1959-07-08

THE ROYAL ASSENT

Mr. Speaker:: I have the honour to inform the house that I have received the following communication:
Ottawa, July 7, 1959
Sir,
I have the honour to inform you that the Honourable Patrick Kerwin, Chief Justice of Canada, acting as Deputy of His Excellency the Governor General, will proceed to the Senate chamber on Wednesday, the 8th July, at 5.45 pan., for the purpose of giving the royal assent to certain bills.
X have the honour to be, sir.
Your obedient servant,
Lionel Massey
Secretary to the Governor General



EXTERNAL AFFAIRS


Hon. Howard C. Green (Secretary of State for External Affairs):: Mr. Speaker, I take pleasure in announcing to the house that the secretary of state for the United States, Mr. Herter, has made arrangements to stop over in Ottawa en route to the resumed foreign ministers' conference in Geneva. Mr. Herter will arrive on the morning of Saturday, July 11, and will leave for Geneva later the same day.
The occasion will offer the right hon. Prime Minister and myself a welcome opportunity to get better acquainted with our distinguished visitor and to exchange views informally with him on some of the problems in east-west relations which are of common concern at the present juncture.


Hon. L. B. Pearson (Leader of ihe Opposition):: The house will welcome the announcement the Secretary of State for External Affairs has just made, particularly in the light of press reports which appeared last evening and this morning to the effect that the secretary of state is coming here for a round of talks during which the Canadian government would make known its own views on the foreign ministers' conference which is to resume next Monday in Geneva.
I think the house would be glad to hear from the minister, when the estimates of his department are considered tomorrow, what the Canadian views are on this very important conference, and perhaps if those views have behind them the backing of all parties in the house and of all members in the house it may be that they will be even more impressive in the talks on Saturday than they might otherwise be.


Mr. H. W. Herridge (Kootenay West):: The
members of this group were very pleased to hear the minister's announcement, and trust that the Prime Minister and the Secretary of State for External Affairs will seize with both hands this opportunity to restore the waning prestige of Canada in international affairs.


Some hon. Members:: Oh.



STARRED QUESTIONS


Mr. Benidickson: 1.	With detail as to location what funds were (a) spent during 1958-59 fiscal year by the Canadian Broadcasting Corporation on construction of T.V. satellite or relay units; (b) budgeted for the 195960 fiscal year for construction of satellite or relay units?
2.	Since April 1, 1959: (i) what expenditures have been made? or (ii) financial commitments made respecting each of the said Canadian Broadcasting Corporation T.V. satellite or relay units? (iii) at what date according to present estimates will these satellite or relay units respectively likely be in operation?


Hon. George C. Nowlan (Minister of National Revenue):: Mr. Speaker, the answer to this question is long and involved, and consists principally of figures giving details with respect to certain appropriations of the C.B.C. With the consent of the house I should like to pass it on to Hansard and have it printed rather than read figures which would be unintelligible unless the columns in which they appear were read at the same time.


Mr. Speaker:: Is the house agreed to this being done?


Some hon. Members:: Agreed.
[Editor's note: The answer referred to follows]
The Canadian Broadcasting Corporation advises as follows:

Inquiries of the Ministry
		(a) Funds Spent (b) Budgeted	
Location	1958-59	1959-60Yarmouth, N.S	
$59,618	$ 15,000Shelburne, N.S	
49,640	12,500Liverpool, N.S	
42,454	14,500Moncton, N.B	
1,505	124,000Kenora, Ont	
1,882	47,000Corner Brook, Nfld	
7,932	200,000St. Boniface, Man	
1,362	35,000Trail, B.C	
634	77,000Additional locations not yet determined	
Expenditures	Commitments	50,000April 1 to	April 1 to	OperatingLocation	June 26	June 26	DateYarmouth, N.S	$ 600.25	$ 2,674	In operationShelburne, N.S	958.19	2,623	In operationLiverpool, N.S	1,219.89	739	In operationMoncton, N.B	525.45	62,281	December 1959Kenora, Ont	609.39	47,124	December 1959Comer Brook, Nfld	39,467.24	146,780	In operationSt. Boniface, Man	824.00	-	Subject to approvalTrail, B.C	
Additional locations not yet	185.89	46,047	December 1959determined 	-	-	Under study



MOTIONS FOR PAPERS


[Stage Direction]
Motion No. 129-Mr. Meunier:
For a copy of all correspondence, agreements, contracts, appraisals and other documents exchanged from 1951 to date between the federal government and the former owners of lands known as commune St. Antoine de la Baie du Febvre, Nicolet-Yamaska county, expropriated by the federal government.
Motion agreed to.
at that time and in the interval, then he decided upon and determined.
Hon. Paul Marlin (Essex East):: Mr. Speaker, may I ask the Minister of Finance if he would explain to the house the statement he made on television last night to the effect that a federal-provincial summit meeting should be called only if it was reasonably sure in advance that such a meeting would be a success and would produce tangible results.



DOMINION-PROVINCIAL CONFERENCE INQUIRY AS TO CALLING OF CONFERENCE ON FISCAL MATTERS

[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, in view of the strong desire expressed by a large majority of the provincial ministers that a plenary conference be held on fiscal matters in 1959, is it the intention of the government to meet that request and to convene this fall the meeting which the Prime Minister once said would take place early in 1958?


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, as the hon. gentleman knows, this matter was discussed and representations were made at the meeting that has just concluded. The Minister of Finance made it very clear that at the resumed meeting to take place in October, this question would in the light of events


Hon. Donald M. Fleming (Minister of Finance):: Mr. Speaker, I did not use the expression "summit conference" at any time, so I am not at all clear to what the hon. gentleman refers. I was asked a question about the conditions under which it would be proposed that a plenary or negotiating dominion-provincial conference might be convened. I pointed out that there was no point in calling these conferences unless there was some reasonable assurance in advance that something was going to be accomplished. At the present time what the provinces which asked for the convening of such a conference before the end of 1959 have in mind is some alteration in the terms of the present agreements applicable for the current five-year period so they would receive more money under those agreements.
I pointed out that a decision in regard to the calling of a conference must depend upon the conditions and those conditions

must, in the light of the present facts, be related to the position of the federal treasury.


Paul Joseph James Martin: Mr. Speaker, may I ask a supplementary question. Now that the minister has indicated that in so far as the present government is concerned the reconvening of such a conference depends on the federal government's judgment as to its capacity to give further moneys to the provinces, may I ask the minister if it is not a fact that the province of Ontario at the conference yesterday and the day before took the strong position that the calling of such a conference should not depend on the attitude of only one but of the two senior levels of government?


Donald Methuen Fleming: Mr. Speaker, the provinces which asked for the convening of a plenary conference before the end of 1959 supported their request on the basis of the heavy obligations which the provincial and municipal governments are called upon to bear under existing circumstances, and they asked that these facts be taken into account in relation to the decision to be made. I indicated, of course, that we have those facts in mind at all times. We must still, of course, as a responsible government, take into account the position of the federal treasury as well. These are all matters that must enter into the decision that has been asked for by a majority of the provincial governments.
. Hon. J. W. Pickersgill (Bonavisia-Twil-lingate): A supplementary question, sir. The minister having indicated that it would not be sensible to have a conference unless there could be additional payments made under tax sharing, does this mean that the present government has abandoned the policy of trying to allocate the tax fields which they used to advocate when on this side of the house?


Donald Methuen Fleming: Mr. Speaker, the present government continues to follow a sound and realistic policy in this respect, a policy that takes account of the problems, the difficulties and the responsibilities of all levels of government in this country. It is following a policy which has been more beneficial to the provinces than the policies of our predecessors.
I pointed out in this conference, Mr. Speaker, that as compared with the payments to the provinces two years ago, the fiscal year 1957-58, we are this year paying in the form of conditional payments, unconditional payments and tax rental payments to the provinces, $400 million more. In other words, out of the federal treasury, in one form or another, this fiscal year $400 million
Inquiries of the Ministry more is going to be paid for the benefit of the provinces than was paid two years ago, and that-


Lester Bowles Pearson: Hospital insurance.


Donald Methuen Fleming: Yes, that includes the provision of hospital insurance, which has brought substantial benefit to a number of the provinces.


Mr. Speaker:: Order. The minister is going beyond the scope of the question, and the exchange is taking the nature of a debate, which is not appropriate at this stage of the proceedings.


Lester Bowles Pearson: In view of the explanation of the policy of the government just given by the Minister of Finance, will the Prime Minister explain the attitude he took during the election campaigns on this matter?


John George Diefenbaker: Mr. Speaker, the attitude taken by the Prime Minister in election campaigns, that the provinces receive additional amounts, has been lived up to.


Mr. Marlin (Essex Easl):: Mr. Speaker, may I ask the Prime Minister a supplementary question. Will he not agree, in the light of the answer he has just given and the statements made by the Minister of Finance in answer to questions, that the Minister of Finance has completely repudiated the stand that his leader took during two federal elections with regard to the calling of a dominion-provincial conference?


Donald Methuen Fleming: That is utter nonsense.


Peter Francis Martin: And this government stands indicted. t


John George Diefenbaker: May I say to my hon. friend that however pompous the attitude he may take, it is no answer to the fact that this government has shown the provinces a regard that was not shown by the previous government.


Peter Francis Martin: Never mind the insults; give us the answer. Mr. Speaker, I rise on a point of order.


Some hon. Members:: Oh, oh.


Peter Francis Martin: I think the time has arrived, Mr. Speaker, when the Prime Minister ought to be told by the Speaker that the way to answer questions is not to insult members of the opposition.


Some hon. Members:: Oh, oh.


Paul Joseph James Martin: All these catcalls are not going to interfere with my right to ask this question. I suggest to you, Mr. Speaker, that the Prime Minister ought to have it indicated very strongly that under

Inquiries of the Ministry the rules of this house, if he cannot give a constructive reply he has no right to throw insults across the floor.


Mr. Speaker:: I observe that when an argumentative question is asked it is usually met by an argumentative answer. I endeavoured to indicate that I thought that this exchange had gone far enough when the Minister of Finance was answering. This is not the time to debate the issue, and unless there are supplementary questions seeking additional information-


Mr. Fulton:: And not provocative statements by the hon. member for Essex East.


Mr. Speaker:: -I think we should drop the matter.


Paul Joseph James Martin: On the point of order, may I say that I know Your Honour seeks to be very fair and is fair in these matters. But I ask you to look at Hansard of this morning and see whether I was not fully justified in suggesting to the Prime Minister that if he cannot give a constructive reply when questions are put to him, he is not allowed under the rules of the house to insult one hon. member or hon. members.


John George Diefenbaker: Mr. Speaker, there is no question of insult at all.


Mr. Mcllraith:: Just abuse of the rules.


John George Diefenbaker: The hon. gentleman, following his usual course, first asked a question and then made an observation to which there could be attributed only that quality which I applied to it.


George James McIlraith: Having been permitted that observation under the rules, I presume it is in order for us to attribute to the Prime Minister the qualities which we may feel his actions warrant and which are quite contrary to the rules.


Mr. Pickersgill:: I have a supplementary question seeking information. I should like to ask the Minister of Finance, who is quoted as having said that the premier of Quebec was more interested in cash than conferences, if he can tell the house how much more cash the province of Quebec is getting from the federal treasury now than it got three years ago.


Mr. Bell (Saini John-Albert):: Ask Lamontagne.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: A very appropriate interjection.


Donald Methuen Fleming: Mr. Speaker, I am deeply impressed by the observation of the hon. gentleman-


John Whitney Pickersgill: I am asking for factual information.


Donald Methuen Fleming: -that he is seeking information. I have not all the details with me in my papers, but I shall be delighted to furnish authentic information to my hon. friend on that subject or on any other subject, because no one in the house needs it more than he does.


John Whitney Pickersgill: I wonder whether at the same time the minister could give us authentic information about the province of Newfoundland, to correct the erroneous information given by his colleague the Minister of Justice.


Donald Methuen Fleming: Mr. Speaker, if
that was a supplementary question I can assure the hon. gentleman that any proper information in this respect will be gladly furnished with regard to any of the provinces. As to his concluding remark, I think he should be fair enough to recall that the Minister of Justice rose in the house at the very first opportunity he had to give the house the figures he had intended to give in speaking on the occasion to which the hon. member has referred.


John Whitney Pickersgill: And which were still
erroneous.


Mr. Augustin Brassard (Lapointe):: I should like to direct a question to the Prime Minister. Would the Prime Minister be kind enough to tell the house if the premier of Quebec has put forward concrete proposals in respect of acceptance of federal grants to universities.


John George Diefenbaker: Mr. Speaker, I have
nothing to add to what has been stated in the past, and may I say that the discussions that took place at the conference will be made available to the house, provided it is proper to do so, by the Minister of Finance.


Donald Methuen Fleming: Mr. Speaker, I
think I should say to the hon. gentleman who asked the question that the subject of university grants was not introduced into any of the discussions at the conference.


Lester Bowles Pearson: Mr. Speaker, in view of what the Prime Minister has just said may I ask the Minister of Finance when he is going to make the discussions at this conference available to the house?


Donald Methuen Fleming: Mr. Speaker, I informed the Leader of the Opposition last week that it was not proposed to keep any verbatim record of the proceedings of the conference. It was the decision of the conference itself that there should be no verbatim record kept of the proceedings, and the conference was carried on in camera

by decision of the conference itself. There is, therefore, no record to produce, and the decisions of the conference are embodied in the communique which was issued yesterday afternoon at the conclusion of the conference and which I tabled in the house at the earliest possible moment.


Lester Bowles Pearson: You should get together over there.



TEXTILES


[Stage Direction]
On the orders of the day:
Mr. Samuel Boulanger (Drummond-Arlha-baska):: I should like to direct a question to the Minister of National Revenue based on a statement made by Mr. Potofsky, president of amalgamated clothing workers of America and reported in today's Gazette, to the effect that continued imports into Canada of clothing from Japan will have a disastrous effect on the Canadian market and parallel industries, with the prospect of an increase in unemployment in Canada. Will the minister tell the house whether the government has received any representations along these lines and, if so, what replies have been made by the government?


George Clyde Nowlan: Yes, Mr. Speaker; I will not say by the government, except the Minister of National Revenue. I have been meeting delegations from time to time representing various industries who have put their views before me, including representatives of the textile industry. When such matters have been advanced in concrete form I have directed that inquiries be made to ascertain the facts of the situation. The matter of textile imports from Japan has been brought to my attention, and my department is now investigating the matter.



CRIMINAL LAW


[Stage Direction]
On the orders of the day:
Mr. D. M. Fisher (Port Arthur):: I should like to direct a question to the Minister of Justice arising out of a news report in today's Globe and Mail to the effect that a police officer in Toronto visited the store of a book dealer and advised him that a certain book by Jack Kerouac was obscene. Would the minister consider checking this case in order to inform the house later what authority has determined or has the right to determine whether or not this specific book is obscene?
66968-9-359
Inquiries of the Ministry


Edmund Davie Fulton: Yes. My attention has not been directed to the particular story, but I shall look into it and find out to what police force the constable belonged, and what if any authority he had for the statement that is alleged to have been made. I will endeavour to give a fuller answer as soon as possible.



IMMIGRATION


[Stage Direction]
On the orders of the day:
Mr. Erhart Regier (Burnaby-Coquitlam):: I should like to direct a question to the Minister of Citizenship and Immigration. Has the minister had time yet to look into the brief recently submitted by the Chinese benevolent association? If so, is she in a position to announce any amendments to the existing regulations in regard to the immigration of orientals?


Hon. Ellen L. Fairclough (Minister of Citizenship and Immigration):: The answer to the first part of the question is yes. The answer to the second part is no.



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Mr. E. W. Brunsden (Medicine Hat):: May
I address a question to the Minister of National Health and Welfare. My question is based on my pride in southern Alberta and its citizens. In view of the fact that Mr. and Mrs. C. B. Hemsing of the hamlet of Rolling Hills in the constituency of Medicine Hat are the parents of 23 splendid Canadians, the 23rd having recently arrived, and in view of the fact that to date a certain other province has been given the honours in Canada for records of this kind, would the minister make inquiries and ascertain if the time is not now ripe for Alberta to receive her proper salute for achievement in this, as in other fields?


Hon. J. W. Monteith (Minister of National Health and Welfare):: Mr. Speaker, I should like to thank the hon. member for having informed me of his intention to ask this question. I feel that Mr. and Mrs. Hemsing are making a great contribution to the Canadian way of life, and I am glad that through family allowances we are able to contribute to their way of life.
Incidentally, with respect to Alberta's achievements in this field, it may surprise the hon. member to know that his province still has a long way to go before it can match
5656	HOUSE OF
Supply-Defence Production the top provincial averages for the allowance paid per family, which is the only yardstick my department has to go by. It may also surprise him to learn that our latest figures indicate that the most productive province by this standard is Newfoundland.


Lester Bowles Pearson: Mr. Speaker, may I ask a supplementary question. As this particular question does not seem to me to involve government policy in any way, will the minister not agree that the family allowances which these 23 children are receiving is the result of Liberal policy?


Jay Waldo Monteith: There is no evidence that 23 members of this family are receiving allowances.


Herbert Wilfred Herridge: May
I ask a sudatory supplementary question of the minister. In view of the announcement of the former minister of citizenship and immigration when in British Columbia that Canadian born babies make the best immigrants, would the minister kindly extend his investigation to the province of British Columbia to see if there has been a liberal response to the former minister's cradlerocking pronouncement?


John Whitney Pickersgill: Mr. Speaker, when the hon. member rose I also rose to ask a supplementary question, and my supplementary question is this. In view of my well known views on this subject, will the minister join my congratulations to his?



CROP INSURANCE


Hon. D. S. Harkness (Minister of Agriculture) moved: the third reading of Bill No. C-66, to provide for contributions and loans to the provinces in respect of crop insurance.
Motion agreed to and bill read the third time and passed.

The house in committee of supply, Mr. Sevigny in the chair.



DEPARTMENT OF DEFENCE PRODUCTION

[Stage Direction]
68. Departmental administration, $7,507,609.
The Chairman:: Shall vote 68 carry?


Augustin Brassard: Mr. Chairman, I wonder if the minister would make a general statement?
[Mr. Monteith (Perth) .1


Hon. Raymond O'Hurley (Minister of Defence Production):: Mr. Chairman, at the outset I would refer you to the actual content of our estimates for the current fiscal year. It will be noted that more or less substantial increases are shown over the estimates for 1958-59 for five of the items, and a decrease in one. Only vote 71, which provides for payment of grants in lieu of taxes on crown owned defence plants operated by private contractors, remains relatively unchanged. In addition, the main estimates include one new item, vote 72, and another new item of major importance appears as vote 504 in the supplementary estimates.
I would like to explain briefly these changes and innovations. Vote 68, which provides for the costs of departmental administration, shows an increase of roughly $275,000 or 4 per cent over the provision made in 1958-59. The bulk of the increase is accounted for by salaries and is attributable to normal annual increments and some upgrading of positions. Those factors have been offset to some extent by a reduction in the total establishment from 1,527 positions to 1,509 positions. I might add that this will be the seventh successive year in which both the authorized establishment and the actual number employed have been reduced.
It will be noted that a further increase amounting to $41,500 is included in the supplementary estimates under vote 502. This is designed to provide for increased travel which has been made necessary largely by departmental activities relating to Canadian-United States production sharing.
Vote 69, for the care, maintenance and custody of stand-by defence plants, buildings, machine tools and production tooling, has also been increased from $450,000 to $882,000. There will actually be a decrease for the second successive year in the amount budgeted for care and custody of defence plants in stand-by condition. However, the task of preserving and storing or disposing of crown owned machine tools and tooling has assumed much larger proportions as a result of the completion of programs for the production of the CF-100, Sabre and T-33 aircraft, and the termination of the Arrow and Iroquois programs.
Vote 70 provides a total of $2,907,000 for capital assistance, which represents an increase of $807,000 over the provision made last year. In fact the provision for capital works and equipment accounts for only $1,657,000 of the amount requested under this vote. The remaining $1,250,000 represents a new departure, related to our efforts to increase the participation of Canadian industry

in United States defence programs under the production sharing plan. In many cases in which Canadian manufacturers might be interested in competing with United States firms for such business, an American firm may enjoy a substantial advantage because most of his preproduction and tooling costs have already been written off under previous contracts. The object of the proposed provision, therefore, is to offset his relative advantage, in part at least, by absorbing a portion of the relevant preproduction and tooling costs in Canada.
I would add that this provision is related, in our minds, to the first year or two of production sharing, when Canadian industry must frequently break into production programs which are relatively well established in the United States. During that period we shall be able to judge the effectiveness of this type of assistance, and determine whether or not it would be appropriate or necessary in subsequent years.
Vote 72 is a new item in the estimates this year and it will be noted that vote 503 in the supplementary estimates provides an additional $450,000, bringing the total requested for the year to $950,000. The purpose of these votes is to make funds available to establish Canadian sources of electronic component parts essential to expected Canadian military requirements. The needs of forthcoming equipment programs can be met in this country only if action is taken in anticipation of these programs to tool up industry for production and obtain production samples which will meet military standards. Limited action has been taken along these lines in past years, using funds available to the Department of National Defence for the development of electronic components; however, it was decided this year to place the development of qualified production sources on a more systematic basis, and to include the necessary funds in the estimates of my department.
This is of necessity a selective program in which we must weigh each case in the light of the quantities of the components likely to be required and existing manufacturing capabilities on which we can build. For approved projects, the funds are intended to cover such costs as production engineering, tooling, the manufacture of sample components, test equipment and testing, evaluation for qualification approval, training and cost studies. It is expected that most of this money will be spent on a fairly wide range of projects, each of them involving only a relatively small amount. I might add that while the purpose of this provision, as originally conceived, is to establish sources of components related to Canadian military 66968-9-359i
Supply-Defence Production requirements, the establishment of such sources also assists Canadian industry in its bidding for United States orders.
Vote 73, which provides for the expenses incurred by Defence Construction (1951) Limited in procuring the construction of defence projects on behalf of the Department of National Defence, shows an increase of about $340,000 or 11 per cent over 1958-59. This reflects the expectation that total defence construction expenditures will be almost double those for last year, taking into account the construction of new Pine Tree stations, Bomarc launching sites and the Sage station. Despite this large increase in the program the expected increase in personnel, which is the chief reason for the additional funds, amounts to only about 15 per cent.
Vote 74, for the administration and operation of Canadian Arsenals Limited, shows an increase of $200,000 over 1958-59. For some years prior to last year the volume of sales achieved by this company was sufficient to cover all its operating costs. Last year, however, sales declined to the point where it became necessary to revert to the practice of the post world war II period and appropriate funds to cover the deficits of the arsenals. A further reduction in the volume of sales is expected in the current year, and the gap between anticipated revenue and costs is therefore widened.
On the other hand vote 75, which provides for the cost of construction, improvements and new equipment for Canadian Arsenals Limited, is further reduced this year by the amount of $226,000. The vote covers only capital costs of a general nature and excludes amounts attributable to specific programs; the latter would be covered by vote 70.
Finally I would direct your attention to vote 504 in the supplementary estimates, which asks for $5 million and commitment authority for an additional $4 million to support selected defence development programs. This item is closely related to the production sharing program and owes its origin to the same circumstances which gave rise to that program. As long as Canada was undertaking the independent development and production of the major equipment requirements of the armed forces, Canadian industry was able to build up and maintain sizeable engineering teams and to develop an advanced technology in a number of fields. As it becomes increasingly difficult for Canada to develop major weapon systems independently, the support previously given to development engineering by the equipment programs of the Canadian services is lessened. We are therefore taking

Supply-Defence Production other steps to ensure that existing engineering capacity will be maintained to the greatest extent practical, and that our technological progress will not be impeded.
This is important for many reasons, among them being the serious effect which a decline in Canadian engineering capabilities would have on our production sharing efforts. The weapon systems and equipments which seem to offer the greatest promise for future production sharing are all characterized by a very high degree of engineering content. Canadian industry will be able to share in such production programs only if its engineering capacity can be maintained and its technical competence advanced through the performance of appropriate development tasks. I would emphasize that we are determined that any Canadian role under production sharing should include some of the more demanding work and not be limited to the pouring of concrete or to what is often called "metal bashing".
The choice of projects to be financed from this vote will, of necessity, be restricted to the most promising areas of development, and no attempt will be made to cover the whole field. We must obviously consider the ability of Canadian industry to meet the engineering demands of particular projects. We must also estimate the prospects for future production orders, which will require a forecast of the future requirements of both the United States and Canadian forces. In addition, the development program will be worked out in a long term context to ensure the greatest possible continuity and stability of Canadian industrial engineering. It will also take account of the probable industrial needs of the civilian economy, to which certain lines of technological advantage may be especially relevant.
The method of selecting and administering development projects is being worked out in consultation between my department and the departments of finance and national defence. There will also be continuous consultation with the United States agencies responsible for defence research and development.
I must point out that there is an element of risk in all development projects. Nobody knows for certain in advance whether the expenditures of development funds will produce a piece of hardware acceptable to the armed forces. There are bound to be failures, and this risk will have to be accepted. Even the failures, however, are likely to be offset in part by the technical experience gained by the industrial teams involved. For those projects which are successful, of course, there is every expectation,

taking into account the much larger United States requirements, that substantial production orders will result.
(Translation):
Those are the main changes and innovations provided this year in the estimates of this department. The remainder of my introductory remarks will deal with some of the most important aspects of our current activities and with the progress made in respect of the production sharing plan.
During the last fiscal year, expenditures for purchases and construction were hardly lower than in former years. The net value of new contracts and of changes in previous contracts is but only slightly higher than the figure for 1957-58. During the current year, I am not expecting any great difference in the degree of our activities, based on the value of contracts and the amount of expenditures.
However, statistics do not give any indication of the main change which has occurred and which is still being developed in the nature of our work. This change, the setting up of a production sharing scheme between Canada and the United States, follows the important decisions taken during the last year with regard to our defence program. As parliament and the people in general soon recognized, these decisions have shown the growing complexity of modern weapons and the ever more complete integration of Canadian-American continental defence arrangements which make it extremely difficult for our country to undertake alone the development and production of the main weapons.
The government had realized the situation more than a year ago. It was obvious that programs like that of the Bomarc missile and the SAGE system, which were being considered at the time, and also the possibility of other more remote defence programs against ballistic missiles, would require a reorientation of the larger part of our development and of our defence production in Canada. Instead of confining ourselves to the sole requirements of Canadian armed_ forces, we would have to get more and more together with the United States, and co-operate with them. In theory, these arrangements were provided for in the Hyde Park agreements and the statement of policy of 1950 with regard to economic co-operation. But, this general theory of co-operation had to be put into practice so that it would apply to the new circumstances. This was the origin of the production sharing plan.

Hon. members will remember that on February 23 last, I informed them of the steps we had taken up to that day jointly with the American authorities for the purpose of an actual sharing of production. I may say that we have resorted to every possible means. The Prime Minister (Mr. Diefenbaker) first of all raised the matter during his last summer's talks with president Eisenhower. The Minister of National Defence (Mr. Pearkes) and myself have explained Canada's point of view to the defence secretary of the United States on various occasions, namely at the meeting of the joint Canadian-American defence board last December. We also exchanged correspondence with Mr. McElroy and the late Mr. Quarles, of the American defence department, in which we dealt with general policy but also pointed out Canada's interests with regard to specific equipment requirements in the United States. Officials of both countries, among whom were my deputy minister and the deputy minister of national defence, took part and will again take part in a number of talks in order to direct and accelerate the implementation of the program. Various working groups, consisting of Canadian and United States officials responsible for special aspects of the program, are meeting almost continually.
(Text):
At an early stage in our discussions with the United States authorities we were able to get their agreement to a definition of the objectives of production sharing. As I reported to the house last February 23, we set ourselves an immediate aim of increasing the participation of Canadian industry in the production and support of North American defence weapons; we also adopted a continuing objective which recognizes the long term nature of the problem with which we were faced, and looks to the co-ordination of the defence requirements, development, production and procurement of the two countries in order to achieve the best use of their respective production resources for their common defence.
In pursuit of these objectives two broad courses of action appear to be appropriate for the Department of Defence Production. The first is to obtain United States recognition and acceptance of Canadian sources of supply. This had to begin, of course, at the top, at the secretarial level in the United States and among the assistant secretaries responsible for the procurement programs of the three services.
It is here, of course, to the senior United States authorities that we have had to look for the removal or modification of policies and
Supply-Defence Production regulations which would hamper Canadian industry's participation in United States procurement programs. The most important example of action of this kind, which I reported to the house on May 1, was the revision of the "buy American" regulations. The general effect of these changes was, of course, to waive the "buy American" act in respect of purchases in Canada of the main kinds of defence equipment within the capabilities of Canadian industry.
There are other instances of action at the secretarial level to remove impediments. Duty free entry, for example, has always been a problem in the past, but arrangements are being worked out for this privilege to be extended to imports of Canadian defence material. I might explain that the exclusion of duty from a Canadian bid for evaluation purposes, under the waiver of the "buy American" policy, does not in itself provide for duty exemption when the material actually enters the United States, unless a duty free entry certificate has been granted. The problem has, in the past, been felt chiefly at the subcontract level, which will, we hope, be an important area of future Canadian sales. I am now confident that the problem will be remedied.
A further problem related to security restrictions. Most of the important defence programs in the United States carry a security classification, which has often had the effect in the past of excluding Canadian firms from access to these programs. A "need to know" could not be established for Canadian industry chiefly because the Canadian forces had no requirement for the equipment in question. The United States authorities are very strict, and understandably so, in their insistence on a "need to know", and even their own industries are unable to obtain information about projects in which they are not directly involved. Now, however, in most cases the production sharing program has been accepted as sufficient grounds for the removal of this security bar, whenever Canadian firms are interested in projects for which their capabilities may be appropriate. Canadian industry is therefore finding it easier to discuss with the large defence contractors in the United States many of the important programs in which the latter are engaged.
By actions such as these we have obtained a framework of United States policy and regulations which is favourable to Canadian participation. But this is only the first step toward securing acceptance of Canadian sources. Many of the actual procurement decisions in which Canadian industry might be interested are taken at the lower levels of the

Supply-Defence Production United States armed service departments, often at procurement centres far removed from Washington, and by the prime contractors or even subcontractors. It has been necessary, therefore, to embark on a broad program of making United States procurement offices and contractors aware both of the implications of the new policies and regulations of their own government and the capabilities of Canadian industry.
In terms of the man-hours of Canadian officials, this has been and will continue to be a major concern of my department in the production sharing program. We have reinforced the staff of our Washington office which, as the Leader of the Opposition observed a short time ago, can play a vital liaison role with the United States authorities. We have stationed officers at key United States project offices. Other officials have been assigned for as long as six months at a time, to work with United States contractors in an effort to discover and bring to their attention opportunities for Canadian participation. The major United States contractors have also been supplied by my department with detailed reports of Canadian production facilities which could be employed on their projects.
I might say that the United States authorities have recognized the need to make their production sharing policy effective at the level of their procurement offices and contractors, and have supported us generously in our efforts.
We have from the outset enlisted Canadian manufacturers to help in this task of education, and representatives of a number of our industries have visited Washington and major United States procurement centres, both to help us in familiarizing United States authorities with Canadian capabilities and to be briefed by those authorities on United States procurement programs and procedures. A growing number of Canadian firms have also acted individually, sending their representatives to visit contractors throughout the United States. I should like to emphasize that this kind of action-the face to face meeting between Canadian and United States industry-is essential to the success of production sharing.
For the same reason, United States contractors have been encouraged to visit Canada and obtain first-hand knowledge of Canadian facilities. I might add that in doing this we have been confident that Canadian industry would make an impressive showing, and this has, in fact, been the experience to date. Our Canadian capabilities are neither as large nor as broad as those of our great neighbour, but within the limits of

specialization Canadian defence industry is the equal of any in its physical plant and manufacturing skills.
All this, then, constitutes one of our lines of attack, going after United States acceptance of production sharing, and recognition of the contribution which Canadian industry can make. The other line of approach has been to help Canadian industry to exploit the opportunities which the production sharing program may present.
I might emphasize at this point that we can only try to help. We have consistently taken the view, in our own procurement program, that the interests of both the Canadian taxpayer and the armed forces are best served when manufacturers compete for our contracts. I can assure the committee that the United States authorities are no less insistent on this point in their procurement programs, and that Canadian firms who are seeking United States defence orders are entering a highly competitive field. In some cases the competition will be largely a matter of price; in others the technical aspects of proposals may be of equal or even greater importance. I know, however, that Canadian manufacturers are aware of this. I am confident that they will go after United States orders aggressively, and will bring all their skills and imagination to bear in the framing of their proposals. If they are not prepared to make this effort, nothing my department can do will make the production sharing program work.
On the other hand I realize that there are ways in which government can help, and we are pursuing these courses as energetically as possible. We are anxious, in the first place, to advise Canadian firms on what is involved in doing business with United States defence agencies and contractors, and to help them to identify the programs in which they might take part. We have prepared and distributed a brochure explaining United States procurement regulations and practices, in which we have tried to include all the information which is necessary to a firm seeking United States orders. As I have indicated, we have arranged for many companies to attend briefings in the United States. We have welcomed inquiries from interested Canadian firms, and I might at this point renew our offer of advice and assistance.
Both the department and the Canadian Commercial Corporation are undertaking to keep abreast of United States requirements, in order to draw to the attention of Canadian firms any opportunities which are likely to be of interest to them. As a result of these efforts, and especially as Canadian industry establishes its own direct links with United

States procurement offices and contractors, there should be no opportunities missed through lack of knowledge.
In addition to the foregoing, there are other more tangible ways in which we may be able to help. I have already outlined two of these in my explanation of the items in the main and supplementary estimates. Vote 70, in part, offers some assistance to Canadian companies who may find themselves competing with United States companies who have already written off most of the tooling and preproduction expenses on previous orders. Vote 504, as I have explained, represents a far-reaching effort to ensure that Canadian skills are kept abreast of developments in defence technology, so that our industry can play its proper role in future production programs.
In addition, mention might be made of the reserve of crown owned machinery which is held by the department. This has been available to Canadian industry over the years to be used on Canadian defence production programs. In some cases items from the reserve might appropriately be made available to Canadian companies wishing to enter into United States defence contracts or subcontracts, providing, of course, that they already have the basic facilities and skills needed for the job.
In summary, I can say without hesitation that production sharing has overshadowed in importance all other concerns of my department in the past year, and will continue in the current year to have first claim on my own attention and that of my senior officials and a large number of officers of the department.
To this point, I have been reporting on what my department was doing, and what it intended to do, to promote production sharing. I feel that this is information which the committee, and the public at large would want and are entitled to have. I realize, however, that in the last analysis it is the results which count.
Firm figures for United States purchases in Canada during the first half of 1959 are not yet available. I may say, however, that during this period United States government procurement offices have placed prime defence contracts in Canada to the value of approximately $32 million. This figure covers Canadian manufactured military equipment only, and does not include construction, maintenance and service contracts. The comparable figure for the first six months of 1958 was $17 million. There has therefore been an increase of $15 million or 90 per cent in direct United States government orders alone. Moreover, within these totals the proportion
Supply-Defence Production representing more complex types of equipment has increased and for the first six months of this year accounted for two-thirds of the total direct orders. Since the end of June we have learned of the award of further contracts, valued at over $3 million, for advanced electronic equipment.
To this must be added the value of subcontracts placed in Canada as a result of the combined efforts of my department and Canadian industry to interest United States prime contractors in Canadian sources of supply. Over 100 such orders have been received, with an aggregate value in excess of $20 million. Many of these orders have a significance far beyond their relatively modest value, since it is a common practice of United States contractors to order small quantities for evaluation with the intention of placing substantial follow-on orders if these initial deliveries are satisfactory.
Too much should not be read into these figures. The idea of production sharing is too new and our experience is too limited to permit any very definite conclusions to be drawn. I am satisfied, however, that the initial results justify optimism on our part.
In the remainder of my statement I propose to review the principal sectors of our current production program and the status of the industries involved. In the field of aircraft production, the major government programs in which the industry is now engaged involve the CP-107 Argus maritime reconnaissance aircraft, the CC-106 transport version of this, the CS2F or tracker anti-submarine aircraft and the CC-109 cosmopolitan transport. The order for the Argus will, however, be completed late this year, and a number of subcontractors have already been affected. The CS2F will be completed in early I960. The effect will be felt by subcontractors several months earlier, but subcontract orders in connection with the Albatross rescue aircraft will provide a partial replacement.
Work on the two transport aircraft will continue for a longer period, and there are now grounds for hoping for substantial commercial orders for both of these. As the committee will be aware, Canadair have already received orders for 15 of the commercial version of the CC-106, with options for the sale of 10 more. Since then other carriers have shown an interest both in this aircraft and their CL-540, which is the transport known to the air force as the CC-109. Needless to say I welcome the initiative shown by the company in stimulating commercial interest in these aircraft, both of which owe their existence to the support given by the government.
Sales of the Beaver and Otter utility aircraft are also continuing, and the Caribou,

Supply-Defence Production which seems likely to satisfy a substantial United States government requirement, is being further developed. The de Havilland Company of Canada has, of course, established a well deserved, world wide reputation as a designer and manufacturer of utility aircraft.
Aero engine production in Canada is now concentrated on supporting the Orenda engines which will continue, for several years, to be employed in large numbers by both the R.C.A.F. and a number of foreign air forces, the manufacture of the 1820-82 piston engine for the CS2F and the Albatross, and the production of Pratt and Whitney piston engines and parts for the world wide market. The repair and overhaul program will, of course, continue to provide steady employment in all sections of the industry, to provide with only a slight falling off as older types of aircraft are replaced.
The sum total of all these programs does not, of course, provide a work load which will support the existing aircraft industry. We therefore attach considerable importance to production sharing in this area and welcome such orders as those which have already been received relative to the Bomarc missile program.
For the same reason, the announcement that the F-104G has been selected as a replacement for the Sabre aircraft in the air division will be of enormous interest to the industry. It is obviously and understandably of great interest to this committee, and although a great deal of hard work remains to be done before contracts are signed I can at least report today on the action we propose to take in the procurement of this aircraft and the kind of program we expect to have.
In view of the fact that we have three major aircraft manufacturers in Canada, each of which is capable of undertaking this program, it has been decided to award the main contract on the basis of competition, in which each of the three will be invited to submit proposals. Whatever may be the outcome of this competition, it is certain that the program will create a substantial volume of work for the Canadian aircraft and associated industries over the next three years. The total cost of the program over this period will run to over $400 million, and at its peak it will create employment for approximately 10,000 people, of whom something over 5,000 will be required by the prime airframe and engine contractors. This work will, of course, be distributed widely throughout industry as a result of subcontracting.
The airframe will be manufactured in Canada with the exception of a small number of parts. Moreover, it is our expectation, based on discussions with Lockheed, that our purchases in the United States of the remainder

of the airframe components will be oifset by the assignment to Canada of the production of certain airframe sections for the requirements of Germany. For the production of the J-79 engines for these aircraft we are now beginning negotiations with Orenda Engines Limited. It is the opinion of the government that this firm is the most suitable for this work, providing their costs can be kept strictly within reasonable limits, and we are looking to the determination of a firm price.
As in the case of the airframes, these engines will be manufactured in Canada except for a hard core of parts for which tooling costs would be prohibitive in a requirement of this size. Here again our imports of engine parts will be offset by other component purchases in Canada by the United States manufacturers. In other words, both for the airframe and the engine the principle of production sharing has been fully accepted by the United States firms involved.
We are now working toward a similar understanding with the developers and manufacturers of the fire control and flight control equipment required for this aircraft. Until these discussions have proceeded further I would hesitate to forecast the actual production program which the Canadian electronics industry will be called on to undertake. I can say definitely, however, that the greater part of this work will be done in Canada, including a number of tasks which will be of a challenging character and consequently of importance for the preservation of the industry's engineering capabilities.
I might give the committee some idea of the expected impact of this program on future budgets, about which the Leader of the Opposition asked last Saturday. In the current year expenditures will be relatively slight, amounting to only about $6 million. In 1960-61 this will be multiplied almost tenfold, the present estimate being $57 million. In 1961-62 this in turn will be roughly doubled, and the peak will be reached the following year when an estimated $120 million will be spent, assuming current price levels and wage rates. Expenditures will fall slightly in 1963-64, during which year the program will be completed, and thereafter only relatively minor expenditures will be required for final settlements.
A breakdown of costs based on the principal elements of the program may indicate its probable impact on Canadian industry. About 41 per cent of the estimated cost of an F-104G, in fly-away condition, represents the airframe. The engine accounts for about 23 per cent, instruments and flight equipment

for 16 per cent and electronic equipment, including the fire control system, for 13 per cent. The remaining 7 per cent represents payments to the original manufacturers for Canada's share of the design and engineering costs associated with the "G" model of the F-104, together with the licence fee and royalties. The engineering charges which I mentioned provide for engineering the airframe to take the fire control system, and strengthening the wings. These costs will be shared equally with Germany, and the Canadian share will be further reduced if the aircraft is adopted by other countries.
I would emphasize that all the cost and expenditure figures and percentages I have given are simply the best estimates we are able to make on the basis of our production studies and preliminary discussions with the Lockheed company. The actual contractual terms remain to be settled by negotiation. I might add that since the decision was announced last week, my officials have met with representatives of Avro, Canadair and de Havilland to explain to them the basis on which proposals are to be submitted, and it is our intention that the prime contractor shall be chosen, on the basis of the proposals received, within six weeks from now.
Interest has also been expressed in the basis on which prices are to be established. This too, of course, remains to be settled by negotiation, but I can assure the committee that we shall not contract on any cost-plus formula. For some items it may be possible to negotiate firm prices from the outset, but in the main the plan is to start on the basis of target prices, with incentive features. Where this is done we shall subsequently negotiate firm prices as soon as our experience with production costs permits.
The Leader of the Opposition asked last Saturday whether provision would be made for alteration of the terms if there were to be a change in our NATO commitments. I can only say that any changes in the requirement, short of cancellation, will be dealt with by the normal procedure for amending contracts, and that each contract will contain the usual provisions relating to cancellation.
As the Minister of National Defence indicated last week, the first of these aircraft will be delivered early in 1961, about 18 months after the contract is awarded. I might add to this, in response to a question by the hon. member for Kenora-Rainy River, that thereafter the delivery rate will build up to a monthly rate of 10 aircraft, reaching this in six or seven months. Deliveries will continue at this rate until completion of the order by mid-1963. Peak employment under this schedule will be reached early in 1961. We are
Supply-Defence Production anxious to get on with this program with the least possible delay, and I can assure the committee that my department will undertake the many negotiations involved with the utmost speed consistent with protecting the taxpayers' interests.
I turn now from the aircraft program to the electronics program. The electronics industry differs from the aircraft industry in that it serves three separate major markets with widely divergent requirements. Defence electronics is just one of these, the other two being the large consumer market for radio and television products and the growing market for industrial applications of electronics. Experience has shown, however, that defence electronics has set the pace of engineering in the industry and has produced the developments on which the growth of the other two markets has rested. The future health of the industry rests largely on the degree to which it is able to participate in future defence programs and, in this way, maintain and develop its engineering skills.
The growing integration of our defence forces with those of the United States probably has a greater effect on this industry than on any other, since the electronics content is particularly high in those weapon systems which form the basis of that integration. We are therefore now in a transition period, which is likely to persist for two or three years, during which Canadian defence electronics production must be reoriented, in a very large measure, to serve a North American rather than a Canadian market.
There is no reason to believe that the general level of activity in defence electronics in this country should decline in the foreseeable future, since the equipment plans of our armed forces, as well as those of the United States, continue to place a growing emphasis on electronics applications. There are also encouraging signs that the Canadian industry, as it showed at the recent meeting of its association, is beginning to adjust itself to the new defence environment, and some initial successes have been achieved in the radar, data processing and communications fields in competition with United States firms.
The other sectors of the defence production program, while they reflect the same changes in defence strategy and establishments, offer fewer opportunities for production sharing.


Joseph Pierre Albert Sévigny: I regret to interrupt the minister, but his time has expired.


Some hon. Members:: Go ahead.

Supply-Defence Production


Joseph Pierre Albert Sévigny: Is it the pleasure of the committee that the minister be permitted to carry on with his statement?


Some hon. Members:: Agreed.


Mr. O'Hurley:: The shipbuilding program will continue at approximately its present level, which is substantially below the peak of the Korean and post-Korean period. The one major new project to be started in the current year involves a fleet tanker to support the destroyer escorts. It has been decided to invite tenders from Canadian shipyards for the construction of this ship. The original order for 14 destroyer escorts will be completed during the current year. Work has now started on the first of the six additional destroyer escorts, which will be similar to H.M.C.S. Restigouche in all essential respects, and the second ship will be begun in the very near future.
While there is a continuing need for weapons and ammunition of conventional patterns, production in these categories is expected to decline further during the current year. New types of weapons may offer some opportunities for the industries which were engaged in this kind of work, but these are likely to be limited by the radical differences in the nature of the new equipment and the relatively small numbers in which they are required.
In summary, it might be said that the defence production program and the industrial complex associated with it are now going through a process of adjustment, reflecting the changing character of modern defence and the increasing integration of Canadian and United States continental defence forces which has resulted from this fundamental change. I am satisfied that the nature of this adjustment is now well understood by the civilian and military authorities and the defence industry in both Canada and the United States. We are determined that the resources of this country shall continue to play an effective role in the new circumstances, and with the co-operation which we are receiving both from our own military authorities and from the procurement agencies and contractors in the United States, I am confident that this can be done.


Augustin Brassard: Mr. Chairman, I should like to thank the minister for his very comprehensive statement in introducing his estimates in the house. I do not intend to deal with the technical questions which have been raised in his statement but I presume that some of my colleagues, far more competent than I am, will have a few words to say about this subject.
(Translation):
Mr. Chairman, I found that the Minister of Defence Production (Mr. O'Hurley) devoted
[The Chairman.]

a considerable part of his speech to what he called the contract sharing scheme or plan between Canada and the United States in the defence field.
I shall naturally have something to say in the matter a little later on in my remarks, but, for the present, I want to deal with some extraordinary powers that are conferred upon the minister. I want to mention those powers, Mr. Chairman, because, before 1957, then hon. members who are occupying today government benches and who were sitting then on this side of the house frequently said that the Minister of Defence Production had extraordinary powers, so extraordinary that they could even shake up this country's whole economy. According to them, it was due, of course, to the manner in which the minister was using his statutory powers.
Mr. Chairman, I only want to give two or three instances of those extraordinary powers. According to paragraph (e) of subsection 1, section 17 of the act:
A contract may be entered into by the Minister without the approval of the Governor in Council if
(i)	in the opinion of the Minister, the contract must be entered into immediately in the interests of defence,
(ii)	the estimated expenditure, loan or guarantee does not exceed twenty-five thousand dollars, or
(iii)	competitive tenders have been obtained and the lowest tender, involving an estimated expenditure not exceeding fifty thousand dollars, is accepted; but the Minister shall make a report to the Governor in Council in respect of any contract involving an estimated expenditure, loan or guarantee exceeding ten thousand dollars and entered into without the approval of the Governor in Council.
A little further on in the act, Mr. Chairman, we find section 23, and I would like to quote the first subsection:
Where a person who has been requested to enter into a defence contract on terms and conditions that the Minister considers to be fair and reasonable has refused or failed to enter into the contract, if the Minister is satisfied that such person owns or controls facilities that are suitable for or can be adapted to the work required to carry out such contract and that his refusal or failure was without reasonable excuse, the Minister may direct that person to produce, deliver or store, or to construct, as the case may be, on such terms and conditions and within such period as the Minister considers to be fair and reasonable in the circumstances, the defence supplies or the defence project or projects that would have been the subject-matter of the contract if it had been entered into.
In concluding my remarks with regard to the extraordinary powers conferred upon the minister under the Defence Production Act, I would like to quote subsection 2 of section 27. To my mind, Mr. Chairman, that

clause embodies one of the most extensive powers conferred upon the minister under the act. It reads as follows:
Where a controller has been appointed to carry on a business or a part thereof, he shall be deemed to be the agent of the owner thereof for the purpose of carrying on the business or that part thereof, except that the owner shall not have any right to control the business or that part thereof and the controller may, subject to any instructions of the minister, do all such things as he thinks fit for the purpose of carrying on the business or that part thereof.
Mr. Chairman, nothing would be simpler than to quote other sections of the act and point to the extraordinary character of the powers conferred upon the minister under that act. If I felt I had to deal briefly with the matter it is because, as I pointed out at the beginning of my remarks, some members who were formerly in the opposition and who are now ministers have vigorously denounced those extraordinary powers conferred by the act upon the Minister of Defence Production.
As an example, may I quote the words of the present Minister of Public Works (Mr. Green). Dealing with those extraordinary powers, including the provision allowing the minister to appoint a controller in an enterprise, the Minister of Public Works, then member for Vancouver Quadra and sitting with the opposition, said, as recorded on page 1964 of Hansard of March 11, 1955:
There is no freedom left to business in Canada, Mr. Chairman, so long as that particular provision remains on the statute books of our land.
Mr. Chairman, I am convinced that the Minister of Public Works was sincere when he spoke those words in 1955. The minister is very influent with the Prime Minister and all his colleagues. That is why I believe he has now an exceptional opportunity to remove from our statutes a provision which, if it remains there, will deprive Canadian business of all freedom.
A little later, the Minister of Public Works said:
A later subsection provides that an investigator appointed by the minister may or may not allow any person whose conduct is being investigated to have a lawyer. The subsection goes just that far. In these provisions, we have a potential tyranny in our land.
Mr. Chairman, that is what the present Minister of Public Works thought at the time of certain powers conferred upon the Minister of Defence Production under the act.
The hon. member for Peel (Mr. Pallett) too, has had some very harsh words to say about
Supply-Defence Production those powers conferred upon the minister. I should like to quote but one paragraph of what the hon. member said, as recorded on page 1992 of Hansard of March 14, 1955:
I have often wondered-
The hon. member was referring to the extraordinary steps which the Minister of Defence Production could take in relation to the powers conferred upon him by the act.
I have often wondered, and I ask myself today, how many of the members who sit behind the minister who administers the department which this resolution concerns, know exactly the terms that are contained in the act. The hon. member for Eglinton-
As you know, Mr. Chairman, the hon. member for Eglinton is today Minister of Finance.
The hon. member for Eglinton outlined some of the terms very carefully. They go the very depths and roots of our system. They take away, on the strength of one man's opinion only, whoever the minister may be who is in charge of the department at the time, every right to which we have pledged ourselves in the past and to which we expect others in the future to pledge themselves.
It was not only the rights that were safeguarded; the sections of an act, too, were safeguarded by those who came after us. And the hon. member for Peel (Mr. Pallett) added:
I suggest, as have other hon. members before me, that a resolution could easily have been introduced which would continue the life of the department but at the same time give it only the powers necessary for carrying out its work under our system of freedom of the individual and of enterprise.
Those were the statements made so feelingly in 1955 by the Minister of Finance (Mr. Fleming), the hon. member for Peel, and the present Minister of Public Works (Mr. Green) concerning the extraordinary powers of the Minister of Defence Production. Now, Mr. Chairman, those gentlemen are members of the government; two of them are cabinet ministers, and not among the least, in the Conservative government cabinet. What is keeping them from acting on the pious statements they made, when sitting on this side, about the rights of parliament and the extraordinary nature of the powers vested in the Mnister of Defence Production under this Act?
Mr. Chairman, we are not surprised. We have become used to quoting statements from former opposition members who now sit on the government side. There have been a number of such statements. We have even quoted definite condemnations of certain actions and certain items of legislation passed
5666	HOUSE OF
Supply-Defence Production by the former Liberal administration in other fields. Then, what did they do when they gained office? What did they do, Mr. Chairman, once they got the power to carry out what they had preached-with apparent sincerity-when they sat on this side of the house? What are they doing now? They just sit there, indeed I might even say they are practically sitting on the statements they made when they sat on this side of the house.
One of the main aspects, or at least one of the aspects which I consider important in the statement made by the minister this morning, is the contract-sharing system, in the field of defence, between Canada and the United States. This is a scheme that already has a background to it.
If, for instance, we refer back to certain newspaper reports giving the background of the minister's and the government's scheme, I think perhaps we may be disappointed with the current turn of events. I must say, however, that the minister and the government are to be commended for taking definite action to obtain, or rather to have Canada obtain, its share of defence contracts, if we are to have an integrated defence with the United States. I commend them on their attitude, but I regret that their efforts, despite all their merits, have not yielded the expected results.
The minister, however, has indicated in his statement that he is very hopeful that current developments and discussions with our United States colleagues will lead to some improvement. I most sincerely hope so.
However, there must be no more of those rather gloomy statements-from our point of view-made to the press by certain officials-
I am not referring to Canadian officials. I have here, for instance, an article which appeared in La Presse of Tuesday March 10 under the title:
Canada wants more U.S. arms orders.
This is a dispatch from New York, dated March 10:
The request made by the Right Hon. John Diefenbaker, Prime Minister of Canada, that Canada get a larger share of orders for the north American common defence has made pratically no impression in the United States.
Mr. Diefenbaker's remarks in the House of Commons were not even published in Washington; and did not provoke any official answer. In fact, the American people, the American industry, even the majority of American politicians are completely unaware of the serious crisis which has resulted for the Canadian armament industry fol-


lowing the cancellation of the Avro Arrow fighter CF-105.
The article goes on:
The main obstacle to the fulfilment of Mr. Diefenbaker's wish is that, by force of circumstances, Canada's defence is bound to the United States' defence.
I must admit that, since the publication of that article, if we take into account all that it contained, there has been great progress, but I do not think it is satisfactory, and the government will have to work hard and consistently to get our share of defence production contracts.
There was a further article in he Devoir of March 6, 1959. I need not read it, but I do say that many Canadians have read with deep concern the statements of some high United States officials. The article published in Le Devoir on March 6, 1959, has the following heading:
Our air forces: the U.S. will provide equipment, aircraft, pilots; our job will be to sweep the runways.
I believe, Mr. Chairman, that Canada, with its technicians-whose ability, devotion and hard work has been rightly praised by the minister-Canada, with its three major industries in that field and the great number of experts who work there, is not asking for favours from the United States in trying to get the share of contracts it deserves. Canada is running a great risk with the United States, I would not say by abdicating its sovereignty, since it has not done so, I believe, but I think our country is running a great risk in relying on the neighbouring government-I do not think I am going too far in saying this-for the choice of certain weapons with which Canada is equipping itself for the defence of our continent. We find proof of this in what happened only recently regarding the choice of the new plane, a matter most ably dealt with by my colleague for Toronto Trinity (Mr. Hellyer).
Again about contract sharing with the United States, I know that words I am about to quote have been said in this house, Mr. Chairman, but I would like to repeat them to show how hard it is going to be for us to reach the goal which the government has in mind, because I hope-not only do I hope, but I gather from the statement the minister made this morning-that the government has set itself a very high standard in the securing of defence contracts. But if I take, for instance, a statement from the Montreal Gazette, dealing, Mr. Chairman, with

the meeting of high Canadian and American officials, and with the recent visit to Washington of our minister of defence; I notice that speaking of Mr. McElroy, the Gazette had this to say:
(Text):
He-
Mr. McElroy.
-added the United States considered "very modest" a Canadian request to place some of the production orders for these systems with Canadian industry.
(Translation):
I am sure that the Minister of National Defence (Mr. Pearkes) and his colleague, the Minister of Defence Production, have succeeded in making Mr. McElroy understand that we intended to make more than modest requests because we were anxious to share in the construction of weapons to be used for the defence of our continent.
The Ottawa Journal of March 23 also published quite sensible remarks which should inspire the government in its dealings with our American colleagues. May I quote part of the item of March 23, 1959 which is headed as follows:
(Text):
What the Canadian government had tried to do, and must continue to do, is to emphasize to the United States that production-sharing is regarded by this country as the very foundation of effective and long-continued defence collaboration. If there is to be no sharing to any substantial degree, then there is bound to be some discouragement of Canadian co-operation in the general association, and more talk, so damaging to our good neighbour (and perhaps to us) about Americans wanting Canadians to be hewers of wood and drawers of water.
(Translation):
Mr. Chairman, the Toronto Globe and Mail of May 4, also made quite judicious remarks which I shall bring to the attention of the Minister of Defence Production. I quote from an article dated May 4, 1959, entitled: "A long way from partnership".
(Text):
Canada still gets the short end of the stick. As matters stand, the best our defence industries can hope for is to win some U.S. subcontracts, to make some components for U.S. weapons-and even this will require exceptional effort and efficiency on their part. Yet we have the capacity, as the Avro Arrow abundantly testified, to design, develop and produce completely a wide range of modern armaments.
How can this capacity be utilized? Not by the efforts of individual companies. Defence industries produce wholly or mainly for governments, and to the specifications of governments. This being the case, there is little point in telling them to get out and compete, to get out and find business. The business must be given to them.
To produce orders for Canadian defence plants is the function of the Canadian government. If Ottawa has no orders of its own for the Canadian defence industry-and this seems to be one of the consequences of North American defence integra-
Supply-Defence Production tion-then Ottawa must get North American orders tor it.
The place to get such orders is in Washington: the way to get them is by top-level negotiations between the two countries-negotiations in which Canada will have to be extremely firm and extremely forthright. The Americans seem to think they can keep us happy by throwing us an occasional sop. They must learn we will settle for nothing less than a full sharing.
(Translation):
And I would like to quote a last paragraph from the Financial Post which is very important, I believe, with regard to the story behind our negotiations with the United States for our share of defence contracts. I will read one paragraph only from the Financial Post of May 9, 1959, and it is found in an item headed as follows: Canadian Companies Hold Keys.
(Text):
"Canadian Companies Hold Key to Those U.S. Defence Orders." The next two years will make or break this marriage.
(Translation):
This, Mr. Chairman, has to do with our discussions with the United States to get a fair share of contracts. The Financial Post goes on to say:
(Text):
If within two years Canadian companies have not got a large slice of United States defence orders, the arrangement will have failed.
(Translation) :
I could quote further notes on this matter, Mr. Chairman, but I think I have said enough to pass now to other questions. But I would again urge the minister and the government to really play their part in this connection. It is all very well to tell Canadian companies to submit proposals which might be acceptable to the U.S. government but I believe we have to go a step further. The minister had an excellent idea when he gave or sent to the various companies likely to be interested a booklet of information about the specifications or standards of the U.S. government in this field.
At the beginning of his statement, the minister told us that some items of his department's estimates this year, had gone down, compared to last year. But if my sources of information are reliable, the estimates of the Department of Defence Production for the year 1958-1959 totalled $9,877,086, while, for 1959-1960, they will reach $17,388,120. Although there may have been cuts in some of the items, we can see that there has been an increase of nearly $8 million in the estimates of his department this year.
Mr. Chairman, that brings us back again to the years prior to 1957. I wonder whether the minister could tell us, when he will be kind enough to make his remarks at the end of the debate on the first item, if there

Supply-Defence Production is much of what some former members of the opposition, now ministers of the crown, used to describe picturesquely as "waste and extravagance". We have here an increase of nearly $8 million, as I have just pointed out to the house. Yet, promises had been made to cut waste and extravagance in several departments. One of the colleagues of the Minister of Defence Production who is sitting beside him at this moment-I refer to the Minister of National Defence-also spoke with great feeling on the extravagant expenditures of the department he is now directing. Suggestions had even been made at that time.
However, before going back to the 1957 campaign, Mr. Chairman, allow me to quote an authority in this house in the matter of suggestions to check waste and stop runaway expenditures in the departments. I should like to refer to page 4330 of Hansard for June 1, 1955, and to quote just part of a speech made that day by the member for Prince Albert who is today Canada's Prime Minister.
This is what he said at the time:
What did the Hoover commission do? Yesterday the Leader of the Opposition referred to some of its activities and some of the results of its work.
Mr. Chairman, I shall spare hon. members the next few paragraphs and come straight to the important part I want to quote.
Let us have an inquiry such as is asked for by the hon. member for Greenwood,-
He too is a minister today.
-in order to bring about savings. If they are even partially commensurate with those achieved by the Hoover commission in the United States they will run into hundreds of millions of dollars in the course of a year from now. But something more is needed than a Hoover commission, as they found in the United States. They set up the Hoover commission and it went to work on its task forces. Then, throughout the length and breadth of the United States, outstanding leaders in finance, in business, in agriculture, in the labour unions and in the fields of national research formed themselves into a non-profit organization in order to assist in the implementation of the Hoover report. In other words, what they said they wanted to do without regard to party or political considerations of any kind was to do away with the pork barrel pressure groups and substitute the cracker barrel pressure groups of thrift in every part of the nation.
(Text):


The Deputy Chairman:: Order. I am sorry to advise the hon. member that his time has expired.


Augustin Brassard: I wonder if
members of the House of Commons will allow me to carry on for five or six minutes?


Some hon. Members:: Agreed.


Augustin Brassard: Thank you very much.
(Translation):
Mr. Chairman, on another occasion-or rather I should say on two or three occasions -during the 1957 election, the extravagant expenditures of the national defence department and of the defence production department have been mentioned. It has been repeated time and time again that those departments were spending money extravagantly and that a commission should be set up to inquire into both departments, and every other department in fact, in order to put a stop to this shameful waste of the Canadian taxpayers' money.
Mr. Chairman, on May 1, 1959-perhaps some of my hon. colleagues do not know the book I am going to quote-


An hon. Member:: The Gospel.


Augustin Brassard: It is what you might call the Conservative bible for 1957.


Mr. Bourgei:: It has been banned since that time.


Augustin Brassard: Mr. Chairman, here is a statement made by the Prime Minister at Truro, Nova Scotia, on May 1, 1957, according to a news item appearing in the Toronto Telegram of May 2, 1957. I quote:
(Text):
Mr. Diefenbaker pledged that a Conservative government would set up a commission similar to the Hoover commission in the United States so that "unnecessary and wasteful federal expenditure could be eliminated."
(Translation):
On May 18, 1957, in Calgary, according to another report appearing in the Calgary Herald of May 1, 1957, the Prime Minister said this:
(Text):
A committee similar to the Hoover committee in the United States should be set up to study and make recommendations on government expenditures.
(Translation) :
At Woodstock,-and that is the last quotation of the Prime Minister which I will read into the record, because I do not want to take undue advantage of my colleagues' kindness in granting me five or six minutes extra time,-on June 6, 1957, according to a dispatch of the London Free Times, issued on June 7 of the same year, the Prime Minister, then leader of the opposition, said: (Text):
The Conservative party in the house had insisted that the government itself first of all should cut its unnecessary expenditures, should reduce the high cost of big government.

(Translation):
Mr. Chairman, those who are now ministers but used to sit on this side of the house have often indicated and even charged outright that the former Liberal administration had recklessly wasted Canadian taxpayers' money.
Today, Mr. Chairman, I ask the Prime Minister, or I might ask the Minister of Defence Production to convey my message to the Prime Minister, in order to give him the opportunity to fulfil one of the solemn pledges that he personally made to the people of Canada that he would create a commission or a committee to study the extravagant expenses of the government and the various departments. The government has the exceptional opportunity today of practising what it had preached, if it was sincere. But I do not want to cast any doubt on its sincerity.
Mr. Chairman, I did not have time to touch upon other matters with which I would have liked to deal. However, during the consideration of the estimates, and as the various items are called, we shall be pleased to direct certain questions to the Minister of Defence Production.
(Text):


Douglas Mason Fisher: Mr. Chairman, in speaking to these estimates one feels like a tenant raising cain with the charwoman instead of going to see the landlord. Of course in this instance it is difficult to know who the landlord is. Sometimes I think it is the Minister of National Defence, sometimes the Secretary of State for External Affairs and sometimes I suspect that the lord of the manor is somewhere down in Washington. It is difficult to know how far to go in this department. It is rather obvious that the minister has little to do with the policies that determine the expenditures.
The point raised by the speaker who preceded me largely had to do with what the "ins" said when they were out. One point the hon. gentleman did not deal with was the difference in personality between the previous minister of defence production and the present minister. We are all aware of the image that was built up of the former minister of this department. He was made out to be a rather fearsome ogre and perhaps merited all the attacks about the powers given him under certain legislation. The fact that these attacks have led to no consequential change is not so much because the present government is perfidious and is not true to its former stand but because under our form of government power tends to build up around a personality or an individual. I think we should look at other departments of this government and see
Supply-Defence Production where that is happening. Fortunately the present minister is not an ogre. I see one minister sitting on the front benches who may be an ogre, but that has nothing to do with these estimates.
In our section of the country we have an example of an industry that is badly in need of defence production orders. This raises a question of the dilemma which confronts the government in its purchasing policy in so far as defence industries are concerned. Over the years defence industries like all others have tended to be concentrated in certain areas of the country and specifically in what might be called the golden triangle from Windsor to Sudbury to Montreal. This concentration has been accelerated in the last 10 years by the fact that most defence industry production is notable for its high capital input and a lessening of its labour input.
This concentration seems to revolve around the fact that in defence purchasing we are getting more and more complicated articles involving more and more engineering skill, as the minister pointed out. This naturally has led to an increased concentration of defence production purchases in the highly industrialized regions. It has meant that the much smaller areas like the lakehead have fallen behind. Perhaps in the natural justice of things these areas should fall behind because they cannot compete in certain terms due to higher transportation costs and the like with the more highly concentrated parts of the country.
In Port Arthur we have an important industry that enjoyed a good reputation for production in the past. In the last few years the company has not been able to obtain substantial orders to make it an important or basic aircraft supplier for the government.
Mr. Chairman, may I call it one o'clock?
At one o'clock the committee took recess.


[Stage Direction]
AFTER RECESS

The committee resumed at 2.30 p.m.
Douglas Mason Fisher: I should like to make a general reference to defence production policy with reference to one very narrow sector and one specific industry, namely the Canadian Car Company plant in Fort William. This plant had a record in the last war of producing aircraft. Since the last war it has had some aircraft contracts and it also produced buses. Recently, it moved into the field of trailer production. In other words, we had an amalgam of commercial production and defence production. Not too long ago the company came under the control of the

Supply-Defence Production great industrial-certainly defence production-giant of A. V. Roe. It is another example of the kind of concentration of industry that I was speaking about earlier. Not too long after A. V. Roe took over this company it was announced that the Canadian Car plant would move its commercial operations to Montreal where there was a new, or a newer, plant than they had in Fort William, and that unless there were some defence orders forthcoming the plant at the lakehead would close. The reaction of the community was immediate and to my mind it is the kind of reaction that raises questions about damn fool socialism and damn fool capitalism. Here we have the spectacle of an entire community, labour unions, municipal officials, rotary club and other service clubs, practically every organization in the community, off touting for defence contracts for this particular company.
When the company made the statement that it was uneconomical to go on with commercial operations in this particular plant and that on the grounds of corporate realism they must move to Montreal, they immediately, of course, brought to the fore the question, what about defence production orders in the same plant? Would they not be too high cost? If the same factors are at work in commercial production, surely they are at work in defence production, and so you have the dilemma that the local people were shilling -if you want to use a slang term-with the government for defence production orders to keep this plant going. And yet if the economic justification for the commercial transfer is true, then the adequacy of this plant for defence production orders on the basis of pure efficiency and the cheapest defence products of the best standard at the best price was obviously, or to me obviously, ruled out.
So you had the spectacle of this very large -well, the largest corporate structure perhaps in Canada-A. V. Roe Company, having the community doing its leg work, one might say, and putting pressure on this particular government in order to get a defence contract that would keep the plant open. In fact, in the past the company did indicate that if there were substantial defence orders, it might reconsider their commercial orders. In fact, what has happened is that the commercial production either has been or is in the process of being switched, and so our only hope of keeping that plant open is to have a substantial order.
The minister is aware that the order that the government has-I will not say promised -given every indication of giving to Fort William is the production of the Bobcat, the armoured fighting vehicle of the army, that the Minister of National Defence referred to.

This particular vehicle is in the development stage. Ostensibly, or conceivably, if it passes the development test and it fits into government policy, then the government will go ahead and decide to place an order, and if the company puts in any kind of decent bid that order will go to Fort William and so we will keep our plant alive and over a thousand people in employment terms and a much larger number in terms of population of the community will be pleased. But, as I said when I first introduced this topic, there is a question of principle here and a fine opportunity for the government to enunciate a policy.
I pointed out earlier there has been this tremendous concentration in a golden triangle. It is a triangle that happens to fit into the United States concentration and beyond this particular region it is very difficult for secondary industries to get going. In the main they often have to be sustained by some form of government contract. While we can regret this concentration, yet it certainly is a fact that it exists and I think that it is a fact the government has to take into consideration in its purchasing policy. If what I see across the country in all the places outside of this particular triangle, and one or two other isolated major industrial regions in Canada, is true, we have a problem which is much larger than the lakehead problem.
Wherever you go in Canada, outside of the very large areas, you hear this bleat or this call for secondary industries. Every part of the country wants secondary industries. The people realize that the primary industries they may have such as pulp and paper, transportation, and such things, are not substantial enough to give them the kind of development they dream of. Therefore, when you go into northern Ontario, around Timmins or around Sudbury, or when you go into Manitoba and into eastern Quebec, or into any of these regions you hear the talk always, "We want and we need secondary industries". It seems to me that here would be an opportunity for this government in its defence procurement policy to recognize this particular need and to deliberately-that is by deliberate policy- decide to react from the concentration in the highly industrialized regions and deliberately direct their defence procurement policy in giving this type of secondary industry, if it is a type of secondary industry, to the regions and the communities that do not have them at present or are losing out at present.
I could give another example at the lake-head where we are finding that our shipyard cannot pick up orders to compete, and there again we are up against a situation. I certainly hear this, "Oh, would that we had

C. D. Howe around again; C. D. would throw us a ship or two to sort of keep us going". My reference to Mr. Howe is not a derogatory one. I just want to make the point that this sort of thing should not be done from the point of view of largess. An order should not come into Fort William just because we are in desperate need; it should come because there is a government policy to direct this kind of contract and this kind of work to areas that are not taking part and have not taken part in this tremendous concentration of industry. To me, this is one of the ways that this government could indicate by such a policy that it has a long range plan for the economy as a whole. I do not think it has to be ashamed of having a long range plan, if it has one up its sleeve.
The very sobering realization came to me the other day, after looking at a study by an economist on the location of the iron and steel industry in Canada, that most of the dreams of places like Fort William and Port Arthur about eventually having some kind of integrated steel operation are dreams that are never going to come to fruition within the next two or three decades unless there is some completely unusual technical change. This particular thesis argued that the plant of Dosco in Nova Scotia, for example, is uneconomical and that its future can only be guaranteed by different forms of government subsidy.
We have had a number of examples in the house of the kind of subsidy that affects that particular operation. We have had examples in the house countless numbers of times, if you check back over the last few decades, where measures have been brought in that recognize, for example, that the western farming community has problems that require a government policy which will direct and assist them down the line. I suggest to the minister that in the field of defence procurement there is a possibility for a government policy that will really help the smaller communities outside the industrial concentrations to develop or to keep alive secondary industry without the opprobium of being looked upon as inefficient or incapable of competing with the much larger scale organizations that are possible in the Montreal and Toronto areas. It seems to me that this possibility would be an antidote to what the former member for Port Arthur and great cabinet minister, if you wish, in the last government, advocated. It seems to me that his policy of getting things done during the war and in the years immediately after the war, arising from the impetuous nature of the man, was of real worth in
Supply-Defence Production terms of war effort but it left out the question of over-all planning and it showed very little consideration of the long term aspects of support for secondary industries or the development of secondary industries in those regions outside the triangle.
It is not within the minister's competence at the present time to enunciate such a policy but I think his department is one area where such a policy can very easily come forward. There are many members of the house who come from communities not unlike the one I represent and who have this very real problem. I imagine that someone who comes from a region embracing some of the smaller cities in the Ottawa valley or some of the smaller communities outside of Montreal or from such places as Halifax and Sydney must be very much aware of this problem and the real possibility of government leadership in this field with the blanket recognition and acceptance by most of the people of Canada, I believe, that here is a situation where straight economic efficiency in terms of the cheapest possible product in the shortest possible time is not necessarily the most important factor.
The final point I want to touch on in relation to the Department of Defence Production is the question of United States orders and the possibilities of Canadian firms getting in on them. Again, in the case of the region from which I come we have the example of rumour and counter-rumour to the effect that the industry involved there has not even been trying to get United States orders. I know that the minister can probably scotch that story and I hope he will do so later during the discussion of his estimates. I think we would appreciate having from him at some stage during his estimates a brief statement about the position of aircraft parts suppliers in this country, with specific names mentioned, and what are the possibilities of the groups in Edmonton, Winnipeg, the lakehead and in other parts of the country aside from the big three to whom he referred who I imagine are Canadair, de Havilland and Avro. I should ask the minister to be frank in his exposition. I think these places would appreciate knowing what is likely to happen rather than to have some golden hope hung in the air which they are not going to be able to reach. If the minister would do that I think it would enable me and the hon. member for Fort William to clear up some misapprehensions that exist in our area, and I would hope he would do the same for the others.
I cannot end my remarks without saying that throughout the past year I have appreciated the pleasant and informative way in

Supply-Defence Production which the minister, his deputy and their associates have always come forward with as much information as they possibly could when they were asked, and in that regard I have no complaints at all about this department. That situation is quite in contrast to that in the Department of Transport and the Department of National Defence. Before you rule me out of order, Mr. Chairman, I want to say that I have never had a straight answer from the Department of National Defence. I should like to suggest to the Minister of National Defence that with regard to sending out letters if he wants to see in operation a technique of giving straight answers he should drop over and have a chat with the Minister of Defence Production or his deputy. He might then be able to improve one very minor aspect of his public relations.


Mr. Broome:: Mr. Chairman, I have a
couple of specific matters I should like to deal with but before doing so may I commend the minister on the activity of his department in opening the way for Canadian industry to participate in defence production contracts originating in the United States and also with regard to the success the department has had in getting rid of the buy American act from the point of view of defence sharing.
At one time Vancouver was a major airplane manufacturing centre. During the war the Boeing Aircraft Company had large plants on Sea island and produced many planes. It is not a remarkable fact that the majority of the aircraft manufacturing plants in the United States are on the west coast because the physical facilities in regard to airplane manufacturing require rather massive, high structures with very large door openings and such structures are more readily, easily and cheaply built on the west coast where you do not have winters such as occur in the east to contend with. After the war these facilities were absorbed by the overhaul plants of Canadian Pacific Air Lines and Trans-Canada Air Lines.
The previous speaker referred to the decentralization of industry and it seems to me that the major manufacturing complex which is in existence on the west coast is a logical place for an airplane manufacturing industry. It follows the pattern set in the United States, and we have had past experience in that form of manufacturing. We have the skills and the technicians out there to carry it on. We know that Avro, Canadair and de Havilland are the three major manufacturing plants and, to refer only to Avro and Canadair, it would seem to me that they were set up in Toronto and Montreal respectively because the majority of their work was


government work and therefore they located in areas that were fairly close to Ottawa so that they would have quick and easy contact with government officials and with the government itself. I believe that we have passed beyond that phase, at least I hope we have, although we do have a saying out on the west coast that we may be 3,000 miles away by air but we are 300,000 miles away as a matter of actual fact.
I would suggest to the minister it is about time that some particular study was given to the problem of spreading out defence contracts across Canada and in particular, so far as I am concerned, to the west coast. I would suggest a team of experts from the department might well visit the west coast and become acquainted with what can be done there. They might have discussions with existing manufacturers on the west coast, including Fairey Aviation and the Bristol Company, who know a fair amount about building airplanes. They could ascertain whether or not a few of these defence contracts in connection with certain phases of airplane building, perhaps also in the electronics field, might be placed with established manufacturers on the west coast.
In general, the procurement of the Department of Defence Production does tend to centre around the manufacturing heartland of Canada in Ontario and Quebec. This is understandable because again the great bulk of manufacturing is concentrated there, and also it is very easy for the representatives of such manufacturers to visit Ottawa and gain information as to what is required. They are in a preferred position so far as being in touch with what is coming up is concerned. Not too long ago I had an instance of this in connection with the construction of radar towers. We have a firm in Vancouver that could build these towers and they were asked by Canadian Commercial Corporation, I believe, to bid on this contract. However, by the time the firm got the information there was not enough time left to prepare a bid. Furthermore, representatives of the firm would have to visit United States defence officials in New York in order to be briefed on the particular requirements. It was just impossible for this firm to compete because of their distance from Ottawa. I think the fact that we happen to be 2,500 or 3,000 miles away from Ottawa should not be an insuperable barrier to our participation in contracts from the Department of Defence Production.
I feel it is up to the department, not the individual manufacturer, to do something to bring the west coast manufacturer into a position where he can complete on an equal

basis, so far as information and engineering advice is concerned, with his eastern counterpart. 1 would suggest, as I said before, that the area around Vancouver is an ideal area for participation in this F-104G project. Instead of limiting participation to Canadair and Avro or de Havilland I suggest we might consider Bristol or Fairey or some other company on the west coast in order to distribute some of the procurement for defence more equitably across the country. We do participate now in the construction of ships for national defence, but that is the only place where we get what I consider to be a fair break.
There is one other point I should like to make, and that is in connection with the calling of tenders for supplies for the armed forces. The air force has three delivery points, Moncton, Edmonton and Weston, Ontario. Moncton is for eastern Canada; Edmonton for western Canada and Weston, Ontario, for central Canada. In regard to navy procurement, the delivery is to various stores depots, but for the army a manufacturer invariably has to quote a price delivered to the central depot at Cobourg. Since freight is sometimes a major item in building up costs, and since you do not quote an f.o.b. factory price but f.o.b. the stores point, this makes it difficult for west coast manufacturers. Even if these stores delivered to Cobourg have to be sent to depots in Calgary or Edmonton, the western manufacturer has to include the cost of freight from Vancouver to Cobourg, and I consider that to be unfair.
I had a specific case where in actual fact, the freight involved was, I would say, something close to 50 per cent of the cost of the product. The product had to be delivered to Ontario, and then it was shipped back to Edmonton for stores there. This practice was changed, and the prices were quoted f.o.b. Edmonton from then on, but up to that time the department would receive the articles in Ontario and then pay the cost of freight back to Edmonton. The two centres which are probably most affected by this are Vancouver and Edmonton, which are the two major manufacturing centres west of Winnipeg. Finally, I suggest the department might well give consideration to strengthening their local offices in so far as local procurement is concerned, to the point where those local offices are able to advise on the procurement of major materials for the department.


Lester Bowles Pearson: In beginning the few remarks which I wish to make on the minister's estimates I should like to thank him, not only for the comprehensive and clear statement which he made this morning but also for his courtesy in sending two copies in
Supply-Defence Production advance over here so that we were able to follow him as he went along. We appreciate that very much. The statement was a revealing one. It revealed-though perhaps it was not required for that purpose because the purpose was obvious, once again that the key to defence production policy is defence policy. The key to the latter, as the minister pointed out in his statement, is the growing integration of our defence forces with those of the United States, which confirmed what the minister of defence made pretty clear in the debate on defence which we had the other day.
Defence production policy must obviously reflect that development in defence policy, which I admit has been going on for many years inevitably, perhaps inexorably, but a development which has gone farther now than ever before, as I ventured to say the other day, in our history. In the light of that, it is natural that defence production policy is now geared on the Canadian side, if I may put it this way, to United States defence policy or, if you would prefer to put it another way, to continental defence policy, which as it inevitably must be is under the major control of the United States, especially continental air defence policy. Of course, Mr. Chairman, this development, and the stage which it has now reached, is a far cry from the talk of emancipating our defence policy and defence production from the overpowering influence and control of the United States, the kind of talk we used to hear so often a few years ago.
The previous speakers from Port Arthur and Vancouver have urged on the minister that he or the government should lay down, as far as possible, a policy of direction in defence production so that procurement may be concentrated in those areas of underemployment, if you like, and surplus facilities. I have no particular argument to make to the minister in respect of my own area in that regard. As long as our defence relies to the extent it does now on nuclear deterrence, perhaps the most important defence production operation in the country is the production of uranium for the nuclear deterrent.
Having served in a government myself, I know of course, because this argument was used so often against us in earlier years, of the difficulties which exist in anything approaching a free economy in the direction by government of industrial and economic activity. Perhaps these is more opportunity, however, to do that in respect of an industrial activity which is so closely associated with government. In view of the minister's statement perhaps it will now be more closely associated than ever with government in peacetime, and probably there is
5674	HOUSE OF
Supply-Defence Production more opportunity for this in defence production than any other form of industrial production. But while that may be the case, here again the integration, if I can use that word, of our defence and defence production activities with the United States will make it more difficult to direct those activities in Canada to areas where the government might wish to direct them.
The burden of the minister's statement this morning was on the importance of defence sharing with the United States as perhaps the only basis now on which we can maintain and develop a defence production industry in this country. I agree with him, in view of developments over the years, that that is probably the most important aspect of defence industry at the present time; but defence sharing must surely be more than getting orders from the United States for equipment for Canadian use. If it means anything, and if it really is a genuine reflection of the interdependence we talk so much about, it means sharing in Canada production for United States use, or certainly for joint use.
Our experience in this country in the last few years has not given us too much cause to believe that that kind of production sharing is going to develop as it should develop in joint or collective defence. Our experience, for instance, with the CF-105, the Arrow, has been a very unhappy one in that connection. If there ever was an opportunity for the United States to carry out in deed as well as in words recognition of the continental and collective concept of defence, it would have been to have shown at least a greater awareness of the desirability of using that Canadian airplane for general collective continental defence. We know what happened. Perhaps this is not the best example in the world to choose, because after the plane itself had been tested it must have been pretty difficult for the representatives of the Canadian government at that time to sell the idea of its use to the United States when the Canadian government itself was making up its mind that it was not going to be used in Canada. Indeed, in the words of the Prime Minister, it would be obsolete before it would come into squadron operation.
It would be hard enough even without that kind of qualification to persuade the United States to accept Canadian production for United States or for joint use, because it means we have to come up against all the pressures of United States industry. Perhaps they will be even greater than less in the days ahead. There is no place where those pressures are stronger, as I am sure my hon. friend knows better than I, than in the aircraft industry. As the defence industry in


the United States sees a reduction of orders, as it is seeing now, in some aspects of defence-I think of the Bomarc, for example, which is having its orders cut $900 million in the next five years-United States industry will be even more careful about permitting, if that is not too strong a word to use, its government to share with Canadian industry.
The minister's statement this morning seems to me to make perfectly clear that if we cannot somehow get Canadian industry into this kind of defence production sharing it will be awfully hard to maintain it, let alone develop it, in this country. I think the statement also makes clear, perhaps more by omission than in any other way, that at the present time the only real outlet for our defence industry outside Canada is the United States of America. Here the prospects, as I have just said, are at least uncertain. The minister points that out himself in his statement, and I would like to quote from the copy which he was good enough to let me have at the point where he says:
By actions such as these-
And he was talking about the steps which had been taken by the government.
-we have obtained a framework of United States policy and regulations which is favourable to Canadian participation.
Then he goes on:
But this is only the first step toward securing acceptance of Canadian sources.
Perhaps I do not need to suggest to the minister that the second step may be more difficult to take than the first. Perhaps he was not unduly pessimistic when he said earlier in this session, as reported on page 1269 of Hansard for February 23, 1959:
The real success of production sharing endeavours depends, to a large degree, upon the determination of Canadian industry vigorously to seek defence business in the United States either as prime or as subcontractors. In assuming this responsibility, Canadian industry must bear in mind that it will have to be competitive with United States industry in terms of technical competence, delivery and price.
That is quite true, of course, but it will have to be more than that. With all the support that the government can give it it will have to overcome the forces in Washington which will be very much on the alert to make sure, even if these obstacles can be overcome, that Canadian industry does not share to any extent in United States production which would constitute what they would call dangerous competition for their own producers.
So there are many difficulties ahead even though some of them perhaps have been overcome, and I am glad of course, as all hon. members of the house are, at the success which was achieved in eliminating those

aspects of the buy American law which remained. That was one step forward, but there are others, and I have mentioned some of the difficulties.
The minister also mentioned another one in his own statement, and that was the difficulty of tariff protection. On that point he has this to say:
I might explain that the exclusion of duty from a Canadian bid for evaluation purposes, under the waiver of the buy American policy, does not, in itself, provide for duty exemption when the material actually enters the United States, unless a dutyfree entry certificate has been granted.
I think it is accurate to say that the importance of this possible obstacle in the way of the development of our defence production through production sharing is shown by the fact that United States duties on defence equipment can be as high as 17 per cent, which would mean that Canadian industry, to get an order on business grounds alone, leaving out all these other things, would have to be 17 per cent more efficient.
The minister also mentioned the security difficulties, and he explained why he thought that most of these had been removed. I hope that is true, because I know what that could mean and, what is perhaps even more important, how it could be exploited by people in other countries. The minister said in his statement that it is the policy of the government to remove these difficulties. In his statement this morning, he said:
As I reported to the house last February 23, we set ourselves an immediate aim of increasing the participation of Canadian industry in the production and support of North American defence weapons; we also adopted a continuing objective which recognizes the long term nature of the problem with which we were faced, and looks to the co-ordination of the defence requirements, development, production and procurement of the two countries in order to achieve the best use of their respective production resources for their common defence.
That is, of course, the proper long range objective of Canadian policy in this important field, and unless that objective is shared by the United States-and we hope it will be shared-then the progress which the minister has mentioned as being desirable will not be achieved.
The minister mentioned this morning the steps which were being taken by the government to assist Canadian development, and a good deal of money is going to be spent on that. But as I followed his statement this morning, that assistance, and I am certainly not quarreling with him about it, wilj. be for Canadian development not so much for Canadian use as to get a share of United States orders.
Then the hon. gentleman said that one of the ways in which progress had been made
Supply-Defence Production was by getting the United States to recognize Canadian sources of supply. It seems to me that ever since the beginning of the second world war the United States has at least recognized Canadian sources of supply for defence equipment, but it is not this recognition that matters, as the minister himself indicated this morning in another part of his statement, so much as the use made by the United States of those sources of supply. He said that certain action had been taken for that purpose, and he thought certain progress had been made, and that in that action and in that progress the government had begun its contact with the United States authorities at the top-at the secretarial level in the United States and among the assistant secretaries responsible for the procurement programs of the three services. Then he went on to say that while it was necessary to begin at the top-and that is certainly true -nevertheless, any progress made at the top level will not be effective in terms of action unless it is followed up at lower levels, so I was glad to learn that the staff in Washington has been strengthened for this purpose.
It will also not be effective unless the same kind of impact can be made on congress as was made on the administration, and that is going to be more difficult. Not long ago I was reading reports of the hearings which took place in Washington on this subject of defence production, and in those hearings the secretary of defence showed an awareness of the joint role which must be played in the defence of the North American continent and of the importance of the United States recognizing the real necessity of cooperation in this matter, and he tried to explain this to the committee. But I read very shortly afterward that, perhaps alarmed by the reaction to his words in certain circles in the United States, he had attempted to remove what might have been a political risk by saying that certain people who had been concerned by his statement need not worry too much because, naturally, the position of the United States producer would always be considered as paramount. So there are going to be difficulties about carrying out this essential principle of defence sharing.
The minister said some time ago in the house in an earlier discussion, and I could quote from Hansard, that it is in the United States subcontract field that the greatest results can be achieved through the production sharing arrangements which the government had set up in conjunction with

Supply-Defence Production the United States. Today, he said with regard to that matter, and his words were, I think, very important:
I would emphasize that we are determined that any Canadian role in production sharing should include some of the more demanding work and not be limited to the pouring of concrete or to what is often called "metal bashing".
I agree with him that if the major portion of Canada's defence production in respect to this sharing arrangement takes the form of subcontracts or minor contracts we shall not get very far. It seems to me that it would oe intolerable, if Canadian producers wish to get this kind of defence business that they must accept the position of becoming marginal suppliers and subcontractors for United States industry, with all the instability and uncertainty that such a provision implies. How we could ever maintain and develop a defence production industry on any such basis as that I do not see, and I hope we will not have that experience. We could surely never expect the Canadian defence industry to expand or even, perhaps, to survive in conditions where it would become a mere adjunct of United States industry completely dependent on the generosity of United States producers and on the comprehension of the United States government.
That secondary position is certainly not acceptable. It would have the further great disadvantage of eliminating Canadian industry from major development work in this field, and I take it that the purpose of the expenditure which the minister talked about this morning to assist in Canadian development is not to develop Canadian industry so as to occupy such a subordinate continental role but to develop the Canadian defence industry on its own so that it could play its proper Canadian part.
As we all know, not very much scientific and technological research is done at the present time in Canada, at least in comparison with what is done across the line in the United States. We know that development work in air defence projects up to a year ago has partially filled and, I think on the whole, successfully filled this important gap. It was that development work which enabled Canadian industry to keep together large teams of scientific and highly qualified personnel working on defence technology.
According to the figures I received there were a year or so ago 7,100 scientific and engineering personnel in the aircraft industry or the associated electrical and electronic industries. If we in this country are eliminated from major development work in this field we will surely suffer a major blow because obviously we will gradually lose our

teams of qualified engineers and technicians and those who are at present teaching in Canadian institutions will not find the same employment opportunities in Canada in this field. That in its turn means we will become more and more dependent on United States technology not only for defence production but for our industrial development.
In this field of defence production there is a real danger that our industry will more and more give up development work for all practical purposes and even to a large extent the production of equipment and weapons, and our aircraft and allied industries, if they survive at all, will survive in a subsidiary role to far too great an extent as subcontractors for United States industry.
We have been told that if the western world is to survive we must accept interdependence. I think Canada in the past and at present is showing its willingness to work within that new system of relationships. We have participated very actively in all aspects of the NATO alliance through financial contributions and industrial contributions as well as through armed forces stationed in Europe. How can we go on doing this if the financial and other burdens involved in those commitments not only put us in a position where our territory itself has to be protected largely by the United States but where our own defence industries depend largely on the United States for their survival?
In the field of defence procurement and production we in this country in the past have accepted, and we must accept, the implications of interdependence with the United States and our other NATO allies, but if interdependence is to mean anything except as a word used in a speech, it has to be a two-way system of relationship. We in this country cannot be asked to make all the sacrifices in the name of interdependence. More specifically, I believe we cannot accept for the sake of an apparent interdependence the dislocation of our defence industries because of their too-close association with United States industry and because that association may lead to a dominant position over Canadian industry by those United States industries.
That is why I suggest that Canadian policy not only in the field of defence but in the field of defence production must be com-pletly re-appraised in consultation with our allies to see how our own interests can best be served and what can be our best contribution in a truly interdependent community.
Before I sit down I should like to mention three points which I feel should guide that kind of reassessment. First, I believe that free trade should be established as soon as possible between all NATO countries with

respect to defence production. Surely if we are going to recognize and be asked to implement interdependence effectively in this field we have to abolish tariff protection and all other obstacles to a free and easy movement of defence products within the North Atlantic alliance and certainly across the Canada-United States border. There is no difficulty in that respect in the other great defence area which is so much a threat to our security now that we have to spend these hundreds of millions of dollars, and if we are to be effective, economically and industrially, as we face this other great area, surely the time has come when we can remove these obstacles at least as they concern defence products.
When I say that I have a realization based on experience of the difficulties which will be advanced against a proposal of that kind and I know we have not made very much progress over the last ten years in the NATO alliance in removing these difficulties but I think we have to keep at it. After all, it is the test of the reality of our interdependence.
Second, I believe that sharing arrangements should not be restricted to the possible participation by one country in another nation's defence production program. At present I think that is Canada's position to far too great an extent. Perhaps the minister will be able to reassure me on that point by telling me how often and to what extent the United States has used Canadian production for its own purposes.
Defence sharing arrangements, as I understand them, must involve the assignment by the whole alliance of specific production sectors to individual countries so that those countries can really specialize in those fields and be sure to have sufficient details to develop manufacturing facilities under optimum conditions of efficiency without fear that other countries will enter into those production fields and dislocate existing facilities.
There again I know the problems involved. There is no better illustration than that found in the case of the CF-105. At the time that the CF-105 was first under consideration, I think I am fair in saying it was admitted in Washington that there was no plane in the United States that had been developed which was comparable to the CF-105 up to that time. I am talking about this plane two or three years ago. But that did not prevent the United States aircraft industry from going to work and developing planes which would be competitive with the CF-105 and
Supply-Defence Production which they eventually decided to use themselves. That is not the way to work out defence production sharing in the North Atlantic alliance.
Third, we should make sure that the specific programs assigned to a given country would be carried out effectively and that other countries could safely rely on the quality of the work being done by that country. We should do that by making arrangements to staff the development teams with the most qualified personnel available for this purpose in NATO, and to provide continuing information in consultation with all other interested countries in the alliance.
Almost ten years ago when those very principles which I have just mentioned were debated and discussed in the NATO council and in all the NATO agencies, they were agreed on in principle and there were defence production committees set up to see if they could be implemented in practice. I confess there was not very much progress made but that does not mean we should give up the search for that objective which is perhaps more important now than it was even in those days.
The three proposals I have outlined have, I know, far-reaching implications and results. This is the reason why they would be so difficult to achieve. Their achievement, however, would benefit all the countries inside the alliance and strengthen NATO which is so vital to the defence of the western world and provide a far better basis for the defence industry in Canada than that which we are likely to achieve if we have to depend almost entirely on the United States for the maintenance and development of that industry.
Surely it would be a wise thing for the Canadian government to take the initiative in this field and put forward proposals of this kind and pursue them at every possible opportunity, both in Paris at the North Atlantic Treaty Organization and-perhaps even more important-in Washington and in the Canadian-United States committees which have been set up in recent years.


Joseph Pierre Albert Sévigny: Shall the item carry?


Mr. Hellyer:: Is the minister going to reply to the questions which have been asked?


Raymond Joseph Michael O'Hurley: Mr. Chairman, my first
remarks will be to reply to some of the suggestions made by the Leader of the Opposition. In my statement this morning I took great pains to make our position quite clear, as the Leader of the Opposition admitted, on this production sharing program that we have embarked on so extensively. I fully realize the difficulties we are going to meet and are meeting, but I also wish to be frank with the people and with the members
5678	HOUSE OF
Supply-Defence Production of this committee. I say that we have obtained certain results. I am not overoptimistic because, as the Leader of the Opposition said, there is a powerful lobby in Washington and they have an aircraft industry of their own in the United States that needs to be sustained. On the other hand, since we have embarked on this program and really worked hard at it, we have obtained results and I am optimistic enough though to say that my hope is that in the months ahead, we shall have extensive orders and shall keep those good relations which exist at the present, not only with the superior officers in the defence department in Washington but also with all levels mentioned and officers down the line.
To come back to interdependence; as the Leader of the Opposition said, it is a two-way road. I want to make it perfectly clear, and I want to emphasize it here today, that on different occasions the Prime Minister has taken exactly the same position, and he did not pull his punches when he said that interdependence of the United States and Canada has to work both ways. This afternoon I want to make my position perfectly clear, as I have in the past, by saying that our strong and good neighbours to the south have to come across to the Canadian people in this production sharing. That is what I am out to achieve and that is what my department is working for. When I present my estimates another year I hope to be able to report that I have obtained some results.
The Leader of the Opposition talked about some figures. I have a list of contracts in front of me which amounts to $31 million of prime contracts and the $20 million that I mentioned this morning in my statement. 1 tell the Leader of the Opposition that it is practically all for the United States army. This is an example: Radome panels, $19,000; calibration and repair of test equipment, $391,000; components for communication systems, $3,568,000; engine spares for the United States, $2,873,000; equipment and spare parts for radomes, $252,000; engine spares, again for the United States, $4,197,000; electronic spares, $443,000; and so on.
I have here a long list of subcontracts also which are in great part for the armed forces of the United States. I appreciate very much the kind remarks of the Leader of the Opposition about the statement I made this morning and about my sending him a copy, which was a pleasure. I also extend to him my appreciation of the remarks he made this afternoon. I have taken note of them and I shall be pleased to peruse and study them in Hansard.
I should just like to answer my good friend from Lapointe who spoke extensively this


morning with a lot of charity because we know each other pretty well. He spoke about the dictatorial powers given to the Minister of Defence Production by certain sections of the Defence Production Act. In reply I wish to state that by statute sections 23 to 31, inclusive, terminate on July 31 of this year, and the government is not renewing these sections which give dictatorial powers to the Minister of Defence Production. Therefore, I hope that my hon. friend from Lapointe will not be worried over the fact that I shall be a dictator by desire.
He also mentioned that there was a substantial increase in the budget. I explained in my statement this morning that the increase in the budget is primarily due to this $5 million increase for the new program of technological work that we intend to do and to continue with this production sharing, where we have an amount of $7 million in different items to help Canadian contractors compete in the United States field.
The hon. member for Port Arthur expressed his interest in the Canadian Car and Foundry plant at Fort William, but some of its employees are from Port Arthur. As the hon. member knows, a delegation came here to meet us on two different occasions to try to have work placed in this plant. To the delegation consisting of all the social clubs and the authorities of these two cities we expressed our sincere hope that we could do something for this area. To be perfectly frank, I want to tell the people what the Canadian Car and Foundry Company are doing at the present time. I want this to go on record. The main activity of the Canadian Car and Foundry Company Limited, Fort William, has been the fabrication of centre sections, wings, and surface controls for the CS2F on a subcontract basis from de Havil-land. In addition, they are fabricating Otter wings, also on a subcontract basis for de Havilland. At present, Canadian Car and Foundry have approximately 10 CS2F components to complete at an approximate value of $1,211,478. Canadian Car and Foundry are working on 25 sets of Otter wings at an approximate value of $250,000. They also have some small contracts for Harvard components.
The Fort William facility has also been actively soliciting business in the United States under production sharing arrangements but as of the present time they have not yet been successful in obtaining any contracts. The development of the Bobcat vehicle, to which the hon. member referred, is continuing very well at the Montreal facilities of this company but it will be some months before any decision can be made about its production. I have said, and I have expressed the same view to the personnel of

my department, that in this production sharing we hope to have the chance to bring some production work into the plant at Fort William.
In reply to the hon. member for Vancouver South who spoke of spreading defence contracts across the country and especially encouraging the west coast,-and I should like this reply to apply to the hon. member for Port Arthur as well-we are striving as much as possible in our purchasing in the different spheres of this department to purchase in the areas affected. For the information of the members of the committee I may say I have received very strong reproaches at different times from hon. members who have said that they used to sell to defence production in certain areas and today they are losing the chance to make those sales. Well, this is because we are trying to buy in areas where the articles are needed and where the food is needed across the country. This is why in the maritimes, for example, this year, although our purchases across the country were down 6 per cent, we had an increase of 20 per cent. We have tried to purchase more in the areas affected, the maritimes, Quebec, Ontario, the three prairie provinces and the Pacific coast. The Pacific coast is an area where there are certain problems. Of course we have to think cost-wise and we have to think of quality but I can assure the committee that as much as possible we strive to do our utmost to buy locally in the areas I have just mentioned.
In my statement I tried to give hon. members a clear picture of what we are doing in defence production and our hopes of improving Canadian industry by production sharing. But I want to admit very frankly that I know the troubles and the work that lie ahead for the officials we have appointed in the United States, the officials of the department here and the government itself in getting substantial orders from United States industry. I want to emphasize that I wish it to be clearly understood by the United States authorities that if we enter into production sharing for the defence of the North American continent it is a two-way road and that there has to be a give and take attitude. That is my position and, as I said a while ago, I hope we will get results in the months ahead.


George James McIlraith: I should like the minister to clarify one point in the remarks he has just made. It has to do with the distribution of contracts within the country. Does he not realize that at a time when the total value of contracts awarded throughout the country is declining and the number of those in the armed forces is not materially decreasing the percentage spent on food 66968-9-360
Supply-Defence Production supplies and the like for the forces, involving mostly local expenditures, would be a relatively larger proportion, and that when he gives statistics, as he did a moment ago, for the increase in purchases in the maritimes they can be quite misleading on this somewhat difficult subject, although I am not questioning their accuracy? Does he have that in mind and does he not also realize that the completion of camp Gage-town and the movement of more troops into that camp would have some bearing on the quantity of local purchases in the area? I want to make that observation because I think that if the statement of the minister on the point is left as he made it it is capable of creating a wrong impression. While the statistics are accurate enough, the statement is not quite adequate in doing justice to the subject.


Raymond Joseph Michael O'Hurley: In reply to the hon. member for Ottawa West, he will realize that the maritime provinces have an economic council which is very active in encouraging industry and selling merchandise in the martimes. The figures I just gave were given offhand but we found that a lot of the purchases for the maritimes were made through the city of Montreal. For the last year we have been concentrating more buying in the maritimes. For example, potatoes used to be purchased in Montreal. They were produced in the maritimes, shipped to Montreal and then sent back to the maritimes. That is just one example of better results by following the policy of buying locally. I gave a figure indicating an increase of 20 per cent over the amount bought in the maritimes the previous year, but if the quantity was very small the previous year it has to be increased by one-fifth to get the increase of 20 per cent for the year I am talking about.


George James McIlraith: I wish the minister well in his effort to increase purchases in that area but the point I want to make is that the statistics by themselves are capable of being very misleading. I have been fairly familiar with them in the past. If he will look at some of the places where purchases are indicated as having been made he will find, for instance, that meat purchases from the Burns Company used to be listed as having taken place in Ottawa, which was completely misleading. Perhaps I do not need to pursue the subject beyond indicating that I hope he is making some progress and I trust he will not assume that statistics such as he has given are proof of his success in that field.
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Supply-Defence Production
There is another point I want to raise having to do with a matter that arose during the discussion of the Department of National Defence estimates the other day. We were dealing with item No. 222 which is listed as being for the construction or acquisition of buildings, works, land and major equipment for the Royal Canadian Air Force. When we look at the particulars of that item as found on page 314 we see one major item under major procurement of equipment namely aircraft and engines.
When I asked questions about that item I discovered from the Minister of National Defence that there was included in that procurement item an expenditure of $45 million for the termination of the Arrow contract. The point I wish to raise is this. I had assumed that the termination of contracts was something that was still treated under a separate item as was the case during the last war and subsequent thereto and that the item to which I have referred provided the Department of National Defence with the authorization and the money to procure equipment and supplies and to take care of military pay and civil staff salaries. I had thought that these other items for termination of contracts were items that came properly under the Department of Defence Production as they did in earlier years and under predecessor departments.
Since I understand that the termination of this contract is being carried out under the minister's jurisdiction, I want to pursue this point. How does the minister derive authority from the wording of item No. 222 which I have just quoted, for the expenditure of this very large sum of money on the termination of a contract with respect to which equipment is not being procured this year but whose purpose is to carry out the liquidation and termination of a Contract which was concluded in the last fiscal year? For the life of me I cannot find anything in the language used in that estimate that would warrant the expenditure of moneys for the purpose of terminating a contract. It seems to me that there is no authority whatever to spend this $45 million under that item. I have no doubt that the treasury officials have looked at this point and that there is some answer. Whatever the answer is I should like to have it, and if there is no answer I should like to have the matter corrected because it seems to me that in this way the house is not being given information to which it is entitled.
So that the minister will have some references to the practice on this subject, if he will look at the estimates for the year ending March 31, 1953, item 81, page 11, he will find


there an item in the estimates of the Department of Defence Production to provide for the liquidation of contracts and so on. He will find the same thing in the estimates of a year earlier, and so on back through the years. The last year for which there was any estimate comparable to this $45 million for the termination of a contract is in the year ending March 31, 1948. He will find an item No. 569 in the estimates of that year for his predecessor department, reconstruction and supply.
I could go back through the years, but in that year the item was $2.5 million and the previous year the item had been $36 million. Now, this year the expenditure for such an item is $45 million for this one contract alone, yet we have no special item for it at all. Unless there is some adequate explanation, I think the matter should be rectified. I wonder if the minister could give an explanation?


Raymond Joseph Michael O'Hurley: In reply to the hon. member for Ottawa West I would say I am advised by my officials that the Department of Defence Production, since its inception in 1951, has never had a separate vote for the termination of contracts. These costs are created by the Department of National Defence and cannot be separated from production costs. We are really acting for the Department of National Defence. The items referred to by the hon. member for Ottawa West related to the termination of disputed world war II contracts, and that is why they were the subject of a separate vote. Since the inception of the Department of Defence Production in 1951 there has never been a separate vote for cancellation charges under a current contract. Does that satisfy the hon. member?


George James McIlraith: It is not quite as full an explanation as I would wish, but I thank the minister for it. There have never been termination problems in connection with contracts of this size or scope since world war II; that is quite elementary.
The point here is that that item and the amount to be paid for the termination of those contracts, some of which were disputed, was always provided through the Department of Defence Production and its predecessor department and passed upon by this committee. The point I wish to raise now has two facets. The first question I have sought to raise is as to the explanation of what appears to be a misapplication of funds voted for procurement of specific equipment, and not being used for that at all but being used for the settlement of claims arising out of the termination of a contract. This is the No. 1 point with which the minister has dealt.

The other point I want to raise is as to the policy of the government in not providing a separate item to come before the committee because it seems to me to be quite misleading to have an item in one year which provides several hundreds of millions of dollars for procurement of a particular type of aircraft and then find, in the next year, when you go to compare the figures, there is nothing in the printed record anywhere to indicate any lesser amount being spent. However, when we start asking questions about it we find the item is not to procure that kind of equipment at all but is to settle termination charges of a contract.
I think the minister will follow my point there. There is no way by which one doing research on the estimates produced to the house can find that the figure is not as it appears at all, and this must be found out by questions. It seems to me this is a practice which should be looked at for future action because while it may be true that, in a large procurement item, there may be small incidental items in connection with termination of contracts they are only a tiny percentage of the total. However, here we have $45 million out of $146 million being spent on termination charges, yet all of it being shown as if the whole $146 million were being spent for procurement This is likely to be misleading to hon. members, and I am sure that is not what the minister wants to do at all. I would ask him to look at this again to see that if the question ever arises in the future, and I hope it will not, the item will be shown in different form and one that will be clear to all hon. members.


Raymond Joseph Michael O'Hurley: I wish to thank the hon. member for Ottawa West for asking these questions, and I can assure him we will study his remarks very attentively. My officials tell me there was a major cancellation in 1954, which was taken out of the national defence budget and there was no vote in defence production. I feel this is a very good point, and I shall be glad to look at it and give the information to the hon. member.


George James McIlraith: What is the authority for spending the money in that way? I cannot, for the fife of me, follow that.


Raymond Joseph Michael O'Hurley: I should like to tell the hon. member that we do not spend the money; we are the agents for national defence.


George James McIlraith: What is the authority for it? You have to handle the mechanics of spending it, and you do not spend money without proper legal authority-at least, the department did not use to do so. It seems to me there is no authority granted for spending the money for that purpose.
66968-9-360J
Supply-Defence Production


Raymond Joseph Michael O'Hurley: I think, by the charter of defence production, when we get orders from national defence for a certain work, it is a question for national defence and the Department of Finance. We execute the orders when we receive them, and it is those two departments that are interested in this problem. I think there is a good point there, and it should be looked into, as the hon. member suggests.


George James McIlraith: There is just one other thing. I take it the item would not permit such expenditures as keeping a small number of these men at work, as was suggested at the time of the Arrow cancellation. These funds were for procurement or legal termination of the contract, but the language would not be wide enough for that, would it?


Raymond Joseph Michael O'Hurley: I am afraid I have not the answer to that question with me this afternoon. I admit we are handling the termination charges under this vote. However, so far as changing from procurement to cancellation is concerned, I am afraid I have not got the information available just now.


Lester Bowles Pearson: Mr. Chairman, it has been suggested that the money which was available for termination of the contract could have been used by the company to keep the employees at work for a time until they got other work. The question my hon. friend is asking is whether this money could have been used under the vote for that purpose.


Raymond Joseph Michael O'Hurley: As far as defence production is concerned, I think the Leader of the Opposition will agree with me that it was the government's decision to terminate. We are executing the orders we receive from national defence, and that is as far as our department concerns itself. As long as the work is paid for by national defence, through us if you will, it is not for defence production to find out under what vote this money is provided.


George James McIlraith: There is a second point there, Mr. Chairman. Once the contract is cancelled, I take it the defence production department would not pay for keeping the men at work after termination? There would be no authority for that. Surely the accounts of the company are audited and checked?


Raymond Joseph Michael O'Hurley: In the cancellation charges it must be admitted that we have paid a substantial amount to the men for their vacation pay, their severance pay and so on. We have paid all these amounts out of that and have completely complied with the full labour contracts and paid out everything that the labour contracts demanded. It comes back to the same question, that it was an

Supply-Defence Production order from national defence and we are executing the order we received from national defence.


George James McIlraith: But my point is that in executing the order received from national defence you paid only those charges you were obligated to pay under the contract. You paid the labour charges, for example, that you were obligated to pay under that contract, and you did not or could not go beyond that and give money to the company merely to pay men in addition to what was provided under the labour and other contracts?


Raymond Joseph Michael O'Hurley: Certainly not, Mr. Chairman. We consented absolutely to paying all charges that were demanded by the labour contract for all the employees. That we accepted; but we could not keep on paying afterwards the men sitting around the plant not doing anything, and we were not justified in making any other payments.


Lester Bowles Pearson: So it is now clear, Mr. Chairman, that this money could not have been used by the company to keep people at work after the contract had been terminated.


Paul Theodore Hellyer: Mr. Chairman, first of all I would like to congratulate the minister for the progress he has made in negotiations with the United States, particularly with respect to the buy American act and the long list of items which he and his officials have negotiated and made exempt from the buy American act, and also the progress they have made with respect to tariff waivers. I think the minister has an excellent staff who have done an outstanding job of negotiating these concessions with the United States. As a matter of fact, I think the minister has staff which he could not excel if he had taken a long time in putting them together. The minister told us quite frankly, Mr. Chairman, that he has problems. We feel that these problems are not particularly of his making, but that most of them are grief caused by other departments of government and the Minister of Defence Production and his staff have to make the best of such bad jobs as are passed to them.
For example, the minister told us this morning that the progress made in the first six months of this year had demonstrated approximately $32 million in prime contracts for military equipment for branches of the United States armed forces. This sounds like a significant achievement and undoubtedly it represents a great deal of hard work and laborious effort on the part of the minister and his staff. Yet it seems he has been fighting a rearguard action, because I have here a press clipping from the Toronto Star of July 6, 1959,


entitled "Aircraft Parts Exports Show Sharp Decline" and it is based on a Canadian Press dispatch from Ottawa which says:
Canada's domestic exports in May fell $51,500,000 from the same month last year due mainly to a sharp reduction in sales of aircraft and parts, the bureau of statistics said.
In other words, the reduction in export of aircraft and parts in the first six months of this year was more substantial than the total number of small prime contracts obtained for Canadian producers to produce military equipment for various branches of the United States government. This indicates the magnitude of the problem which we face. The minister, as I have said, is fighting a rearguard action, and this has been the case ever since the cancellation of the Avro Arrow, when we lost our great leverage with the United States. We have to be realistic in our dealings with them.
Certainly they want to co-operate with us, and certainly the high level official talks taking place between the minister and his staff and their opposite numbers in Washington are productive. There is the greatest amount of co-operation and a real desire on the part of our United States friends to try to work out satisfactory solutions. But they have to operate within the context of the political situation existing in the United States of America, and they have problems in putting into effect their good intentions. We are just babes in the wood if we do not realize that if business is bad in the United States of America the pressure of the aircraft and other defence industries down there on their government is going to be very great indeed. If business is good in the United States and they have full employment, then probably it would not be too difficult to get a few prime contracts for Canadian producers. But in times when business is not good in the United States and there is a great deal of unemployment in various parts of the country, it is unrealistic for us to think that we are going to go down there and negotiate large prime contracts for Canadian producers unless we use the leverage we have in negotiation with them.
We have a number of things we can use as leverage. We have a number of geographical requirements which they have to ask for from time to time, and there are a number of concessions which the United States asks us for, and we do have some bargaining power. It is very difficult within the context of the political situation within the United States of America, without using such leverage as we have available to us, to negotiate any sizable prime contracts, and particularly defence production contracts.

Mr. Chairman, with those introductory remarks I would like to ask the minister a few questions. I would like to commence with reference to the Avro Arrow CF-105 and continue a question asked by the hon. member for Ottawa West and the Leader of the Opposition. I would like to ask the minister if any study was made of the cost of continuing to completion the 37 aircraft which were under construction at the time the cancellation order was issued?


Raymond Joseph Michael O'Hurley: At the request of the hon. member for Trinity I am asking for the file of the study made of the CF-105 to be brought down. If he will continue I will get that information.


Paul Theodore Hellyer: I have a further question, Mr. Chairman. Of the completed five aircraft, Nos. 1 to 5, were they turned over to Crown Assets Disposal Corporation for disposal?


Raymond Joseph Michael O'Hurley: Yes, Mr. Chairman.


Paul Theodore Hellyer: And are they still in the
custody of the Crown Assets Disposal Corporation?


Raymond Joseph Michael O'Hurley: They are being dismantled at the present time and arrangements are being made with the United States government for the return of the engines and the fireheads and the classified materials which are in these planes. They will be dismantled.


Paul Theodore Hellyer: Upon what terms and conditions were the planes offered for sale by the Crown Assets Disposal Corporation?


Raymond Joseph Michael O'Hurley: The fact is that the ministry of national defence gave orders to my department, and my department to crown assets that all equipment should be taken out of these aircraft and that they should be reduced to scrap. Those were the orders received from national defence.


Paul Theodore Hellyer: Did the Minister of National Defence turn them over to the Crown Assets Disposal Corporation as surplus equipment? Did he declare them surplus?


Raymond Joseph Michael O'Hurley: They were declared surplus, yes, and the instruction was given that all equipment should be taken out of the aircraft and they should be reduced to scrap.


Paul Theodore Hellyer: What was the statutory authority by which the Minister of National Defence determined the method of disposal by the crown assets corporation?


Raymond Joseph Michael O'Hurley: This was an aircraft constructed not only by Canadian engineers and the Canadian air force but also by the United States. It was classified. It could not have been sold on an open market. I do not see any other solution available to the Minister
Supply-Defence Production of National Defence but to turn it to scrap. That is the way the situation was.


Paul Theodore Hellyer: That does not answer my
question. I assume there could not have been very much classified material about the plane, because we were told in this house it was obsolescent and that it would not have been useful by the time it was put into squadron service. If the minister of defence had declared it surplus it could perhaps have been sold by the crown assets corporation in the normal way, and I am wondering what statutory authority the Minister of National Defence has for deciding it should be disposed of in some other manner.


Raymond Joseph Michael O'Hurley: After the contract had been cancelled, any classified material was taken out, and I think the only solution was to have these aircraft reduced to scrap. I wish to say to the hon. member for Trinity that to my knowledge-and I can be corrected by the Minister of National Defence if I am not right-the department tried on different occasions to make a research bid of this plane in the United Kingdom, without success. Terms were not discussed, and they were not interested in the least. So I am still of the opinion that there was no alternative but to take out all the equipment from these planes and then have them disposed of in the only way possible.


Paul Theodore Hellyer: What parts of the plane were classified?


Raymond Joseph Michael O'Hurley: One would practically have to go over the whole plane-hydraulics, fire control, engine, electronic equipment. With the experience which the hon. member has with regard to planes he will certainly know that there are hundreds of parts in that plane which were classified. I am certainly not versed enough to give him a complete list of the classified materials in the CF-105 this afternoon.


Paul Theodore Hellyer: It must have been a good aircraft if there were hundreds of classified parts in it.
There was a request that plane No. 6 and subsequent aircraft be photographed in the factory during the process of destruction, and the minister, in answer to a question in the House of Commons, said the reason photographs were not allowed was because classified fire control apparatus had been installed in the planes. Is that correct?


Raymond Joseph Michael O'Hurley: That is correct.


Paul Theodore Hellyer: Can the minister tell us on how many of these planes fire control apparatus had been installed?


Raymond Joseph Michael O'Hurley: There is perhaps a difference of opinion there. The fire control system for
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Supply-Defence Production several of the planes was in manufacture; I cannot say definitely if it was installed in some of the planes, but it was definitely there in the plant with other classified material when the cancellation started. It was not only on my part that I took the decision, but I had the concurrence of the Avro people not to have photographs taken at that time in the plant.


Paul Theodore Hellyer: The reply the minister gave to the house earlier was that it was because of the Hughes fire control system that photographers were not allowed to be present at the time of the destruction. However, it is my understanding that there was no fire control installed on aircraft No. 6 and subsequent aircraft. Can the minister advise the committee whether or not that information is correct?


Raymond Joseph Michael O'Hurley: I am told that the fire control system was not installed in these planes.


Paul Theodore Hellyer: Was, or was not?


Raymond Joseph Michael O'Hurley: Was not.


Paul Theodore Hellyer: A final question on the subject. Does the minister not think that this very important chapter in Canadian history should have been recorded and filmed for posterity?


Raymond Joseph Michael O'Hurley: I do not think it was a very important chapter in the pages of Canadian history-in the pages of aviation history-to see the work of years being scrapped. I do not think it would have been of advantage to Canada.


Paul Theodore Hellyer: I cannot let that comment ride without replying that I think it was an important chapter in Canadian history. I think it represented the greatest single achievement in Canadian aviation history, and the greatest combined effort of design and development ever undertaken in this country. Not only that, I regret, and I want to put this on record again, that this government did not have the courage to finish No. 6 and let it take the world's speed record away from the Lockheed 104. I think this is a matter which will cause regret to Canadians for decades to come-that when we had reached a stage where, in a few weeks of additional development and testing, this plane could have captured the world's speed record for this country, the decision should have been made not only to stop work on the plane but to cut up the corpse and put it underground as soon as possible.


John Whitney Pickersgill: I wonder if I can ask a question about the cancellation of this contract? Hon. members will, no doubt, recall that the Prime Minister had some very severe things to say about the Avro company because


they discharged their staff as soon as they received an order from the minister's department to do so.
Mr. Richard Jackson in the Sudbury Star of June 20 had this to say:
What evidence have the members of parliament of there being something less than the loyalty of political impartiality normally expected of a civil service?
That shocking telegram that ordered the immediate firing "at once" of the 14,000 Avro workers was sent by some bureaucratic brass hat in defence production.
Would the minister say whether this telegram was sent without his concurrence or with his concurrence.


Raymond Joseph Michael O'Hurley: We sent the telegram to cancel all work on the Arrow and the Iroquois engine. This telegram was sent with my concurrence. I will admit frankly I was under the impression that the idea of sending the telegram at that time was to prevent further buying of expensive material for the plane or for the engine, but that the men would continue for their ordinary period of time on notice, which was two weeks or three weeks. I was most surprised myself to hear the same evening the men were let out that afternoon. The telegram was sent with my concurrence.


John Whitney Pickersgill: Could the minister read the telegram for the committee now?


Raymond Joseph Michael O'Hurley: Mr. Chairman, I have not got it with me; the telegram has been tabled and is on Hansard.


John Whitney Pickersgill: I think it might be convenient to have it in Hansard at this point.


Some hon. Members:: Oh, oh.


John Whitney Pickersgill: This is a very serious charge made by a responsible journalist against the honesty and integrity of senior civil servants of this country.


An hon. Member:: Read it yourself.


John Whitney Pickersgill: If the hon. gentleman is finished mumbling perhaps I could be allowed to continue. The minister has said this telegram was sent with his concurrence. I accept his word at once. I am sure it was. However, in order to remove all doubt about this serious and shocking reflection I believe the whole story should appear all together in one place.
It will be recalled, of course, that my friend the hon. member for Laurier had the telegram put on the record after the Prime Minister said he expected the company to go on employing these people on work that was not going to be accepted and for which the company could not be paid-a very odd attitude it seemed to me for the Prime Minister

to take-but there is no doubt whatever that the telegram did say specifically that the work was to cease immediately. I believe that the record should be straight.


Raymond Joseph Michael O'Hurley: Does the hon. member want to put on the record again a copy of the telegram? I do not have a copy in my files today.


John Whitney Pickersgill: Would the minister get it and put it in the record a little later on?


Joseph Pierre Albert Sévigny: Is it correct that the hon. member for Bonavista-Twillingate would like the minister to read into the record a document that has already been tabled?


John Whitney Pickersgill: I am sorry, Mr. Chairman, but I did not hear you.


Joseph Pierre Albert Sévigny: Do I understand that the hon. member for Bonavista-Twillingate is demanding that the minister put into the record something that has already been put into it?


John Whitney Pickersgill: I would not like to use the word "demand". I am not making a demand. I was asking the minister if he would be good enough to do it so that the record of this transaction would be complete in one place. The reason I am asking that is because, although it is on the record, it does not seem to be easy to find. My friend the hon. member for Ottawa West appears to have it and perhaps he could read it.


Mr. Bigg:: Just say "yes".


Joseph Pierre Albert Sévigny: For the sake of good order, it is generally admitted by all that this telegram has actually been tabled and is in the records of the house. It would be a repetitious occurrence if we continued the debate concerning the tabling of a document that has already been tabled. I appreciate the hon. member's explanation that he is not demanding that it be tabled because it would be out of order for him to demand that the minister table a document. It is the opinion of the Chair that since this telegram is already on the record and should be quite easily located it is really repetitious to request that we continue the debate regarding the matter.


George James McIlraith: I still think we are entitled to debate this item under the administration of the Department of Defence Production and ask all the questions we wish about the termination of the contract and other related matters.


Mr. Charlton:: It is out of order.


George James McIlraith: I know that my friend the hon. member for Brant-Haldimand-


Joseph Pierre Albert Sévigny: Order. I must point out to the hon. member for Ottawa West that the
Supply-Defence Production Chair has not indicated that hon. members of the opposition would be prevented from asking questions they wish to ask. I am simply referring to the unnecessary tabling of a document which has already been tabled. This has nothing to do with questions that might be put by hon. members of the opposition.


George James McIlraith: I wish to say something about the telegrams. The reason they were not presented to the house when the Prime Minister spoke as recorded at page 1306 of Hansard is quite obvious. He made certain statements there about the ceasing of the work and the fact that the A. V. Roe company should not have let their employees go immediately. After considerable hounding and questioning of the government the opposition was able to have the telegrams presented to the house. They are printed in an appendix to Hansard of February 27, 1959, at page 1487.


Thomas Miller Bell: By agreement.


George James McIlraith: When they were tabled and printed in Hansard it became immediately obvious that the Prime Minister's whole point on this aspect of the subject had been completely wrong. If hon. members will check the page references I have given they will see that the telegram to the A. V. Roe company, marked attention Mr. J. L. Plant, Malton, TCO via CN telegraph from Mr. D. L. Thompson, of the Department of Defence Production, Ottawa, contains in it a direct instruction in this language, "You shall cease all work immediately." Then the corresponding telegram sent about 12.30 p.m. on the same Friday was directed to Orenda Engine, attention Mr. E. K. Brownridge, from Mr. D. L. Thompson of the Department of Defence Production. It used precisely the same language, "You shall cease all work immediately." The minister has today admitted that he approved of those telegrams.


Raymond Joseph Michael O'Hurley: I never denied it.


John Whitney Pickersgill: The minister is quite right.


George James McIlraith: Precisely.


Mr. Nesbitt:: More innuendo.


Mr. Montgomery:: You are leaving the impression that he did deny it which is wrong.


George James McIlraith: I never suggested that the minister denied it. Indeed, I never discussed his relationship up to this moment. I was just coming to it. I was saying and I will repeat again that the minister now admits these telegrams were sent with his concurrence and knowledge. His position is quite clear on that. It become abundantly clear from the contents of the telegrams and from what
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Supply-Defence Production the minister said earlier in answer to the discussion we had a few moments ago about the items he could allow by way of salary to the employees of the A. V. Roe company,- allowance for severance pay, holiday pay, and so on-that he allowed those under agreements that were outstanding with the men. That was quite proper and I have no criticism of that. It becomes clear that the statement made to the house by the Prime Minister on February 23, four days before the telegrams were presented to us but three days after the contracts were terminated, that the Prime Minister's remarks as they appear at the bottom of the first column of page 1306 are not in accordance with what was done or in accordance with what could be done under the contracts. That is where the situation stands now. It is a good thing that this matter has at long last been cleared up so that everyone interested in this subject can know exactly where the responsibility for the immediate dismissal of these men lay, why it was done and what allowance has been made in respect of it.


Lester Bowles Pearson: Yes; it seems to me it is now perfectly clear that the Prime Minister did not know what he was talking about when he said this termination of contract money could have been used to keep people at work in the A. V. Roe Company after that telegram had been sent. It seems to me that the journalist in question did not know what he was writing about when he made the reflection on the integrity of senior officials of the department for sending the telegram which we know was sent with the knowledge and under the authority of the minister.


Mr. Denis:: Do I understand from the minister that the taking of a picture of the CF-105 before it was destroyed was not allowed? If this is so, how is it that the Postmaster General got a picture of it and was so proud of it that he put it on a stamp? I would like to get an explanation because he said that this event was not so important after all. There seems to be a difference of opinion or a misunderstanding between the Postmaster General and the Minister of Defence Production.


Raymond Joseph Michael O'Hurley: In reply to the hon. member for St. Denis, I wish to tell him that the CF-105 has been filmed and photographed. They are all over the country and he can get many copies of pictures of the CF-105.


Azellus Denis: Will the stamp be declared surplus?


Raymond Joseph Michael O'Hurley: If the hon. member has any money left over he can buy the stamps and put the surplus stamps in his pocket.


Paul Theodore Hellyer: Can the minister tell us whether the five completed Arrows were ever offered to the royal aeronautical establishment in Great Britain for testing purposes?


Raymond Joseph Michael O'Hurley: Mr. Chairman, the CF-105's
were offered to the aeronautical research establishment in the United Kingdom and they were turned down.


Paul Theodore Hellyer: What were the terms and conditions of the offer?


Raymond Joseph Michael O'Hurley: They were offered; there were no terms or conditions. They were offered and they were turned down. No terms were discussed.


Paul Theodore Hellyer: Were they offered free?


Raymond Joseph Michael O'Hurley: I cannot say they were offered free. No terms were discussed. They were not interested; they did not want them.


Paul Theodore Hellyer: Mr. Chairman, there seems to be an awful lot of confusion and buck-passing between the Department of National Defence and the Department of Defence Production on this whole matter of the disposal of these things. I have asked the Minister of National Defence in the house who was responsible for the disposal of the aircraft, and he said it was a matter for defence production. Today the Minister of Defence Production says it was done under orders from the Minister of National Defence; similarly, with the Iroquois engine. I submit that these two ministers should get together in the future and agree on responsibility.


Augustin Brassard: I have gone over the statements and the questions put by the hon. member for Eglinton when he was sitting on this side of the house. I have gone over the debates for 1953, 1954 and 1955. Since he is not in his seat today, I am sure the Minister of Defence Production will be very glad to answer a question in which his colleague is most interested. What is the breakdown of our purchases in the United States with regard to defence procurement compared with those in the United Kingdom?


Raymond Joseph Michael O'Hurley: Mr. Chairman, as the hon. member for Bonavista-Twillingate remarked the other day, this is the black book. Mutual defence procurement between Canada and the United States is carried on under the joint statement of principles for economic cooperation which was signed by the two countries in 1950. When the present defence program was initiated, it was necessary to place fairly substantial contracts in the United States for equipment urgently required and not at the time produced in Canada. With respect to the Canadian defence contracts placed in the United States, the figure for 1958-59 is $23.1 million to our credit. The

net value of Canadian defence contracts placed in the United Kingdom was $10,590,000. We have a credit with the United States because we cancelled more than we placed. We got a credit of $23.1 million, and we placed orders to the amount of $10,590,000 with the United Kingdom.


Paul Theodore Hellyer: Can the minister tell us whether in the $32 million prime contracts which he mentioned in his statement this morning were included the turbines being installed at Grand Bend?


Raymond Joseph Michael O'Hurley: No, Mr. Chairman.


Augustin Brassard: I have another question for the minister. I am sure this will be a pleasant recollection for him and I am sure it will be of great interest to my hon. friend from Montmagny-L'Islet. Sometime during last fall the minister paid a visit to an establishment called La Fonderie de l'lslet in the county of Montmagny-L'Islet, and we read in the paper a few days later that he paid a visit to these people in the hope that he could offer them some work from his department. Since his talk with the officials of the company, I wonder whether anything has materialized in concrete form?


Raymond Joseph Michael O'Hurley: Mr. Chairman, I think the hon. member for Lapointe has got things twisted up a little bit. They really invited me to see the facilities of their plant.


Lester Bowles Pearson: Is any production going on at the present time in this country of F-86's or CF-lOO's?


Raymond Joseph Michael O'Hurley: Just the production of spares, Mr. Chairman.


Lester Bowles Pearson: In view of the fact that the CF-100 will be in use for some years, presumably, and the F-86 will not be replaced by the F-104 completely until 1963, according to the minister's own figures this morning, how are those squadrons to be maintained at strength if only spares are being produced?


Raymond Joseph Michael O'Hurley: The spares are to maintain the aircraft. The Leader of the Opposition will admit with me that, as far as defence production is concerned, all I can do is act when I get an order from the Minister of National Defence. I am just the agent to purchase; I have no more authority than that.


Lester Bowles Pearson: Perhaps this is irregular, but I wonder whether I could ask the Minister of National Defence what happens when a CF-100 or the F-86 crashes and he asks the Minister of Defence Production for a replacement for that plane and the minister says, "we are not making any more"?


Mr. Pearkes:: We have a reserve of CF-lOO's which are capable of replacing any of those which happen to crash.
66968-9-361
Supply-Defence Production


Lester Bowles Pearson: Then, it is considered that there is a sufficient reserve of F-86's and CF-lOO's to maintain those squadrons at full strength until some years from now when they will be replaced by other planes?


George Randolph Pearkes: That is correct, utilizing spares to replace any spare parts which may be destroyed, where practicable.


Augustin Brassard: I have another question for the minister. I must apologize if I implied in my question that he visited the plant in Montmagny-L'Islet on his own initiative, and I quite accept his correction. I wonder whether after his visit he has been able to give some word to La Fonderie de L'lslet either by way of tender or by negotiation?


Raymond Joseph Michael O'Hurley: Mr. Chairman, I recollect that they tendered on some contract but as far as I can remember they have received no contracts from the government. I know they tendered several times on different contracts.


Azellus Denis: Is the minister aware that they had a contract from the government and that that contract has been cancelled? Not only did they get no contract but the one they had was cancelled.


Raymond Joseph Michael O'Hurley: How many years ago?


Azellus Denis: I mean lately.


Raymond Joseph Michael O'Hurley: Well, it is pretty hard to cancel a contract if you do not have any.


Azellus Denis: They had a contract to make some postal boxes for the Post Office Department and now they are out of work.


Raymond Joseph Michael O'Hurley: If the hon. member for St. Denis wants to get information about postal boxes he will have to ask the Postmaster General.


Augustin Brassard: I wonder whether it would be imposing too much on the minister to ask him to give us a breakdown of defence procurement for the provinces of Ontario and Quebec.


Raymond Joseph Michael O'Hurley: The net value of head office contracts placed with firms in Quebec in 1958-59 was $218,408,000, and in Ontario $264,040,000.


Mr. Forgie:: Mr. Chairman, may I ask the minister whether the construction work for the air force at Foymount in the county of Renfrew is under his jurisdiction?


Raymond Joseph Michael O'Hurley: It is under a crown company, defence construction.


James Moffat Forgie: May I ask the minister these questions? I do not expect that he can answer them at the moment but I hope he

Supply-Defence Production will. Were tenders called for all federal government contracts in connection with the expansion of the Foymount air station? If so, can the minister give us the names and head office addresses of the firms to whom these contracts were awarded, together with the names and addresses of unsuccessful bidders for these contracts? Lastly, were the contracts awarded to the lowest tenderer in each case? I should like to have that information very much.


Raymond Joseph Michael O'Hurley: The contracts were all
awarded on the basis of tenders and generally were awarded to the lowest tenderers, but it is practically impossible for me to give the names of the tenderers and the amounts this afternoon. If the hon. member would like to have the information I would be pleased to procure it for him. I am sorry I have not got it with me this afternoon.


James Moffat Forgie: I did not expect the minister would have the information this afternoon but I thought I would ask him these questions so that possibly we could have the information tomorrow.


Raymond Joseph Michael O'Hurley: I will be pleased to get that information for the hon. member.


Mr. McGee:: Mr. Chairman, at this stage of his estimates I wonder whether the minister would care to comment briefly on the report and recommendations of the estimates committee of last year under the general headings of destroyer escort program, performance bonds, general comments and recommendations and, in particular, general conclusion of the report, No. 5.


Raymond Joseph Michael O'Hurley: No. 1 is the destroyer escort program. The observations and recommendations of the standing committee on estimates with respect to the destroyer escort program were dealt with in considerable detail when the estimates of my department were last presented-Hansard, August 9, 1958, pages 3238 to 3240. At this time, however, I should like to say that in the very near future tenders will be invited covering the construction of a naval fleet supply tanker. We are going to call for tenders for the naval fleet supply tanker.
No. 2 is performance bonds. Last year I reported that considerable thought had been given to the questions of accepting performance bonds and/or pay-and-performance bonds. Since that time the cabinet has agreed that for a trial period commencing January 1, 1959 contractors should be given the option of submitting either surety bonds or security deposits to ensure due performance of work on government contracts. Treasury board has approved three types of surety bonds which are to be regarded as the standard, acceptable


bonds for government contracts, namely a bid bond, a performance bond, and a labour and material payment bond.
With regard to the question of improving liaison between my department and the Department of National Defence, I should like to point out that while there has been very close liaison in the past between the two departments there is now an even closer liaison. The procedures which have been established to carry out our production sharing program with the United States involve a senior policy committee comprised of senior officials of not only the departments of defence production and national defence but also external affairs, finance and the United States department of defence, a steering group to handle the co-ordination of all activities and a number of working groups consisting of technical personnel to work out the detailed arrangements on specific projects of mutual interest. The officials of the departments of defence production and national defence are intimately associated in all these activities.
I am also very pleased that the Minister of National Defence has appointed the deputy minister of defence production as a member of the defence research board. The other specific recommendations, and my comments on them, are as follows:
That the department encourage, assist and coordinate the growth of technical skills and knowledge in the Canadian industry as a program of industrial preparedness.
As members may be aware, the Defence Production Act requires the minister to organize, mobilize and conserve Canadian industrial resources to meet the current and prospective needs of defence. I would assure the house that I am anxious to discharge fully this statutory obligation, with which this recommendation of the committee is in keeping.
For the benefit of those who are unfamiliar with the department's operations, particularly those who were not members of the standing committee, I might explain briefly some of the ways in which we attempt to accomplish this task. First, in purchasing the supplies requisitioned by the armed services we recognize the services cannot always depend in an emergency on the production resources of other countries or the maintenance of normal ocean shipping. Consequently, since the organization of the department it has been concerned with the development and maintenance of defence production resources in Canada which can keep abreast of the changing needs of the armed forces and can also be expanded quickly on short notice.

This has meant, in many cases where military equipment of a specialized nature was involved, that Canadian industry has been asked to create important new facilities, both large and small, and to acquire the technical skills needed for the production of highly complex equipment. It has also meant that for the more commonplace type of supply we either limit our invitations to tender to Canadian suppliers or grant a reasonable preference to goods of Canadian manufacture over any competing goods of foreign manufacture.
Where the development or expansion of Canadian industrial capacity has been necessary we encourage industry to undertake this job of expansion through private investment as far as possible, since the equipment demands of the services affect almost every part of industry and the total cost of providing all the equipment needed for defence production would be prohibitive. However, we are continuing in appropriate cases to encourage defence industries to organize and expand their capacities through the granting of accelerated depreciation allowances. Where industry is unwilling or financially unable to provide the necessary facilities, because of the likelihood that there would be little, if any, residual value on completion of a defence project, direct capital assistance is available.
It is my general policy, therefore, to develop and protect Canadian defence production capabilities to the greatest extent possible. I might point out that the need for development of new capacity is much less now than it was seven years ago. However, we are conscious that the continuous change in defence equipment requires that the existing industrial base be maintained in up to date condition and adapted from time to time to new requirements.
Then, there is the recommendation that the department distribute purchases as broadly as possible in Canada. I have dealt with this before. The next recommendation was that the department use the maximum Canadian equipment and parts where possible. I dealt with this point in my statement this morning.
Then, there is the recommendation that technical assistance presently offered to larger corporations should also be made available to smaller Canadian companies. I understand that this refers to the capital assistance program of the department, and I would assure members that we do not differentiate between large and small companies in considering requests for assistance of this sort. I might explain that the purpose of such assistance is to provide machine tools and other production facilities needed for the production of 66968-9-361J
Supply-Defence Production defence equipment where there is no commercial application for the plant and equipment involved. It so happens that the greatest need for capital assistance is experienced in the aircraft program and as a result has affected the major aircraft manufacturers more than any other company. This, however, is not because they are large but because of the nature of the work in which they are engaged. All possible requirements are given equal consideration regardless of the size of the contractor.
Then, there is a recommendation that Canadian plants should be provided every opportunity to tender on defence contracts. I have dealt with that in my statement this morning. The next recommendation is that development contracts should be available for tooling and product development. I have not heard any questions on this point.


Lester Bowles Pearson: May I ask the minister whether there is any defence production in Canada, apart from mutual aid, for NATO countries other than the United States?


Raymond Joseph Michael O'Hurley: One example I would give the Leader of the Opposition is the manufacture of torpedoes for the United Kingdom. This is one example which comes to my mind.


Paul Theodore Hellyer: Can the minister tell us if there are other examples, other commonwealth countries, for example?


Raymond Joseph Michael O'Hurley: There are other firms in Canada which have contracts for other countries, but I am sorry to tell the hon. member for Trinity that I do not have these figures or names of the countries available here.


Paul Theodore Hellyer: I understood the minister to say we were manufacturing torpedoes for the United Kingdom.


Raymond Joseph Michael O'Hurley: Yes.


Paul Theodore Hellyer: What contract does Britain now have under which they are manufacturing military equipment for us?


Raymond Joseph Michael O'Hurley: There is some in the shipbuilding industry; tank-automotives; weapons; ammunition and explosives; electronics and communication equipment and some aircraft equipment.


Paul Theodore Hellyer: Does the minister have any idea of the dollar volume on an annual basis?


Raymond Joseph Michael O'Hurley: Here I have the net value
of Canadian government defence contracts placed in the United Kingdom by defence production on behalf of the Department of National Defence. The contracts placed amounted to $6,093,000, of which $1,921,000 was for aircraft; $147,000 for ships; $1,091,000

Supply-Defence Production for tank-automotive; ammunition and explosives, $237,000; electronics and communication equipment, $2,143,000; other equipment, $857,000. The value of expenditures on Canadian government defence contracts placed in the United Kingdom by the Department of Defence Production and Defence Construction Limited on behalf of the Department of National Defence amounted in 1958 to $13,157,000.


Paul Theodore Hellyer: Would the minister say there had been any diversion of purchases from the United States to the United Kingdom?


Raymond Joseph Michael O'Hurley: I understand the hon. member for Trinity is quite serious, but I think he is fishing. I am sure that defence contracts were executed on behalf of the Department of National Defence, and it is rather difficult for this department to say we really diverted some of the trade. I would not want to make a statement to that effect because we fill any orders requested by the Department of National Defence.


Paul Theodore Hellyer: I am really surprised that the Department of National Defence and the Department of Defence Production have not made a little more effort in this regard, especially after checking back in Hansard and reading the words of the Minister of Finance as recorded on page 5523 of Hansard for June 29, 1956, where he says:
-express again regret that the department did not find it possible to make in the United Kingdom more of the purchases that it was unable to make in Canada and in that way assist the United Kingdom with its dollar problem in order that it might in turn purchase more of our products in this country.
With reference to the F-104 Lockheed Star-fighter, could the minister say he recommended the purchase of that aircraft to the cabinet defence committee?


Raymond Joseph Michael O'Hurley: It certainly is not the role of the Minister of Defence Production to recommend any aircraft to any department.


Paul Theodore Hellyer: I am glad to hear that, Mr. Chairman, although from the words of the Minister of National Defence the other day we gathered the views of the Department of Defence Production had carried a considerable amount of weight, perhaps even an overwhelming proportion.


George Randolph Pearkes: Mr. Chairman, the member is putting words in my mouth. I never said at any time that the opinions of defence production carried overwhelming influence.


Paul Theodore Hellyer: The minister is quite right, he did not. He certainly led us to believe that they had been consulted and from that, 
and from the context in which he put it, we gathered that their views had been given overwhelming consideration.


George Randolph Pearkes: Well, you were quite wrong.


Paul Theodore Hellyer: I wonder if the Minister of Defence Production could tell us what the cost of tooling for the F-104 will be?


Raymond Joseph Michael O'Hurley: I am sorry, Mr. Chairman, but I have not the figures on tooling available here.


Paul Theodore Hellyer: Perhaps the minister could get those figures for us. In the meantime, would he tell us where the tooling will be done?


Raymond Joseph Michael O'Hurley: Mr. Chairman, all I can say is that all the tooling which is needed will be done in Canada, except as I mentioned, I think, in my statement this morning when I spoke about the engine, that there might be some very intricate parts too expensive to make tooling for. As I said before, 85 per cent of the parts of the engine will be made in Canada and the airframe will be practically all made in Canada. But the tooling will certainly all be done in Canada.


Paul Theodore Hellyer: The tooling will be done in Canada. I wonder if the minister could tell us whether the West German government plans to do its own tooling at the same time for production in its own country?


Raymond Joseph Michael O'Hurley: Mr. Chairman, as for what the Germans are doing with their own manufacture I am at a loss to say. I am sure it is not expected that we should know what the German contract is with Lockheed. All we know is that there is a definite contract signed for the 66, and we will be making some parts here in Canada for these 66 F-104G's which have been bought from Lockheed by the German government.


Frank Charles McGee: I wonder if the minister will continue with his comments on the estimates committee report of last year with reference to the Crown Assets Disposal Corporation and the contents of the committee report concerning the organization and management of that corporation, and also the final recommendation which dealt with the advisability of employing an independent business consultant to examine one or more of the crown companies. The report says that on completion of this review the government should then decide whether a further examination of the remaining crown companies is desired. I wonder what progress has been made in that direction?


Paul Theodore Hellyer: Mr. Chairman, I wonder if the hon. member for York-Scarborough would mind if we continued with the balance of the

questions with regard to the F-104 and then he can pursue this other point if he wishes.


Frank Charles McGee: Mr. Chairman, was that question directed at me? It is a question of who is interrupting whom. I had a question going here which was interrupted by somebody on that side before I had an opportunity to continue it.


Paul Theodore Hellyer: The hon. member may as well go ahead now he is awake.


Raymond Joseph Michael O'Hurley: In reply to the hon. member for York-Scarborough, consideration was given to the recommendation of the committee and we are preparing plans for a management consultant with regard to crown assets which is before the government at this time. The reason it was not done before was because of the excess amount of work in front of crown assets through the disposal of a lot of property during the late fall and winter months; but the plan, as I say, for a management consultant is before the government and the president of crown assets is perfectly in agreement with the suggestion which has been made.


Paul Theodore Hellyer: I wonder if the minister would tell us if any arrangements have been made, or what attempt has been made to work out a production sharing arrangement with the West German government?


Raymond Joseph Michael O'Hurley: There is no arrangement worked out with the West German government as yet, none whatsoever.


Paul Theodore Hellyer: Is there any intention on the part of the minister to work out a production sharing arrangement with the Germans?


Raymond Joseph Michael O'Hurley: Yes. I think it will be a difficult situation, and I do not know what prospects there are of any success; but if there is any chance I am sure we will see what can be done.


Lester Bowles Pearson: Mr. Chairman, I gathered from the minister's statement this morning that arrangements have already been made to share the payment to the manufacturers in the United States of the design and engineering costs with the German government. As the minister said this morning, the design and engineering costs associated with the alteration to the F-104G model which Canada must pay will be up to 7 per cent, plus a licence fee and royalties. That means there will be an additional charge of $28 million. Could the minister say how much of that $28 million is Canada's share of the design and engineering costs of the remodelling, and how much is the licence fee and the royalties to be paid to this United States company for the privilege of manufacturing in Canada an airplane for Atlantic defence?
Supply-Defence Production


Raymond Joseph Michael O'Hurley: The licence, Mr. Chairman, as the Leader of the Opposition knows, is the straight, ordinary fee of $3 million for all the aircraft. The royalty is $20,000 per aircraft; and the development of the F-104G is $14 million for the production and the alteration.


Lester Bowles Pearson: Is the minister saying that it will cost Canada $14 million for her share in altering this plane to make the F-104G suitable for the use it is intended for?


Raymond Joseph Michael O'Hurley: We each pay the same amount, both West Germany and Canada.


Paul Theodore Hellyer: Is it true that the West German government is using the same mark of this aircraft, the G model, which is proposed to be used by the Canadian government?


Raymond Joseph Michael O'Hurley: Yes, West Germany is using the F-104G.


Lester Bowles Pearson: Could the minister say what share the United States manufacturer is paying of the cost of development and design? I gather we are paying a certain percentage of the cost of the redesigning and redeveloping; what share does the United States company pay?


Raymond Joseph Michael O'Hurley: I do not want to be exact, Mr. Chairman, about this, but my understanding is that it is $28 million. Germany is paying $14 million and we are paying $14 million to make the F-104G. If other planes are sold there will be a reduction in those costs. This is what I understand is the fact.


Lester Bowles Pearson: Is it the case that if the United States air force should use this redeveloped and redesigned plane, the F-104G, our share of the cost of the redevelopment and redesigning goes down?


Raymond Joseph Michael O'Hurley: Yes.


Lester Bowles Pearson: As far as the minister's first statement is concerned that the 7 per cent is to be shared by Germany, he said, and I am quoting from his statement, a copy of which he gave me this morning:
The remaining 7 per cent-
That is, 7 per cent of the total cost of the contract for Canada, which is $400 million.
-represents payments to the original manufacturers for Canada's share of the design and engineering costs-


Raymond Joseph Michael O'Hurley: Yes. You have the licence, and then our share of the production. You have the royalties and licence of the engine, which comes to roughly 7 per cent of the contract.


Lester Bowles Pearson: When the minister said that the Canadian share will be further reduced

Supply-Defence Production if the aircraft is adopted by other countries, he included in "other countries" the United
States?


Raymond Joseph Michael O'Hurley: Yes.


Lester Bowles Pearson: Because the redesigning and redevelopment is now purely for Canada and West Germany?


Raymond Joseph Michael O'Hurley: That is right.


Paul Theodore Hellyer: Is the engineering for the F-104G complete?


Raymond Joseph Michael O'Hurley: The engineering is complete.


Paul Theodore Hellyer: Is a model being made of the F-104G and, if so, does tooling exist for it or is it being made by hand as a prototype?


Raymond Joseph Michael O'Hurley: The tooling is ready. Only parts of these planes are being developed. The whole plane is not being redeveloped. The tooling is there. Under the contract they have to have 66 planes for West Germany. Parts of the tooling are going to be sent to the manufacturer in Canada for the manufacture of certain parts of the aircraft.


Paul Theodore Hellyer: The minister says only parts of it are being redeveloped, and that is true but the Minister of National Defence has told us that the airframe is being altered, the wings are being altered, and the fire control and electronic equipment are being altered. These are very serious and comprehensive changes. They may be compared to the process of making a light truck into a heavy truck. You start out by putting on heavier tires and wheels, and then you find you need a heavier axle. Then, if you drive across a ploughed field you find that your frame twists like a pretzel. Then you have to have a new frame, which leads to a new drive shaft and, perhaps, a new engine. Sometimes these minor modifications can become substantial operations.
If I may, I will refer to the Minister of National Defence and pose a question based on information given to us by him. We should like to know what makes these planes easier to modify by way of comparison than Canadian interceptors, because the Minister of National Defence told us the other day that the F-104G was selected as the most suitable after more than 20 types of British, United States and European aircraft, including our own interceptors had been evaluated by the R.C.A.F. As reported in Hansard at page 5352, he told the committee:
Such aircraft were developed essentially as fighter or interceptor aircraft, and were designed to engage hostile bombers at great heights. The requirements for a strike reconnaissance aircraft do not demand long range and great height, but do call for the ability to fly fast at low altitudes. The two requirements are not compatible.
[Mr. Fearson.l
What the minister is telling us today is that he is taking the very type of plane which the Minister of National Defence told us could not be reworked into a low altitude strike reconnaissance aircraft, and proposing to modify it, and do that cheaply because there will not be many modifications involved


Raymond Joseph Michael O'Hurley: Surely the hon. member realizes that in defence production work we talk about production, the awarding of these contracts and their execution, but I am unable to enter into details now regarding the technical side of the manufacture of these aircraft.


Paul Theodore Hellyer: I thought the Minister of Defence Production might have had that information since the Minister of National Defence did not. Perhaps the minister would be able to tell us how long his officials have been working with Lockheed in working out the terms of this proposed contract.


Raymond Joseph Michael O'Hurley: The officials of my department' have had several meetings with the Lockheed company, as with other aircraft manufacturers. The date of the first meetings goes back, I think, to November. But the real negotiations are going on now in California. One of my officials has just returned, having been down there for over a week. But there have been several conversations and meetings with Lockheed company officials during the winter months, as with other companies.


Paul Theodore Hellyer: I am glad to hear that negotiations go back that far. There seems to be some confusion on this point, because on March 5, 1959 when the Minister of National Defence was speaking about the Messer-schmidt contract he said he had no detailed information on the subject-it was a matter between the government of West Germany and the government of the United States. That was in March. Last week, in the debate on the estimates of the Department of National Defence, he gave us a different impression, namely that the question had been under serious consideration at least as far back as January. There seems to be something inconsistent about those statements.


George Randolph Pearkes: Nothing inconsistent.


Paul Theodore Hellyer: Perhaps the Minister of
Defence Production would tell us if he thinks it is efficient for both the governments of West Germany and of Canada to build up completely from scratch to manufacture limited numbers of these planes?


Raymond Joseph Michael O'Hurley: I cannot give an answer to that question. It is a technical question.


Paul Theodore Hellyer: The Prime Minister told us on March 3 of this year, and I quote from page 1553, that we would work with the United States in the same way as the United States and Canada work with all the other countries of NATO on the continent of Europe-
-to the end that in the spirit of unity and a common dedication of purpose we shall be able to assure to this and future generations the freedom which we inherited.
We have heard a great many speeches about production sharing and working together in the western world within the NATO alliance to find the most efficient and cheapest means of producing defence requirements, yet here is a perfect example of two NATO countries, both presumably embarking on the production of very limited quantities of the F-104G completely failing to carry out in practice the high-sounding declarations which were made in those speeches. I understand, of course, that these aircraft are not for the same purpose; that in the case of West Germany they are getting the plane as an interceptor and plan to use the Fiat as a strike reconnaissance plane, whereas we are presumably intending to use the F-104G as a strike reconnaissance plane. Notwithstanding this difference, this would seem to be an excellent opportunity for the governments of Canada and West Germany to get together to work out a system of cooperative defence sharing in order to reduce the cost to the taxpayers of both countries. I am surprised and disappointed to learn from the Minister of Defence Production that no effort has been made in this direction. Now perhaps the minister would explain to the committee what is meant by a competition for the production of this plane in Canada.


Raymond Joseph Michael O'Hurley: We are asking for proposals -tenders if you will. As the hon. member for Trinity knows, we have here three major manufacturers. We want to see that this work is distributed in the centres where there are possibilities; I think it is important that no new industry should arise for the manufacture of new components, but that we should offer encouragement to the companies which have worked in this field in past years.


Paul Theodore Hellyer: I am a little confused. The minister said "tenders, if you will" and yet he referred in the same sentence to "proposals". Are these proposals to be made in a form designated by the Department of Defence Production so that they may be evaluated properly, and so that there will be no question whatever as to the relative merits of these proposals?
Supply-Defence Production


Raymond Joseph Michael O'Hurley: The three companies have already had a meeting with officials of my department, and the same instructions have been given to the three companies. The same instructions were given and will continue to be given by my department, and they will be the same for three of them.


Paul Theodore Hellyer: Do the three companies have complete sets of engineering drawings of the aircraft and its component parts and do they know precisely what tooling they will have to do and to what extent assistance will be available from the Department of Defence Production and the Lockheed corporation?


Raymond Joseph Michael O'Hurley: I should inform the hon. member for Trinity of the fact that officials of the three companies are today in Burbank, California, obtaining the information they require from the corporation.


Paul Theodore Hellyer: I hope they have a nice trip and that the weather is good down there.


Some hon. Members:: Oh, oh.


Paul Theodore Hellyer: I know that hon. gentlemen opposite want to get home as soon as they can and so do we but we are not going to be bullied by a big government majority.


An hon. Member:: We will go on shifts and keep you here until December.


Paul Theodore Hellyer: Can the minister assure us that the competition will be so arranged that upon examination the committee would be satisfied that the submissions have been made on the basis of quality with no room for interpretation or interpolation in assessing the merits or evaluating the proposal?


Raymond Joseph Michael O'Hurley: I hope that the hon. member for Trinity is not interested only in quality and that he is interested also in price. Price and quality are two important factors.


Paul Theodore Hellyer: I thought that was implied in my question.


Augustin Brassard: Mr. Chairman, would the minister be kind enough to let us know what is the proportion of contracts which have been awarded without tenders being called? I appreciate that he would not have that information at his fingertips but I am agreeable to receiving it when he has it available either in writing or verbally at the conclusion of his estimates.


Mr. Peters:: I was interested in the question asked by the hon. member for York-Scar-borough. When the committee examined the estimates of the Department of Defence
5694	HOUSE OF COMMONS
Supply-Defence Production Production last year I believe we were unsatisfied with the methods used for procurement and with many other phases of the department. I was pleased about the questions he asked and not at all satisfied with the answers.
The need for implementing the recommendations of the committee are highlighted by an article entitled "A Story of Waste on the Mid-Canada Line", which appeared in Saturday Night, issue of March 14, which article was written by Arnold Edinborough. He explains that the magazine made an investigation into the cost of the mid-Canada line. It cost the Canadian taxpayer something over one-quarter of a billion dollars. The author points out that this project consisted of building 102 separate sites across northern Canada and involved the handling of over 200,000 tons of material. A project of this magnitude would assume the drawing up of a contract document with a managing director. In this instance it was the Bell Telephone company. The contract was not drawn up until nearly the end of the construction phase. As a result of this there was no clearly defined authority for responsibility as between the Department of National Defence, which was the actual customer for the line, the Department of Defence Production, which was the procurement agency, Defence Construction Limited, responsible for the actual construction, and the management contractor who should have had over-all authority. The article sets out the following as being required for this project:
(1)	The signal and radio equipment cost approximately $34,500,000.
(2)	Transportation to get this equipment into the line cost $42 million.
(3)	Cost of housing and servicing that equipment was $107 million.
The author points out that the simple conclusion from these figures is that the cost of construction and transportation as opposed to the cost of equipment was in a ratio of 4 to 1. This indicates that this was not necessarily the type of company that should have been the management director of this job. The article cites many instances of outright waste simply because the company was qualified in the fields of construction and transportation. The article continues:
From Winisk on March 17, 1956, an Inspection report informed the engineer in charge that "the piles (for the harbour) received since the beginning of February form a good part of the last purchase by the prime contractor. They are eastern pine and of a very poor quality. There is evidence that they may be poles rejected by the Ontario Hydro company in that they bear the Ontario Hydro stamp and are dated 1953. Many have spiral checks, are badly distorted, and show signs of having been cut from a burnt timber stand. Breakage is between 30 and 40 per cent, tending toward the latter".

There are many other instances which if the article is accurate reveal that the company was unqualified, or if qualified, botched the job which would not have happened if the recommendations of the committee had been implemented. I continue:
The most dramatic example of this waste of money both to feed and lodge skilled men (as well as to pay their wages for doing nothing) is contained in a memo to the E.C.A.F. from the cost inspection and audit division, querying the claim of a construction company, whose contract was for the antennae and transmission lines.
Says the CIAD: "We would like to draw your attention to the considerable number of charges for room and board supplied to the contractor's employees in Montreal in varying periods which are described as "waiting time pending transit to site". Some of these periods are two and three weeks in length and total to a considerable sum of money. These waiting periods occur not only at the time of hire but are charged as well for periods in between engagement at sites".
The CIAD might well question this particular account in which 22 men were listed as putting in waiting time to a total of $3,490.41. One man alone had hotel bills of $1,066.98-this apart from his normal pay. In this particular instance, in fact, waiting time accounted for 6 per cent of the total contractor's claim for that area.
The author mentions other projects that were mishandled and points out the need for managerial service to put the contracts on a sound basis. A section of the article entitled "How the Money was Wasted" reads as follows:
A gravel crusher was shipped into Hudson's bay from Toronto. It stayed on Bear island all summer and was freighted back from Halifax after the St. Lawrence freeze-up. It never turned a wheel in all this time.
Two landing craft were bought from the British navy so that stores could be unloaded from their bow doors on the beach at Winisk. When they arrived in Canada, these LCT's had their bow doors welded up. As a result a small harbour had to be constructed at cost of well over a quarter of a million dollars.
One technician had hotel bills for over $1,000 while waiting to go from Montreal into the construction area.
Thousands of small wooden slabs to be used as mounts for switches were individually wrapped and sealed before being freighted in.
The article goes on to point out what this waste amounted to, and what it could have bought. The article goes on:
The over-run on the mid-Canada line was in the neighbourhood of $30 million.
This could buy 2,500 medium-cost three-bedroom homes. Pay the total salaries for all members of parliament and the cabinet for over 10 years. Pay the total fees and maintenance costs of all four years for 5,000 young Canadians going through university. Buy six Arrow aircraft. Mean a charge of over $5 out of the taxes of every member of Canada's labour force.
I think this reporter in doing a survey of some of the waste that took place under procurement methods by this and previous governments has given an indication that

something is wrong with the system that is being used by defence production.
I think it is well understood that the members of the committee last year were not at all satisfied that the department had done the job that they should have done in removing some of these loopholes that the committee recommended be removed. I think the type of waste that is taking place under one contract of $30 million is so important that we would be well advised to hire outside managerial consultants. No matter how busy the department appears to be, the questions and recommendations which were raised by the hon. member for Burin-Burgeo warrant immediate consideration, and the waste of $30 million should be looked into and no excuse should be accepted.


John Whitney Pickersgill: I want to ask the minister one or two questions about the answer he gave to a question of mine which appeared in Hansard of June 3 with regard to procurement in the Atlantic provinces. I understand the minister made some statement about that this afternoon when I was at the broadcasting committee, and if he has answered any particular question I raised I apologize to him because I am not trying to hold up the committee at all. The minister did give the impression at the end of that statement, although I do not think he exactly said it, that there had been a very substantial increase in last year-that is to say, since March 31, 1958-in the amount of procurement in the Atlantic provinces. The minister will perhaps recall that in the famous Atlantic resolutions of 1957, which were endorsed unanimously by all the Tory candidates in the Atlantic provinces and which were published under the name of the Conservative party, the first part of the second of those resolutions reads-this was one of the things they pledged themselves to:
Decentralization by placing a more equitable share of defence contract expenditures within the Atlantic provinces.
What I want to find out from the minister is, first of all, what was the dollar increase in 1958-59 over 1957-58, in the total defence purchases in the Atlantic provinces? I will give the questions all at once. Second, what proportion of that increase was on construction; what proportion was on shipbuilding or ship repairing for both years, and what proportion of it was on the procurement of an industrial character; that is to say, things that were bought from industrial plants because that is what it was promised would be increased. Of course, I have the minister's answer. Although I do not question the factual accuracy of the answer, I think it
Supply-Defence Production was very misleading indeed because obviously, of course, expenditures on construction are not contributing to the decentralization, as was promised by the government. Neither, of course, are expenditures on shipbuilding and ship repairing unless indeed the government is deliberately diverting that work from some other part of the country to the Atlantic provinces. Of course, if that is done deliberately at a higher cost I wish the minister would answer that question also. Perhaps the minister would like to answer those questions; then, I may not have any others.


Raymond Joseph Michael O'Hurley: I certainly cannot answer all of the questions that the hon. member for Bonavista-Twillingate asked me just now; I have not this breakdown. I have a prepared statement on the defence work in the Atlantic provinces. I shall be pleased to give him this report. I have not got at hand a breakdown of the question asked.


John Whitney Pickersgill: Perhaps the minister should not bother giving that statement now. What I am interested in is answers to the specific questions.


Raymond Joseph Michael O'Hurley: I have no objection.


John Whitney Pickersgill: Perhaps it can be given at a later stage.


Raymond Joseph Michael O'Hurley: I will get the answers for the hon. gentleman.


John Whitney Pickersgill: The other thing I would like to ask the minister is that if at the same time he would indicate which of the contracts let in the year 1958-59 were for entirely new projects initiated by the present government and which were merely a continuation of projects that had been started by the previous administration. That is very important, because if any attempt is made to show that there has been any progress in bringing about this industrial decentralization, which we were promised would be the result of the change of government, we have to know whether it is something new or merely, as I suspect most of it is, a continuation of the projects that were started by the previous government.


Raymond Joseph Michael O'Hurley: I will obtain this information for the hon. gentleman.


William Arnold Peters: The matter which has been raised by the Saturday Night reporter, pointing out this vast waste of money, warrants some consideration by the department and some answer. Certainly this must have been investigated. These charges have been made publicly and there must have been some investigation. The committee is owed an explanation of how it occurred and what steps have been taken to prevent it from occurring

Supply-Defence Production again. The sum of $30 million is a lot of money on such an order and I think we should be assured that this type of procedure has been corrected and that a different system of supplying managerial contractors has been obtained. I do not know whether the department's general auditor has been able to find out the difficulty or where the department's cost inspection and audit division comes in; but they did make a number of reports to the air force section and I presume they must be under defence production or the treasury department and their recommendations and their memos on this matter should receive some attention from the minister.


Raymond Joseph Michael O'Hurley: Mr. Chairman, when this article appeared in Saturday Night I asked my officials to look into it. There was an inquiry. I have a statement on the history of the construction of this line, when it was constructed and so on. It is quite lengthy. I shall be pleased to give to the committee the results of the investigation made by my department. If need be I will be pleased to read to the committee the results of the investigation made by my department. The mid-Canada early warning line is basically a detection system, which is supported by a transcontinental communication network.


John Whitney Pickersgill: I wonder whether I might make a suggestion to the minister. Would it not serve all our purposes, in view of the fact that we are going to be interrupted, if the minister had permission to put the statement on Hansard so that we would have it there to see tomorrow. It would save reading it.


Charles Edward Rea: Is the committee agreeable to having this report placed on Hansard?


Some hon. Members:: Agreed.
(Editor's note: The report above referred to follows.)
The mid-Canada early warning line is basically a detection system, which is supported by a transcontinental communication network. The whole line is constructed over terrain which, from the accessibility and climatic point of view, is the most difficult in Canada. The problems of construction, transportation, communications and manning were of such magnitude as to require an unprecedented degree of effort and team work by the Department of National Defence, the Department of Defence Production, Defence Construction Limited, and Canadian industry.
It was decided to proceed with the project in two phases. Phase I was to include a technical study and report including an estimated cost for the complete project. Phase II known as the implementation phase,


involved the complete engineering, procurement, transportation, construction and installation of the entire system.
It was realized that the construction of a communication system of this magnitude demanded that the basic planning and systems engineering be of the highest order and excellence. As it was to be built across all provinces of Canada, it was obvious that advantage should be taken of the local knowledge in the various provinces.
After a great deal of study and consultation with the armed forces, industry and experts in the communications field, it was established to the satisfaction of the Department of Defence Production that the employment of one company in the commercial communications field to manage the contract was the most efficient way to carry out a project of this magnitude and complexity. The techniques used to operate the system are almost entirely those of communications theory and practice. The major contribution to reliability rests with the ability of the communication system to carry the necessary warning data from each detection station to its appropriate sector station where after screening the combined information it is passed to air defence command.
The organization in Canada which most satisfactorily filled the requirement was the trans-Canada telephone system. This system comprises all the major provincial and commercial telephone operating companies and was set up primarily to allow a smooth and efficiently reliable transcontinental system to be achieved. It is because of this that the Department of Defence Production considered the trans-Canada telephone system the best organization to fulfill the requirement for co-ordinated systems engineering, planning, provincial know-how and the means to bring a large body of experienced and proven communication people together.
The exact relatonship between the contractor and the crown took some time to define because the original plan envisaged delegating almost complete control to the management contractor. This was dropped in favour of one where the Department of Defence Production performed its normal procurement functions, Defence Construction Limited was responsible for construction contracts and the RCAF acted as design authority. Under this plan the management contractor would co-ordinate all aspects of the engineering, construction and installation of the system.
Every contract placed by the Department of Defence Production or Defence Construction Limited, contained a clause stating that the requirement was a portion of an over-all project which was being co-ordinated by the

trans-Canada telephone system (represented by the Bell Telephone Co. of Canada as management contractor) and stating that the management contractor would act under the control and direction of the Minister of Defence Production as agent of Her Majesty in the supervision of the contract.
An executive committee to speak for the deputy ministers of the departments of government directly concerned with the building of the mid-Canada line and to act as a "clearing house" for complex problems was formed in November 1954. The management contractor was a member of this committee. The committee met monthly for 17 regular meetings in Ottawa and for many special meetings in Ottawa and at mid-Canada line sites. Most problems were settled at these meetings despite the varied opinions and convictions of individual committee members concerning technical and managerial matters.
Although the tentative program developed by the systems engineering group (RCAF) in June 1954 envisaged the completion of the line by the end of 1957, there was an urgent necessity for rapid and continuous improvement in the North American air defence system which accelerated the project so that the line could be in essentially full operation by January 1, 1957. Portions of the mid-Canada line were in operation as early as September 1956. The line came into operation sector by sector progressively, proceeding from west to east along the line. A report, dated January 8, 1957, indicated the detection equipment working from Winisk on the west side of James bay to Dawson creek with some sections of the balance of the line also in operation. Provisional acceptance tests and interim operational tests continued through the spring and late summer of 1957. Some deficiencies such as tower clean up, antennae alignment and modifications to the north-south Doppler detection equipment were carried over into the maintenance contracts.
Under the terms of his contract, the management contractor submitted "Forecasts of Expenditures" quarterly. The first was submitted in May of 1955 with an overall estimate of approximately 169 million. This figure included approximately 16.7 million for management function. This estimate remained unchanged in the management contractor's quarterly forecasts until August 1956 when the management contractor revised the estimate upwards by 10 million to 179 million. At the insistence of the R.C.A.F. and the executive committee, the management contractor immediately undertook a complete review of the mid-Canada line costs and submitted early in October an estimate of approximately $206 million. This estimate was
Supply-Defence Production discussed at the executive committee meeting of October 15, 1956 and additional breakdowns of cost estimates and reasons for change were requested. It was also agreed that an estimate should be made to provide for interim maintenance costs prior to the effective date of the maintenance contract. This further	review	was undertaken	by	the
management contractor and completed by the end of October, part of which was made with the assistance of the systems engineering group personnel. This study established a figure of 203.4 million for the construction phase with 6.4 million for interim maintenance.
Cost estimates were under constant review from this point on, with the highest estimate of $230	million	for construction	and	$9.8million for interim maintenance appearing in March 1957 quarterly review. The present estimate	of cost	inclusive of interim maintenance	is $228	million.
Only a few of the reasons for upward revision in the over-all costs are outlined here for your information. Construction costs increased as a result of additional buildings (185 in place of 120); the size of the buildings increased by 31 per cent in cubic content; two additional rearward scatter sites and three additional DDSs were added; special harbour work at Winisk had to be undertaken; additional airstrips had to be constructed; there was a fire loss at Knob Lake; and extra foundations as well as access roads had to be built. The increase in sites resulted in an increase in the number of main towers, as well as an increase in electronic equipment, diesels, domestic furnishings and transportation costs. The original estimates did not provide for the purchase of helicopters or the procurement of scows, barges, and other lightering equipment for use in Hudson Bay. The original estimate for transportation did not provide funds for rental of civilian helicopters as it was anticipated that RCAF could supply all helicopter support. The early target completion date necessitated airfreight of urgently required equipment including the Dorman diesels airlifted from England. Later estimates included equipment to be left on site for RCAF use during the maintenance of the line and was estimated to provide two years' maintenance of spares. This also included fire-fighting equipment, heavy construction equipment, laundry equipment, furniture, kitchen and mess equipment as well as spares and tools to be put into stock for replacement and repair.
Shipping conditions in the Hudson bay were far from ideal. Cargo returned to Montreal by ship urgently required for winter construction had to be airlifted. A record cold

Supply-Defence Production winter on the eastern half of the line caused extremely high consumption of fuel for heating and construction operations and required airlift of fuel not previously planned.
The stress of this project from the first was one of urgency as to time and this unquestionably contributed to higher costs. It was generally recognized that this approach would result in heavier costs than would be the case in a normally spaced program. To meet the date, it was necessary to work during the extremely difficult annual freeze-up and break-up periods when efficiency of operation drops markedly.
It must be accepted that a project of this magnitude undertaken, as it was, on a "crash" basis would be fraught with differences of opinions, both technical and administrative, and problems of an almost insurmountable nature. The decision to hire a contractor to take over completely the detailed responsibilities, perform the management function including over-all co-ordination, technical assistance and detailed design as required was intended to relieve the RCAF design authority, Defence Construction Limited and the Department of Defence Production of details for which no staff was available. The hopes of the government agencies, that the detailed responsibilities would be taken over by the management contractor, were not entirely fulfilled. It should be pointed out, however, that the work was carried out at a time when the entire construction and shipping industries were struggling to cope with some of the heaviest demands in their history. It is reasonable, therefore, to conclude that the project could not always progress in the most efficient and desired manner.
While those who were close to the project may remember it chiefly for the difficulties which had to be overcome collectively, it is generally agreed by the members of the executive committee that the construction of the mid-Canada line was a truly remarkable achievement, and it accomplished its objectives in spite of an unavoidable but nevertheless complicated administrative control. These controls are of course essential in all projects involving large expenditures of public funds.
(Translation):


Mr. Roberge:: Mr. Chairman, I would like to ask the Minister of Defence Production (Mr. O'Hurley) a question. Is the Frobisher Bay project the responsibility, entirely or in part, of the Department of Defence Production? I may have other questions to ask, depending on the answer.


Raymond Joseph Michael O'Hurley: I am sorry, but I did not understand the question.
[The Deputy Chairman.]


Gabriel Roberge: Is the Frobisher bay development the responsibility, either entirely or in part, of the Department of Defence Production? Depending on the answer I will receive to that, I may have other questions to ask.


Raymond Joseph Michael O'Hurley: You want to know if it is under the jurisdiction of my department?


Gabriel Roberge: Yes, that is right.


Raymond Joseph Michael O'Hurley: No, there are contracts being carried out on behalf of the Department of Northern Affairs and National Resources. The Department of Transport is also concerned.


Gabriel Roberge: Is the Department of Defence Production interested in that development?


Raymond Joseph Michael O'Hurley: Yes, because we have
awarded contracts on behalf of the Department of National Defence.


Gabriel Roberge: In that case, I should like to ask the following question: What are the companies that now have contracts with regard to the development of Frobisher bay, and what are the contracts for?


Raymond Joseph Michael O'Hurley: Mr. Chairman, I am sorry I do not have this information before me, but I may tell the hon. member that contracts have been awarded for the construction of wharves, buildings and for their installation. I might obtain that information for the hon. member but I am sorry I do not have it here with me.


Gabriel Roberge: Mr. Chairman, I should like the minister to give us that information later, so that it will not delay the passing of his estimates.


Augustin Brassard: This is my last question on item 68, Mr. Chairman. May I ask the minister if he can tell the committee whether it happened that public tenders for some clothing items, which had been received, were recalled, and new ones asked for, mentioning the same quantities, but different specifications with regard to quality. I realize that the minister may not be able to give me an immediate answer, and I do not want to delay the passing of these estimates.


Raymond Joseph Michael O'Hurley: I might say to the hon. member that the answer is yes, because sometimes, tenders are called, and then returned after having been examined. In that case, others are called for.


Maurice Bourget: This morning, the Minister informed the committee that there were six more escort vessels to build. Could he tell:

us whether contracts have been awarded for the construction of those vessels, and if so, to what companies, and on what dates?


Raymond Joseph Michael O'Hurley: First, I must tell the hon. member that this information was given when the estimates of my department were under consideration last year. The contract for the first vessel was awarded to the Canadian Vickers, in September 1958. As for the construction of the other five, work will begin in July 1959, and new starts will proceed from then on at three month intervals, until July 1960. One of the destroyers will be constructed by the Canadian Vickers, as I have already told you; another one by the Burrard Dry Dock, of Vancouver; a third one by the Davie Shipbuilding, of Lauzon; the fourth by the Halifax Shipyards, of Halifax; another one by the Marine Industries, of Sorel; and the last one by the Victoria Machinery Depot and Yarrows Limited, of Victoria.


Maurice Bourget: Mr. Chairman, could the minister indicate whether contracts for the construction of those ships have definitely been awarded to each of the companies whose names he has mentioned?


Raymond Joseph Michael O'Hurley: Absolutely.


Maurice Bourget: Could the minister give the exact dates, because that is the very point I want to clear up. I was aware that the government intended to have these ships built by certain companies, but the dates were not definite.


Raymond Joseph Michael O'Hurley: Mr. Chairman, the Burrard Dry Dock Company will start building one of these ships in July 1959. In October, the Davie Shipbuilding Company will start work on the third.


Maurice Bourget: In October 1959?


Raymond Joseph Michael O'Hurley: Yes. They have been
awarded the contract for the third destroyer. From then on, construction will start at intervals of three months, until the sixth ship is under construction, so as to complete the order by 0.962-63.


Maurice Bourget: Then, it is in October 1959?


Raymond Joseph Michael O'Hurley: The contract for the second destroyer has been awarded and the work is to start in July. I know the Davie Shipbuilding Company is to start construction of the third destroyer in October, and the work on the other ships will start at intervals of three months.


Maurice Bourget: Could the minister indicate how the contracts for these ships were allocated to each of these companies? On what basis?
Royal Assent


Raymond Joseph Michael O'Hurley: Mr. Chairman, I cannot recall the exact French expression but it is called in English "target incentive price". This is the prevailing method in all shipbuilding companies. I regret being unable to give you a translation of the expression "target incentive price".
(Text):


Maurice Bourget: Can the minister give us the target price for each?


Raymond Joseph Michael O'Hurley: The target incentive-


Maurice Bourget: What is the target price? Is there a fixed target price?
(Translation):


Raymond Joseph Michael O'Hurley: The contract prices are
based on the number of working hours, according to the shipyards experience. That is why each shipyard may have a different target incentive price. Anyway, I can get further information and I will be glad to give it to the hon. member.
(Text):


John Whitney Pickersgill: I wonder whether I could ask the minister when the vessel to be built in the Halifax shipyards is to be started?


Raymond Joseph Michael O'Hurley: The fourth destroyer will be built in the Halifax shipyard and work will commence somewhere around the holidays.


Charles Edward Rea: Shall vote 68 carry?


John Whitney Pickersgill: No.
Progress reported.



THE ROYAL ASSENT

[Stage Direction]
A message was delivered by Major C. R. Lamoureux, Gentleman Usher of the Black Rod, as follows:
Mr. Speaker, the Right Honourable the Deputy Governor General desires the immediate attendance of this honourable house in the chamber of the honourable the Senate.
Accordingly, Mr. Speaker with the house went up to the Senate chamber.
And being returned:
Mr. Speaker informed the house that the Deputy Governor General had been pleased to give, in Her Majesty's name, the royal assent to the following bills:
An act for the relief of Maurice Castonguay.
An act for the relief of Iris Marion Saunders Robbins.
An act for the relief of Eleonora Dudarowa Shukoff.
An act for the relief of Jeannette Belanger Ross.
An act for the relief of Evelyn Isbitsky Golden-berg.
An act for the relief of Salla Weisman Stopnicki, otherwise known as Sally Weisman Stopnicki.
An act for the relief of Ovila Rivet.
[Stage Direction]
Royal Assent
An act for the relief of Bella Valinsky Segal.
An act for the relief of Alexander Pavlovich.
An act for the relief of Catherine Anne Gillis Roper.
An act for the relief of John Robertson Low.
An act for the relief of Barbara Ann Foam Armstrong, otherwise known as Barbara Ann Foam Copan.
An act for the relief of Ruth Mary Morgen-stern Usher.
An act for the relief of Eddie Ronald Joe Willard.
An act for the relief of Michel Alphonse Dubois.
An act for the relief of Phyllis Ann Applebaum Isenberg.
An act for the relief of Zita May Pardoe McCall.
An act for the relief of Monique Andree Seguin Tyson.
An act for the relief of Bertha Sylvia Berman Maxwell.
An act for the relief of Margery Fletcher Dennis Phillips.
An act for the relief of Margaret Helen Dawson MacKenzie.
An act for the relief of Eleanor Gwyneth Henley Norman.
An act for the relief of Marie Pauline Primeau Landreville.
An act for the relief of Ellen Wilk Tuke.
An act for the relief of Rhoda Lillian Rabinovitch Katchan.
An act for the relief of Roger Myre.
An act for the relief of Lee Dacks Moscovitch.
An act for the relief of Lillian Goldbloom Howard.
An act for the relief of Giovanni Cavallero.
An act for the relief of Lorna Frances Hutchinson Kerr.
An act for the relief of Jessie Balfour Mains McCartney Manson.
An act for the relief of Guy Charbonneau.
An act for the relief of Meade Alexander Morgan.
An act for the relief of Carol May Campbell Williams.
An act for the relief of Adela Hawthorne Pattison.
An act for the relief of Samuel Currie Millar.
An act for the relief of Helen Mary Margeson Ransome Scudamore.
An act for the relief of Claire Anna Theresa Verdon Monette.
An act for the relief of Constance Edna Medcalfe Blood.
An act for the relief of Norma Margaret Martin Raymo.
An act for the relief of Audrey Barrasford Milburn.
An act for the relief of Sandra Stoll Goldenberg.
An act for the relief of Edith May Driscoll Jeffrey.
An act for the relief of Joyce Ethel Commerford Brewster.
An act for the relief of Hirsch Glaser.
An act for the relief of Maria Gagne Cote.
An act for the relief of Gail Patricia Northrup Brazauckas.
An act for the relief of Gilbert Forest.
An act for the relief of Yvon Poulin.
An act for the relief of Karl Wilhelm Oskar Bartels.
An act for the relief of Joseph Aime Paul Guy Genest.
An act for the relief of Allan Ray Wright.
An act for the relief of Michael Kalabiha.
An act for the relief of Joyce Ann Breaker Lee.
An act for the relief of Zina Goffman Filler.
An act for the relief of Omula Karnitis Rakauskas.

An act for the relief of Joseph Bernard Alberia Gustave Lahaise.
An act for the relief of Michael Palangio.
An act for the relief of Grace Evelyn Heggtveit Richter.
An act for the relief of Ross Kevin Ladd.
An act for the relief of Georgina Horne Parsons.
An act for the relief of Esther Paula Beemaert Martindale.
An act for the relief of Audrey Bruce Laborgne.
An act for the relief of Timothy Allan Moran.
An act for the relief of Antonio Choma.
An act for the relief of Helen Ruby Riley Onions.
An act for the relief of Simone Alberta Chretien Welsh.
An act for the relief of Edward John Mendelsohn.
An act for the relief of Marcus Gilmour.
An act for the relief of Joyce Rosemary Hudson Plam.
An act for the relief of Bernard Lawrence Boire.
An act for the relief of Marie Madeleine Marielle Faust Morin.
An act for the relief of Ruth Georgina Potts Dobie.
An act for the relief of Patricia Burnell Fraser Rosensweig.
An act for the relief of Dawn Jean McKenzie Barr.
An act for the relief of Helen Ann Kovach Ujvary.
An act for the relief of David Scott Brown.
An act for the relief of Doris Margaret Turner Smiley.
An act for the relief of Angelo Ciamarro.
An act for the relief of Gustave Rene Gosselin.
An act for the relief of Marie Berthe Jeannine Quesnel Patenaude.
An act for the relief of Mary Athanas Copis.
An act for the relief of Greta Libenstein Gold-feder.
An act for the relief of Andre Maurice Petit.
An act for the relief of Jean Huard DeRoberval.
An act for the relief of Juanita Patricia Hamilton Long.
An act for the relief of Benjamin Gordon Davidson.
An act for the relief of Margaret Isabella MacKellar Thomas.
An act for the relief of Philip Joseph Kelly.
An act to amend the Judges Act.
An act to make provision for the reduction of certain class and commodity rates on freight traffic.
An act to amend the Excise Tax Act.
An act respecting the Roman Catholic Episcopal Corporation of Prince Rupert.
An act to amend the Prime Minister's Residence Act.
An act to amend the Bretton Woods Agreements Act.
An act to amend the Federal-Provincial Tax-Sharing Arrangements Act.
An act to implement a convention between Canada and the Republic of Finland for the avoidance of double taxation with respect to income tax.
An act respecting the testing, inspection and sale of seeds.
An act to mark the occasion of Her Majesty's visit to Canada by providing for the establishment and administration of a fund to aid in research on the diseases of children.
An act to amend the Length and Mass Units Act.
An act to amend the Weights and Measures Act.
An act to amend the Export Credits Insurance Act.

An act to incorporate The Free Methodist Church in Canada.
An act to amend the Prisons and Reformatories Act.
An act respecting the adjustment of certain public service pensions.
An act to authorize the provision of moneys to meet certain capital expenditures of the Canadian National Railways System for the period from the 1st day of January, 1959, to the 30th day of June, 1960, and to authorize the guarantee by Her Majesty of certain securities to be issued by the Canadian National Railway Company.
An act to amend the Farm Improvement Loans Act.
An act to amend the Veterans' Land Act.
An act respecting the superannuation of members of the Royal Canadian Mounted Police.
An act respecting the superannuation of members of the Canadian forces.
An act to amend the Unemployment Insurance Act.
Business of the House BUSINESS OF THE HOUSE
Paul Theodore Hellyer: I wonder if the acting house leader can give us the business for the remainder of the week?


Mr. Brooks:: Mr. Speaker, the business for tomorrow and the next day was indicated last evening by the house leader, and there will be no change as far as I know.


Paul Theodore Hellyer: Can the acting house leader give us any indication of what will be taken up on Monday?


Alfred Johnson Brooks: I am sorry, but I have no information on that.


[Stage Direction]
It being eight minutes after six o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Question

[Stage Direction]
The following answer, deposited with the Clerk of the house, is printed in the official report of debates pursuant to standing order 39:

Mr. Bell (Carlelon): 1.	Was Canada a party to the 1949 road traffic convention?
2.	If so, what negotiations have been conducted with the provinces concerning the possibility of Canada ratifying this convention?
3.	By what means have such negotiations been conducted?
4.	What attitude has each of the provinces expressed to the ratification of this convention?
5.	Does it appear likely that Canada will be able in the near future to ratify this convention?
Answer by:	Hon. Howard C. Green
(Secretary of State for External Affairs):
1.	No.
2.	In 1949 provinces were informed of the forthcoming UN conference on road and motor transport and of its possible implications for Canada. After the conference, their views were requested on the possibility of ratification by Canada of the convention on road traffic. In 1956 they were asked whether they would be willing to bring their legislation into line with the provisions of the convention. They were also consulted
in 1953 and in 1957 concerning detailed questions of implementation in the matter of the licensing of drivers.
3.	By correspondence, in most cases between the lieutenant governor of the province concerned and the secretary or the under secretary of state.
4.	Not all the provinces have replied to the government's inquiries. One province has suggested that provinces should not be asked to comment on this problem separately, as decisions of this nature should be arrived at at a conference of all the provinces. Two provinces have expressed their lack of interest, and two provinces have stated that they are working to achieve uniformity of provincial legislation by other means. Two provinces have suggested that ratification of the convention, or discussion of this possibility, would be of little value. Two provinces have replied without commenting on the desirability of ratification.
No province has expressed interest in the possibility of Canadian ratification. One province has said that none of the provisions of the convention conflict with its own legislation, but no other province has given a substantive reply to our enquiry of 1956.
5.	After completing a review of the inconvenience caused to motorists abroad by failure to ratify the convention, the government will decide whether a further approach should be made to the provinces.

Thursday, July 9, 1959