in, industrial enterprises in Canada: (1) if, in the opinion of the bank, the amount of capital invested or to be invested by the owners is such as to afford the bank reasonable protection; and (2) if, in the opinion of the bank, the credit would not otherwise be available on reasonable terms and conditions. An industrial enterprise is defined to mean a business in which the manufacture, processing or refrigeration of goods, wares and merchandise or the building, alteration or repair of ships or vessels or the generating or distributing of electricity is carried on.
Industrial Development Bank Act
There were some in 1944 who were sceptical of the need of such an institution and doubtful whether it would serve any useful purpose. There were others who were worried about the dangers of a state institution of this type making unsound loans and incurring heavy losses. It was realized, of course, that the type of lending activity which was envisaged would necessarily be attended with something more than the normal commercial measure of risk, but it was believed that it would be possible to maintain the bank on a self-supporting basis.
What has been the record during these past few years? Personally I think it is a record in which we have every reason to take pride. That record has, in my opinion, demonstrated the need for such an institution and has shown that the bank has been able to perform a very important public function and conduct itself on a self-supporting basis. There are, no doubt, questions of detail which may better be answered in committee, but perhaps I may illustrate the general conclusions I have just stated by reference to a few statistical facts.
Since the start of its operations and up to March 31, 1952, the bank has authorized 995 loans, investments or guarantees for a total amount of $75,322,971. As at March 31, last, there were 569 current authorizations for a net amount of $41,160,509. Total disbursements on loans and investments at March 31 amounted to $55,062,206, of which there had been paid back something over $13 million, leaving approximately $32 million still outstanding.
Of the current authorizations at March 31,. last, 18 were for amounts of $5,000 and under; 241 for amounts from $5,001 to $25,000; 111 for amounts from $25,001 to $50,000; 98 for amounts from $50,001 to $100,000; 60 for amounts from $100,001 to $200,000, and 41 for amounts in excess of $200,000.
With the consent of the house, I would like to place on Hansard some tables giving the facts I have just summarized in somewhat greater detail and also giving a classification of loans, investments and guarantees by provinces.


Mr. Speaker:: Does the minister have
consent to place this table on Hansard?


Some hon. Members:: Agreed.
3342

Industrial Development Bank Act Mr. Abbott: The tables are as follows:



CLASSIFICATION OF LOANS, INVESTMENTS AND GUARANTEES MARCH 31, 1952

[Stage Direction]
By Provinces	Authorizations to March 31, 1952*	Gross authorizations during first half fiscal year 1952	Current authorizations at March 31, 1952	Amount outstanding at March 31, 1952$	$	$	$250,000	250,000	250,000	Prince Edward Island	107,000	36,000	90,000	29,475Nova Scotia	1,110,106	27,738	671,182	440,500New Brunswick	1,967,549	25,000	1,104,721	860,053Quebec	27,006,600	2,115,939	21,461,562	13,048,982Ontario	17,004,275	680,613	11,988,498	8,703,785Manitoba	2,030,584	185,000	1,541,250	688,283Saskatchewan	2,285,658	10,000	2,087,658	1,402,685Alberta	4,496,384	1,471,000	2,616,200	1,127,096British Columbia and Territories	8,728,312	631,676	7,238,476	5,554,88764,986,468	5,432,966	49,049,547	31,855,746
* Gross authorizations less cancellations and reductions of amounts authorized.
By Size	Current authorizations at March 31, 1952*	Number of credits
	$	
	76,368	18
5,001 to 25,000	3,663,499	24125,001 to 50,000	4,254,764	11150,001 to 100,000	7,254,155	98100,001 to 200,000	9,142,447	6024,658,314	4149,049,547	569
* Because of partial repayments on account of current authorizations the net authorizations were $41,160,509 of which those in excess of $200,000 totalled $22,335,864.
[Stage Direction]
Industrial Development Bank Act

[Stage Direction]
March 31, 1952
Loans, investments and guarantees authorized:
November 1, 1944 to September 30, 1951	
October 1, 1951 to March 31, 1952	
Total	
Less
Cancellations of authorizations and reductions in amounts authorized:
November 1, 1944 to September 30, 1951	
October 1, 1951 to March 31, 1952	
Total	
Authorizations which have lapsed by reason of full repayment or write-off:
November 1, 1944 to September 30, 1951	
October 1, 1951 to March 31, 1952	
Total	
Current authorizations as at March 31, 1952
Reductions by reason of partial repayment or write down:
November 1, 1944 to September 30, 1951	
October 1, 1951 to March 31, 1952	
Total	
Net authorizations as at March 31, 1952
Numrer
Amount
945 50	69,890,005 5,432,966
955	75,322,971
165	9,744,330
8	592,172
173	10,336,502
232	14,901,395
21	1,035,527
253	15,936,922
569	49,049,547
	6,903,696
	985,342
	7,889,038
569	41,160,509
Disbursements on loans and investments: November 1, 1944 to September 30, 1951 October 1, 1951 to March 31, 1952	
Total	
50,620,824
4,441,382
55,062,206
Repayments and write-offs amounting to $136,000, on loans and investments:
November 1, 1944 to September 30, 1951	
October 1, 1951 to March 31, 1952	
21,423,091
2,005,869
Total
23,428,960
Outstanding as at March 31, 1952:
Loans and investments	
Guarantees	
Total	
A great deal of additional information is given in the annual reports of the bank, which are made available to members of the house and which give full information in regard to losses experienced. I would call the attention of hon. members to the annual financial statements of the bank contained in these annual reports, and particularly to the statements of profit and loss. The last annual statement, for the year ending September 30, 1951 for instance, shows a balance of income after expenses for that year transferred to reserve
31,633,246
222,500
31,855,746
fund amounting to $663,333, a total reserve for losses at the end of the year of $400,000, and a total reserve fund of $2,081,273. I might add that the bank in its operations has received excellent co-operation from the chartered banks.
I come now to the specific purposes of the present bill. The first purpose of the new bill is to give the industrial development bank authority to make loans or otherwise extend financial assistance to commercial air services operating in Canada in the same manner and
:3344	HOUSE OF
Industrial Development Bank Act subject to all the other conditions under which the bank now assists industrial enterprises. Apart from Trans-Canada Air Lines and Canadian Pacific Air Lines, there are nearly 100 air transport companies using multiengine planes or, at least, large single engine planes, in the operation of regular air line service in Canada. These companies provide a useful and in most cases essential commercial service in the transportation of persons and cargo in areas where other methods of transportation are either very slow or nonexistent. After world war II the number and scope of operation of these companies expanded greatly. The companies were assisted in this expansion by being able to purchase a large number of war surplus aircraft at relatively low prices. For the first few years they were engaged in establishing their bases and ground facilities, inaugurating services and working up business in new territories.
The air transport board now reports that the need of these companies to replace old equipment and augment their holdings of first * class modern aircraft has today become quite urgent, that substantial cash resources are required for this purpose, and that efforts to *obtain such financing from banks, insurance companies and other private investors have in general proved fruitless. It is clearly in the national interest that companies which have been providing efficient services of the type I have mentioned should be able to continue operating their services with safe, high grade, up-to-date aircraft and engines. We are therefore seeking authority in the first amendment to this bill to enable the industrial development bank to provide long term or medium term credit which is not readily available from other sources.
Turning to the second purpose of the bill,
I might remind the house that when the bill was first introduced in 1944 it contained no provision limiting the size of loans or the number of loans of any particular magnitude which the bank might make, though of course there was a provision limiting the aggregate liabilities of the bank to three times the aggregate amount of the paid-up capital and reserve fund. However, because of the fear of some members that on this basis the bank might have insufficient resources to make all the small loans that should be made, the bill was amended in the course of its progress through the house to include a provision limiting to $15 million the aggregate financial assistance that could be extended to borrowers in individual amounts exceeding $200,000. At the second session of parliament in 1949, after the need had become apparent, the limitation on such loans was increased from $15 million to $25 million. The bank 
[Stage Direction]
has once more practically reached the new limit, the net outstanding authorizations in accounts over $200,000 being approximately $22 million. Authorizations for amounts under $200,000 total approximately $19 million. The number of accounts in this latter category is 528 compared with 41 in amounts over $200,000.
Having in mind that the potential lending authority of the bank is approximately $100 million, it seems clear that the amounts available for small borrowers will be ample to supply the demand for the foreseeable future, even if there is a substantial increase in the lending limit for accounts in excess of $200,000. The high level of natural resources development which has been under way for some years, and the financing of industries highly essential to the defence program, have both played their part in the increase in the bank's loans in individual amounts exceeding $200,000, and for the future there will be the probable necessity, as a result of the first amendment I have just outlined, of making some additional loans in this category to finance commercial air services. I believe it would be unfortunate if as a result of having reached its $25 million limit the bank found it impossible to give needed assistance to worthy Canadian industrial enterprises seeking intermediate or long term capital funds in this dynamic period of Canada's economic development. It is for that reason, Mr. Speaker, that we are introducing a bill to provide for the two amendments to which I have referred.
James MacKerras Macdonnell: Mr. Speaker, I have very little to say at this stage. There may be some questions we shall want to ask later. I think the minister is quite justified in saying that the bank has filled a need, and consequently I judge by the record that it has been prudently operated. I have no doubt the management of the bank, judging by the amount they set aside for reserves, have been reminding themselves they have been operating all these years in a boom, and that booms do not go on forever.
I am not saying that in any sense of criticism of the management of the bank; it is rather to endorse it. So far as I am concerned, I think that the other questions I have can wait until we are in the committee, so I leave it at that.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Robinson in the chair.
On section 1-Limitation on commitments exceeding $200,000.
James MacKerras Macdonnell: There are one or two questions of detail I should like

Industrial Development Bank Act
to ask the minister. What is the staff of the bank, how many officers are there and how many loans were actually made last year?


Douglas Charles Abbott: I think most of the information is in the annual report if the hon. member will give me a moment to find it. There is a great deal of detail in the annual report which the hon. member may not have had an opportunity of looking at. There is a breakdown giving the loans year by year.
1 do not know that I have information on the number of employees in the bank. I do not think that information is in the report.


James MacKerras Macdonnell: My reason for asking the question was that the information was not in the report.


Douglas Charles Abbott: The table which I put on Hansard today shows a breakdown of current authorizations as at March 31, 1952, and they were as follows:
Amount of Loan	Number
$5,000 and under	 18
$5,001 to $25,000	 241
$25,001 to $50,000	 Ill
$50,001 to $100,000	    98
$100,001 to $200,000	 60
Over $200,000	  41
These loans total $49 million, as is shown on the table. I shall have to get the data as to how many of those were authorized during the current fiscal year, but of course that information is readily available.


James MacKerras Macdonnell: I would not like to delay matters for that.


Douglas Charles Abbott: The table which I prepared and placed on Hansard I thought would give a great deal of the detailed information which the members of the house might want. Anything it does not contain, I shall be glad to get.


James MacKerras Macdonnell: One notes how little in percentage or in numbers of the loans went to comparatively large borrowers. That is to say, from the point of view of the operation of a bank $200,000 is not a very large loan, but I wonder if the minister could say what the management has found with regard to the small loans as against the large loans. I take it from the words "industrial development" they are all business loans, even the smallest of them, which were given to various types of businesses. Can anything be said, and is there anything to be gathered from it, as to the assistance this actually is to small businesses? The minister may reply that, relatively, it is all small inasmuch as even $200,000 is not a big loan as business goes, but I would ask the minister if there is any information available concerning just how far it is being made use of by the really
small businesses. The number of loans to small people is perhaps not as large as one might have expected.
While I am on my feet I might digress for a moment to speak about the decision to make loans available to air enterprises, the reasons for which I can understand and which I applaud. The management may find that it is easier to make losses there than it has been in other cases. To come back to my first question, can the minister say anything as to the performance of the bank and the results they have found in the really small cases, by which I mean under $25,000 or a good deal less than that?


Douglas Charles Abbott: I have no detailed breakdown. From discussions with the chairman of the bank I know that the experience of the bank over the last seven years has been exceptionally good. Of course, as my hon. friend pointed out, the bank has been operating in relatively prosperous times. Naturally with several hundred smaller loans the losses in numbers there have been greater than they have in the somewhat larger loans. But so far no serious losses have been sustained by the bank.


Donald Methuen Fleming: May I ask the minister what interpretation is put on the words "commercial air service"? Does it include every form of air service that is for hire, whether it be passengers, freight, express or mail? Is every form included? For instance, is this broad enough to include Trans-Canada Air Lines or Canadian Pacific Air Lines?


Douglas Charles Abbott: It would be broad enough to cover those, but of course it is not contemplated to make advances to those concerns. This is the language which was recommended by the air transport board from whom the first suggestion came that it might be desirable to look at the Industrial Development Bank Act to see whether financial assistance might be made available or whether loans might be made available through that bank to meet this real need of the smaller commercial cargo and passenger transport lines. The larger lines have no difficulty in arranging their financial requirements. In the case of Trans-Canada Air Lines they do not need to go to the industrial development bank.


Donald Methuen Fleming: They come here.


Douglas Charles Abbott: They finance as in the case of the Canadian National Railways under the bill we shall be considering a little bit later. But the situation is difficult for small commercial air lines, and this is to meet that need. The loans here will have to meet the test of being business loans, but it is to cover a field in which at present loans are not available from other sources.

Industrial Development Bank Act Mr. Fleming: It represents something of a new departure, as I understand it. Hitherto when the industrial development bank has been making loans and taking security, in practically every case it has been on the security of real estate plus equipment. In the case of loans now made enabling a commercial air service to purchase planes, it means taking a different type of security. In view of this experience will there be any real estate to take a mortgage on? It will be equipment and a chattel mortgage in practically every case.


Douglas Charles Abbott: It may take some form of bond issue or debenture, on the security of the planes, which would be covered by insurance of course. That would be the usual requirement there.


Donald Methuen Fleming: My other question relates to a later subsection as much as to this one. In the proposed increase from $25 million to $50 million proposed in subsection 2 of section 15 of the act, how much of that sum is it expected or estimated will now be required for the purpose of making loans to cover air services and how much to enterprises within the scope of the act?


Douglas Charles Abbott: So far as I am aware, Mr. Chairman, no estimate has been made as to what would be required for any particular type of enterprise. But as I indicated in my statement, we are so near the limit-authorizations are now close to $22 million-that it is quite clear that if two or three desirable loans came along it might develop that it would be impossible to make those loans without the amendment which is proposed here. But so far as I am aware no attempt has been made to estimate how much should be in ordinary industrial enterprises and how much in loans to commercial aircraft companies.


Donald Methuen Fleming: How did the government arrive at the figure of $50 million in shaping this amendment?


Douglas Charles Abbott: The government did not arrive at it at all. That was suggested by the banking and commerce committee when the bill was first before it in 1944. As I pointed out, originally there was no limitation. Then in the banking and commerce committee, when the present bill was under discussion, there was some suggestion that if no limit was placed on the amount, having regard to the original purpose of the bill to cover cases of small, limited-size enterprises, there might not be enough money for them. Therefore a limitation was put in. In the event it has been proved, of course, that there has been ample.


Donald Methuen Fleming: That is the $25 million.
[Mr. Abbott.1


Douglas Charles Abbott: It was $15 million first. Then it was increased in 1949 to $25 million. Now the suggestion is that it be increased to $50 million.


Donald Methuen Fleming: I wondered how you happened to arrive at $50 million.


Douglas Charles Abbott: I can say frankly that it seemed to me that was all we probably should need; at least, it is all we could possibly contemplate in the immediate future. We increased it from $15 million to $25 million two or three years ago; and we are now up to the limit. It seemed to me that it would be just as well to increase it to $50 million because it is quite clear that there is no real prospect of a shortage of funds available for the small and medium sized loans.


Solon Earl Low: That will only go about as far as the $25 million anyway.


Douglas Charles Abbott: No comment.


James MacKerras Macdonnell: Can the
minister give any indication as to what is contemplated with regard to raising whatever extra money is necessary? My recollection is that liabilities now are practically all in the form of capital stock. Is that correct? There is a small amount of debentures.


Douglas Charles Abbott: Capital stock and loans from the Bank of Canada.


James MacKerras Macdonnell: What is proposed as the means for raising further money? Will there be any disposition to spread it out by issuing debentures and getting it from the public?


Douglas Charles Abbott: Under the terms of the bank charter it is certainly possible to do that; but up to the present time it has not been considered advisable to do it. There is no reason why it could not be done. The moneys have been available from the parent company, that is the Bank of Canada.


Mr. Herridge:: Like the hon. member for Greenwood I was interested in hearing from the minister how the bank was serving smaller industries and smaller businesses. I rose particularly to ask this question. If I heard the minister correctly, I think he said the purpose of the bank was to provide funds for industry and commerce and things of that type that normally might not be able to get that type of credit from the private banks.


Douglas Charles Abbott: Not from the private banks; from private financial institutions generally.


Herbert Wilfred Herridge: From private financial institutions generally. The question I wanted to ask is this. Is it the policy of the bank to make to any industry, for the purpose of

expanding plant, loans from the funds of the bank if the industry is already borrowing money from private banks?


Douglas Charles Abbott: Oh, yes. It is normal practice for borrowers who borrow from the industrial development bank to have obtained their ordinary commercial current banking requirements from the commercial banks. The type of loan which the industrial development bank makes is the medium or long term loan, a loan say for five, ten or even fifteen years. The loans which the ordinary commercial enterprises get from: the commercial banks are loans which in the ordinary course would be paid off within six months or a year.


James MacKerras Macdonnell: I suppose it is asking the minister to venture into the realm of prophecy to ask how much new money they will need; but I am coming back to the question I asked a moment ago. I take it that at a certain point, as to the raising of new money, if it is taken even from the Bank of Canada, indirectly in the end, it comes back from1 the taxpayer. While that raises other questions that I am not going into now, I should be interested to know whether the minister would see any objection in principle to the bank availing itself of the opportunity of getting a considerable amount of money by borrowing. I should be interested to know whether the minister sees any objection in principle to that procedure. In the case of the ordinary commercial bank I think there would be objection. I would not think it was a sound thing for a commercial bank to get money which it borrowed in that way. I would think it ought to have capital at risk. But with a bank of this nature it does not seem to me that point arises. My point is this. Does the minister see any objection in principle to the bank availing itself much more liberally than it has of the right to issue debentures, because I think there is about a million out.


Douglas Charles Abbott: Personally I see no objection to the principle at all. I think it would be a question of business judgment. If the management of the bank believed they could borrow this money; if the Bank of Canada was willing to lend that money to its subsidiary at a certain rate-I will not mention the rate-and if it were going to cost them li per cent or 2 per cent more to get it from the public, the management of the bank might well feel that they should borrow at a lower rate. But directly answering my hon. friend's question, I would see no objection in principle whatsoever. In fact it might even be desirable in certain circumstances.
Industrial Development Bank Act


James MacKerras Macdonnell: That raises this question. Is there any information available as to the rate the bank does charge? Is it a flat rate, or does it vary more or less with the rates of the commercial banks, or does it not?


Douglas Charles Abbott: The interest rates would
be related to going commercial rates. The rates, for obvious reasons, are slightly higher in the case of the smaller loans because of the expense of servicing them, and they are slightly lower in the case of the larger loans. I do not know that I have available, or whether it would be proper to indicate, the exact rates that are being charged.


Solon Earl Low: And the general type of security?


Douglas Charles Abbott: And the general type of security.


Mr. Laing:: As a British Columbian I want to congratulate the minister on introducing this amendment to the Industrial Development Bank Act. We in British Columbia think this is a most important amendment, having to do with commercial air services. We are particularly interested in this aspect for this reason. We have quite a number of commercial air firms in the province of British Columbia whose experience has been identical with that mentioned by the minister based on the report from the air transport board. They came into the picture after the war. Some of them were organized by young men who had returned from overseas. They bought up surplus planes. They have given an excellent and an expanding service in the province of British Columbia, and are doing so at the present time. They are vital to the many great undertakings along our coast both from the point of view of air freight and the transport of workmen to various points along the coast. They now find that their equipment is wearing out and they are in a difficult financial position because of the fact, as the minister has explained, that they find it difficult to obtain financial assistance from the ordinary sources.
This is a most important amendment that the minister has suggested. It will be of great benefit to us in the province of British Columbia. I see the hon. member for Comox-Alberni (Mr. Gibson) in his seat. I know he will agree with me, and I should like him to say a word, if he feels like it, because this is most important for us in British Columbia where these firms have done a magnificent job.


[Stage Direction]
Section agreed to.
Preamble agreed to.
Title agreed to.
Bill reported.
3348
[Stage Direction]
Boundary Pipeline Corporation
Mr. Speaker:: When shall the bill be read the third time?


Douglas Charles Abbott: Now.


Mr. Knowles:: By leave.


Mr. Speaker:: I have already expressed my opinion on the right of the hon. member to say "by leave".


Stanley Howard Knowles: It is correct to say that Your Honour expressed an opinion on it. But you did not rule on the point, did you, sir?


Mr. Speaker:: I have expressed my opinion; that is all that I said.


Stanley Howard Knowles: I will reserve my speech until you do reach the point of making a ruling.


Douglas Charles Abbott: the third reading of the bill.


[Stage Direction]
Motion agreed to, bill read the third time and passed.
At six o'clock the house took recess.
[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.


[Stage Direction]
The house resumed, from Friday, June 13, consideration in committee of Bill No. 62, to incorporate Boundary Pipeline Corporation- Mr. Larson-Mr. Beaudoin in the chair.
On section 1-Incorporation.
Mr. Fulton:: Mr. Chairman, the first thing I want to say in continuing the discussion of section 1 of this bill is by way of congratulation to the sponsor. According to page 18 of today's order paper it would appear that the sponsor of this bill is in perhaps a unique position in the history of private bills in this house. Not only is his bill the first on the order paper; it is the only item appearing there. I have tried for many years to have bills or resolutions in which I was interested come to the top of the list, and I think on only one occasion a resolution of mine came up for discussion; and although it may have been at the top of the list, it was not the only one on the list. I think the hon. member for Kindersley deserves our hearty congratulations. upon having arrived in this unique position.
When I spoke on Friday night on this clause I was discussing some of the reasons some of us are opposed to this bill and feel that the group of gentlemen seeking incorporation for the purpose of transporting gas from Alberta to Winnipeg and thence south
[Mr. Laing.l

into the United States should not be granted a charter. The main reason I think a charter should not be granted is that if a charter is granted and the company incorporated and gas exported in the manner indicated, it is a certainty that Alberta natural gas will never reach Ontario and Quebec.
I think there are other reasons which should occur to all hon. members of this committee why this charter should not be granted at the present time. These reasons emerge from the latest decision of the board of transport commissioners with respect to an application by another company, West-coast Transmission Limited. Your Honour is probably as familiar as I or any other member with the reasons for the decision given by the board in that case. It will be remembered that the board said that although they favoured the application of Westcoast Transmission Limited over the application of any other company seeking to export Alberta gas to British Columbia and the Pacific northwest, nevertheless they felt that before they could give approval to the application- in case you are uneasy, Mr. Chairman, that this is sub judice, may I say that the board has handed down its decision-they felt it was necessary to conduct an independent inquiry into the question of the gas reserves available in Alberta.


Louis-René Beaudoin: If I am uneasy about anything it is about the fact that the last time the hon. member spoke for 38 minutes, and he has spoken tonight for more than 2 minutes.


Edmund Davie Fulton: Your Honour is keeping better track of my time than I am, and I shall conclude my remarks immediately by saying that if the board of transport commissioners felt that before they could give final approval to an application to export gas they should reserve their decision because there was a question as to whether there were sufficient gas reserves to export to the Pacific northwest, then there must surely be the same question with respect to an application to export gas to the east.
Another main reason hon. members, particularly those from western Canada, should be opposed to this application is the fact that the Financial Post of June 14, published in Toronto-I know this will interest the hon. member for Fraser Valley-contains an editorial condemning the efforts of those who are opposed to this application. We in western Canada have always said that if the Financial Post was opposed to anything, that was a good thing to favour. If the Financial Post is opposed to the efforts of those of us who seek to prevent this company getting a charter I am reinforced, if I needed any

reinforcement, in my decision to continue the present course which is unalterably in opposition to the application presently before the committee.


William Joseph Browne: Mr. Chairman, on a previous occasion you stated that this bill had been under consideration in the committee for about eight hours, and I imagine at least another hour has been added since then. It is an important measure, being one of a series of applications that have been made to the house during the past three years dealing with a natural product of the province of Alberta which is likely to bring that province great prosperity.
Hon. members may wonder why I am interested, coming as I do from a province where we cannot expect ever to have a pipe line. Unless they invent some new way of transporting natural gas we shall never have any of it down there from Alberta. But we believe that what is going to make Alberta prosperous is going to make the rest of the country prosperous, and we hope to benefit indirectly. Everyone in the house and in the country is interested in seeing that the best possible solution is found for the transportation of natural gas from the locations where it may be discovered.
This bill was first introduced in the other place; it came to this house about March 13 and was then sent to the committee. I happened to be a member of the committee that dealt with that subject, but I was able to attend only one meeting. On account of the Easter vacation and not getting back in time I was not able to attend the other two meetings which were held immediately after the recess.
The bill before us is brought in by a firm of solicitors representing five gentlemen from the city of Regina, three solicitors and two businessmen, who are seeking incorporation by means of a statute. In other words they are looking for concessions from the government which are not available to ordinary persons without the sanction of parliament. They are desirous of getting authority to transport natural gas from the province of Alberta to the provinces of Manitoba and Saskatchewan at the present time, and if other resources are discovered, in the adjoining province of Saskatchewan they want the authority to transport the gas from there to the United States. Their intention was disclosed at the first meeting of the committee I attended, when it was stated that they wished to have authority to transport gas or oil through the provinces of Alberta, Saskatchewan and Manitoba and outside Canada.
At this point I should like to draw attention to a statement by the hon. member for 55704-212J
Boundary Pipeline Corporation Springfield the other evening, when he praised the hon. member for Fort William for introducing an amendment in the committee which he thought would preserve the natural gas for Canada. The amendment, as read by the hon. member for Springfield, is as follows:
That paragraph (a) of clause 6 be amended by inserting after the word "lines" in line 23 thereof the words: Provided that the main pipe line or lines for the transmission and transportation of gas and oil shall be located entirely within Canada.
The hon. member for Springfield approved of this amendment, which was debated at some length in the standing committee and which has no merit whatsoever because the main line must be in Canada even if the gas is going to be sold across the border in the United States. It was practically admitted in the committee by the sponsor of the bill that the gas would be brought as far as Winnipeg and from there down to the United States border where a connection would be made with the line of a United States company sponsored by the same people who are behind this legislation. Therefore I think the hon. member for Springfield was wrong in the praise he gave the hon. member for Fort William for introducing that amendment which in my opinion, and I believe in the opinion of many members of the committee, has no effect so far as the route to be followed in the transportation of the gas is concerned.
The principal witness before the standing committee was a Mr. Herring of the Fish Engineering Corporation of Houston, Texas. This gentleman is undoubtedly a very clever engineer and was an excellent witness before the committee. He told us that his company was interested in building the line and that they had a lot of experience. Mr. Herring said, as found at page 12 of the report of the proceedings of the committee:
We have been very active in the Alberta gas picture, both with this company and with the Prairie Company, as mentioned by Mr. Green-and may I pause to qualify our company one step further. We as a company have built three of the major gas pipe lines in the United States, including the transcontinental gas pipeline system from the Mexican border to New York City; the line from Texas to Chicago; and Mr. Fish, president of the company, built, as vice-president of the company, the Tennessee Gas Transmission Company, which is the largest operating company of its kind in the field today.
It seemed to me that this man was very experienced and well qualified to construct a line, and certainly knew a great deal more about the business than most members of the committee. But there was a gentleman who was a member of the committee, the hon. member for Calgary West, who showed his great knowledge in the examination of this witness. It was not surprising that the hon.

Boundary Pipeline Corporation member for Calgary West and, the witness from the Fish Engineering Corporation should get into a private discussion that eventually bored the rest of the members1 of the committee. I think the discussion became too technical for most hon. members, and eventually the hon. member for Iles-de-la-Madeleine suggested that enough evidence had been produced and that we should not have any more witnesses. As a result the committee then finished its work very promptly.
As hon. members know, this is only the first in a series of steps that may take years in order to obtain the right to transport gas from the province of Alberta. It might be worth while to draw attention to the peculiar fact that the principal resources of this country apart from wheat-and I suppose you might even say it of wheat-are located at considerable distances from the markets.they are supposed to serve. Wheat has to be brought long distances to get to the best markets. The iron ore mines of Newfoundland and the new iron ore mines in the Ungava on the Quebec-Labrador boundary are both long distances from the markets where the product sells best. For many years Newfoundland sold its ore in Germany, Rotterdam and the United States, its nearest market being in the province of Nova Scotia.
Similarly, the coal fields of Nova Scotia and Alberta are long distances from the markets. Although the province of Alberta is certainly blessed by its discoveries of oil and gas the province is sparsely populated and the neighbouring provinces have no very large cities. Therefore it is necessary for companies to be formed with huge amounts of capital to transport gas and oil to places where they can be sold profitably. It costs enormous amounts of money to build pipe lines to transport gas or oil to the markets. After this bill has passed this house the company has to be formed, and in this respect it is worth noting that the sponsor-
I do not mean the hon. member for Kindersley but Mr. Herring, I think it was, or Mr. Mac-Tavish, the solicitor-stated in the committee that up to the present time they had only spent $25,000. In other words they have not really spent any money on exploration or anything of that kind. In fact Mr. Herring told us that it was not their function to engage in exploration. What they proposed to do was merely buy the gas from Pincher Creek or same other area where gas is plentiful, and then transport it. Therefore they had not spent very much money and would not proceed to spend money until they had secured [Mr. Browne (St. John's West) .1
a charter and could make a contract with somebody who had gas to sell.
After they have their company formed they then have to make application to the Alberta gas and petroleum conservation board. It may be a long time before that application could be heard, and it is very unlikely that it would be granted. In this respect I should like to draw the attention of members of the committee to the Financial Post of April 26 where an account is given of the application of the Westcoast Transmission Company for the right to export gas from the northern section of the province of Alberta and the Peace river district across the Rocky mountains to Vancouver and thence to the northwest part of the United States. That company has been incorporated for a couple of years, and it is only now that it has secured permission from the Alberta board. But that permission was not the final step, because they then had to make an application to the board of transport commissioners, and it was only yesterday morning that the judgment of the board of transport commissioners was published in the Ottawa Citizen. Judgment was given on Saturday, and it was stated that the board of transport commissioners gave conditional approval-mark that, "conditional approval"-to the Canadian section of a proposed $111,240,000 pipe line to carry the first natural gas into southern British Columbia and the United States Pacific northwest.
This report goes on to say:
Final approval of the application by Westcoast Transmission Company Limited of Calgary depends on an independent check by the board of the adequacy of the company's available gas reserves in the Peace river areas of British Columbia and Alberta.
The board had under consideration three applications from other companies to build natural gas pipe lines in western Canada, but shelved the other two applications.
That was the experience of the Westcoast Transmission Company after getting permission from the Alberta government. They had to appear before the board of transport commissioners, and the board of transport commissioners gave them only conditional approval. It must be remembered that the Alberta government, though believing there is a great quantity of natural gas in the province, is still not willing to allow export except by Westcoast Transmission.
In his evidence Mr. Herring said he was only going to build a small pipe line. His evidence was to the effect that he would only build a small pipe line because he did not think the province of Alberta had sufficient reserves to justify a large line. The pipe line

he proposed to build was a 16-inch line and a larger pipe line might be as big as 24 inches.
The reserves of natural gas in the province of Alberta have increased very considerably following the intensive search for gas and oil that has been going on during the past five or six years. The story of the discovery of oil and gas in Alberta is one of the most fascinating stories of industrial enterprise in the history of the world. It is only five or six years ago that this oil was discovered in the Leduc area. I see the hon. member for Fraser Valley is shaking his head. I do not know whether he is shaking his head at what I have said or-


Mr. Cruickshank:: Pardon me; it was because of some foolish remark by one of my neighbours here.


William Joseph Browne: If it was
in reference to the statement I made, I might say I was aware of the earlier discoveries and the work that has taken place in the Turner valley section of southern Alberta.


Mr. Harkness:: Still one of the major fields in Alberta.


William Joseph Browne: Yes, but nothing compared to the discovery in 1946 in the Leduc area.


Douglas Scott Harkness: Oh, yes.


William Joseph Browne: However, the oil and gas companies in the United States and of course our own Imperial Oil Company became tremendously interested and have carried on intensive investigation and exploration ever since. It is certain that the grant of permission by the Alberta natural gas conservation board to the Westcoast Transmission Company to transport gas from the northern part of Alberta will bring about more intensive search up there, because that is the area which is said by the Alberta government to be best protected as far as reserves are concerned. Companies will probably carry on more work there than in other parts of the province.
Reserves three years ago were supposed to be 1J trillion cubic feet. By now the figure has risen to 6-8 trillion cubic feet; yet the Alberta government does not feel satisfied that it has sufficient reserves in all parts of the province to provide for industrial development which they feel might outstrip discoveries of gas during the next thirty years. Mr. Herring of the Fish corporation stated that he did not think they would be justified in giving permission for a large pipe line to be brought to Ontario and Quebec if they only had the amount of reserves they said they had; but it seems to me that Mr. Herring in saying that was putting a spoke
Boundary Pipeline Corporation in the application of Trans-Canada Pipe Lines, which has already been incorporated and which is prepared at an expenditure of $220 million to build a pipe line from the province of Alberta through the two provinces of Saskatchewan and Manitoba, across the head of the lakes, down to Toronto, Montreal, and even Quebec.
The chief argument that has taken place in connection with this application seems to me to be based upon whether it is preferable to have that great company put in a large pipe line which would be sufficient to supply the needs of the central provinces where the great industrial centres are situated, or to give this applicant the right to transport gas to the two neighbouring provinces where there are no such great enterprises as now exist in Ontario and Quebec. I think the house will have to make up its mind which it prefers.
What other companies are interested in this transportation of gas? In addition to Trans-Canada Pipe Lines there is also Western Pipe Lines which, according to the April 26 edition of the Financial Post, would draw gas from Pincher Creek and other southern Alberta fields and pipe it eastward to Saskatchewan and Manitoba communities and then southward from Winnipeg to tie in with large indicated markets in northern Minnesota, which is the same idea that is contained in the bill before us.
Trans-Canada Pipe Lines is a subsidiary of Canadian Delhi Oil Limited, who are backed by Delhi Oil interests in Texas. They plan a $220 million pipe line from Alberta across the prairies. This proposition would use some 385 million cubic feet of gas daily. This would be the longest natural gas pipe line in the world, running more than 2,000 miles over an all-Canadian route. Canadian Delhi is busy proving up gas fields, and has had considerable success this summer. The line would likely take gas from Pakowki lake and/or Pincher Creek fields if there was a surplus, and from Princess and Cessford fields at the eastern edge of Alberta.
However, that company was refused permission to carry gas from Alberta because the government of the province did not consider there were sufficient reserves. Before the board of transport commissioners on Saturday the applications of these two companies I have just mentioned-Western Pipe Lines and Trans-Canada Pipe Lines-to carry gas eastward from the Pincher Creek field were adjourned indefinitely. The board indicated that the applications could be reopened if Alberta reversed a recent decision and permitted the companies to export gas from the province. The report went on to
3352	HOUSE OF
Boundary Pipeline Corporation say that Trans-Canada Pipe Lines planned a pipe line to Ontario and Quebec. Western Pipe Lines proposed to pipe Alberta gas to Winnipeg, Minneapolis and St. Paul, which was an extension of what had been said earlier about bringing it into Minnesota only. Mr. Justice John D. Kearney, chief commissioner, said the board would hold up final approval of the Westcoast application until the board investigates whether gas reserves in the Peace river area are adequate. He noted that the board and the United States power commission have a "common concern" in the adequacy of reserves, and indicated that a co-operative survey could be made.
Westcoast Transmission is sponsored by Pacific Petroleums of Calgary, which has promised to supply half of its natural gas. The company has claimed that the Peace river gas fields, almost equally divided between British Columbia and Alberta, hold 2-2 trillion cubic feet of gas reserves with another trillion of probable reserve. This is supposed to allow for the demands of the market for over twenty years. It will be seen, therefore, that with this and other companies interested in obtaining permission to export gas, the gas will not be obtainable from Alberta, which has said "We have not sufficient reserves to permit any more gas to be exported. We will allow this gas to be exported from the northern part of our province because there is very little industry up there at the present time, and we feel there are sufficient reserves in that area to supply its needs for a long time to come. In the southern part of the province, however, we have not sufficient reserves; therefore we are not going to allow any export."
We have to consider as a committee, therefore, what is the purpose of granting this company the right to transport gas when there is little likelihood, according to these judgments, that the company will be able to obtain permission to transport the gas. On the other hand, it might be said, what harm is there in letting the company go ahead? A few years ago the politicians in Ottawa and Alberta would have been tumbling over each other if there was a company in sight looking for the right to develop, at its own expense, the natural resources of a province. We have reached such a stage in this country today, however, that we are very choosy about whom we want to develop our resources. We think this company is not in the best position to develop those resources. There are other companies in the field with prior rights, and they are in a position to do it. There is no need for this company.
I do not know, Mr. Chairman, whether there should be any arbitrary limit put on the number of companies that might be


allowed the right to export gas from the province. When you look at the reality of the situation, with the Alberta gas and petroleum conservation board being so particular about granting permits, is there any likelihood of that board giving this company permission when there have been two other companies in the field ahead of it who have made application?
There was another argument used in this debate, and I do not know whether or not I would be considered out of order in talking about it. It concerns the fact this company made no secret of its intention to transport gas outside of Canada. The other company, Trans-Canada Pipe Lines, intends to follow an all-Canadian route from the province of Alberta about 2,000 miles across Canada. This company, therefore, should have preference over one whose avowed intention is to transport gas to the United States border and sell it in that country. One may look at that whichever way one likes, but there is no doubt from what we have heard here and in the committee that the provinces of Ontario and Quebec are very anxious to get what natural gas they can. It has been said that an exchange could be arranged by having gas from Canada taken into the northwestern and central United States in exchange for gas which would come through Detroit or Buffalo into Quebec and Ontario. Some mention has been made of that possibility. Are we to say that this company should be favoured on that account?
It seems to me reasonable that if some exchange of that sort could be arranged it would be desirable, because we might save the tremendous expense of bringing gas such great distances across the country. This company, Trans-Canada Pipe Lines, seems to be in a position to finance such a project once it obtains permission to get gas. I do not know how other hon. members feel, but it seems to me that Trans-Canada Pipe Lines Company offers the better proposition. While no great harm can be done by granting permission for the incorporation of this company, it hardly seems likely that such a company would receive consideration from the Alberta conservation board or from the board of transport commissioners.


Mr. Blackmore:: Will the hon. member
permit a question?


William Joseph Browne: Yes.


John Horne Blackmore: I have gained the impression from the hon. member's remarks that he has the impression that the Alberta conservation board's action is more or less arbitrary. The board's concern is that no uneconomic development should take place. It would be

a most unfortunate state of affairs if too many companies obtained the right to carry gas from Alberta, thereby destroying or impoverishing the supply so that all these companies would lose heavily.


An hon. Member:: What is the question?


John Horne Blackmore: I am coming to it. It is
not in the best interests of the companies themselves for too many companies to get permission to export gas. They would be depleting the source of supply, and eventually they would be losing money.


William Joseph Browne: Will the hon. member permit a question? I am wondering what your question was.


John Horne Blackmore: I was leading up to the question. Is the hon. member aware that it might not be in the interests of the companies themselves, the province of Alberta or the country as a whole if too many companies obtain permission to export gas?


Mr. Stick:: On a point of order, Mr. Chairman-


Louis-René Beaudoin: Order. The hon. member for Trinity-Conception rises on a point of order.	[DOT]


Leonard T. Stick: May I ask who has the floor, because I cannot listen to two gentlemen at the one time?


Louis-René Beaudoin: I believe the hon. member for Lethbridge has asked his question.


William Joseph Browne: I understand the hon. member for Lethbridge is asking me if I do not think the Alberta government is considering that it might not be in the interests of the province or the country to have too many applications granted. I do not know whether the hon. member is referring to applications to parliament or applications to the conservation board of Alberta?


John Horne Blackmore: The reference is to the Alberta conservation board. The hon. member has used the word "choosy". I think perhaps "choosy" was not fortunately chosen. "Choosy" would seem to indicate that the board was discriminating, but it is a question of using the resources which are available and not permitting any uneconomic developments until there is an assured supply.


William Joseph Browne: Well, Mr. Chairman, I have read a good deal on this subject during the past week or so; I have followed the proceedings of the committee, and I am aware of the attitude of the Alberta government. It seems to me they are extremely cautious. Certainly the province is prosperous at the present time as a result
Boundary Pipeline Corporation of the tremendous flow of capital into it arising out of these discoveries and the subsidiary industries that have been established. They can afford, therefore, to pick and choose between applicants. I am not so sure that the province is considering to any great extent the interests of the particular corporations or companies that are making these applications. I am inclined to believe they are thinking only of the best interests of the province; and indirectly, I suppose that would be the best interests of the country. But certainly I do not suppose they are greatly concerned with the effect upon the fortunes of the company of any refusal they might give.
No; this is a business proposition. The people from the city of Regina who are making this application are lawyers and businessmen who are certainly well aware of the chances they are taking when they ask to have this company incorporated. In the present state of development of the oil and gas business in the province of Alberta, and the probability that it will spread to a considerable extent into the province of Saskatchewan, they feel they would be justified in forming this company. Personally I think they deserve a certain amount of credit. As I said before I am sure the House of Commons, a few years ago, would not have considered turning down a proposition such as this. But now that there are so many other companies in the field the house can be eclectic; that is the word I would use instead of "choosy".
(Translation):


Mr. Poulin:: Mr. Chairman, it is not my intention to speak at any length on the bill now before us. I am sure that hon. members, having heard that preliminary statement, will be glad to know that I intend to be brief.
However, it is fitting that some members from the eastern provinces should make known their views during the discussion on such a bill, because of the great problem which is at stake, namely, the way Canada may dispose of her natural resources.
I know very well, Mr. Chairman, that, in making these remarks, I stand very close to breaking the rule of the committee of the whole on what it is permitted or forbidden to say. For this reason, I wish to revert immediately to the subject matter of the bill.
In short, we have here a group of persons seeking to form a company to dispose of natural resources, in this case oil and gas. According to the request set out in the bill, the use of these resources would be restricted at least as far as Canada is concerned, to

Boundary Pipeline Corporation three provinces. It would seem, according to the wording of the bill that the surplus will be used outside Canada. That is exactly what we oppose. Of course in saying "we" I am possibly being a little too forward as far as expressing the opinion of the other Quebec members is concerned, but for my part 1 do submit that this should not be allowed.
Speaking of natural resources I must say that we from Quebec have been especially blessed by Providence in this regard. This is not said in a boastful way since we are obviously not responsible for this. We have mineral resources which have already been developed or which are in the process of so being since the last year or two especially. We possess immense forest resources. Our potential electric power is equal to more than half that of the whole country. We do know something about it.
The present Quebec government, as well as the preceding administrations, have always tried to put these resources to the best possible use. That is why we readily understand and are quite willing to admit that the other provinces, in the western part of Canada, also have immense natural resources which they have been developing to their advantage, particularly in the past five or six years.
We of the eastern provinces are very pleased to see the tremendous wealth lying in store under the earth of the three prairie provinces and we understand that they should be somewhat anxious to keep these tremendous riches first of all for themselves, which is quite normal. We know very well that the Alberta conservation board-to which reference was made a moment ago-is following the matter very closely and is making sure that these riches are not wasted or improperly developed. It sees to it in particular that they are developed first of all in the interests of its own province.
This board will obviously benefit from the experience gained elsewhere in the United States, for instance where monumental errors were committed in the disposal of natural resources.
As a matter of fact, a citizen of Alberta told me recently that development of natural gas must not be too intensive because in certain cases at least the gas exerts a certain underground pressure on the oil-sheets located nearby and in certains places, no system of pumping is necessary, precisely because of that pressure on the oil. I am told that this condition is nowhere to be found in the United States. Mechanical pumping systems have therefore been installed everywhere.

I understand the Alberta conservation board will endeavour to avoid the evils that might follow the passing of certain bills in this house.
Of course, that conservation board does all it possibly can to restrict the distribution of such assets to the province or even to the neighbouring provinces in order to attract new industries. That is perfectly normal, that is as it should be, because up to now the western provinces have not been as fortunate as the eastern provinces in that field and we must admit that they have the right to keep their assets for themselves with a view to attracting new industries.
I am even told that around Regina industries are being organized, and that some are even in operation, thanks to that natural gas. But the surplus which these provinces cannot use must be shipped somewhere else, and this is where we disagree with some hon. members both from the government benches and the opposition benches who have already taken part in this discussion.
The hon. member for Springfield (Mr. Sin-nott) said Friday, among other things, as reported on page 3221 of Hansard:
But surely, for the good of Canada, we cannot afford at this time to hold back industry in Saskatchewan and Manitoba. Any attempt to conduct a filibuster on this bill would have the effect of creating a monopoly for other pipe line companies which have already been granted charters, and would thereby prevent the company now making application from competing. It would have the effect of eliminating from the field what might very well be a most competent company and one highly capable of carrying on this great enterprise, which would result in placing natural gas at the disposal of the people of Saskatchewan and Manitoba.
Mr. Chairman, I find very little to criticize in that statement by the hon. member for Springfield, except to say that I do not think I am attempting to conduct a filibuster on this bill when I participate in this debate; on the contrary.
Furthermore, I would strongly oppose any attempt to prevent the provinces situated alongside Alberta from being the first to avail themselves of the tremendous advantages that these natural resources offer.
I feel that we, the people of Quebec, would act and indeed do act in exactly the same way. We endeavour to develop the resources at our disposal for our benefit and the benefit of our close neighbours. The same thing is happening in the west and I repeat that as far as the present bill is concerned I do not in the least intend to conduct a filibuster or to prevent the western provinces from being the first to take advantage of these immense resources.

It might seem strange that we of the province of Quebec who have inexhaustible waterpower resources at our disposal should ask the western provinces to supply us with natural gas, while it is being alleged in certain circles that electricity substitutes favourably for gas. It is true, I think, in a very great number of cases, but there necessarily exist certain sectors of our economy where gas is better than electricity.
We find proof of this in and around the city of Quebec, where there is such a large supply of electricity that some is left over, and where people nowadays use propane gas, imported from the United States.
As a passing remark, I would like to point out the case of a young man who used to live in my constituency. He is building today, near the town of Levis, a warehouse for storing propane gas, which is to be distributed in that district. It does seem to prove that in spite of our abundant waterpower resources, we sometimes find it more advantageous to use natural gas.
However, the natural gas that we use in the province of Quebec-I speak of Quebec because it is the region with which I am most familiar-is extremely expensive. I have been told that the owner of an average house, well built, well insulated, has spent, over a period of two years, between $250 and $300 to heat his house with propane gas. On the other hand, someone from Alberta recently told me that it was possible in that province to heat an ordinary home for something like $75, $80 or $90 a year. That means a tremendous difference.
Of course, I understand that the transportation of natural gas from the west to the eastern provinces would considerably increase the cost of that gas, but I doubt that this could increase it to the point where it would cost something like $300 to heat a home in our part of the country, whereas it only costs $80 to $90 in Alberta.
It may have slipped our minds that in the United States there are something like
315,000	miles of pipe line, of distribution lines, which supply about 20 per cent of all the heating fuel in the United States. This means that considered solely for heating purposes, gas is an extremely important asset. Consequently, I believe it is our duty to be careful, and very wary, when the question arises of passing legislation under which the eastern provinces may or may not benefit from this enormous wealth, which the western provinces are now enjoying.
I hope I would not be out of order in quoting a very brief excerpt from he Soleil,
Boundary Pipeline Corporation of Quebec, dated June 12, 1952. It is an editorial which approves categorically, emphatically, if I may use that word, the position taken in this house by the hon. member for Three Rivers (Mr. Balcer) and the hon. member for Chicoutimi (Mr. Gagnon) on this very matter. At the end of the editorial, we find the following:
The government will undoubtedly step in before it is too late and expound clearly a national policy regarding the use of Alberta's gas, which is an essential source of energy to the industrial development of Canada at large.
In concluding, I again wish to assert clearly my position on this matter. I repeat that I have no intention of blocking or of killing this bill. On the contrary, I would like to see many members from the east express their views, so that we may know what they think of the problem we are now considering.
As far as I am concerned, I wanted to assert my position, because I think that we have here a vital problem, the solution of which could bear on the settlement of very difficult conditions.
I say once again that the western provinces are now developing immense natural resources and we from the east hope that these resources will be developed wisely. Without wishing to side with any government or political group, I am of the opinion that the province of Alberta is now privileged in having a sound administration and in enjoying a measure of very intelligent protection regarding the utilization of these immense natural resources. It seems to me, however, that we should not authorize any measure likely to deprive the east of these immense resources, and, on the same basis, it seems to me that the eastern provinces, which are also blessed with considerable natural resources, should, as far as possible, make these resources available to the western provinces before exporting them or authorizing our neighbours to make use of them to the prejudice of our people.
(Text):
Section stands.
Progress reported.


Mr. Speaker:: It being nine o'clock, the house will resume its business which was interrupted at six o'clock.



CANADIAN NATIONAL RAILWAYS


Alphonse Fournier: that the house go into

Canadian National Railways committee to consider the following resolution:
That it is expedient to bring in a measure to authorize the Canadian National Railway Company to make capital expenditures in the year 1952 not exceeding $154,755,280 and to make certain capital expenditures and enter into certain contracts prior to July 1, 1953: to authorize the national company to issue securities to provide amounts required for the authorized expenditures; to provide that the aggregate principal amount of securities, not including any securities issued to secure temporary loans made by the Minister of Finance, outstanding at any time shall not exceed $202,405,280; to authorize the governor in council to guarantee the principal and interest of securities issued by the company for the purpose aforesaid; to authorize the Minister of Finance to make temporary loans to the said company secured by such securities and not exceeding $202,405,280 in principal amount to enable the said company to meet such expenditures and with authority to give financial aid and assistance to other companies of the said national system.


James MacKerras Macdonnell: Is the parliamentary assistant going to make a statement?


James Sinclair: In view of the debate last night I do not know whether I would be in order to make my statement now or in committee. I am in the hands of the house.


Mr. McLure:: It is all right any time.


James Sinclair: We will have it in committee, in that case.
Motion agreed to and the house went into committee, Mr. Beaudoin in the chair.


James Sinclair: Mr. Chairman, this is the annual resolution which paves the way for the introduction of the Canadian National financing bill. Perhaps I could make a short statement and then be ready to answer questions. The bill to be founded on this resolution is divided into four specific parts. The first part is similar to that of previous years and is to authorize Canadian National Railways to incur capital expenditures up to $154,755,280. The second part is to authorize the railway company to acquire additional working capital in an amount not exceeding $15 million. Provision was made last year for additional working capital of $20 million. The third part authorizes the railway company to make capital expenditures prior to July 1, 1953, to discharge obligations incurred under this act which become due and payable after January 1, 1953. That is to take care of the six months lapse between the end of their calendar year and July 1.


James MacKerras Macdonnell: Is there any specific amount?


James Sinclair: No. I am putting a table on Hansard. Those are the capital expenditures authorized by this bill but which do not become due until after the calendar year ends. We cannot say what the amount is, but the total amount will be within the $50 million

I have specified. While this section is new it does not involve any new principle, as the law officers of the crown have ruled that the authority contained in the annual financing and guarantee acts does not expire at the end of the calendar year. It was felt that it would be more desirable to disclose this to parliament by specifically referring to it.
The last part provides for the railway company to enter into contracts for new equipment in the amount of $123,130,710. This provision was first introduced last year when the company was authorized to place orders for $111,512,920. It will be noted that none of this equipment is expected to be delivered in 1952.
To summarize, parliament is being asked to approve financing either by way of direct loan from the government or by way of the issue of securities guaranteed by the government in the amount of $202,405,280. For the convenience of hon. members who will want to study this before second reading I have a table here which perhaps the committee will agree should be placed on Hansard. It is not too long, but perhaps it is too long to read.


Louis-René Beaudoin: Has the hon. member the consent of the committee to place the table on Hansard?


Some hon. Members:: Agreed.


James Sinclair: The table follows:
Additions and betterments (excluding new equipment)-
Ordered prior to 1952 (revote)	
Ordered and to be paid in 1952	
Branch line construction Sherridon-Lynn Lake .

New equipment-
Ordered prior to 1952	 $93,647,760
Ordered and to be paid in
1952	 2,413,092

 96,060,852
Acquisition	of	securities	
516,900Acquisition	of	additional working capital 15,000,000
Payment for equipment ordered but delivered in period January 1 to July 1,
1953	 50,000,000
Total	 $219,755,280
Less amounts available from depreciation
reserves and debt discount amortization 17,350,000

It will be noted from the above that we are including in this legislation amounts that were authorized by previous financing and guarantee acts. In other words the legislation to be founded on this resolution will be the sole authority for the financing of the railway company up to July 1, 1953. This is an interesting point because last year in

the meetings of the committee on railways, canals and shipping owned and operated by the government the chairman, the hon. member for Halton, suggested that it would be desirable to have all commitment authority in one bill rather than to have outstanding commitments from earlier bills. During the debate last year the hon. member for Eglinton pointed out the difficulty which arises when we attempt to apply parliamentary control to an ordinary commercial company whose operations are continuous. This suggestion has been incorporated in the bill and all commitment authority will be covered by this bill. The earlier commitment authorities authorized by the bills of last year and 1949 are now included in this bill and from now on the total commitment authority will be in the bill of the year.
The usual authority is provided for the making of temporary loans to the railway company and Trans-Canada Air Lines to meet operating deficits up to June 30, 1953. While the capital revision act of this year contemplates that the railway will not have any deficits in the future, it sometimes happens in the early months of the calendar year that deficits do occur. In the case of an ordinary commercial company it would finance these by bank loans; in this case we are prepared to extend these temporary advances as we have in the past.
Loans by the government to the railway company made under previous financing and guarantee acts were outstanding at May 31, as follows:
1947 Act	 $ 5,886,566.33
1949	Act	
1,656,463.451950	Act	
6,911,989.101951	Act	
66,333,939.821951 Act (No. 2)	
21,448,924.37

Advances under the first three of these acts and part of the fourth will be converted either into preferred stock or the $100 million twenty-year obligation referred to in the capital revision act. The budget of the national company has already been referred to the committee on government-owned railways and has been scrutinized by that committee. I am happy to have with me my colleague the parliamentary assistant to the Minister of Transport, who is on that committee and who can answer much better than I questions of detail as far as the real use of these sums is concerned.


James MacKerras Macdonnell: In view of the statement which has been tabled, perhaps the detailed figures can be gone into more adequately when we have had time to study it. I understand that it is proposed to try to make each year more or less self-contained.
Canadian National Railways


James Sinclair: The bill for each year.


James MacKerras Macdonnell: It is rather a qualification of that, that while you are cutting off what is behind you are also stepping forward into the coming year. That is to say, you are making certain provisions to carry you into the first six months of 1953. I am not going to comment further until I see the figures. There is one figure, however, which if I have it right, puzzles me. I understood the parliamentary assistant to give a figure of $154 million as capital expenditures.


James Sinclair: Yes.


James MacKerras Macdonnell: And additional working capital, $15 million.


James Sinclair: Yes.


James MacKerras Macdonnell: And then for equipment, part running into the next year, $123 million.


James Sinclair: All of it to be paid ahead.


James MacKerras Macdonnell: That gives a total of $292 million, which of course is much bigger than $202 million. I take it that that carries it into 1953.


James Sinclair: It is a commitment authority.


James MacKerras Macdonnell: We may have more to say about that when we have seen the figures. What is the policy with regard to equipment? There was a time when bonds were sold to provide a great deal of the money required for equipment. My recollection is that when the matter was up a year ago it was stated that some was to be raised that way and some by straight assistance by the government.


James Sinclair: It is a matter of market conditions. If the market will handle equipment trust bonds, then the money is raised that way. Otherwise it is obtained from the government. When the bill is before the house I shall have a statement on the financing of equipment for you.


Stanley Howard Knowles: I take it from what has been said that the policy from here on will be that there will be no left-over commitments from previous bills that are not included in the current bill.


James Sinclair: That is right.


Mr. Benidickson:: This year; and other bills will have what we ordinarily would call a revote.


Stanley Howard Knowles: It is getting to be like some items we have in the estimates both in terms of revotes and in terms of advance commitments. Perhaps that leads to another question that I had intended to put with reference to

Canadian National Railways the provision for contracts in the first six months of 1953. With respect to that may I point out that from the way it now reads apparently we are covering eighteen months in this bill. Will it always be an eighteen months provision or once we have made this transition will it be twelve months?


James Sinclair: That arises because of the fact that the railway operates on a calendar year and the financing bill passed by parliament usually does not come up until May or June, so there is a lag of four or five months in which there are no financing powers. Therefore there is authority in the bill for a six months period so that equipment which has been ordered, the contracts for which have been entered into during the fiscal year and on which payment does not come until after the beginning of the next year, will be covered. That will take us up to July 1 this year, by which time I hope the bill will be through. That of course does not apply to this year but next year the same situation will occur, and in the bill there is a limit put on how much they can carry forward. A top limit of $50 million is put on the carry-over of contracts that have been entered into in the calendar year but as to which demand for payment was made after the end of the calendar year.


Stanley Howard Knowles: That provision will be
included in the bill?


James Sinclair: Yes.


Stanley Howard Knowles: In other words it is comparable to the commitment authority that appears in certain estimates. I should also like to ask the parliamentary assistant for a further word by way of explaining the relationship between this measure and the bill that was before us a short while ago with respect to the capital structure of the Canadian National Railways. Will there continue to be bills of this kind in future years even after the other act comes into full operation?


James Sinclair: I would expect so because as the railway expands it is going to need more capital, and parliament is the source of capital for the national company.


Stanley Howard Knowles: By way of loans.


James Sinclair: Yes, loans. One thing we hope will disappear is the temporary advances we make to cover operating deficits during the course of the year. If at the end of the year they have a deficit then that is of course included in the financing bill for the next year, but if the capital revision places the railway on a basis where it is unlikely to have continuing deficits then this part will at least be greatly lowered if not eliminated.


Stanley Howard Knowles: That is the point I was hoping the parliamentary assistant would deal with. We dared to believe that the other bill would make it possible for the C.N.R. no longer to have deficits arising from its top-heavy and unfair capital structure. If that is the case the providing of money to meet those deficits should no longer be necessary.


James Sinclair: That of course is the statement made by the Minister of Transport. As far as I am concerned, provision is made here for the advance of moneys to the company for temporary deficits in the same way a commercial company would turn to the banks for temporary advances.


James MacKerras Macdonnell: I think it was made quite clear that this measure would still be a necessity even after the adjustment in capitalization because, as we will see when we come to the other bill, it did not go far enough to cover all the need for capital adjustment. Without going into details now, when the bill comes forward and we are examining these figures further I wish the parliamentary assistant would have regard to the statements made on pages 128 and 129 of the committee evidence. Perhaps my question follows somewhat along the line of that asked by the hon. member for Winnipeg North Centre. The committee that studied the recapitalization bill was given what it is true is only an estimate of what might be required by way of additional authorization for capital expenditure. I confess these figures are somewhat higher than I had hoped, and when the bill is before us I think we should be prepared to scrutinize them closely and try to relate them first of all to what was said in the committee last April; and second, to what was said to the other committee a couple of weeks ago.
Resolution reported, read the second time and concurred in.
Mr. Abbott thereupon moved for leave to introduce Bill No. 346, to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways system during the calendar year 1952, and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
Motion agreed to and bill read the first time.



TAX AGREEMENTS


Douglas Charles Abbott: that the house go into committee to consider the following resolution:
That It is expedient to present a measure to authorize (a) the Minister of Finance, on behalf of the government of Canada, to enter into agreements with the governments of the provinces to provide inter alia, subject to terms and conditions to be agreed upon, that in consideration of the said governments agreeing not to levy income tax, corporation income tax, corporation tax or succession duties for a period of five years or any lesser period the government of Canada will pay compensation to the said government; and (b) the Minister of Finance to pay to the government of each province one-half of the income tax collected from corporations whose main business is the distribution to or generation for distribution to the public, of electrical energy, gas or steam in respect of income of the corporations derived from the said distribution or generation in that province during the period commencing on January 1, 1952, and ending on December 31, 1956.


Mr. Fraser:: Is the minister making a statement?


Douglas Charles Abbott: I have a very brief statement. I thought I might make it in committee.


Stanley Howard Knowles: Without prejudice.


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


Stanley Howard Knowles: Without prejudice.
Motion agreed to and the house went into committee, Mr. Beaudoin in the chair.


Douglas Charles Abbott: Mr. Chairman, the bill to be based on this resolution seeks authority to authorize the governor in council to enter into tax rental agreements with those provinces which may wish to participate in such agreements. At a later stage I would expect to make a more detailed explanation of the provisions of the bill, but perhaps all I need to say at the present time is that the bill will be in practically the same form as the bill which was passed by the house in 1947. The only differences of any substance will be the provision of different guaranteed minimum payments for the various provinces, a different method of calculating the adjusted payment in relation to the minimum, and the consequential changes which result from the decision to eliminate the 5 per cent provincial income taxes.


George Alexander Drew: Mr. Chairman, the subject now before us involves a great deal more than merely the form of a statute. Hon. members should realize what the statement the minister has just made means. The adoption of this bill in no way disposes of the fundamental problem which it has been drafted to meet. The minister has just said that this measure will be in practically the same form
Tax Agreements with Provinces as that which was introduced in 1947. In 1947 it was explained that the bill was practically in the same form as that which had been introduced in 1942. This is the third stage of what was intended and declared to be only a temporary expedient for the purpose of the war, when it was originally brought forward in 1942.
I intend to recall the circumstances under which this situation arose because the adoption of this bill at this time in no way disposes of a problem which must be faced unless our whole federal system is to be threatened. There was a time when members of this government were not so casual in their attitude towards the constitution. There was a time when members of this government felt impelled to explain their position when they introduced a measure that made very real changes in the normal relationship between the dominion and the provincial governments in the tax fields available to the governments of this country. I will quote from the words used in this house in 1940.
These were the words of the minister of finance at that time, Hon. J. L. Ralston; and an agreement of this nature was not yet before the house. Nevertheless the whole question of dominion and provincial taxes was under consideration. I would like to quote the words simply to indicate the attitude of the minister of finance at that time. In discussing the necessity for raising taxes and what that might mean he said:
This means that unless we are prepared to be entirely arbitrary and unfair and to set up schedules of rates which when added to the rates imposed by other taxing authorities would be nothing short of fantastic, the dominion must, in fixing its schedule of rates, take cognizance of the highest schedule of rates effective in any province. This is but an instance of the chaotic situation in the fiscal systems of Canada to which the Sirois report has drawn attention and which, I regret to say, appears to be getting worse rather than better.
The following year Hon. J. L. Ilsley was minister of finance. At that time in his budget speech he explained that it was intended to place before the provincial governments a proposal that they should vacate certain tax fields which had traditionally been regarded as those fields available to them. In doing so he made it perfectly clear that this was something he was only proposing because of the emergency of the war, and that it was the intention of the government as soon as the war was over to take the appropriate steps to return the provinces to their taxing position with their powers undiminished.
Because we must bring our minds back to this problem, no matter what is done in regard to the measure before the house, I wish to recall the words of the minister of

Tax Agreements with Provinces finance in 1941; and I am quoting from Hansard of April 29, 1941, as reported at page 2345. In explaining that it was intended to place the proposals before the provinces for the vacation of the tax fields, the minister of finance said:
... it is proposed, therefore, as a temporary expedient for the duration of the war only to ask the provinces to vacate these two tax fields.
Surely those words are clear enough. It was for the duration of the war only. He went further, so there might be no doubt about his intention, and said:
I should like to emphasize that this is not an attempt to get the provinces out of these tax fields permanently.
Later in the same speech he said:
I should like to emphasize that no province is being forced to accept this offer and any province which does accept will have the right to withdraw from the plan at the end of any year subject to reasonable notice. Furthermore, the arrangement with the provinces will be discontinued and the dominion will cease making the payments which are contemplated in the proposal and will agree to reduce its taxes in these two fields proportionately, within one complete fiscal year after the termination of the war.
The plan which I have outlined for alleviating the present difficulties is by no means perfect and is not intended to be more than a temporary wartime expedient.
What we now have before us for the second time since the end of hostilities is a return in form for all practical purposes, with nothing more than the figures altered, of an agreement which according to the clear and repeated declaration of the minister of finance in 1941 was not intended to be more than a temporary wartime expedient.
I have some personal recollection of the discussions which took place prior to the original acceptance of these agreements by the provinces in March of 1942. It was emphasized at that time that the war emergency made it desirable to centralize in the hands of the dominion government a measure of authority which the dominion government did not wish to be regarded1 as more than a temporary measure, but which they suggested was advisable in view of the fact that there was such a centralization of authority to meet the unusual tests and strains of war.
I am speaking there of what I heard at that time in the way of arguments presented in support of these agreements. I heard the arguments put forward by the dominion government. I was in the Ontario legislature when that province accepted these agreements. The arguments of the dominion government and the arguments accepted by Ontario and the other provinces of Canada at that time all related to a measure of centralization. which no one suggested was desirable-in fact it was clearly indicated, it was

not desirable in peacetime*-so that the unusual concentration of power demanded by the test of war could be met in that way. So far as I can recall all the provinces accepted those agreements in the belief that they were performing a patriotic duty in turning over the tax fields which had been traditionally theirs.
It is no answer today to the suggestion that this is an undesirable invasion of the taxing powers of the provinces, Mr. Chairman, to say that the British North America Act clearly leaves it open to the dominion government to occupy any tax field. The very fact that from the time of confederation until 1917 the dominion government had never at any time entered these tax fields had, by precedent, created an understanding that these were the tax fields from which the provinces should draw their main sources of revenue to carry out the administrative responsibilities imposed upon them by our constitution. So clearly was that principle recognized that when, during the first world war, an income tax was imposed for the first time by the dominion government the finance minister at that time, Sir Thomas White, pointed out that they were entering this field with great regret. He made it clear that he regarded this as a provincial field of taxation, and reassured the provinces that they would vacate this provincial field of taxation as soon as possible after that war. The principle was embedded in the very argument that was made in favour of the entry into that field by the dominion government for the first time.
The arguments that were put forward in 1941 in support of this course were arguments that in no way changed the right of the dominion government to enter the fields, but they nevertheless did very clearly accept the established position of the provincial governments in that field. No words could more clearly state the acceptance of that proposition than the words of the Hon. J. L. Ilsley, as minister of finance, who made it clear that the rights of the provinces in that field were to be returned undiminished. In order that they might understand how that was to be done he used these words, which I submit are not open to any misinterpretation. I read from Hansard for April 29, 1941 as recorded at page 2345:
. . . the arrangements with the provinces will be discontinued and the dominion will cease making the payments which are contemplated in the proposal and will agree to reduce its taxes in these two fields proportionately, within one complete fiscal year after the termination of the war.
If that undertaking had been carried out, it would have been fulfilled in 1946. This is 1952, and no attempt has ever been made to

carry it out. On the contrary, when any argument has been presented that there was some obligation on the part of this government to carry out its solemn undertaking made at the time these agreements were originally entered into, that argument has been branded as an attempt to read this government a lecture on its constitutional obligations. Either the undertaking given by the minister of finance in 1941 was given in good faith or it was not. I prefer to believe it was made in good faith. If it was made in good faith, it has been the obligation of this government at all times to carry out that undertaking and then seek arrangements with the provinces without this club over their heads, and without the suggestion that they were creating difficulties from the point of view of dominion-provincial relations if they did not immediately submit to any proposals put forward.
I am well aware of the fact that there was a dominion-provincial conference in 1945, and that it met on different occasions, I would recall that when the proposals which were ultimately embedded in the agreements of 1947 were put forward, they were not put forward as proposals for discussion. The conference was adjourned on motion of the dominion government in May, 1946. Then in this house the Minister of Finance announced that these were the terms that the provinces would be allowed to accept. It was that or nothing else and, subject to certain subsequent revisions, those became the terms entered into by seven of the nine provinces and later with modifications by eight of the ten provinces after the union with Newfoundland.
It will not serve any useful purpose at this time to oppose the measure now before the house. It is obvious that those provinces which accepted the agreements must continue this arrangement until some other can be made. Nevertheless this is an opportunity to emphasize reasons why steps should be taken to re-examine the whole tax structure of this country in the hope of establishing a position in which the legislative and administrative jurisdiction and responsibilities of the provinces will go hand in hand with the powers of taxation under their own control, which powers should be adequate for the purpose of carrying out the obligations our constitution imposes upon them. One of the difficulties facing those provinces which have entered into the agreements is that since those agreements were originally entered into there has been an increasing concentration of taxation in the hands of the dominion government, to a point where both provincial governments and municipal councils find
Tax Agreements with Provinces themselves with a very limited part of the tax dollar available to them.
This is not a subject I am presenting to this government for the first time, nor is it a subject I alone have drawn to the attention of this government. The government is well aware that at a recent meeting of the mayors' association of Canada one of the main subjects before them for discussion was the difficulty of carrying out their municipal obligations with the limited part of the tax dollar now available to them. Right across Canada the provincial legislatures have been discussing their difficulties in meeting their responsibilities because of the limited portion of the tax dollar available to them. Without giving comparative figures again, may I simply recall that approximately 72 cents of every tax dollar is now paid into the dominion treasury; that 16 cents of every tax dollar is paid to the provincial treasuries, and that 12 cents of every tax dollar is paid to the municipalities. That concentration of taxing power is going on all the time at an accelerating rate. If the present course continues, no matter what agreements may be made the tax dollars will be so greatly absorbed by * the dominion government that both the provinces and the municipalities, which have their extremely heavy responsibilities to carry out on behalf of the people, will have great difficulty in fulfilling their tasks without imposing an unduly heavy burden upon the people.
I recall the words of Hon. J. L. Ralston in 1940, when he told the House of Commons that it was the responsibility of the dominion government to recognize the level of taxation in the lower legislative jurisdictions and, in determining what taxes would be imposed here, to have regard to the taxes they were called upon to impose. The reverse is the case today. The dominion government imposes the taxes without regard to what taxes must be imposed elsewhere, and then leaves to the others scramble for what they can obtain.
Either we believe in the federal system or we do not. No one in the House of Commons or outside of it needs to become hysterical or to suggest that we are treading on sacred ground if anyone should assert the proposition that he believes in unitary government in this country. That argument has been made before and it will be made again. There are those who sincerely believe that Canada would be better off with a single government. I must confess that in the conduct of this government at no time have I seen any evidence that they do not believe they can do everything better than anyone else in this country, whether they assert their belief in a unitary government or not. Nevertheless
3362	HOUSE OF
Tax Agreements with Provinces there are those who sincerely believe that a unitary government would be the best system for this country. There are those who believe the contrary.
In presenting my arguments, I present them from the point of view of one who believes that the continuing strength and unity of Canada depends upon the extent to which we adhere to the idea of confederation, and the extent that we not only express our belief in the federal system but also give positive evidence that we are prepared to make that federal system work by assuring to the provinces the measure of taxing independence they should have in relation to their legislative and administrative responsibility. Anything else places some measure of control over the provincial governments.
This government may think it is in a better position to exercise judgment in regard to important matters than are some of the provincial governments. If that is their opinion, most certainly they are free to assert it; and anyone should accept that opinion as an expression of individual belief or the collective belief of this government.


Douglas Charles Abbott: Only it has never asserted that.


George Alexander Drew: But it is not consistent with the concept of the federal system. The Minister of Finance has just said "But it has never been asserted." That is perfectly true; it has never been asserted; yet the course that is followed is one that is only consistent with the belief that we should work toward a unitary government in this country.
The predecessor of this agreement, similar in form and in general intent, was brought forward as a temporary expedient in time of war. There was never any suggestion that it would not centralize authority. It was agreed that it would do so. It was agreed that centralization was necessary during the years of war. The years of war have passed and the centralization continues. I suggest that more than lip service should be given to the principles of confederation, and that this government should take appropriate steps to show that when the undertaking was given in 1941 that the status of the provinces would be returned to them unimpaired, the government really intended to carry out the undertaking which was the condition precedent to the acceptance of that agreement which is now being renewed with certain amendments. The agreement is before us.


Douglas Charles Abbott: Not yet.


George Alexander Drew: I assume that eight of the ten provinces have indicated their willingness to continue that agreement. This is the time for the government to assure us that steps


will be taken to examine our whole system of taxation in Canada so there may be a clear allocation of taxing powers which will give to the dominion government its clear field of taxation and to the provincial governments their clear fields of taxation. Then the provincial governments, under whose jurisdiction the municipal councils operate and tax, will have their tax fields made available to them.
Without going back over the arguments which have been made and without debating this agreement in itself, may I say that this would be the opportunity for the government to indicate that it has paid attention to the requests of the provincial governments and the municipalities, and that it will take the appropriate steps to explore the various possible methods of taxation so that proposals may be submitted to the ten provincial governments for consideration in the hope of ending the confusion which has been emphasized over and over again in this country. It was emphasized by Hon. J. L. Ralston in 1940 when he referred to the Sirois report. It has been emphasized over and over again. Instead of muttering comments which I cannot hear clearly across the floor of the chamber, I would hope that the Minister of Finance would pay some attention to this subject and would give us some assurances that the solemn undertaking, put forward by this government as a condition it would fulfil if the provinces accepted the agreement, is to be carried out and that this government intends to take appropriate steps to bring our federal system back to the underlying principles which were accepted in 1867.


Stanley Howard Knowles: It seems to us most unfortunate, indeed it is almost a tragedy, that we have not yet reached a proper and nation-wide basis for taxation agreements as between the federal and provincial governments. The importance of this problem in our federal system, and its importance to the welfare of the people of Canada, cannot be overstated. Nevertheless I disagree, and I disagree profoundly, with the basis upon which the leader of the opposition would like to see that agreement reached.
Every time I hear speeches of the kind to which we have just listened, whether it be on the question of the British North America Act or whether it be on financial arrangements between the provinces and the dominion, it seems to me there are some people in this country who think of Canada as a group of ten little kingdoms in conflict with some overriding body to which they have surrendered some authority with great reluctance. That is not our view of Canada. Our view of Canada is that it is a nation of

people, of Canadian people, who have chosen a form of government. Perhaps it was chosen by our forefathers but we share in that decision, and in that sense we today can say that we have chosen the federal system. We have chosen it because we are a far-flung nation. We are a nation of many different strains, of different economic and other interests; and it seems to us in our nation desirable that there should be a division of the functions of government as between the central government and local governments. But having made that decision we feel as Canadians-and I think this view is the view of Canadians generally- that each of those governments, both the central one and the local ones, has important functions to perform.
When one talks about the sanctity of the federal system, about doing things to keep that federal system alive and functioning, he should bear in mind the responsibilities of both these levels of government. It is not a defence of the federal system just to stand up time and again and insist that certain functions and rights should be restored or given to the provinces. It is a proper defence of the federal system to remind us of the functions and the rights and the responsibilities of the provincial governments, but at the same time to remind us of the functions and the rights and responsibilities of the central government.
Both these levels of government, as I see it, have an overriding responsibility; and that is not just to quarrel with each other, to vie for position. It is their overriding responsibility to serve as best they can the interests and the welfare of the people of Canada.
In my view this issue was grappled with very thoroughly and wisely by the Rowell-Sirois commission. A lot has happened since then. The picture in degree at any rate has altered tremendously because of the war and the economic developments that have taken place since; but it seems to me that the pith and substance of what the Rowell-Sirois commission recommended still holds true, namely that we have somehow to rethink and recast our financial set-up in this country so that the wealth that is created across this broad land is not channelled into two or three areas where there can be great prosperity at the expense of other parts of the country, but rather that that wealth is made available for the highest possible standard of living and as nearly as possible equality of opportunity throughout the country.
The system we were labouring under prior to the war did not facilitate that sort of
Tax Agreements with Provinces arrangement or that sort of distribution of the wealth created by our people. The system we were working under prior to the war enabled people in certain parts of the country to make wealth out of the labours of people in other parts of the country and yet, in the nature of things, to escape the taxation that should go with the wealth they were thus drawing to themselves.
The recommendations of the Rowell-Sirois commission, if I understand them at all, were directed to the idea that arrangements should be made so the nation's wealth could best serve the interests of all Canadians. Accordingly the Rowell-Sirois commission felt that in terms of taxation authority the position of the central government of the Canadian people should be strengthened. I plead with the members of this house to think in those terms, not to think of ten provincial governments and ten provincial cabinets, as it were, vying with the cabinet down here for prestige and power and authority. That is not the problem. The problem is: what is the best way that government- government in its entirety-in this country under the federal system can serve the interests of the Canadian people. I am satisfied that the heart of what the Rowell-Sirois commission recommended is correct; that if we are going to serve the interests of the Canadian people in the best possible way it is desirable that so far as the taxation of the wealth of the people for redistribution in terms of improved social security, and government projects of one kind and another is concerned, it must be strengthened at the level of the central government.
I agree that that having been done and there still being functions which the provincial governments, which are in closer proximity to the people, can perform better because of that very promixity, they must be in a financial position to perform them. All the provincial governments must be in that position, not just two or three or four of them depending upon their geographical location or how the wealth of this country gets channelled; and if they are all going to be in that position we have to think in terms not of our loyalty to provincial governments in various parts of the country but of our loyalty to Canada as a whole.
In my view it is a tragedy that conditions, some of which were beyond our control -I refer to the outbreak of the war-and some of which were internal, prevented the implementation in some form or other of the pith and substance of the Rowell-Sirois recommendations. The war came, and the desirability that what had been drawn to

Tax Agreements with Provinces our attention by the Rowell-Sirois commission be done became a necessity and so we had the wartime taxation agreements.
Then came the 1945 dominion-provincial conference and the proposals made at that conference by the federal government. I am not going to take time to rehash the whole Story of what happened at that conference, how it broke up, who broke it up and why. Neither is it my function to come to the defence of the federal government, although these days they do seem to need somebody to help them out. They are in a bad way on a good many fronts.
It seems to me that the proposals put forward in the green books of 1945-I have one of them here on my desk-were at least in keeping with the spirit of the Rowell-Sirois recommendations. Again I think it was a tragedy that a basis for agreement was not found. I am not suggesting that it was a tragedy because the nine provincial governments who were there on that occasion did not accept the dominion government's proposals precisely as they were put forward -naturally in a conference you need considerable give and take and compromise- but I do think it was tragedy that some basis for agreement was not worked out. It was a tragedy that those who were there on all sides seemed to think of themselves as the heads of little kingdoms which were warring with each other, instead of realizing that they represented two aspects of the federal system of government which the people of Canada chose long ago and have confirmed many times since.
However, that conference was abortive. The proposals to some extent were put on the shelf. We have been able to get some of them off the shelf and put on the statute books, and I refer in particular to the proposal regarding universal old age pensions. It took a long time, from 1945 up to this year, before it was made effective; but at least we seem to have gotten over the barrier we faced for many years, namely that none of these proposals could be implemented because the taxation arrangements were not accepted.
Even though we have made some headway in getting one of these proposals implemented, the fact remains that we still have to solve the basic problem of taxation in this country in line with the general principle laid down by the Rowell-Sirois commission, namely that we are one country, that we are all Canadians, that we produce a great deal of wealth and somehow it should be possible to arrange for the distribution of that wealth so as to provide some equality of health and living standards, and some equality of opportunity among our people.


To get down to cases, what I dislike about the proposal of the leader of the opposition, what I dislike about the kind of taxation authority that he wants the individual provinces to have, is that it would take us back, to a lesser or greater degree depending on its exact terms, to the situation we had before the war under which the people of certain provinces whose great wealth which had been channelled there because of the nature of our economy were able to escape paying taxes that should be paid in connection with the making of that wealth. In the other provinces from which wealth has been drained away the taxation problem is insuperable under a situation of that kind.
I see no threat to our federal system through strengthening the taxation authority at the centre and having with it some proposals such as were made in 1945, subsidy proposals, proposals that the provincial treasuries should have sufficient money to carry out their obligations. On the other hand I see a threat to our federal system, I see a threat to Canada, I see a threat to Canadian unity, I see a threat to the wellbeing of the Canadian people if we go back to the disunity which inevitably grows out of the kind of set-up we had prior to the war and which I think is involved in the proposals made by the leader of the opposition.
I hope that we shall not go back in that direction. I am sorry that the measure now before us in the name of the Minister of Finance does not go all the way. I know the reason is that some of the provinces have not agreed and so we have this temporary expedient, this stopgap measure. But at least it is an attempt to move in that direction and to co-operate with those provinces which are willing to co-operate, or co-operate because there is no alternative, whichever it is.: To that extent we give it our support.
But I hope the day will soon come when the people who represent our various provincial governments and the people who represent our federal government will realize that their responsibility in this matter of taxation is not to vie with each other for prestige and power and authority and the right to collect or spend so much money. I hope they will realize that their responsibility is to achieve an arrangement that will make for the best deal, the best standard of living, the best chance at equality for Canadian people from coast to coast.
This is a little more than I had thought of saying when I learned that this motion was being called tonight. Obviously what I have said has been prompted by the remarks of the hon. gentleman who preceded me. Before I sit down I want to say to the Minister of

Finance that even as we have old age security *on the statute books, despite the fact that the taxation arrangements proposed in 1945 have not been agreed to by all the provinces, I insist that similarly it is possible to treat health insurance in the same manner. As the Minister of Finance knows, the proposals made in 1945 were lumped together in one parcel. The taxation proposals were there and so were the proposals for health insurance, for old age security, for federal responsibility for the employable unemployed, for public works programs and all the rest of it. For quite a few years every time we raised the question of old age security or health insurance we were told "yes, those were in our proposals to the provinces in 1945, but the taxation part was not accepted, so we cannot go ahead with the rest". We have not heard that defence for some little while now. Perhaps one of the reasons we have not is that we have got over it and now have old age security on the statute books.
1 submit to the Minister of Finance that so far as the provinces which have entered into taxation agreements are concerned, it is unfair to them to continue to deny to them the benefits of that kind of health insurance program which was proposed to the provinces in 1945, or something like it. Indeed some of the provinces are now suggesting that there should be a federal measure for health insurance with provision for provincial participation. The whole idea of a national social security program in terms of old age security and in terms of health insurance was part and parcel of the Rowell-Sirois concept and was part and parcel of the federal government's proposals in their attempt to interpret that concept in 1945. I suggest that just as it is a tragedy that these financial arrangements have not yet been worked out as they should be, so it is a tragedy that in the meantime the Canadian people have been denied the benefits of proposals such as the one for health insurance that was put before the provinces and the people of Canada in 1945.
The Minister of Finance may have agreed with the remarks I made with reference to the comments of the leader of the opposition. I hope he agrees with me now in these further remarks I am addressing particularly to him to the effect that in my view there is no reason for any further delay. It is unfair not only to the provincial governments, because as far as I am concerned they do not come into the picture, but it is unfair to the people of Canada, particularly those in the provinces with which agreement has been reached, to deny a health insurance program any longer. I hope the minister will give close attention
Tax Agreements with Provinces to that together with the whole question of these taxation agreements.


John Horne Blackmore: Before we get too far from the remarks' of the hon. member for Winnipeg North Centre I think I should say something. The hon. member assumes, as is customary with people of his school of thought, that there is no money available in Canada except that which is taken out of people's pockets. That assumption is absolutely * fallacious.


Mr. Gibson:: Let's make this painless.


John Horne Blackmore: I do not want to be unfair to the hon. member for Winnipeg North Centre. I know he is very honest, straightforward and sincere, and so>
am I. I do' not agree with him at all in most matters of this kind. The hon. member has disregarded the essential element of provincial sovereignty. I suppose he would deny that, but I say it now because I want to be fair to him. The leader of the opposition made a speech, which I regret I was not in the chamber to hear, in which I understand he set forth the case for the individual province and its sovereignty. In doing so he was emphasizing an exceedingly important matter in this dominion.
When the fathers of confederation planned Canada they planned it with a number of sovereign provinces. Everything in connection with the British North America Act tends to show that. The decisions which were made by the privy council for a long time tended to show that. There is another school of thought which believes that it is impossible to govern Canada successfully unless the dominion government has the authority to command the provinces and abrogate their sovereignty. I favour the point of view of the leader of the opposition.
I believe the present government is deserving of much credit because it has learned the essential fact that by co-operation with the provinces it is possible to attain any desirable objective in the dominion. The present government ever since 1940 and before has had excellent results in co-operation with the provinces.
It must be borne in mind, as I have said many times on the floor of the house, that the men whom the people send to the provincial legislatures are just as intelligent as any man who has ever been sent to this house, and that the members of the provincial governments are just as skilful, sincere and single-hearted in their desire to govern well as any man who ever held a position in the government at Ottawa. This being recognized, we approach this whole problem from an entirely different standpoint. We agree

Tax Agreements with Provinces with the idea of the leader of the opposition. I should like to put in a word for the recognition in Canada of the sovereignty of the provinces to a growing degree.
I object to centralizing control and the deprivation of the sovereignty of any governing body not only in Canada but in the world. I have set forth my reasons for that position. No group of people on the face of the earth knows better how to govern Canada than Canada itself. No group of people in the world knows better how to govern New Zealand than New Zealand itself. We do not have to have a cabal of people situated in Europe or some other place to govern any one of these great nations.


James Sinclair: What about foreign leaders campaigning in British Columbia? How do they fit in?


John Horne Blackmore: British Columbia is a part of Canada, is it not?


James Sinclair: I was talking provincially.


John Horne Blackmore: I would imagine that any Canadian would be quite at home campaigning in British Columbia concerning any matter pertaining to Canada.


Solon Earl Low: I seem to recall that Gerry McGeer and others campaigned in Alberta.


John Horne Blackmore: Continuing with the question of decentralization of power, I do not believe that power in a province ought to be centralized unduly in the capital of that province. It is fitting that power be decentralized so as to bring the government of the people as close to the people as you can possibly get it. The people in their communities, their counties, their municipalities, their school and' hospital boards, will govern magnificently. Usually the only thing they need is the financial means with which to discharge the responsibilities resting upon them. They will do the rest.
May I come now to the Rowell-Sirois report? I have said on the floor of this house on other occasions that the Rowell-Sirois report was one of the most pernicious documents ever published in the Dominion of Canada. I am prepared to back that position with a good deal of argument, but not tonight. I should like to deal with one or two other considerations. I do not know whether the hon. member for Winnipeg North Centre remembers this; probably he does not. If it had happened while he was here he certainly would have remembered it. I am going to take this occasion to give credit where I believe credit is due. I consider the hon. member for Winnipeg North Centre one of the best members1 who has ever sat in this house from every angle-


James Sinclair: Misinformed but good.


John Horne Blackmore: -from the standpoint of knowledge, courage and everything else it takes to make a good member. That does not mean that I agree with his ideas.


Stanley Howard Knowles: That is the best compliment of all.


John Horne Blackmore: Wait till I get through.


James Sinclair: He is going to call you ignorant in a moment.


John Horne Blackmore: Probably it will not be such a compliment after the story is all told. It will be found by and by that the line of thought I am following is sound, and that those who take the other view have not matured sufficiently in their thinking as yet. I say the hon. member for Winnipeg North Centre probably would not know what the original recommendation of the Rowell-Sirois report was. Financially the Rowell-Sirois commission recommended that in return for the taxing privileges which are involved in this resolution the provinces should be given an annual adjustment grant. Quebec was to receive $8 million a year, although I could never understand why. Manitoba was to receive $2 million a year and all the other provinces combined were to receive $4 million a year. If the hon. member for Winnipeg North Centre contrasts that with the allowances which are now given to the provinces for these great taxing privileges he will realize that he might like to make some reservation of his unqualified commendation of the Rowell-Sirois report.


Stanley Howard Knowles: Surely the hon. member wants to be fair.


John Horne Blackmore: That is why I am talking as I am right here.


Some hon. Members:: Oh, oh.


Stanley Howard Knowles: I think I made it perfectly clear that I was supporting what I called the pith, substance and heart of the Rowell-Sirois recommendations. I made the statement that since that time we had experienced a war and we now have an almost entirely different situation. I may tell the hon. member that I read the Rowell-Sirois report long before I came here.


John Horne Blackmore: I said what I did so the hon. member would have a chance to answer me. When I have anything to say against a man I say it in his presence. I do not try to misrepresent what he said or to distort what he said; I give him a chance to say what he wishes right where I am talking.
Now let me go back to the recommendations of the Rowell-Sirois report. Let us remember

that those recommendations were issued somewhere around 1939 or 1940, so we were not completely immature.
The province of Ontario was to receive nothing in the way of financial adjustment grant. The province of Alberta was to receive nothing and the province of British Columbia was to receive nothing. They were to give these almost priceless taxing privileges to the central government and receive nothing in return. Now I just ask any member of this house or anyone in the country to justify a set of financial recommendations like that.
What did it mean? It meant the centralization of financial control in Canada to such an extent that no province in this dominion would ever have a ghost of a chance of discharging its responsibilities to its people. It meant complete financial subjugation of the provinces of Canada to a central power which would have over them absolutely dictatorial financial power. I do not want to be unkind to anybody, but that seems to me to be a general line of thought that my socialist friends rather like to dream about. Well, I do not. I say that if the Rowell-Sirois report had been accepted just as it was, it would have been the end of sovereignty in the Dominion of Canada amongst the provinces.


Mr. Adamson:: Hear, hear.


John Horne Blackmore: What caused the change? The hon. member for Winnipeg North Centre has given some fine expression of opinion and I am glad that he had the opportunity to do so. I gave it to him deliberately. But what happened? Before I say what I am going to say next may I recall to the members of this house, particularly those who were here in 1941, that there was a dominion-provincial conference called in Ottawa in the early months of 1941. To this conference came all the premiers. The Rowell-Sirois report with the undesirable features which I have already mentioned was presented to the premiers. One of the provincial premiers refused to accept this report, and he gave a masterful speech rejecting it. That man was Premier William Aberhart of Alberta.
Fortunately two other premiers joined him in the struggle, Premier Hepburn of Ontario and Premier Pattullo of British Columbia. If it had not been for the courageous stand of those three great premiers, the Rowell-Sirois commission recommendations would have been, shall I say, imposed upon or pressed upon the provinces of Canada. Because these three premiers were courageous enough to take that stand the dominion
Tax Agreements with Provinces government began to negotiate with the provinces and, in the course of years, the dominion government discovered that it could pay rather substantial sums of money in exchange for the taxing privileges which are involved in this resolution.
I do not believe it would be quite in order for me to say more on this subject right here.


Stanley Howard Knowles: Tell us what has happened to our gross national product during those years. It did not remain constant.


John Horne Blackmore: ' I am not saying that it did. As the hon. member for Winnipeg North Centre has implied, it would require much more extensive discussion than a person could undertake in a speech in this house in order to set everything in its proper proportion. I will grant that we greatly increased our national production, our national wealth and our national financial income as a result of our war activities.


An hon. Member:: And good government.


John Horne Blackmore: I grant all that, but it would not have mattered a particle if we still had the Rowell-Sirois report with the spirit which prevailed in that document. It would not have mattered how greatly the income of Canada had been increased, we still would have found that Ontario and Alberta and British Columbia did not need any financial adjustments. That is just about what it would mean, and I do not see how anyone could draw any other conclusion.
I think it is fitting on this occasion that these observations should be made and these facts put before the people of Canada so that those who did not live through those dangerous times will have an opportunity to learn from history what some of the great men who have lived in Canada during the last two decades have done for the people of this country today. '
It has been suggested that I elaborate just a little on the division of responsibility under the British North America Act. I do not propose to take long, not more than two or three minutes. I think the first thing to bear in mind is that the allocation of responsibility between the provinces and the dominion under the British North America Act is sound. We do not need to change the British North America Act at all. All we need to do is interpret it as it was intended to be interpreted, and give provincial governments the recognition and the financial assistance which evidently it was intended that the central government should give them. They will do the rest.

Tax Agreements with Provinces
Just one more word before I close. When the dominion government and the people of Canada come to realize the tremendous financial resources which are available to the dominion government by the use of social credit, then they will really understand how great is the capacity of Ottawa to give financial assistance to the various provinces in accordance with their needs. We do not need to change the British North America Act at all. It is something like Christianity; all we need to do is live it.


Mr. Stuart (Charlotte):: Mr. Speaker, I would just like to say a few words; and at the outset I would say that I was greatly surprised tonight to hear the leader of the opposition, the leader of a national party, take the stand he has taken with regard to the dominion subsidy payments. In my opinion he certainly appeared once more in his old role as premier of the province of Ontario.
We hear the leader of the opposition in the house and outside preaching fair distribution of the wealth of this country. I have heard him do that on many occasions, particularly in the by-elections; but here is an example of one of the fairest distributions of wealth that could take place in the Dominion of Canada and it is being opposed by the leader of the official opposition,
I wish to speak briefly now as one coming from what you might call a "have not" province, or a less fortunate province. I believe that when we look upon the whole dominion we must all agree that if we are all to enjoy the same standard of living, then the wealth of the whole country must be fairly distributed. From my observations during the last fifteen years I would say that under Liberal administrations we have made more progress in that line than had been made from the time of confederation until 1935.
In my own province we will receive no less than $16-5 million under this agreement. To New Brunswick that is an enormous amount of money. When broken down it means over $30 for every man, woman and child in the province. For example, just taking family allowances alone, we get about $30 million in New Brunswick. As I say, we have about half a million people or one-half of the population of the city of Montreal and far less than the population of the city of Toronto. In that province we have already provided nearly 1,500 miles of paved roads, which have been built and maintained by
500,000	people. It would be utterly impossible to take from those people by way of taxation an amount to provide for those roads as well as the other services that must be provided. Our school system today is in the


same category. The province has a fine school system, but it is very expensive when you have a small population.
In my opinion the only way we can enjoy these services is through a fair distribution of the wealth of this country. At this point I might say that when you mention subsidy payments, some people do not like the sound of it. I should like to point out, however, that we reciprocate in this way. We receive subsidy payments from the federal government, but over the years we have paid back millions and millions of dollars in subsidies to the manufacturers of these two central provinces-, and we are continuing to pay those manufacturers. It is not a one-sided agreement. We have been paying these millions since -confederation. It would appear to me that these subsidy payments are being opposed by the leader or the official opposition for the same reason that family allowances and the other services which we enjoy were opposed. It would seem that the central provinces do not wish the other -parts of Canada to have the same standard of living which they enjoy. That is the way it would appear to a maritimer or one coming from New Brunswick.
I might say also that when the representatives of the provincial legislatures meet with the officials of the federal government, it is only natural that they should ask for larger subsidy payments; that is human nature. But I believe 90 per cent of the people of New Brunswick today, if they will be as honest as I am in speaking here tonight, will state that the -payments we receive from the federal government are fair and just. So far as the payments made by the provincial governments to the municipalities and towns are concerned, those arrangements are purely between the provinces and those municipalities. No criticism can -be levelled at the federal government on that point. How anyone can stand up on the floor of this house and suggest that we should be dealing with the municipalities is beyond my understanding. We deal with the provinces, and they deal with the towns and municipalities.
In concluding my few remarks I want to say I am confident the people of New Brunswick appreciate this assistance which is given by the federal government by way of subsidy payments. I have not the figures before me, but I am going to suggest before I sit -down that this $16-5 million, which is the minimum payment under this arrangement, would be four times greater than our total provincial revenue for any year previous to 1940.


James MacKerras Macdonnell: I think I have seldom heard in this house anything so outrageously unfair as the remarks just

made by the member who preceded me, who is usually a very fair-minded man. He has tried to leave the impression that the leader of the opposition has objected to the carrying out of these agreements. Actually he said tonight that of course these agreements should be carried out. The hon. member has tried to give the impression that the leader of the opposition is seeking to create a state of affairs in which there will be no recognition of the fact that there are certain provinces which, through no particular virtue of their own, are better off than others, and that there should be no fair attempt to equalize the burdens and privileges which are enjoyed in this country. For a member to stand up, as he has done, and try to create this impression I think is grossly unfair.


Andrew Wesley Stuart: May I ask the hon. member a question?


James MacKerras Macdonnell: Yes.


Andrew Wesley Stuart: Did the leader of the opposition suggest that the federal government was taking all the taxing powers from the provincial legislatures?


James MacKerras Macdonnell: What the leader of the opposition said, as I understood him-and incidentally it is what the member for Winnipeg North Centre was saying-was that there were certain duties to be carried out by the provincial legislatures and by the dominion government. He quoted statements to show that when this arrangement was set up it was with the full intention of restoring to the provinces the taxing powers which they had given up. But things have greatly changed since then.


Andrew Wesley Stuart: May I ask one more question?


James MacKerras Macdonnell: Let me interrupt you for a change, and I shall continue what I am saying. What the leader of the opposition suggested tonight was not taking away anything from anybody. Let me digress a moment to speak again to the hon. member for Winnipeg North Centre, and tell him that when he suggested going back to the time of the Rowell-Sirois report he neglected to take into consideration that many things have happened since then. There have been family allowances, old age pensions and so on, and nobody suggests going back on them. I suggest to him he is, to some extent, setting up a straw man.
I return now-


Andrew Wesley Stuart: May I ask one
question?


James MacKerras Macdonnell: Let me finish. The point I want to make clear is
Tax Agreements with Provinces that the leader of the opposition did not suggest this legislation should not be passed. He suggested that there was a problem to be considered. The premiers who were here in 1946, particularly the premier of Nova Scotia and others, all suggested there was a problem to be considered. Of course it is a difficult problem; we all recognize it. It is true, as the hon. member implied, that if Ontario and Quebec tried to erect a wall around themselves and say what we have we hold, that would be very unfair. As a matter of fact what has happened since in the way of federal taxation, old age pensions and family allowances, has vastly changed the position because the dominion now takes care of those services.
I say, therefore, that what the member said tonight was grossly unfair. Furthermore we affirm what the documents which report the dominion-provincial conferences showed years ago, and he will find it most explicitly stated there, that there was recognition of the fact there had to be a sharing of the burden right across the country. Let me say this finally. There has been a great deal of most important support from men who have thought the thing through, including the premier of Nova Scotia and other premiers for the view that just as soon as you take away taxing powers and keep them away from the provinces in normal times, you create difficulties. It was with that in mind, and not with the intention of depriving anyone of anything, that the leader of the opposition spoke tonight.


Andrew Wesley Stuart: May I ask my
question now?


James MacKerras Macdonnell: Yes.


Andrew Wesley Stuart: The hon. member has said the leader of the opposition was in favour of these subsidy payments. Did he take that stand when he appeared at the dominion-provincial conference as premier of Ontario?


George Alexander Drew: Let me answer that question. The hon. member is the victim of the propaganda which he has been assisting in spreading.


Andrew Wesley Stuart: No. I am the victim of propaganda the other way, namely the propaganda of the speech of the leader of the opposition.


George Alexander Drew: I would commend to the hon. member a little diligence in reading the record of what actually took place. If he would spend a little time reading it he would find, with regard to our position, that we made it clear that we wanted the adjustment of payments to be made in a manner that recognized the advantages of the province of
3370	HOUSE OF
Tax Agreements with Provinces Ontario and the other provinces that had advantages. II he will look at the official record of the dominion-provincial conference which started in 1945 he will find that, as reported at page 519, I said this:
Yes, we receive benefits from outside of Ontario; and those benefits were admitted, were stated in our brief presented last January; and may I remind everyone at this conference that Ontario has said, and said very emphatically, that it recognizes certain advantages it possesses, and that it is not only willing, it is insistent upon combining with the other provinces of Canada to share any advantages it possesses.
I repeat that statement today.


Agar Rodney Adamson: Mr. Chairman, I merely want to make one suggestion to the minister with regard to the leasing of tax fields. It has reference to succession duties. The statement made in this committee tonight with regard to the distribution of wealth being a good thing is one with which I am in agreement. But may I suggest that there is no other tax which tends so greatly to concentrate wealth and to perpetuate monopolies and large corporations as does the succession duties tax. Many small companies, particularly family companies, on the death of the owner or a large shareholder, in order to raise money for the succession duties have to sell the assets of the concern either on the public market or to some larger concern. By this procedure more and more of the productivity of the country is being forced into large corporations.
Until the war succession duties were solely a provincial levy; but as an emergency measure for war purposes the federal government invaded the succession duty field. If the federal government really want to get agreements with the provinces, I suggest that they should be willing to relinquish this taxing field. It raises little money. Particularly in the central provinces but also in British Columbia and Alberta, there are at the present time double succession duties. Because of this fact, instead of acting to distribute the wealth or to keep the small operator continuously in operation you are, through the effect of the succession duties, concentrating the productive output of this country into fewer and fewer hands. I think that is a wrong procedure. I think that at least a conference with the finance ministers of the provinces could be held to advantage in order to find out whether the federal authority could not profitably relinquish the succession duty field.
May I now say a word with regard to what was said by the hon. member for Charlotte. Assuming that a part of the profits of business in the maritime provinces leaves those provinces, we find that one of the worst drains those provinces have to suffer


is through the excise tax and the sales tax. Every dollar of business done in those provinces has to pay the tax which goes to the central government. In effect-and this is one of the evils of the sales tax-you are putting a centralizing tax on business done in the maritimes; the central government is taxing them on the business so done. There is no drain which any manufacturer or any business in the central provinces puts on the maritimes that can possibly be compared to the drain of the sales tax and the excise tax. Those are inescapable facts.
I wish to make my plea that, as far as possible, the tax structure of this country be simplified and that where there is double taxation, as there is at the present time in the field of succession duties, the first job of governments at all levels is to see to it that such double taxation, wherever it exists, be eliminated.
Resolution reported, read the second time and concurred in.
Mr. Abboit thereupon moved for leave to introduce Bill No. 347, to authorize the government of Canada to enter into agreements with the governments of the provinces pursuant to which, in return for compensation, the provinces agree to refrain from levying certain taxes for a limited period.
Motion agreed to and bill read the first time.



CRIMINAL CODE


Alphonse Fournier: the second reading of Bill No. 309, to amend the Criminal Code (race meetings).


Agar Rodney Adamson: What is the principle of this bill?


Alphonse Fournier: Two amendments are proposed in this bill. The first is to subsection 4 of section 235 of the Criminal Code, and involves a change in the percentage which may be retained by the racing associations from the total amount of money wagered on each race, the change being from a graduated scale of percentages, depending on the amount wagered on each race, to a fixed percentage. In the old section the percentages varied from 9 per cent to 5 per cent, according to the amount. This amendment would fix the rate at 9 per cent.
The second amendment is to clarify the method of dealing with the odd cents which are retained at the present time by the association, and to make it clear that any remainder, as well as any odd cents, that may occur in

the quotient when pools are calculated may be retained by the association. I am told that everybody agrees with this change and it is for the good of the community.


Agar Rodney Adamson: Does it assist the $2 fellow
to get a better chance?


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Beaudoin in the chair.
On section 1.
Stanley Howard Knowles: The minister who is sponsoring this bill said that everybody agreed to it.


Alphonse Fournier: I had not consulted my hon. friend.


Stanley Howard Knowles: Whom does he mean by "everybody"? Seriously, who is asking for it? Who are the people who have agreed to it and why has this limit been raised? Previously when the amounts involved were higher the percentage that could be retained was less. It was down as low as 5 per cent in some instances. Why has the amount that can be retained by the association been increased? I have no doubt that the association agrees with it. What about the other parties?


Alphonse Fournier: I think the provinces will agree also because they administer these parimutuel systems. Here are the notes. I am no expert myself because I never make any bets. Subsection 4 of section 235 of the Criminal Code now provides for such graduated scale of percentages ranging from 9 per cent to 5 per cent that may be retained by the racing association. It is now proposed that this rate shall be fixed at 9 per cent of the total amount wagered on each race.
At present the amount retained by racing associations throughout the country is calculated at the rate of 9 per cent on the amount of money wagered in respect of 85 per cent to 90 per cent of the races run. The lower rates of this graduated scale are used mainly on Saturdays and holidays, and these are the days when stakes races with substantial purses take place.
In the United States a fixed rate of parimutuel commission has been adopted instead
Criminal Code of the sliding scale in effect in Canada at the present time. The difference to the racing associations by reason of a change to a fixed rate of 9 per cent would be a fractional percentage, but the change would greatly simplify the work of the departmental supervisors at the track and it is recommended for the purpose of a more efficient supervision and administration.
This has been submitted to the authorities, I suppose, because they can administer it more easily with a fixed rate than with this graduated rate which starts under the old section of the code when the total amount staked or deposited on each race is $20,000 or under at 9 per cent; over $20,000 but not over $30,000, 8 per cent, and so forth. I am told there is not much difference in the amounts which the association will get out of it, but to administer and operate these parimutuels it is more effective to have a fixed rate. I can bring as my witnesses editorials from some papers that have said it was a sensible amendment.


[Stage Direction]
Section agreed to.
Title agreed to.
Bill reported, read the third time and passed.

Alphonse Fournier: Tomorrow we will proceed with the notice of motion of the Minister of Transport to approve the agreement for the promotion of safety on the great lakes; then, the following bills: Bill No. 308, to revise the capital structure of the Canadian National Railway Company; Bill No. 307, to amend the Canada Dairy Products Act; Bill No. 322, to amend the Unemployment Insurance Act, 1940, and Bill No. 337, respecting the Northwest Territories.


Solon Earl Low: In that order?


Alphonse Fournier: Yes, as closely as
possible.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
3373
[Stage Direction]
Wednesday, June 18, 1952