1960-03-21

Hon. Donald M. Fleming (Minister of Finance):: Perhaps this, the first day of spring, might be a suitable occasion for me to inform the house that barring unforeseen contingencies I hope to introduce the budget on Thursday evening, March 31.



DELIVERIES TO FEED MILLS IN DESIGNATED AREAS

[Stage Direction]
On the order:	Government notices of
motion:
March 17-The Minister of Trade and Commerce- The following proposed motion:-That the standing committee on agriculture and colonization be empowered to examine and inquire into the delivery of grain by producers to feed mills operating in the designated area as defined by the Canadian Wheat Board Act, and to report to the house observations and proposals thereon.
Mr. Speaker:: Pursuant to section 2 of standing order 21 this notice of motion is transferred to and ordered for consideration under government orders at the next sitting of the house.



MISCELLANEOUS PRIVATE BILLS

[Stage Direction]
Sixth report of standing committee on miscellaneous private bills-Mr. McCleave.


[Stage Direction]
On the orders of the day:
Hon. L. B. Pearson (Leader of the Opposition):: In view of the various statements of government policy on these important matters may I ask the Prime Minister whether he is in a position to comment on a report out of Washington to the effect that President Eisenhower has informed Premier Khrushchev that the United States has no present intention of sharing nuclear weapons with its allies.


Right Hon. J. G. Diefenbaker (Prime Minister):: In so far as the report is concerned, I have seen it; but the communications which passed between Mr. Khrushchev
and President Eisenhower were confidential, and any observation on press references would therefore be improper.



NUCLEAR TEST EXPLOSION IN ALBERTA TAR SANDS

[Stage Direction]
On the orders of the day:
Mr. J. S. Speakman (Wetaskiwin):: I should like to ask a question of the Prime Minister, of which I have sent him notice. Would the Prime Minister care to comment on the article appearing on the front page of the Montreal Gazette of this morning headed "A-Blast Set for Alberta Oil Sands"?


John George Diefenbaker: I have read the article in question, and without going into details respecting the same I wish to say that any decision as to whether a nuclear test explosion will be made in Canada in connection with the Alberta tar sands depends entirely on the government of Canada, and is not a question which the United States atomic energy commission can decide.
There has been no decision to authorize a nuclear test explosion in the tar sands area. Indeed, under the regulations made under the provisions of the Atomic Energy Control Act no one can deal in any way with fissionable substances in Canada except by permission of the atomic energy control board of Canada. That board has not received any application from the United States atomic energy commission or any other person or persons for permission to carry out any explosion of a nuclear device in these sands.
That is as far as I want to go on this occasion, again underlining the fact that the government of Canada has not decided to authorize a nuclear test explosion and that no application has been made, and therefore the article in question is not borne out by the facts.


Mr. Hazen Argue (Assiniboia):: Mr. Speaker, on this question I wonder if the Prime Minister could say whether any discussions are taking place or whether any inquiries are being made within any of the departments as to the feasibility of such a test? I would also ask the Prime Minister, if any such studies are under way, whether these would be called off while negotiations for the cessation of nuclear weapons tests are going on so favourably.

Inquiries of the Ministry


John George Diefenbaker: Mr. Speaker, the fact that the hon. gentleman asks the question indicates that he knows the answer, which is that there have been discussions going on among various departmental officials relative to the technical basis for action along the line indicated. However, in so far as the government is concerned its view has been expressed on previous occasions, that it is opposed to tests. In so far as tests are concerned which would be for the good of mankind, I mentioned the other day the attitude that had been taken some two years ago by myself, speaking for the government.
In saying that, however, I want to make it clear that in my opinion so long as these disarmament discussions are continuing, any kind of nuclear test should certainly not be considered.


Lester Bowles Pearson: Mr. Speaker, in view of the Prime Minister's statement that the government is opposed to tests, and his reference to his statement of two years ago on this subject, may I ask him whether the statement he has just made modifies the statement made on that earlier occasion, August 22, 1958, as reported at page 3944 of Hansard, to this effect:
-on several occasions since I became Prime Minister I have advocated the suspension of nuclear tests, but always providing there was adequate international control to ensure the observance of the undertakings made in that connection.


John George Diefenbaker: Mr. Speaker, in so far as this earlier statement is concerned, there have been developments since then. I see no contradiction in the viewpoint expressed today and that expressed two years ago, except that naturally with the events that are now taking place modifications become necessary in order to meet changing conditions. Possibly what 1 have said should not be considered as a modification. What it is in fact is an interpretation of an actual reality existing today.



REPORTED U.S. SUPPORT OF COMMON MARKET GROUP

[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to direct a question to the Minister of Trade and Commerce. I apologize for not sending him notice but I just spotted the article as the bell was ringing. My question is based on a press dispatch from Washington dated March 20 and entitled, "Inner Six Gets Support of United States in Trade Row", which reads in part as follows:
The United States has quietly come to the support of the European common market against the rival free trade association.

By backing the latest manoeuvre of the six-nation common market in a new and bitter phase of the European trade dispute, the United States has caused distress and even anger among members of the seven-nation European free trade association, led by Britain.
In view of statements by the government that we were marching in step with Britain and the United States in trade matters, would the minister be able to tell the house in which direction the government will be marching now?


Hon. Gordon Churchill (Minister of Trade and Commerce):: Mr. Speaker, I am at some disadvantage in not having seen the article which has so suddenly come to the attention of the hon. member, but the organization of the Six and of the Seven is very well known to everyone. The Minister of Finance (Mr. Fleming) and I participated in the conference at Paris in January with regard to this particular problem, where we were able to suggest a compromise in the apparent dispute between the Six and the Seven on that occasion.
I think there is nothing disturbing with regard to present developments and that we shall find ourselves marching in step with all countries that are interested in extending their trade, which is precisely what the Six and the Seven are interested in doing.
The article suggests that there is some conflict between the United States and Great Britain with regard to those regional trading blocs in Europe. That was not obvious to us at the conference at Paris.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Hon. Lionel Chevrier (Laurier):: May I ask
the Prime Minister when the government intends to make arrangements for the resumption of the debate on the private bill concerning capital punishment, now before the house?


John George Diefenbaker: Mr. Speaker, at the present time the order paper contains a number of matters which require attention. When these matters have received consideration then, as the result of consultation among the house leader, the hon. gentleman and a representative of the C.C.F. a determination in this regard can be made.


Lionel Chevrier: May I ask the Prime
Minister a supplementary question. Has the government in fact decided to amend the

Criminal Code concerning capital punishment in certain cases, as has been stated by three government supporters outside the house?


Mr. Speaker:: Order. A question in similar form arose the other day, and I raised a point of order that seemed to me to be valid; that this question of capital punishment is one before the house for a decision, and to ask whether the government has reached a decision on policy in these circumstances, relating to that same subject, seems to me a breach of the privileges of the house in this sense, that it assumes the government can do such a thing when the decision is now one for the house to make.


Lionel Chevrier: Then, Mr. Speaker, I would like to rise on a question of privilege and bring to your attention the fact that on Friday, when the hon. member for Essex East (Mr. Martin) brought this matter before the house and I did bring up a question of privilege, Your Honour seemed at that time to agree with me that it was a matter of privilege; and, since some of those hon. members are now in the house, I think it is a question of privilege to determine, at least in so far as the government is concerned, whether the house is going to be entitled to receive information of this character, or whether it is going to be given outside the house.
In the statements which the hon. member for Essex East brought to Your Honour's attention on Friday, there was a statement by the hon. member for Winnipeg North Centre (Mr. MacLean) in which he said he understood that the federal government planned to propose legislation limiting hanging to certain types of murder. To that I would like to add the statement made in Hamilton by the hon. member for Parkdale (Mr. Maloney) on March 1, and one made by the hon. member for York-Scarborough (Mr. McGee) as reported in the Ottawa Journal on the same day. Both are of the same nature. I think perhaps I should put them on the record, because this is the matter of privilege.
Frank McGee. Toronto-Scarborough Progressive Conservative, told the North York Progressive Conservative association last night:
"I think it will come to a vote now but I can't see it passing".
He was referring to the capital punishment bill before the house. I continue:
He said the next move likely would be a compromise bill sponsored by the government which likely would reduce the number of offences for which the death penalty is the ultimate sentence.
Arthur Maloney, Conservative, Toronto Parkdale, who spoke in the commons in favour of abolition of capital punishment for murder, said in Hamilton last night that he expected the abolition bill to be defeated and be followed by government legislation
Inquiries of the Ministry
taking into account the views expressed in the debate. Mr. Maloney's comment supported a growing opinion on parliament hill that, whether the abolition bill is defeated in a vote or talked out, the government intends to take action to revise the law.


Mr. Speaker:: Is it the hon. member's point that expressions of opinion of this kind by private members outside of the house constitute in any sense a breach of the privileges of the house?


Lionel Chevrier: Mr. Speaker, the point I am making is in reply, I think, to what you indicated on Friday to the hon. member for Essex East. I may be mistaken, and I am sure Your Honour will correct me if I am wrong, but I understood from the opinion of Your Honour that it would be preferable to bring this matter before the house when the hon. members were present. I understand that one and perhaps two of the hon. members who made such statements are here, and what I am complaining about is that surely the government should find it possible to tell us here in the house what its plans are in connection with this matter at a time when three members, in breach of privilege, I respectfully submit, have indicated outside of the house-


Mr. Campbell (Stormont):: Mr. Speaker, I rise on a point of order.


Lionel Chevrier: -what the government intends to do.


Mr. Speaker:: Perhaps I have not made my viewpoint clear. I may be mistaken, but it seems to me that if the government or someone having authority to speak for the government expressed an intention at this stage while the matter is before the house, then the privileges of the house might be involved; but when private members express their opinions as to what may happen, and no spokesman for the government has undertaken to say that the government has arrived at a conclusion while the house is still debating the subject, it seems to me that a question of privilege does not arise, and that it is improper to frame a question which assumes that the government would make such a decision while this matter is before the house.



COMMONWEALTH CONFERENCE


[Stage Direction]
On the orders of the day:
John George Diefenbaker: Mr. Speaker, on Friday last the Leader of the Opposition asked whether there was anything to report about the date of the forthcoming commonwealth prime ministers'

Inquiries of the Ministry conference, which date has appeared in the press, or the items which might be discussed at that conference, reports of which have also appeared in the press.
In so far as the first matter is concerned, I refer the Leader of the Opposition to a press release issued on December 15, 1959, in which it was stated that the commonwealth prime ministers' conference would begin in London on May 3. Since then it has been determined as well that the conference will close on May 13.
So far as the agenda of the conference is concerned, the hon. gentleman knows from his experience that it is not the practice to make public the agenda for the conference. It is true that from time to time there are speculative articles on the agenda, but because of the agreed and established practice of not disclosing the agenda, press speculation is not made the subject of official comment. The latest declaration in this regard was made in the British House of Commons on December 15, 1959, at which time Prime Minister Macmillan replied in like manner to questions then being asked respecting the matters which will come before this conference.
As the hon. gentleman knows, the field of commonwealth and international matters is generally traversed. Beyond that, the experience of the past has been that no fixed agenda is followed, and that each and every prime minister, having equal status in the conference, may bring before the conference such matters as in his opinion deserve to be considered.



INQUIRY AS TO ACTION RESPECTING UNEQUAL DELIVERY QUOTAS

[Stage Direction]
On the orders of the day:
Hazen Robert Argue: I should like to direct a question to the Minister of Trade and Commerce arising out of the very low grain quotas still in existence at many marketing points, particularly in southern Saskatchewan and Manitoba. Can the minister indicate what action he is considering to remove this gross discrimination and unfairness?


Gordon Minto Churchill: The hon. member for Assiniboia, I think, raised the same question two or three weeks ago. I protested then against the use of the word "discrimination", and today he has added the words "gross unfairness".
As everybody out west knows, and as the hon. member for Assiniboia knows only too well, the wheat board was faced with a very difficult situation during the fall and winter


months in moving large quantities of damp grain to the terminal elevators where that grain could be dried. In order to accomplish this, it meant that farmers living in other parts of the prairie provinces whose grain had not suffered would have to wait for a period before the quotas in their areas could be raised.
This situation was well known and was mentioned in the house in January. At the present time every effort is being made to stimulate the movement of dry grain from the areas that have been waiting so long, and hundreds of box cars are moving out west to pick up that grain from the country elevators. The quota allotment will be raised very quickly in some of the areas that have been on small quotas, and before much time has elapsed I think there will be a close equalization of quota distribution across the country. The causes for the present distinction between one area and another were simply weather conditions last fall, as all the farmers are well aware.


Hazen Robert Argue: I wonder if I might ask the minister a supplementary question. Does the minister not feel that a substantial part of this very difficult situation arises from the fact that total marketings were 40 million bushels less than at this time about a year ago, and would the minister say whether or not he expects that some of this discrimination could be removed as a result of-


Mr. Speaker:: Order. The hon. member's question is a bit leading and seems to be more in the nature of a statement than a request for information. He repeats the charge of discrimination, which is an improper tag to put on a question. I ask whether this question is not actually the substance of the motion which is to be referred in the house for consideration by a committee to deal with the delivery of grain by producers-


Hazen Robert Argue: No. On the point of order which you have raised, Mr. Speaker, I may say that is an entirely different situation, one of marketing within the local area to a feed mill a few miles away from where the grain is produced. The other question relates to the tremendous marketings that ordinarily go for export.


Mr. Speaker:: I thought the matter might be properly left over until it came before the committee. However, if the hon. member wishes information and will frame his question in a proper manner, I will admit it.


Hazen Robert Argue: 1 am not trying to use the word "discrimination" if some other word is more appropriate, such as "unfair" or "unequal". I do not know how to describe it. However,

I ask the minister whether some of this unfairness, if he cares for that word, has arisen because total marketings have been less and not just because of the damp grain. Could the minister hold out any hope to grain producers that there may be some improvement this year over last year, considering the low quantities of grain that moved through the seaway?


Gordon Minto Churchill: Mr. Speaker, I accept the word "inequality", rather than "discrimination" or "unfairness". The total marketings out west-


Hazen Robert Argue: That is because you are on that side of the house.


Gordon Minto Churchill: -that is the deliveries by the farmers to the country elevators, have been delayed this year because of the conditions I have already mentioned. Actually the overseas clearances of wheat have been running ahead of last year and are still ahead of last year by between 3 million and 4 million bushels, so there has been no delay or restriction in the overseas movements, and that is reflected back to the market throughout the prairie provinces.


Hazen Robert Argue: I wonder whether the minister would answer my question, which was, does the minister feel there could be an improvement in the shipment of grain through the St. Lawrence seaway, which had fallen so drastically last summer?


Gordon Minto Churchill: The course of events will indicate that. It depends on the orders which are placed for shipment through the seaway. If the orders are placed at the port of Churchill or at Vancouver, as so frequently happens, that is where the shipment is made; but much depends on the activity of the trade in general.


Mr. G. J. Mcllraifh (Ottawa West):: May I
ask a supplementary question. Would the minister agree that one of the necessary results of taking the tough and damp grain to the terminal elevators, which has always seemed a perfectly proper and normal course, has been that the other grain was not in position in Vancouver to be loaded on the waiting boats when available there for loading?


Gordon Minto Churchill: No, Mr. Speaker, I think there has been sufficient grain in position to fill all orders. The situation which developed out in Vancouver some time ago has been cleared up, and there is no trouble there now at all.


Mr. Badanai:: Have the dry grain shipments to the lakehead been resumed?


Gordon Minto Churchill: Yes, Mr. Speaker.
Inquiries of the Ministry (Translation):



CAPE BRETON


[Stage Direction]
On the orders of the day:
(Page 2255)
Hon. Paul Comlois (Minister of Mines and Technical Surveys):: Mr. Speaker, on Wednesday last, March 16, the hon. member for Villeneuve (Mr. Dumas) put to me the following question:
In a brief submitted to the Rand commission this morning, the Dominon Coal Company stated its intention to shut down three mines in Cape Breton, with the resulting lay-off of 2,557 miners. What action is the government planning in this regard?
In reply to this question, Mr. Speaker, I am pleased to say that I have now inquired into the part of the brief submitted by the Dominion Coal Company to the royal commission on coal, with regard to the shutting down of certain coal mines in Cape Breton.
The brief does not specify when those three mines would shut down, but it does imply that they would not do so at the same time and that the closing would be spread over a certain period of time.
When the shut-down of a mine is being considered, formal notice must be given to the provincial government and an agreement must be reached with that government as to the date, safety measures and other factors.
I must add that neither the company nor the Nova Scotia provincial government has advised me of their intentions in this regard. In the circumstances, I think the hon. member for Villeneuve will agree that it is not part of my duties to anticipate future decisions of the provincial government or the findings of the royal commission on coal.
I can assure him, however, that all aspects of the coal mines problem in Nova Scotia are being carefully looked into. When the facts are clearly established, appropriate action will be considered and no doubt announced in due course.
(Text):



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Hon. J. W. Monleilh (Minister of National Health and Welfare):: Mr. Speaker, on March 18 the hon. member for Burnaby-Coquitlam asked me whether the government of British Columbia has sought federal assistance for its chronic hospitals. As far as operating costs are concerned, I should like to confirm

Inquiries of the Ministry that the province has not requested the inclusion of chronic hospitals in the agreement under the Hospital Insurance and Diagnostic Services Act.
With regard to construction costs, the federal government does provide assistance to chronic and other hospitals under the hospital construction grant.



INCOME TAX


[Stage Direction]
On the orders of the day:
Herbert Wilfred Herridge: Mr. Speaker, I wish to address to the Minister of National Revenue a question of which he has good knowledge; I think it has almost become an administrative hobby. Has the minister endeavoured to arrange a meeting of officials of the International Nickel Company and officials of the international union of mine, mill and smelter workers with any members of the cabinet to discuss pension vesting principles as applied to the Income Tax Act? If so, what was the result?


Hon. George C. Nowlan (Minister of National Revenue):: Mr. Speaker, meetings have taken place between officials of that union and members of the cabinet; meetings have also taken place between officials of the company and members of the cabinet. It is a problem which is being discussed at the present time.



CANADIAN BROADCASTING CORPORATION


[Stage Direction]
On the orders of the day:
Hon. J. W. Pickersgill (Bonavisla-Twillin-gate):: Mr. Speaker, I wonder whether I might ask the Minister of National Revenue, in his capacity as reporter for the C.B.C., if he does not think the point has almost been reached where there has been undue delay in replying to the question about television at Flin Flon?


George Clyde Nowlan: That is a matter, Mr. Speaker, as I recall it, dealing with the capital budget of the C.B.C. Under the statute the budget does not have to be submitted until the end of this month; therefore when one is within the statutory period I am quite certain that no one can accuse any member of this government of being guilty of undue delay.


John Whitney Pickersgill: A supplementary question. Could the minister give the house a preview?


Donald Methuen Fleming: that the house go into committee of supply.



TRADE-REQUEST FOR ACTION TO REMEDY UNFAVOURABLE BALANCE

Mr. Speaker:: Carried.


Lester Bowles Pearson: Mr. Speaker, I must begin by expressing my regret at disappointing you.
On an occasion like this it is not always easy to decide what matters to bring to the attention of the house and the government. A very obvious question, of course, is defence policy. On that matter, Mr. Speaker, although the house has been in session now for more than two months, we have not yet had a word from the minister or the government in regard to defence policy.
We have now had nine departments put into supply, but the Department of National Defence is not included among those nine. We had a throne speech debate for some days during which there were several statements on defence matters from this side of the house, but no statement on defence policy was made by a representative of the government, either the Minister of National Defence or any other minister. We have had no white paper on defence, and I gathered from an interjection of the minister the other day, though it does not appear in Hansard, that we may not be getting a defence white paper this year.
It is true that we now have what by courtesy has been called a defence committee; but according to the Prime Minister it will not be permitted to discuss policy. The Prime Minister made that clear last January. However, the Minister of National Defence said last Thursday-and this introduces a note of ambiguity in an already ambiguous situation.-as reported on page 2182 of Hansard for March 17:
It is also my understanding that when my estimates are brought forward the leader of the house will move that they be referred to this committee. That would give this committee an opportunity to examine the estimates for the next year and to discuss therefore the policy that is being followed.
Yet on the very next day after that statement was made the minister had this to say, as reported on page 2221 of Hansard:
The Prime Minister (Mr. Diefenbaker) made quite clear that those expenditures were to be considered in relation to the general policy, but that the general policy was not to be discussed.
That, Mr. Speaker, is the very essence of clarity in regard to the work of this so-called defence committee. When we on this side refuse to accept this kind of committee, with

the contradictory and confused statements made about it, the Minister of National Defence gets angry and accuses us of "whining and blubbering"-I think that was the expression used-when we object to a committee set up to discuss expenditures only for a particular period of time. The committee is not permitted to discuss defence policy. Therefore I hope that before long we will have a statement from the Minister of National Defence with regard to defence policy which might be the basis of a debate in this house. Certainly there can be no such discussion or debate in the so-called committee which has been set up.
There is another subject which indicates the fumbling and indecisive attitude of the government, and which is also a very good illustration of contradictory statements made by members of the government. I am referring to the subject of our international trade and balance of payments. This is a big subject, and although I may have to speak for some time I shall not of course be able to discuss all aspects of it. The government has left itself open to so much criticism that it would take many hours to deal with all its sins of omission and commission. What I omit will be dealt with by other hon. members on this side of the house.
With regard to this subject, unlike that of defence, we do have some information from government spokesmen. We heard an extraordinary speech by the Minister of Trade and Commerce on January 26 last. The minister will no doubt be replying to me in this debate. We also had a very important report by the governor of the Bank of Canada which deals with these matters, a report which in its terms challenges and contradicts the easy optimism of the Minister of Trade and Commerce as expressed in this house on January 26. If the Minister of Finance agrees with the views of the govern-nor of the Bank of Canada-and he has given some indication outside this house that he does-then surely the Minister of Finance will wish on an appropriate occasion to take advantage of the opportunity to deal in this house with the speech made by his colleague the Minister of Trade and Commerce. There are many precedents in this government for that sort of thing happening.
Let us look at the situation with regard to our international trade and balance of payments at the present time. In 1959, in our transactions in goods and services with other countries, Canada made several records; some very bad records indeed, which expose certain of the weaknesses in our economy at the present time to an extent which should provoke the concern of every member of this house. They have already provoked a great 79951-0-142
Trade Balance
deal of concern outside of this house among businessmen, economists and others who are qualified to speak on these matters.
I shall mention some of these. First there is the question of our total liabilities, that is non-resident investments, either direct investments or investments in securities and bonds. We had a record here in 1959. The figure reads $24 billion, which represents a doubling of this total since 1952. Moreover-and this is the alarming feature-the rate of increase is rising. Second, there is the figure regarding net indebtedness, that is the difference between our liabilities and our assets. In this respect we established another record in Canada in 1959 of $15.4 billion, a figure which has more than tripled since 1952. Then there is the figure covering total deficit in current transactions in goods and services in 1959, another record; $1,460 million as against a surplus of $164 million in 1952.


John George Diefenbaker: What was the position in 1956-57?


Lester Bowles Pearson: I could give the figures for every year from 1952 onward, but I am trying to take a figure far enough back to show what has altered during a reasonably long period of time. In some cases I will give the figures for 1956 and 1957. These figures are all available in the bulletins of the bureau of statistics.
There is yet another figure which covers our deficits in non-merchandise trade in 1959. That constitutes another record of $1,074 million, a figure which, I may point out, is steadily increasing, apparently without regard to the economic position of the country in any particular year. For the benefit of the Prime Minister and others I will be glad to give the figures for some of the years up to 1959 with regard to this deficit in nonmerchandise trade. In 1949 the deficit was $116 million; in 1952 it was around $500 million; in 1957, $845 million, and in 1958, $915 million. In 1959, as I said, it stood at the figure of $1,074 million.
Then there is another interesting figure which covers the deficit on current account transactions with the United States. That figure in 1959 stood at $1,236 million.


John George Diefenbaker: Would the hon. gentleman, while giving us these figures, which are selective ones, tell us what it was in 1956?


Lester Bowles Pearson: I will be glad to do that, but if I put all the figures on record for every year with regard to all the matters I am discussing here I should be speaking for a very long time. The figure was $1,236 million in 1959. That is lower than it was in 1956-57-

Trade Balance


John George Diefenbaker: I asked what was the figure for 1956.


Lester Bowles Pearson: It is slightly higher than the figure I have given. The deficit on current account transactions with the United States decreased slightly in the last year. But though this figure of our deficit with the United States was somewhat higher, in 1956 and 1957, it should not be forgotten that at that particular time we had a compensating surplus with regard to our overseas transactions. However, the figure was higher than in 1958, and it has now reached a point where it represents 85 per cent of our total deficit, that is our deficit with the United States. This shows or helps to show, because there are many other features which also show it, the measure of our dependence on the United States.
Even more disturbing than some of these figures, and certainly more significant, is the geographical distribution of our balances. The traditional surplus we have had in this country in our transactions with the United Kingdom and the sterling area has been reduced from $502 million in 1952 to $64 million in 1959, of which $52 million was a surplus with the United Kingdom and $12 million a surplus with the other countries of the commonwealth. Our balance with the
O.E.E.C. countries excluding, of course, the United Kingdom-and this is a very important area of our trade and one which is causing a good deal of trouble in the light of developments in Europe-has fallen from a surplus of $332 million in 1952 to a deficit of $149 million in 1959.


Gordon Minto Churchill: But there is mutual aid in there, and things of that nature.


Lester Bowles Pearson: That is perfectly true, but the biggest figure for mutual aid was before 1952, with respect to the United Kingdom, when we made our $2 billion grant immediately after world war II. The figures for all the other countries except the United Kingdom, the O.E.E.C. countries and the commonwealth, have fallen from a surplus of $179 million in 1952 to a deficit of $139 million in 1959.
Summing up, then, our balances with countries other than the United States have changed from a surplus of $1,013 million in 1952 to a surplus of $49 million in 1958 and to a deficit of $224 million in 1959. Surely the minister will agree, as every hon. member in the house must agree, that this is a disturbing situation.
Equally disturbing is the present character of our net capital inflow. That has changed drastically in recent years. It is now directed more and more to the financing of our long

term debt. In 1957 only 15 per cent of our net capital inflow was directed to this purpose. In 1959 the figure was 30 per cent. On the other hand our net direct and portfolio investment-that is the direct portfolio investment of foreigners in Canadian concerns -which was 73 per cent of our net inflow in 1957 has fallen to only 41 per cent in 1959. This is the kind of investment which develops productive capacity in Canada and should add to our export capacity after the investment has taken place.


Mr. Pallell:: Would the Leader of the Opposition permit a question? Is not that reduction in equity ownership an indication of a reduction in the foreign equity ownership of concerns in this country, and of an increase in Canadian ownership?


Lester Bowles Pearson: I am talking about direct portfolio investment and not necessarily equity ownership. I do not think my hon. friend's observation applies to this category at all.
In contrast, our short term capital imports are increasing. In 1957 they were only 12 per cent and in 1959 they were 29 per cent, a figure I mentioned only a few weeks ago in this house. Surely that is disturbing. That money comes into this country not to develop productive capacity in Canada and add to our export capacity, but comes in for speculative purposes and can be withdrawn as easily as it comes in.
In 1957 only 27 per cent of the capital inflow was designed to finance government and short term needs. In 1959, 59 per cent came in for these purposes and, as I have said, not to increase future production or export capacity. It is this inflow of capital, covering merchandise deficits which has kept the exchange value of our dollar up. The average value of the United States dollar in 1959 over the year was 95.90 per cent. In
1958	it was 97.06 per cent, and in 1957 it was about the same.
The result of that, of course, is obvious. It has encouraged imports into the country and has discouraged exports out of Canada. The reason for this is equally obvious. It has been due to the general monetary policy of the government, relatively higher interest rates, the tight money position here, and the scarcity of funds in Canada which forced the provinces and municipalities to have recourse to financing in the United States. I will have some figures on that subject a little later.
Let us look not at our general deficit position but at our merchandise deficit position. In
1959	it was $386 million, lower than 1956 and 1957.


Gordon Minto Churchill: By quite a bit.


Lester Bowles Pearson: It is lower in those years,
but it is more than twice that of 1958. This arises from the fact that our exports in 1959 went up by about 5 per cent-I think just over or under that figure-and our imports went up by 9 per cent. It is quite true, as no doubt the Minister of Trade and Commerce will point out when he speaks, that there has been an improvement in the last quarter of 1959, when there was actually a surplus. It is also true, as the dominion bureau of statistics in its "Quarterly Estimates of Canadian Balance of Interest Payments" points out on page 2, that there were very special and seasonal factors which accounted for this. Quoting from that report of the bureau, I find it warns that-
-export balance on commodity account in the quarter appears to have been affected by special factors-
-and one that comes immediately to mind is the steel strike and the effect it had on our exports and imports of that commodity. All these things should be viewed by every hon. member of the house as a disturbing situation, it is emphasized by the statistics I have mentioned, but it does not appear to be disturbing to the Minister of Trade and Commerce.
All this merely reflects, he says, our rapid growth. He attempts to suggest that this has often been shown before, that it is just a natural and normal part of Canada's development. Let us look at our experience to see whether that kind of observation is founded on fact or on wishful thinking.
We had, of course, a series of almost uninterrupted trade deficits in the early years of this century, during which period we witnessed the opening up of the west, a terrific period of expansion during which our import needs were very great. Our deficit in those years was brought about primarily by the necessity for investment in this country to increase our export capacity especially from the west. But during the period 1915-52 we do not find that situation. The pattern changes during those years. We had trade surpluses in 32 of the 38 years in the period from 1915-52, and we had deficits in only 6 years in that period, namely 1920, 1929, 1930, 1931, 1950 and 1951.
Therefore, Mr. Speaker, the past experience of this country does not support the claim that we have not very much to worry about with respect to trade deficits because they are part of the normal pattern of the historical development of this country. In the period since 1952 imports have been more unstable than exports. The trend has been to increased merchandise trade deficits; there is no doubt about that. I am covering the 79951-0-142J
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period from 1959 to 1952, an interval during which both parties were in office. But what is more worrying than the actual figures is the thought that such deficits are ceasing to be directly related to industrial development in this country and to increasing its capacity to export.
I am sure the minister will respect the judgment of the former deputy minister of trade and commerce, Mr. M. W. Sharp, who in a speech delivered in Montreal on March 8, 1960 pointed out that-
-broadly speaking, the whole ot the increase in exports between 1952 and 1959, some $800 million, was offset by increased imports ol consumer goods alone.
He also pointed out that this increase in such imports had been distributed throughout all the categories of such goods. If that shows anything it shows that our increased exports have paid only for the imports designed to improve our consumer standard of living, and not to provide greater production and exports.


Donald Methuen Fleming: Will the hon.
member permit a question? Will he not agree that the year in which we had the biggest deficit on our merchandise trade account was the year 1956, and that the deficit that year was almost double the deficit of 1959?


Lester Bowles Pearson: I have always said, Mr. Speaker, that the figure for 1959 was less than for that year; and another year, 1957, was higher, too. But I am pointing out the figure has gone up since 1958; that it is not being covered now by the kind of capital imports which saved us from some of the undesirable consequences of those deficits in past years, and I have done that by trying to explain to the house the character of capital imports during those years, and especially during the last year when our merchandise trade deficit is again at a very high figure.
In this speech which Mr. Sharp made in Montreal he underlined another very disturbing feature about our exports, namely the narrow bases for the increase we have had in those years, an increase which I said was about $800 million, because $540 million of this $800 million increase is covered by three products which do not figure at all, or to any extent, in our export returns in 1952 or before. I am referring to uranium, which in 1959 will be over $300 million, but it will not be nearly that figure in the years to come; iron ore, $135 million; gas and petroleum, over $100 million. They are the three commodities which cover $540 million of the $800 million increase in our exports since 1952. Because so much of this increase

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has been concentrated in these three categories it puts our export situation in a more vulnerable position that it otherwise would be.
We can all hope-and we hope our hopes will be realized-that gas and oil exports should continue to increase, but it will be very doubtful indeed whether they will increase enough to compensate for the decline in uranium exports. We also ask ourselves the question, what will be the effect of European developments in an area where our export figures are already disturbing? I am thinking now of the European free trade area, where tariffs are to be reduced by 20 per cent as of July. Within the area there is the European common market, where tariffs are to be reduced by 30 per cent, and a common tariff to be applied against all coutries outside the common market. Reference was made to that earlier this afternoon.
It is true that there are disturbing divisions of opinion in regard to this step which it is proposed to take, as between the United States on the one hand and the United Kingdom and other members of the free trade area on the other. If Canada does not share in the concessions which these groups are making among themselves, how can our exports expand in this market, especially if restrictions and obstructions on trade are placed on outsiders by those developing groups?
On the other hand, as Mr. Sharp said- and I quote again from his speech-
Our imports are going to be more resistant to downward adjustment than might have been expected.
Moreover, as we have seen, our nonmerchandise trade deficit has grown rapidly and regularly from $116 million in 1949 to $1,074 million in 1959, and unless pretty strong action is successfully taken it will continue to grow. Surely, Mr. Speaker, this is a matter of immediate and deep concern. The longer we go on piling up deficits, huge deficits, the harder the ultimate problem of adjustment becomes and later moves, which will have to be made if this continues, will perhaps be more drastic. They may have the kind of undesirable economic, social and employment effects which we certainly want to avoid in any financial moves that we may have to make.
The Minister of Finance himself has warned us about this development; the governor of the Bank of Canada has certainly warned us in the annual report, in which he told us we are living beyond our means, and so have many others. It will be folly to ignore those warning signs. Certainly, Mr. Speaker, the United States is not ignoring them, and the signs are not nearly so obvious in the United

States in respect of United States business as they are in Canada in respect of Canadian business. The over-all trade deficit in the United States in 1959 was $3.7 billion as against ours of $1.46 billion; and in terms of relative national income that is a much less serious situation than that which confronts us in Canada.
It is also different in the sense that the United States has, I believe, a commodity trade surplus, and that its deficit is due largely to its military and economic aid, in a way which is not the case in Canada. But the United States has already shown its concern, its deep concern, with this situation by taking steps to increase its exports through special financial arrangements which perhaps are known to my hon. friends opposite.
What are we doing in Canada even to show our concern with this situation? Well, the minister who is especially responsible for this matter, the Minister of Trade and Commerce, had this to say in the House of Commons on January 26. He did not seem particularly worried. He said this, and I quote from page 330 of Hansard:
A large trade deficit is not a new phenomenon in Canada-


Donald Methuen Fleming: On a point of order, surely it is quite out of order for the hon. gentleman to read from an earlier debate in the present session. That debate was concluded.


Mr. Speaker:: That is so; if the debate was concluded.


Lester Bowles Pearson: Mr. Speaker, I am reading from the discussion in the speech from the throne.


Donald Methuen Fleming: That is quite out of order.


Lester Bowles Pearson: In talking about our trade deficit the minister indicated that this was not a matter that caused any very serious concern, that a trade imbalance on current transactions is the normal attribute-I have said this already this afternoon and' the Minister of Finance did not take any exception to it-of a rapidly developing economy. He went on to say that this kind of imbalance- and of course he is right-is generally financed by an inflow of capital funds. Then the minister added that I seemed to be unhappy about the size of the deficit and the way it was being financed, about the source of our capital inflow, which is largely from the United States market. Well, Mr. Speaker, I certainly am unhappy about these matters, and I hope the minister will show more concern about them than he has in the speeches he has previously made in the House of Commons dealing with it.


Gordon Minto Churchill: Were you unhappy in 1956 and 1957?


Lester Bowles Pearson: We expressed our concern about these matters in 1956 and in 1957 by doing something about them.


Donald Methuen Fleming: Oh. What did you do?


Mr. Bell (Saint John-Albert):: The people did not think so.


Lester Bowles Pearson: When these discussions develop my hon. friends fall back on the argument that there was an election in 1957, and it covers all their sins of omission since. Believe me, Mr. Speaker, in the period from 1945 to 1957, when situations of this kind developed, we did do something about them at that time and the result was that we did not have this kind of situation in those years that we have now.


Donald Methuen Fleming: Will the hon. member permit a question? Will he be specific and say what the government of which he was a member actually did with the much more difficult situation of 1956, as reflected in the figures the hon. gentleman could quote?


Lester Bowles Pearson: Oh, Mr. Speaker, the minister will throw off these diversionary tactics. I know what we did; he knows what we did, because he was in the house during those years.


Donald Methuen Fleming: What did you do?


Lester Bowles Pearson: I will tell the minister this. During all those years this country was never in a financial and economic situation such as it finds itself in now; and Mr. Speaker-


Mr. Speaker:: Order.


Donald Methuen Fleming: Will the hon. member permit a question?


John Whitney Pickersgill: The minister cannot take it.


Lester Bowles Pearson: If the minister does not like this kind of statement he will be able to reply to it in due course.


Donald Methuen Fleming: I had the hon. gentleman's permission, Mr. Speaker, to ask him a question.


Lester Bowles Pearson: You have asked the question.


Donald Methuen Fleming: I asked a question but he will not answer it. He is running away from it.


Mr. Speaker:: The minister is now rising without the permission of the member who has the floor.
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Lester Bowles Pearson: The minister asked me a question about 1956 and 1957; and while he talks about the terrible situation in those years in regard to deficits-


Donald Methuen Fleming: It was much worse, then.


Some hon. Members:: Oh, oh.


Lester Bowles Pearson: -he cannot quote figures to show that it was worse in those years. He can quote figures to show that the merchandise deficit was higher in 1956 than in 1959, which I have already admitted; but he cannot prove, because the figures do not prove it, that the deficit as a whole was as high in 1956 and 1957 as it is now. He cannot show that the capital imports in 1956 and 1957 were the same type they are now. In other words, Mr. Speaker, he cannot show, because the figures do not prove it, that the financial and economic picture in 1956 in regard to our foreign trade was comparable in its seriousness to what it is at the present time.


Donald Methuen Fleming: Mr. Speaker, apparently the hon. member did not hear my question. Would he permit me to ask for an answer? The question-


Mr. Speaker:: Order. I take it that the hon. member who has the floor does not consent to the interruption which is being made, and therefore-


Donald Methuen Fleming: I just wanted to ask him if he heard my question. He evidently did not, because he has not answered it.


Mr. Speaker:: The minister knows the rules very well, and unless the member who has the floor yields to him by sitting down-


Lester Bowles Pearson: I heard the minister's question, and I have dealt with it.


Donald Methuen Fleming: I asked you what you did in 1956.


Lester Bowles Pearson: The minister has the habit of tossing off his own observations and his own statistics in the middle of other people's speeches. I have given the figures, and he cannot challenge the accuracy of any of the figures I have given. I have admitted that these figures perhaps were not favourable in all respects with regard to the situation that confronted the government in previous years.


Donald Methuen Fleming: That was not the
question.


Lester Bowles Pearson: The minister will just have to ask his question later.


Donald Methuen Fleming: I asked what you did in 1956.

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Lester Bowles Pearson: To get back to the Minister of Trade and Commerce, who is the minister who should be most concerned about this matter-he is the minister who undoubtedly is going to reply if the Minister of Finance will permit him-when the Minister of Trade and Commerce was talking about this situation on January 26 he showed, as I have stated, a kind of casual unawareness and unrealistic optimism that everything was all right, in startling contrast not only to the report of the governor of the Bank of Canada but, indeed, in contrast to some of the statements made by his colleague the Minister of Finance outside the house.
He did not seem particularly alarmed about the deficit. He said-I am paraphrasing, but I think this is reasonably accurate-that he would leave it to the economists to determine whether a deficit in a period of economic expansion is as serious as is sometimes made out. Perhaps he will also leave it to the annual report of the governor of the Bank of Canada, written by an economist who no doubt was assisted by economists. That report certainly does not in any way, shape or form share the minister's complacency in this matter.


Gordon Minto Churchill: There are other economists.


Lester Bowles Pearson: This report is by the governor of the Bank of Canada, an agency of the government, of course, and one that is naturally in touch with the financial, monetary and fiscal policies of the government itself. On March 10 in this house the Minister of Trade and Commerce, in answer to a question, I think, is reported on page 1920 of Hansard as having said:
In other words, the rise in the current deficit which occurred in 1959 is not being sustained into 1960, whereas Canada's foreign earnings are rising sharply.
Presumably that was the basis of his optimism at that time. Because of the figures for the last quarter, things are going to be all right. Let us see what the governor of the Bank of Canada has to say about this in his report; perhaps the minister will ponder over these words. I quote from pages 8 and 9 of the report, where it has this to say:
Three more years have gone by in which we have had very large balance of payments deficits, and we are now launched on another year with the prospective excess of total spending over production being greater than ever, presumably to be matched by an equivalent excess of imports which will have to be financed by foreign resources in one form or another.
The cumulative effect of all these developments must be to weaken the ability of the Canadian economy to meet the difficulties of the next recession to come upon us from abroad, and to make more likely the development of a domestic recession arising from excesses and structural strains

within our own economy, which may or may not coincide in timing with recession conditions abroad.
Then he went on to say:
Even if we were intent on trying to continue in that way, it must be recognized that in a capital-hungry world we cannot in fact count on having ready access to foreign capital year after year on a large scale. The longer the process of attempted overexpansion or over-rapid expansion goes on, the more maladjustments will be built into our economy, and the more difficult and painful will be the readjustments which will in time be forced upon us. We must in the end learn as a nation to live within our means, and exhibit the strength and will to do so. It would in my view be the path of realism to move firmly in that direction on a broad front without delay.


Gordon Minto Churchill: May I ask the Leader of the Opposition a question?


Lester Bowles Pearson: All right.


Gordon Minto Churchill: In the report from which he has quoted there is the following on page 8:
Three years ago when reviewing the development of the very large balance of payments deficit of 1956 I remarked that "An import surplus or balance of payments deficit of the present size is the product and symptom of an excessive rate of spending in the economy, not just of a reasonable rate of real growth."
That comment was made in 1956. He sounded that note of what the Leader of the Opposition calls gloom then. What action was taken by the government of that day?


Lester Bowles Pearson: Mr. Speaker, instead of the minister asking me a question he has read another paragraph from the governor's report with which I also agree; but if the situation explained by the governor of the bank with respect to 1956 was dangerous then, it is far more dangerous now; and if the minister feels that something should have been done about it in 1956-we claim that something was done about it-the minister should be all the more worried and ready to do something about it now, when the governor says we are reaching a position of danger which was not the case to the same extent in those years. That is all the more reason why the minister should not be so complacent and optimistic.


Donald Methuen Fleming: What was done in 1956?


Lester Bowles Pearson: Mr. Speaker, I have been pretty generous with my hon. friends in letting them interrupt. Perhaps they will let me go ahead with my statement, and the hon. gentleman can make his statement after the Minister of Trade and Commerce makes his.
I want to talk for some time about the objective of our trade policy, having given some statistics which should, I hope, convince the minister that all is not as rosy with that policy as he tries to indicate in his speeches. With the minister showing a kind

of blend of complacency and ignorance it is not surprising that there should be a good deal of confusion about the objectives and direction of our trade policy at this time. The traditional Tory protectionist approach has been shown in the woollen tariffs and so-called voluntary quota restrictions on Japanese goods. At a time when the ministers preach liberalism to foreign countries they have taken the arbitrary valuation powers under the 1958 revision of the Customs Act. They once even boasted about a 15 per cent diversion of trade as an objective of policy, as a direction of policy, but that proud policy is now reserved for Canadian speeches in Albert hall in London. It has declined from exaltation and exhortation to mere illusion. It is another disappearing vision.


John George Diefenbaker: Has there not been a diversion of about 12 per cent?


Lester Bowles Pearson: No, of course not. If the Prime Minister would really try to understand the trade statistics of his own officials he would surely not say that there has been a diversion of 12 per cent. A diversion of 12 per cent, within the meaning of the Prime Minister's original statement, would have meant that we would have transferred about $300 million of our imports from the United States to the United Kingdom. Have we done that? Let the Prime Minister look at the figures and find out for himself that we have not done that. On the contrary, we are more dependent on the United States than ever before.
Then, Mr. Speaker, if as the governor of the Bank of Canada says we must, as a nation, learn to live within our means, we must begin to balance our exports and imports and goods and services. How are we going to do that? We must do it by reducing our imbalance of current trade transactions, the imbalance about which I have been talking. There are two ways in which we can do that. The first is by reducing our non-merchandise deficit, and we know what that has reached this year. The second way is by changing our merchandise deficit into a surplus.
Let us take the first course first. This is not going to be easy to do, because the last year in which we had a non-merchandise surplus was 1948. I admit that fact. Let us take one item in our current non-merchandise deficit, the item of travel account with the United States. In 1948 we had a surplus in travel account of $148 million. In 1959 that has been changed to a deficit of $200 million, and it is growing. What are we going to do about that? Will we keep Canadians from going across the border or get more tourists
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from the United States to come into Canada? There is no choice, of course, between those two as objectives of trade policy.
Similarly, as another illustration of the difficulty, let us consider the current deficit on interest and dividends. In 1948 this amounted to $255 million, while in 1959 it is $486 million. It did go down in 1953 to $239 million, and in 1956 it was about $339 million. It has now gone up since 1952 by 26 per cent, until it has reached the present figure of $486 million. In 1959, the present year, sales abroad of new issues of Canadian securities reached the figure of $440 million, of which the provinces accounted for $279 million and the municipalities for $121 million. That also is a new record, and we know the effect that has had, I have already mentioned it, on the premium on our dollar. It is a very unhappy situation, surely when we are financing so much of our public services in this country by borrowing abroad and thereby increasing our over-all deficit through the payments of interest and principal which we have to make on those loans.
Has the government any ideas on how to reduce this non-merchandise deficit? I have mentioned travel expenses, and two ways of doing it; by encouraging those coming in and by control of those going out. The same thing applies, of course, to investments. No one in this country, I think, wants any control, certainly no unnecessary control except as a last resort, of foreign investment in this country. Nevertheless, when you quote this figure of $440 million in one year you realize that it is a pretty serious situation.
However, this would be a negative approach to this problem. A far more satisfactory approach, because it is a more positive approach, would be to transfer our current commodity deficit into a growing surplus to offset this non-merchandise deficit; that is what we have done in this country in the past. We have often had a surplus for that purpose. I have quoted the figures to show that.
How are we going to do that? A first possible way of doing it is by way of reducing our imports. The elimination of the premium on the dollar would help to do this as well as help to increase exports. The Minister of Finance has already indicated outside the house some of the obstacles in the way of doing that, the objections to it, and perhaps during the course of this debate some of those objections will be repeated in the house. It could be done, of course, by higher tariffs, quotas or other trade restrictions to reverse the trend of increased imports; and it has been a general trend. If that course of action were taken, not only

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would the restrictive action have to be drastic to be effective, but it would be undesirable and would be wrong. It would cause a further rise in the cost of living and especially a rise in the cost of production, thereby damaging our exports even if it did help our imports. It would prejudice, if not destroy, our position in GATT, and it would invite retaliation against us. This course, therefore, is not to be recommended.
The only desirable, logical, practical way is in the direction of increasing our exports. I am not going to stop there. I am going to try to indicate how, perhaps, that can be done. Faced with this situation, though in a much less serious way, this is exactly what the United States is doing at this time, as the minister must know.


Donald Methuen Fleming: And what we are doing, too.


Lionel Chevrier: You are doing it in reverse.


Lester Bowles Pearson: Here is what the governor of the Bank of Canada says about it, and I quote from pages 12 and 13 of the governor's report:
United States policy has not sought to restrict the flow of imports for balance of payments reasons, nor to cut the total flow of foreign aid. Rather it has sought to increase exports-by improving competitiveness and strengthening sales efforts, and by pressing for the removal of foreign import restrictions-and to persuade other countries financially able to do so to look after a large share of the increased foreign aid requirements of underdeveloped countries.
This must be our policy too.


Donald Methuen Fleming: That is exactly what we have been doing.


Lester Bowles Pearson: Indeed, this is far more important for us than it is for the United States. We must realize that our export trade is more vulnerable, as well as being far more important to us, than the export trade of the United States. It is quite true that the index value of exports has gone up from its figure of 100 in 1948 to 163 in 1959. But the index of physical volume of export trade for the period 1948 to 1959 has gone up only to 134. Therefore, allowing for the rise in productivity in the export industries during those years, the employment content of our export trade has remained just about the same from 1948 to 1959. The lack of expansion in exports in these terms is a main cause of our chronic unemployment, as I have already said.
This might serve to modify some of the optimism which the Minister of Finance has been expressing in his muttered interventions in the last few minutes. Most of the increase, as 1 have pointed out, is due to three products, uranium, iron ore, and gas and oil,

and our traditional exports over the past years have not increased as they should have increased, especially since 1952.
Before the minister boasts about the recent increases he should recall, as I mentioned a few minutes ago, the dominion bureau of statistics explanation of this increase. He should take note of the warning in the Bank of Canada report, page 14, where Mr. Coyne says:
In a number of important respects, therefore, it seems likely that Canadian exports will be less assisted by specially favourable conditions than in the recent past and will have to depend more on ability to meet stiff competition in a world in which alternative sources of supply are now readily available. Even on the assumption of favourable developments in the trading policies of European and other countries, merely passive reliance on presumed natural advantages cannot be expected to improve or indeed even to maintain our position in world trade.
Well, Mr. Speaker, it all adds up to the fact that we may be approaching nothing less than a crisis in our international trade and balance of payments position. The government has to face up to this problem and do something about it. Basically it is a problem of finding increasing markets for the products of our present excess capacity. Having excess capacity-and we are very fortunate in having it if we can use it-means that exports could be increased without additional investments or additional foreign capital, and that itself would greatly improve our balance of payments position. More than ever in this country an expanding volume of exports, must be the main objective of Canadian trade policy.
What is the government going to do to bring that about? I know that they will say, "Well, what would you do?" That is the reply of the government to every question of this kind which we ask. I will mention certain things which in my view should be done.
First and foremost we must adopt a sensible tariff policy. We must realize that if we are going to sell, because we are an exporting country, we have to buy, and we must be particularly careful in our trade and tariff relations with a country like Japan which represents an important developing and, we hope, permanent market in the future for our primary products. But it is a market which we can easily lose because we are selling products in this market which the Japanese can get from other parts of the world unless, we are careful in our diplomatic negotiations with them with regard to Japanese exports to this country. It is quite true, as someone said the other day, that while we must buy Canadian, other things being equal, even more we must sell Canadian.

Second, we must adopt a more aggressive export trade promotion policy. The government foreign trade services should be enlarged and improved and we should start sending selling missions to the world instead of the type of buying mission which we sent in 1957. We must be more effective and agres-sive in our trade negotiations.
Let me mention one commodity, uranium, which represented $320 million of export trade last year. When that trade hung in the balance, as it did during 1959 because of the attitude of the United States, what happened? We had a return the other day and that return showed that in this particular situation when representations should have been made to the United States on the highest level to maintain that trade there was one dispatch from the government of Canada through the embassy in Washington signed by charge d'affaires ad interim to the secretary of state. That is the only document in two years which represented formal official representations to the government of the United States in respect of a commodity which last year represented in our export table $320 million.
This is also an obvious thing to say, but it is important. We must improve our competitiveness by keeping our costs of production down. That does not mean only that there should be no wage increases which are not justified by increased productivity. That is an important matter, but it is only one element; it is not the only element. It is not even the only important element in costs of production, though it certainly is one. Keeping our costs of production down means also avoiding excessive profits both in the operation and in the formation and financing of companies. It means avoiding excessive taxation and preventing, so far as government can help prevent, administrative pricing arrangements by big corporations which prevent the play of economic and competitive forces on prices; arrangements which prefer high prices even if less volume, to lower prices and greater volume.
Then we have to improve our competitive position by expanding our export credit facilities. I know the government took steps last year to this end, but I would like to hear from the minister how those steps are working out and what has been the result of these increased export credit facilities. Very often, as I am sure the minister knows, sales are lost and permanent trade relationships are not established, not because of price or quality of Canadian goods but because our competitors are able to give better credit terms. This is all the more serious a problem at the present time because 79951-0-143
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of the steps which the United States government is now taking to improve its credit facilities, and we will have to consider meeting those steps.
May I mention one other way in which we can push exports; that is by pushing the exports of natural gas to the United States. There have been long delays in this matter due to legal and administrative difficulties created, in part at least, by the Canadian government itself. In June, 1959 when the energy bill was introduced the Prime Minister promised at that time early action in respect of this matter. It is now nearing the end of March 1960 and no action has yet been taken.
Another thing which has to be done is to continue the assault on non-tariff obstacles to exports. Customs procedures, administrative regulations, arbitrary valuations, health and quarantine regulations; all these things create uncertainty, delay and expense. We came up against that when we were in office and I know that the government has come up against it since it has been in office. I know that the government has taken steps to correct this situation, but surely more can be done now than was possible in the past. In dealing with these matters, which can at times be worse than tariffs themselves as obstacles to our exports, this kind of change can be made without there being any danger of infringing any of the rules of GATT.
It is time to push these changes with the United States more vigorously perhaps than we have in the past, because the United States, now warned by their own trade balances, are beginning to push this complaint of administrative protection in other countries. Therefore they may be a little more receptive to vigorous representations from Canada now than they have been over the years. Perhaps now is a good time to impress upon them that postprandial expressions of sympathy and understanding of Canada's problems are not enough, and try to convince them that if they cannot help us in these matters, our increasing difficulties will hurt them more than ever before; because we are now by far their best customer, both for goods and for investments, I think it is fair to say that our negotiating position with the United States today, certainly in this field, is stronger than it has ever been.
These are some things which I suggest could and should be done. But they themselves will not be enough to meet the long range dangers ahead which require long range solution. This long range danger, which has perhaps at times been overshadowed in our minds by our short range difficulties, is due to the development in the world of

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economic regionalism, the emergence of these great new trading blocs. We have two now in western Europe; we have the common market with its overseas affiliates in Africa, and we have the free trade area of seven European countries. This move is extending to Latin America where they are discussing a Latin American free trade area. In fact they are more than discussing it; I may be wrong in this, but I believe they are on the verge of drawing up a treaty to that effect. They are discussing a Central American free trade area. I read not long ago that negotiations have begun for a preferential system of trade between all Arab countries. A southeast Asia economic association is being talked about; and we all know about the communist bloc and its concentrated regional effort to interfere with our trade and our exports.
All this means that perhaps instead of the multilateral world to which we have been accustomed since world war II we are approaching and moving into the world of giant regional economic blocs competing with those outside those blocs not only in the sale of manufactured goods but in the purchase of raw materials. I wonder how long the most favoured nation principle and the principle of non-discrimination can persist in the face of a developing situation of this kind. Our own position is as vulnerable as that of any other country in the world if such a development takes place. It is perhaps more exposed than any other country in the world. While the United States can be hurt by this kind of thing, it cannot be hurt nearly as much as we can.
We are just beginning to realize how much one of the blocs could hurt not only Canada but all the countries of the free world. I am speaking now about the communist bloc. We have learned in the last year or two that the U.S.S.R. and its trade satellites, with trade controlled from one central office, are in a good position to compete successfully with our traditional exports. Even though they might lose financially in the competition, they are willing to accept that loss for reasons which have nothing to do with trade. They can do that and disrupt normal trade channels to our disadvantage. We are just beginning to see the effect of this. Although there has been relatively little damage as yet, we have learned from what has been done what might happen if more were attempted. And Canada, as I have said, is very vulnerable.
Mr. Khrushchev no doubt had this idea in mind when he said: "We will bury you." He meant that the Soviet union would bury the free nations in the peaceful field of trade conducted under the rules of the Soviet union,

and these are not likely to be Marquis of Queensberry rules. I doubt whether we shall be able to compete very successfully with this kind of aggressive trading, if and when it takes place, through national competitive trading policies organized on the basis of exclusive competing nation states.
It seems to me that the United States, again, has seen the dangers of this situation more clearly than we have in this country, although I know that the Prime Minister has made some strong statements with regard to it. It was the under secretary in the United States, not the Secretary of State for External Affairs in Canada (Mr. Green) nor the Minister of Trade and Commerce (Mr. Churchill) who initiated the talks with the O.E.E.C. countries in December to lay the groundwork for Atlantic economic co-operation. This, as has been pointed out by the government, is a very important development, and this next meeting in Paris on April 19 may prove a very significant one for the future or our country and for our whole system of trading.
It is not easy to be optimistic about early tangible results. If the United States and Canada remain outside the common market *-and I do not see how any other result could happen immediately-it will be impossible under GATT for the six nations of the common market or the outer seven to grant us any special concessions, especially as their area will take in some of the colonial and trust territories of Africa. Perhaps the only good result we have any right to expect from this development at the present time is a general reduction of tariffs inside these two groups which would be applicable to all the countries of GATT, and it is not likely that this can be done now on any material scale.


John George Diefenbaker: Can that be done within GATT?


Lester Bowles Pearson: Yes, it would be quite possible. I understand that the common market is giving consideration at the present time to that aspect, but it will have to be applicable to all members of GATT or they will be breaking the GATT regulations.


John George Diefenbaker: So it really cannot be done within GATT.


Lester Bowles Pearson: It could be done, but perhaps we would be unrealistic if we expected too much from that kind of development at the present time. But we have every reason to expect that the common market is likely to become much more self-sufficient. Unless something more far-reaching happens than has now occurred we may well find that not

only manufactured goods but raw material from overseas areas will be competing with our own.
That need not happen. If the common market countries so desired, they could remove obstructions against trade between themselves and the outside world rather than increase them, and I hope that will be done, but it would be unrealistic to think that is bound to occur, and it would be very unrealistic to evade the possibility of dangerous consequences.
The Minister of Trade and Commerce, speaking on this subject earlier this session, said:
The future of Canada's external trade appears bright. The prospects are for substantial increases in Canada's exports and for further diversification of our foreign trade.. . our exports are expected to grow at a more rapid pace.
I do not believe this optimistic assessment of the present position is likely to be borne out by the facts. I hope I will be wrong in this, and I hope I will not be accused of being a prophet of doom and gloom because I bring these dangers forward. I am basing my views in part on those of people outside politics who have studied this question and who have made a sober assessment of the prospects before us. I refer particularly to the governor of the Bank of Canada.
The Minister of Finance (Mr. Fleming), in a speech in Saskatoon on February 20, had this to say:
We must also keep in mind .. . the importance of preserving the world-wide multilateral trading system which has been so patiently and successfully constructed over the past 12 years.
That in itself is a compliment to the trade policy of the preceding government; to say that over the years we have patiently and successfully built up a multilateral trading system. I think that statement is true, but I suggest that the situation is changing, and I am not so sure that it is going to be possible to maintain this system for the next 12 years based, as it is, on the foundation of GATT. Of course, we must try to retain this foundation of the multilateral system, but if that system declines through no fault of ours, what are we going to do? These questions have been raised by another authority on the subject outside this house, and I should like to quote the words of Professor Deutsch spoken in Montreal on March 8:
One of the more disturbing problems which arise from recent developments is the difficult choice which they pose for countries such as Canada, Japan and for many small nations around the world. Canada has built her post-war policy on the multilateral and most favoured nation principle. Should Canada now seek to align herself more closely with some regional group, none of which could provide a satisfactory arrangement? Should it be toward Europe or toward the United States? Is it
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possible to build a wider Atlantic association into which Canada could fit? Or, failing this should Canada seek to go it alone in the hope that reasonably liberal international policies can be made to prevail?
These are some of the questions which the changing objectives and changing trends in world trade pose for us today, and in the years to come.


Gordon Minto Churchill: You did not answer any of the questions.


Lester Bowles Pearson: The government is in a
better position than anybody to try to answer these questions because the government has the responsibility of dealing with them. We are bringing these questions and problems to the attention of the government in the hope that we may get a statement of government policy with regard to the search for a solution of them.
These are the problems. What is the approach of the government toward their solution, aside from cheerful and optimistic surveys?
The ultimate objective, we agree, is the freest possible trade on a universal basis. For Canada it is more imperative than ever to have an expanding and diversified trade, for the reasons I have indicated earlier. Otherwise we will continue to live beyond our means while an increasing part of our resources will be unemployed. That really spells disaster. The immediate problem is how to reconcile this reliance on the multilateral approach through GATT with a world which, whether we like it or not, is moving toward regionalism.
Can we avoid this trouble? Can this problem be solved by continuing to rely on the principles and practices of the multilateral approach of the past? In such a situation how do we increase our exports and maintain our domestic industries against new and aggressive regional competition and communist trade movements? Can we possibly go it alone? Can we isolate ourselves in a world divided into giant economic blocs or will we be inevitably forced into our own special kind of bloc, complete economic integration with the United States? I do not think anyone in this house wants that to happen, but even if it did how would that guarantee the essential expansion of our exports?
Recent trade developments show that we are rapidly being faced with some categorical imperatives. Isolation is impossible. Increasing dependence on the United States is not a tolerable solution. We cannot improve the situation by joining the Six or Seven as presently organized. What, then, is the long range solution? As I see it the only one that appears to fit the developing situation

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is an Atlantic free trade area including the common market countries, the European free trade area and the United States.


An hon. Member:: What about Japan?


Lester Bowles Pearson: The formation of an association such as an Atlantic free trade area would leave us free to determine our relations with other countries as we wished just as the members of the European free trade area are now in a better position to determine their relationships with other countries outside of that area including Japan. I know the difficulties and complexities of this. I am not putting it forward as some pat solution that can be found in the next 12 months. I know there would have to be a gradual adjustment over a period of years as is the case in Europe now and it would have to be done by stages; but I also know that a few years ago when we talked in this house about the development of the European common market and the European free trade area-and my friend the hon. member for Greenwood (Mr. Macdonnell) will remember this-there was a general feeling that it would take years before it could be brought about, that political and economic reasons would make it almost impossible to accomplish inside a generation. But look at what has happened in the last two years.
We have reached the point now that on July 1 of this year the common market countries will take steps that in their earlier draft arrangements were not expected to take place until 18 months after July. Things are moving and while it will take a long time to accomplish these larger measures, if they can ever be accomplished, surely it would be a good thing to start the process now.
I am not, of course, asking the government for a commitment in favour of an Atlantic free trade area at this time. That would be quite unrealistic. I am asking the government, however, to give immediate, careful and complete consideration to this possibility, to get the best men in the country studying the possibility of an Atlantic free trade area on instructions from the government. If the results of these studies show that it can be done and that it is desirable that it be done, I urge the government to take the initiative in pressing this matter before the European countries. That is what is being done now by the United States. That is why Mr. Dillon went to Europe last December and was instrumental in calling this meeting.
There is no reason on earth why Canada should not at least associate itself in this initiative in an aggressive and formal way. It seems to me there is a real urgency in this matter. This is the time to do it if it is
going to be done at all. The European countries are finalizing their respective trade arrangements and next year it might be too late for any alternative proposal to be made to them.
There are new problems, new challenges and new opportunities, and so I ask the government and the Minister of Trade and Commerce in particular: What are you going to do? If you cannot give immediate and sympathetic consideration to the gradual establishment of an Atlantic free trade area, will you please tell the house why and give us an alternative which will meet the situation we are facing today, one that will prevent that situation developing into a danger and perhaps even into a crisis that will further weaken our balance of payments position and reduce our prosperity and check our growth as a nation. Of one thing I am certain, and it may be paradoxical. If we want to become less dependent we have to become more interdependent.
May I sum up, Mr. Speaker, by saying that our grave concern as to the deterioration in Canada's trading position arises from:
1.	A record deficit of nearly $1.5 billion in total trade.
2.	A record deficit of nearly $1.1 billion in non-merchandise trade.
3.	A $1.2 billion dollar deficit in our trade with the United States.
4.	A rapidly declining favourable balance with the United Kingdom and other sterling area countries-$64 million in 1959 as compared with $502 million in 1952-and growing deficits with all other trading areas.
5.	A record $15 billion net debt abroad.
6.	Stagnation in the volume of our traditional exports.
7.	The financing of a growing proportion of Canada's unfavourable balance by imports of capital which do not increase Canada's capacity to export.
8.	The emergence of trading blocs throughout the world threatening to isolate Canada from important markets.
Therefore, 1 move, seconded by the hon. member for Ottawa West (Mr. Mcllraith):
That all the words after "that" be deleted and the following substituted therefor:
"this house expresses its grave concern at the deterioration in Canada's trading position as emphasized by an unfavourable balance of nearly $1.5 billion in Canada's total trade in 1959, and urges the government to deal with this serious problem by taking effective action, including the working out of proposals for the establishment on a gradual and progressive basis of an Atlantic free trade area."


Mr. Harold E. Winch (Vancouver East):: Mr. Speaker, it is not my intention to repeat many of the worth-while arguments and interesting statistics that have just been given the house
[Mr. Pearson.)

by the Leader of the Opposition (Mr. Pearson) on this important subject of trade and Canada's position both as an exporting and importing nation. I thing we all agree that Canada is facing a great challenge. I feel certain from reading editorials in recent newspapers that the press and through them the people are very much concerned as to what is taking place and are expecting that the government benches here in Ottawa will meet this challenge and let them know how serious the situation actually is and what the government has in mind to deal with problems of the future as far as Canada is concerned.
I was interested in a recent editorial carried in the Timmins Press which concluded with these words:
The time has come for Prime Minister Diefen-baker and Finance Minister Fleming to tell us where we are heading and what is being done about it.
You can go not only to Timmins but to every leading newspaper in Canada and you will find the worries that are in their minds and the demands for government explanation and government action.
There can be no question that the government, through its highly placed civil servants and the analyses they must be making of the reports of industrialists, financiers and economists, has had some warning as to the development of the present situation, some warning as to the grave development that might face us in the future. I just wish to make a brief mention of two that I noted in a speech made to the economic forecast panel of the Vancouver board of trade on November 23 last by Mr. O. J. Firestone, economic adviser to the Department of Trade and Commerce, who had some very pertinent comments to make. In view of the most influential position he holds, surely what he had to say there has been studied by the minister and by the government and that therefore we are entitled to know what they are doing about the analyses which have been presented to them.
I am not going to take the time of hon. members to read it, although I think it might be worth while if all could read the statement made by Mr. Firestone in November of last year in my home city of Vancouver, but I would just point out that he did say there were very serious problems ahead. He outlined some of those problems as being export problems. It is noticeable that what Mr. Firestone put at top priority in discussing export problems was to a great extent the same matter which the Leader of the Opposition has just been drawing to the attention of the government and of the house.
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Mr. Firestone very definitely pointed out that the creation of trading blocs, such as the common market, the outer seven, the Central American common market and increasing reliance on bilaterial trade agreements would tend to limit the opportunities of Canadian businessmen to sell increasing quantities of our products abroad. He also pointed out- it was touched upon very briefly by the Leader of the Opposition-the problem of the premium on the Canadian dollar. He emphasized at that time that the high premium on the Canadian dollar has been creating problems for our industries, both those catering to the export market and those catering to the home market. I feel that we need a real explanation from the Minister of Finance, and perhaps from the Minister of Trade and Commerce (Mr. Churchill), as to the ultimate effect of our high premium dollar and as to whether it would be advisable for Canada to consider its relation to our financial situation.
There can be no question at all that if we are to maintain and to increase our exports we have to deal with the cost of production and productivity. Of course, related to that are all those things that make up the total cost of produce in Canada which will of necessity include profits and wages. All of these things have an impact and we are hoping that as a result of their studies the government will be in a position in this two-day debate to give an honest and factual picture of Canada's trade situation today, how they think it will be tomorrow and the year after, without doing any wishful thinking, and how they are planning to meet the problem.
We all know, and it should be accepted as axiomatic that Canada is an exporting nation. We are a very large country with a relatively small population. Therefore, we cannot maintain an economic self-sufficiency because we have not the consumer market that can cope with our productivity. Neither can we produce on an efficiency level with countries like the United States because that country does have a consumer market consisting of 180 million people. Therefore, we have to rely, or place a greater emphasis in our thinking, on exports. In my estimation at least we are now in, or facing, a most difficult situation and so far we have not heard of any government planning to take care of the problem which is now arising.
If we are honest we recognize the absolute necessity that compelled the inner six to form that group. Their economy, their desire for higher standards for their people necessarily drove them into that organization; but it is going to have a deep impact

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on Canada because not only are they working out free trade among themselves but they are doing something which a combination of capitalist countries have never done before. They are planning their economy; they are planning their productivity; they are planning their manufacturing according to the location and the country that can produce the highest quality and the greatest quantity with the greatest efficiency at the lowest price. That kind of planning is bound to have a great effect on their cost of production, on their rate of quality and quantitative productivity, and place them in a position of competition far greater than it has been in the past.
Because of that recognition, I feel sure that many companies in the United States and in the United Kingdom are no longer relying on being able to export from their own factories in their own countries. They are establishing factories in the countries of the inner six in order to be sure that if they cannot make profits on producing in their own countries and exporting, they can make profits by producing and selling in the countries of the inner six. This is just a simple fact. These are the facets of the case, and this is bound to have an effect on Canada.
I think we should hear from the great planners across the way as to how in an unplanned economic system in Canada they are going to meet a planned system of private enterprise in the inner six, because this is the situation. We are not going to feel the impact at the moment but I would say that inside of a few months, or a year, we certainly will feel it.
To a considerable extent we rely on our exports overseas. There is also the fact that we have not been facing up to the problem. This is because there has not been planning in Canada, planning of production, planning of exports and planning of imports. Already the situation is getting serious. I come from the province of British Columbia where we are so dependent on our lumber exports. May I emphasize again, as I have pointed out before, that seven years ago we shipped 200 per cent more lumber to the United Kingdom than did the U.S.S.R. while in 1959 the U.S.S.R. shipped 250 per cent more lumber to the United Kingdom than was shipped from the province of British Columbia. There has been a complete reversal of the trade picture. That is only the start of the economic cold war on the part of the U.S.S.R. From all I have been able to read it appears that within the next five years at the latest the U.S.S.R., if it so desires, will be able to go almost anywhere in the world and meet any price not only for lumber but also for metals and agricultural products.

It is no good waiting until that day arrives before we in Canada decide what we are going to do about the situation. I think a great service has been done our country by the forthright manner in which Mr. Coyne has outlined the problems as he sees them. I am not going to refer to the report itself because hon. members all have a copy of it. The Leader of the Opposition also made some excellent comments on it a few moments ago. But I should like to give the house the editorial comment of the Victoria Times on Thursday, March 17. This is what the Times had to say in an editorial headed "The Rake's Progress":
In plain terms Mr. Coyne tells the Canadian people they have been sowing the wind and, in due season, will reap the whirlwind. This warning does not come from a politician who must comfort or alarm the public to secure its votes. It comes from the non-partisan governor of the Bank of Canada, a great public servant with no axe to grind. If we continue our present course, Mr. Coyne believes, we shall not only be in a weak state to meet any business recession imported from the world but may well produce a domestic recession of our own.
Without referring to the Minister of Trade and Commerce, Mr. Coyne flatly rejects Mr. Churchill's cheerful assurance that our gigantic and growing foreign debt is nothing to worry about. Also, Mr. Coyne's courageous report may help the Canadian people to see that their "easy-going illusions'' are leading them toward the gravest kind of trouble, may persuade us all, in Mr. Coyne's final words, to "stand on our own feet". Standing on foreign loans which may dry up at any time, we are due for a painful fall.
I cannot find any words of my own to highlight the situation better than the editorial comment of the Victoria Times on Mr. Coyne's report. We have got to face up to the world situation. We have got to face up to the new developments that are taking place around the world. We have got to face up to the fact that we in Canada must face reality. We would like to hear from the government whether they are going to face up to realities, whether they are going to face up to the hard facts even though they may be cruel and do some definite planning. As long as we continue to live under our present unplanned system we will continue to run into trouble and difficulties such as are now being experienced in our country.
I know that the government, the official opposition and the majority of people generally do not like controls but when controls are needed for the social good then controls should be brought into effect. We are not going to face up to the realities of the import and export situation by relying completely on a laissez-faire policy. I think the time has come when we have to consider import and export controls in an endeavour to balance that phase of our economy. If we are going to maintain the living standards of our people,

if we are going to increase those standards, which everybody desires, then it can only be done by not letting increased costs, increased wages and all other costs outstrip the productivity of the Canadian people. Productivity has to be ahead of increasing costs and that cannot be done if the matter is left to individual, regional or provincial action.
There has to be greater assistance from government sources in research and planning so as to bring the productivity of Canadian industry to the highest possible level. I say that if we do not do these things we will continue to be in the same position in which we are today and have been for some time. We are losing some of our markets already; for example, our market for lumber in the United Kingdom. In January of this year 2,300 men were left without work because there was no way we could dispose of herring caught off the British Columbia coast. This year the whaling fleet is not going out at all. We are familiar with the difficulties at Elliot Lake. Ten days from now the last coal mine on Vancouver island is shutting down. We are letting these things develop and continue because of the unplanned situation-I cannot say "policy" because I do not know how you can have an unplanned policy-in Canada.
I know I have the bad habit of reiteration but I do reiterate that the government is not, cannot and will not face up to our present deficit and the export-import situation unless it will come forward with a policy of planning for agriculture, finance, exports and imports. We find people in Canada having to go out of business or being bought out by outsiders and at the same time we are importing the very things that we are denying our own people the right to be able to produce. They are unplanned imports, if you want to put it that way.
I was invited out to dinner last week and I was most interested in looking over the shelves in the pantry. I was so interested that I picked up a couple of the items. They show what I mean by not planning. We felt like having some frozen strawberries. No finer strawberries are produced anywhere in the world than in Canada and particularly in the Fraser valley, but look at what has happened to the strawberry industry in British Columbia. In a supermarket in Ottawa we got some fresh frozen strawberries and I immediately assumed that they were Canadian strawberries because they were the famous York brand. It is a Canadian company well known across Canada. But these were whole strawberries, fresh frozen, fancy brand, product of Holland. Since when did we import strawberries from Holland? Right on the next shelf there was another famous Canadian brand,
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Aylmer. These strawberries were packed in the United States for Canadian Canners Limited. However, that company was bought out by United States interests and plants were closed down. Now produce is brought into our country and the Canadian brand name is used.
Why is it that we have an unplanned state where our own people go out of business because they cannot sell and at the same time we have a big deficit between exports and imports because we are importing products like these? I can go on with others.
I like cream in my coffee, and a lot of other people do, too. We have had a lot of trouble getting rid of powdered milk, have we not? We have given it away. Then why in the name of heaven do we adopt the policy under which we import powdered cream? You will find it is on the shelves of the stores in Ottawa. I am just bringing these things up as examples of not planning, not thinking, to keep our own people at work. In order to do this we should have some control of imports and we should recognize the absolute essentiality of importing things a little different from these.
Then there is the declared policy of the government to develop trade within the commonwealth. We have another company which is well known in the country, Honey Dew. It is very well known, and you will find it in Ottawa. This is Honey Dew orange juice. Why buy this when we have commonwealth countries that are crying for assistance which grow the finest oranges in the world? These are things we can think about, changes we can make to assist the commonwealth, to assist our own people and to bring our import position to a more realistic point. These are some of the things we ask the government to think about. These are some of the things upon which we are asking the government if they will kindly explain their policy. Will they tell us how they are facing up to the grave danger which now confronts our country from abroad?
Canada is facing a terrific challenge, a challenge that has to be met. The only ones who have the ultimate power of formulating policies to meet the challenge are the government, through their thinking and planning, and then tying that thinking and planning into a selling job to the Canadian people to aid Canadian labour, Canadian industry and Canadian agriculture. We are asking the government if they will make an announcement of their thinking and their policies.
I am not going to continue in this vein, but we do feel that the amendment introduced by the official opposition is not


Mr. Macdonnell:: Were those Australian figures in dollars or pounds?


Harold Edward Winch: In dollars; I got them from our own Canadian records.


Mr. C. A. Cathers (York North):: Mr. Speaker, I should like to make a few observations on the statements that have beeen made today by the Leader of the Opposition (Mr. Pearson) and the last speaker. I should like to refer to the last speaker's remarks concerning planning. He went into a great amount of detail about the fact that this government should plan for these economic things. I thought that probably after his trip to Asia this year, and the observations he made concerning foreign trade, he had probably changed a little bit. I think his observations which were made upon his return from Asia were the truest words I have ever heard him speak. He said that labour had to take its share of responsibility for our foreign trade. I think this is most important, and is one of the reasons for Canada losing a great deal of her foreign markets.
The last speaker also made reference to planning by governments. I should like to

point out to him that planning by governments, the former government and the other governments in the world, is greatly responsible for the trouble we are in, if we are in trouble. I do not believe we are in nearly as bad shape as the Leader of the Opposition portrayed today. During the war this country developed its industrial capacity to a great extent. After the war there was a great shortage of manufactured commodities in the world, so we were able to retain some markets and get into other markets.
However, the former minister of agriculture led us down the garden path during the last war, and this can be confirmed by asking any of the western members. He said, we will ship our wheat to England, and I agree that we should ship our wheat to England. However, the farmer alone was asked to accept a price which was about half the price of wheat on the world markets. The farmers were given assurance that after the war was over we would be able to retain these markets.
We know what nonsense that was because no one can afford to pay more than the price of the world market which existed at that time. I think that was one of the greatest injustices ever done to the farmers of Canada. They bore the brunt at $1.55 a bushel when industry and labour were getting their large cut of the profits. I wonder what would have happened if the labourer had been told; "We are going to send these armaments to help England; will you take instead of $2 an hour, $1 an hour for your labour?" That is exactly what the former administration did to the farmers. Through that we lost the rest of our markets. Consequently it has been a big effort to get them back.
I remember being in England in 1949 and asking for some cheese to go with a piece of apple pie. I asked for old Canadian cheese, and they brought me a piece of cheese that looked like a cross between margarine and butter. It had no flavour and I complained. I said, "Where is that good Canadian cheese for which we built up a market and a high reputation?", and they said, "Well, the government is doing the dealing now. It comes in and is sent out; there is no classification, grading, or anything else." Now, that is not the fault of the former administration, but what I am trying to point out is interference by another government in ordinary business channels.
I would like to give another instance. The other day when the Leader of the Opposition was talking about the uranium industry in Canada and our dealings with the United States with regard to that very important product he stated that this government could

have put pressure on them because the United States had a moral obligation to buy our uranium for a further period beyond the terms of the contract. I ask him as a business man, would he expect the United States to be buying it from the mines of Canada when the mines of the United States would probably be closed? We have to be realistic, and I was surprised when he referred to it again today.
Frankly, I lay a lot of the blame for our uranium industry and the export business it involves on the former administration, because they went out and took over these mines-I am referring to Eldorado, a crown corporation-and went along making contracts and interfering with the ordinary business channels. I do not think the former administration had any business to get into Eldorado and making it a crown corporation.
The former speaker talked about planning. I do not adhere at all to his views, and I had hoped that he and his group were being a little more tolerant toward this planning business. Frankly, I do not believe that governments can plan economic matters the way he thinks they can, unless we all want to go back and exist on the same basis as the people in Russia are existing.
East fall I went from Germany into Czechoslovakia. I went from a free enterprise country into one which is 97 per cent state operated, and frankly I wish that the former speaker could have seen the difference in those two countries, where you have planning on one hand and the free enterprise system on the other. In the eastern part of Germany you saw farms the like of which I defy anyone to see any place I have been, Canada included. I have never seen such good production and orderly, clean farms. Then you go into the other country where they are on a larger scale, and it was obvious, because it was harvest time, that there was a great difference between the two.
Before the last war Czechoslovakia was one of the greatest industrial countries and exported a great deal to this country. I wish you could see it today. I asked questions of different people who knew I was from Canada, and where there was no chance of any leak they told me that the people in Czechoslovakia are very unhappy today. I would like to say to the former speaker that I do not want to see any part of such plan in Canada.
I also believe that the businessmen can handle our exports more efficiently than any government branch or service. It is true the government is doing more business at the
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top level than businessmen are. For example, before 1940 there was a very healthy export business in wheat, flour and feed grains which was conducted by the grain brokers. Although I have not seen the figures, I believe we were getting a better share in world trade under that system than we are today under this crown corporation method. Mind you, I do not know a great deal about what happened before but I was in Europe last year and met one member from the wheat board and its European representative in two or three different countries, and I think those men are doing an exceptionally good job. I met them in the Near East at Istanbul, I met them in Greece and also in Austria. I was in 22 countries last fall and I met most of the trade representatives, and I would like to pay a compliment to that part of our government service. I think they are men who are dedicated to the job and are doing everything in their power; but frankly, with our cost of living and standard of living today in Canada, we are trying to keep up with our good neighbour to the south and I think it is leading us into a great deal of trouble.	1
Take our extravagance in the credit field. We have heard it said last week, why are we so short of credit? All you have to do is to look at the consumers' credit, the amount of money going into things people are buying on a credit basis. I think we have to get back to the spirit of some of our good Scottish ancestors and operate within our means.
I think there is a good deal too much dependence today on the government, a tendency which I abhor. We see it every day in this house. People come in to me in my riding and say, with regard to some local problem: what is the government going to do about this? It is the same with our businessmen. Our industries have built up a gigantic production of goods which they were able to sell in Canada, and they have not gone out on their own to seek markets abroad to the extent they should. I have talked to trade commissioners in South America, particularly, and they tell me that they have sent requests to certain industries asking whether they would be interested in exporting a particular product. In a number of cases the Canadian industry approached did not even answer the letter. Why? It was because after the war business was good and manufacturers could sell all their production in Canada. Consequently, they did not go to seek other markets.
The most important factor in our loss of markets is the cost of labour. I was in the exporting business after the war, and I was

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one of those who could find business easily in practically every place in the world because there was a great shortage of production. But when Germany and Japan got into the market-and what a recovery those countries made-we soon saw the realities of the situation. I was interested in a quotation on a ship in Venezuela in 1952. It was a comparatively small ship for one of the Canadian yards. We were beaten by the Germans on that quotation by nearly one third. Why? Because of their lower labour rate. In 1952 I was in a plant in Germany with as high a standard of labour as anywhere in the world. The top rate for machinists and other skilled employees was 55 cents an hour, whereas we in our yard in Canada were paying $1.85 an hour. When labour costs constitute such a large part of the cost of the manufactured article, how can we compete in these circumstances? I think organized labour has some very smart men and I frankly do not know why they cannot see that they are pushing us right out of the foreign market by these demands for higher and higher wages.
There is one other reason why, in my opinion, we have priced ourselves out of the foreign market, and that is our cost of government. If hon. members figure that out of every dollar of profit the federal government takes approximately 50 cents, the provincial government takes another piece and then the municipal government takes a further share, they will realize that if this burden were reduced, say by half, we could reduce the price of the individual article that we are trying to sell on the foreign market by a substantial amount. I agree with the fiscal policy of the Minister of Finance (Mr. Fleming) 100 per cent. I think he has done everything he can possibly do, but I believe-and I admit that this expression has become a little hackneyed-we have inherited a lot of these troubles, and I am not very sure that the trend can be changed, because it is very difficult to back up, to turn the wheels of expenditure backward. The big question today is certainly whether we are living too extravagantly.
There is one field in which I do believe a certain amount of blame lies with the former administration, and that is in relation to our dealings with the United States, though, as I say, I often wonder how much any government really influences the trend of economic forces. Nevertheless, I see things in our tariffs which disturb me; cases where an article can enter Canada at a much lower rate of duty than it can enter the United States. One example which occurs to me, is that of chickens. A pound of chicken or
[Mr. Cathers.l
broiler, for example, can come into Canada from the United States and pays only three cents duty. If we ship a pound of chicken into the United States a duty of five cents a pound has to be paid. Soybeans and onions are other examples, and I could probably name dozens of commodities with regard to which there is a disparity between the rates. I should like to ask the Leader of the Opposition what his government did to correct these differences when it was in office. I know that our Minister of Agriculture (Mr. Harkness) and our Minister of Trade and Commerce (Mr. Churchill) have made some corrections in this field, and I am pressing them to continue their efforts.
I think we are going through a period of transition. This is the natural effect of the war. We built up our production; we lost our markets during the war, and now we have got to get down to hard work and restore those markets. I am one of those who are realistic about this question, and I say it is not going to be easy because we are in competition with Russia, for example, which does not need to maintain anywhere near the standard of living or the freedom that we have. Russia can go out on to the world markets and sell their goods in any way it considers best. That country is not involved in any combine or group such as GATT, and it can go out and sell whatever it likes at whatever price it wishes, and the people back home have to bear the brunt. That could never be done under our government, and I hope it never will.
There are many countries that are potential markets for Canadian goods. We will have to balance our trade books with the United States and attempt to direct some of that trade elsewhere. An illustration that comes to mind is Israel. We could do a considerable volume of business with Israel in citrus fruits. When I was in Israel last year I spoke to a German wholesale importer of fruits from Hamburg. He told me that the grapefruit produced in Israel today surpasses the fruit grown in the United States. Israel does not produce wheat or other feed grains for its animals in large volume and these commodities are readily available in Canada. I really believe we could do a good business with Israel today.
I also think we could obtain a greater proportion of our citrus fruits from the West Indies. Another market of which we are not taking full advantage is Spain. That country, I am sure, would buy our grain. Spain produces the finest oranges I have ever tasted. I point these out as examples of how we could direct our trade, not in the way the previous speaker outlined, but through normal

business channels and the trade service we maintain in those countries in an effort to obtain a greater share of that business for Canada.
In a year or so I hope world trade will be on an upswing. It appears to be contracting at the present time but I think this is a transitory condition and sincerely hope Canada will maintain and increase its markets in the countries of the world.


Mr. H. M. Batten (Humber-St. George's):: Mr. Speaker, I listened with a great deal of interest to the previous speaker. On many points I agree with him but on others I do not. He referred at length to the part which wages play in the cost of Canadian production. All would agree that wages do play a large part in the cost of goods produced in Canada but in all fairness we must face the fact that wages are not the sole factor that serves to drive up the cost of Canadian production. Indeed we must take into account profits, taxes, plant and equipment, methods of production, transportation, plant efficiency and all the things which contribute to the cost of Canadian production.
If we are to face this problem I think we must recognize it is more than a matter of maintaining wages at their present level or reducing them. It is also a matter of being able to maintain or reduce expenditure in all the other fields that relate to Canadian production. I think we can sum up the whole thing by saying that what we need in Canada is greater productivity and I use the word "productivity" in its broadest scene.
I listened, as I have on many occasions during the last two or three years, to hon. members opposite make their recriminations of the previous administration. I suppose in politics that is fair game but I would suggest that the serious trade problems facing us now are not going to be solved by this government telling the country what the last government did not do. The position this government must now take is one of leadership. Hon. gentlemen opposite will solve nothing by becoming the critics of the critics. That will get no one anywhere.
I do agree with my hon. friend when he says we have to operate within our means. I believe that is the big problem that faces all of us at the present time. We in all branches of Canadian industry must learn to stand on our own feet as the hon. member says. We must not become too dependent on government.
As far as selling Canadian production is concerned I think we just have to get out and sell. We have heard a great deal in the last
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two or three years of the need to buy Canadian. This is not original on my part but I suggest it is equally important to sell Canadian.
We have a large imbalance of trade at the moment. I agree with the hon. gentleman who just resumed his seat that we should make an effort to balance our trading picture but it will be a very difficult task. For example, with respect to merchandise trade, next year we would either have to increase our exports by $400 million or decrease our imports by $400 million, or increase one and decrease the other by roughly $200 million. With respect to the total trade picture, the total balance of trade including merchandise and non-merchandise, next year we would either have to increase our exports by $1,500 million or decrease our imports by that amount or split it between the two. If we take into account that we are not too far from the time when we will lose $300 million in uranium exports, we have to realize that the figure is perhaps more accurately $2 billion.
A serious effort will have to be made to bring our trade balances more into line. We live in a country where trade is very important, a country where one out of three people depends for his livelihood on export trade. A country like Canada that is large in area with great natural resources and a small population necessarily depends on exporting a large percentage of its production. We are not in the same position as our neighbours to the south. That country is a third of the size of ours and has ten times our population. Its productivity is higher than ours. If it did not receive nearly as much export trade as it is now receiving, perhaps its economy would still carry on without undue fluctuation but that is not true with respect to the Canadian economy.
On other occasions inside and outside the house the Minister of Trade and Commerce (Mr. Churchill) has said there has been an increase in imports into Canada and an increase in exports from Canada. While it is a good thing that exports have increased and it is good that our imports increase to a certain extent, but not too much, the people who talk about these figures rarely explain the real relationship between them.
The unfortunate part about it is that during the past year our imports into this country have increased much more than our exports. Our merchandising trade imbalance in 1957 was $579 million; in 1958, it was $170 million; last year, it was $386 million. If we take our merchandising deficit due to the exchange of physical goods and the nonmerchandising deficit due to the payment of

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non-tangible services, our total deficit would be about $1,460 million. Of this amount, our merchandising trade deficit was roughly 25 per cent. In the year 1958 it was only 17 per cent. Our exports increased in 1959 by some 5 per cent, from $4,890 million to $5,152 million. Our imports increased in the same time by nine per cent, from $5,060 million to $5,538 million.
Over the years Canada has depended on an overseas surplus to offset the trade deficit with the United States. In the year 1959 there was a very distinct and a very disturbing change. Our total overseas deficit was $224 million, on top of a total deficit of $1,236 million with the United States of America. One of the most disturbing things about our overseas trade is our trade with the United Kingdom. Our surplus in 1956 was $252 million; in 1957, $138 million; in 1958, $108 million; and in 1959 only $52 million. Over these years we have seen our surplus with the United Kingdom decrease to only 20 per cent of what it was in 1956. With the remainder of the sterling area, the overseas countries, we have always had a fair balance. The surplus is now at an all time low of $12 million. It was $60 million in 1958. With the non-sterling area of western Europe in 1952 we had a surplus of $330 million; in 1959 this was converted into a deficit of $150 million.
With the rest of the world we had a record deficit of $137 million in 1958, and in 1959 it reached a new record of $139 million. It is very obvious that Canada is adding to her obligations at a faster rate than she is able to meet them. This is a most serious situation. It is partly due to the changes in production and trade throughout the world, particularly since the second world war, but it is also true that it is partly due to the policies of this government which in my view have been based on expediency rather than on sound trading principles.
Despite the bright hopes and promises of the present government two and a half years ago, it is clear that Canada is losing ground in its most important markets. Surely nobody in Canada today can look with anything but grave concern at the sharp reversal from a surplus to a deficit in trading with Europe. Of all Europe only Great Britain, as I said just now, made possible a surplus with Canada and even this was reduced by 50 per cent over last year.
The Prime Minister's hope of a 15 per cent diversion of trade has not worked out very well. The reverse has happened, and we are now buying more from the United States than we ever did before. I come from a province which is very dependent upon trade. Nearly

everything we use has to be brought into the province; in the main it is brought in from the mainland of Canada, something to the value of $250 million, and nearly everything we produce is sold outside the confines of Canada. I do not think it is unfair for my province to feel that since it provides such a worth-while domestic market for the produce of the Canadian mainland it can look to the federal government for policies which will preserve its export trade with the rest of the world.
I think we are entering into a period when we are beginning to experience the results of a renewal of the production and trade facilities of western Europe. They have not been able to measure up in those fields since the war as they did before, but now they are overcoming the effects of the very devastating war and they are producing materials which can be sold in markets where normally Canada has been able to sell in the last eight or ten years. We are being surrounded by trading blocs. We now have five large trading blocs composed of 38 countries and hundreds of millions of people. Certainly, these trading blocs will change the trading picture as we knew it in Canada heretofore. The only thing which Canada can do is to find out what changes are taking place and endeavour to meet those changes in a sound and sensible manner.
I give you one example. There are proposed tariffs for the European common market and they are outlined on page 28 of the March 12 issue of the Financial Post. One that concerns me very much is this:
Salt cod: Italy was the one good market in the common market area, and we had negotiated an agreement with Italy for free entry.
Now the common tariff is set at 12 per cent-18 per cent.
Canadian exports will suffer unless the Italian tariff can be negotiated downwards this fall.
If this tariff is not negotiated downwards, certainly it is going to have a tremendous effect on one of the main exports from my province.
Besides these trading blocs we, too, have to face the fact that we have the Russian trade giant who is gradually looking over the remainder of the world for markets where he can send his own produce produced under state control and sold by state trade. Here in Canada, of course, there is nothing in the form of state trade and it will be very difficult for a country like Canada to compete with a country which sells produce by state trade.
We have, for example, figures of the government of the Netherlands showing the amount of wheat sold through Rotterdam in 1958 and 1959. In 1958 Canada sold 485 million bushels and in 1959 the figure was

152 million bushels. The United States sold 262 million bushels in 1958 and 272 million bushels in 1959. But while the Soviet union only sold 8 million bushels through Rotterdam in 1958, in 1959 that country sold 308 million bushels.
Here is an example of what is happening with respect to wheat as far as Russia is concerned. One begins to wonder what will come next. Will it be the pulp and paper industry, will it be the fishing industry or will it be any of the other industries upon which the economy of Canada is founded? I believe that we have to face this problem immediately and with all the seriousness at our command. I agree that the government cannot face the problem alone. I believe it is the problem of all those who are interested and that includes all Canadians. But one thing remains, namely that the government must show leadership in this matter and in this matter talk will not be enough.


Gordon Minto Churchill: Mr. Speaker, I face the problem that several of us on this side face from time to time on these supply motions, that of being taken a bit by surprise by the introduction of an amendment. We have to go through a guessing game from week to week as to what is going to be brought forward. Of course, today the Leader of the Opposition (Mr. Pearson) extended the guessing period for a few minutes because he indicated that he had had in mind at one time dealing with the subject of defence. I thought that might be a suitable topic for the opposition today in view of the discussion of defence we had last week and their complaint that the subject matter of defence policy was not to be discussed by the committee on defence expenditures. Here was the opportunity for them to launch a debate on defence policy but they shied away from it just as they did last week and as they have on other supply motions that have come before us this session.


Lester Bowles Pearson: We have already talked about it twice and you have not said a word about it.


Gordon Minto Churchill: So that is still left open for debate. The Leader of the Opposition then indicated to us that the subject matter for this afternoon was to be Canada's trade and the question of our balance of international payments. He made a long speech to which I hope to make a somewhat similarly lengthy answer. What I have to say now is by way of introduction prior to the interruption which will occur at six o'clock but before the evening is over I will deal, I hope, with all the points that the Leader of the Opposition raised in his lengthy address.
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One thing that the Leader of the Opposition attempted to stress was that as Minister of Trade and Commerce I was showing complacency and too great optimism. There has been no complacency whatsoever on the part of the Department of Trade and Commerce or the government in dealing with matters affecting Canada's trade. The Leader of the Opposition overlooks the fact that in June and July of 1957 when we took office one of the greatest problems facing us at that time was the tremendous surplus of wheat on the prairies. It was the subject of comment in all the newspapers across the country and the matter was raised, of course, in the session which opened in October of 1957.
Far from being complacent about that problem, which was the immediate problem of the moment, we took very quick action. I well recall that within 10 days of being sworn into office I was in Winnipeg meeting with the wheat board to discuss plans for enlarging Canada's exports of wheat abroad, and in September of that year I went with the wheat board to Europe on the first of three annual visits to discuss Canada's export problem. Success attended our efforts in that field and the great surplus of 730 million bushels of wheat which was overhanging the prairie economy and affecting Canada's economy in the summer of 1957 has been very materially reduced to the extent that in each of two crop years the surplus was cut down by 100 million bushels and in the 1959-60 crop year will be similarly reduced.


George James McIlraith: I wonder whether the minister will permit a question? Would he agree that the weather had something to do with the reduction of that surplus?


Gordon Minto Churchill: Farming is always affected by weather conditions but there was also a very active sales promotion campaign carried on, and in the first crop year to which I have referred, 1957-58, our actual commercial sales for cash exceeded those of the preceding year by about 22 million bushels. We also instituted a program of long term loans and gifts to countries in great need of food with the result that our export position was improved from a figure of approximately 262 million bushels up to over 300 million bushels and the average for the two years that have elapsed has been over 300 million bushels. We hope to approach that average again this year. That is just one example of the activity shown in trade promotion by the government of the country and by the Department of Trade and Commerce working closely in conjunction with the wheat board and with our trade commissioners overseas.
Trade has been one of the main preoccupations of the government. One of the first

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things undertaken at the instance of the Prime Minister (Mr. Diefenbaker) was the calling together of a commonwealth conference and the preparatory talks that were held in September and October of 1957 at Mont Trem-blant prepared the way for the commonwealth meeting which took place in the following year.
One of the great purposes of that meeting was to persuade our commonwealth partners to remove the restrictions against dollar imports that prevailed in the sterling bloc. This was an active trade promotion campaign on the part of the Canadian government and it met with success because during the last year and a half the restrictions on dollar imports by sterling bloc countries have almost all been removed. That was done largely on the initiative of the Canadian government and is an instance of the active interest of the government in the removal of trade barriers.


Lester Bowles Pearson: That is not what the British say.


Gordon Minto Churchill: At the GATT conferences in 1957, 1958 and 1959 Canada's position was clearly set forth with regard to the removal of trade restrictions, whether they were those that I have just mentioned in the sterling bloc countries or other trade restrictions which were imposed for balance of payments reasons, the setting up of import quotas and things of that nature. Throughout the world there has been an easing of these trade barriers. This has been one of the prime objectives of the Canadian government because of Canada's interest in trade, because of our knowledge and the knowledge of every Canadian that Canada can only be prosperous if her export trade is well maintained. One out of every five Canadians depends for his or her livelihood on Canada's export trade. We are one of the great world traders and we want to maintain our position. We are maintaining that position by this type of activity that I have mentioned.
It has to be on a broad front, on the broad front of international relations, through GATT, through commonwealth conferences or through close liaison with our greatest trading partner, the United States. We have had half a dozen meetings now with people in authority in the United States, chiefly discussing matters of trade and the removal of barriers to trade which, in some instances, have prevailed between our country and the United States. It was through our initiative as a Canadian government that we secured the relaxation of the control imposed by the United States on the importation of oil into that country. This is another instance of Canada's activity, and of our far from complacent attitude with regard to our trade

position. These things have all been of great benefit to Canada. I shall show tonight, with statistics, the effect over the last two and a half years of some of these policies.
I will show how Canada's export trade has improved, as we know very well. During the period of world recession when world trade was declining in 1958, Canada's export position was maintained and no other country can say that. We maintained our export position and it has improved during the year 1959, and is improving again in 1960. Of all the times for the Leader of the Opposition to select for an attack on Canada's trade policy, he selects a period when things are better than they have been before.


Lester Bowles Pearson: You are taking only three months, now.


Gordon Minto Churchill: A year ago it would have been more advantageous from his political point of view to have attacked the government on trade problems. Today, through another error of judgment, he picks this period of March, 1960 when world trade has improved and Canada's trading position has vastly improved. The last quarter of 1959 showed a very substantial upsurge in Canada's exports,-


Lester Bowles Pearson: How does the bureau of statistics explain that?


Gordon Minto Churchill: -and the month of January, 1960 has again shown a great upsurge. The third quarter of 1959, I think for the first time in seven years, showed a favourable trade balance. But this is the occasion upon which the Leader of the Opposition makes an attack on our trading policies. Of course, the attack will fail because the people are not that easily fooled.
The Leader of the Opposition makes much of the fact that I have been, as he says, too optimistic with regard to Canada's trade and Canada's development. However, I am not in a minority of one. I have been reading today the reports by the provincial premiers across this country with regard to the situation in their own provinces. Is the Leader of the Opposition going to say that these men are wildly optimistic? This is the Financial Post, overseas edition, March 1, 1960. In so far as Nova Scotia is concerned the headline reads, "Ready for Expansion". I quote:
Long term outlook is bright, especially for the $55 million primary steel and coal industry, the $44 million fish processing industry and the $40 million forest industry.
In so far as New Brunswick is concerned, the headline says, "Many New Industries". The article says:
New capital investment for the year is estimated at $180 million.

Long dependent upon the forest, the farm and the sea for a great part of its manufactured production, New Brunswick has now entered many new fields.
There is no sound of the pessimistic approach there, whatever. The story with regard to Quebec in this issue is one of great expansion, great optimism. The population should rise from 5 million to 9.5 million in the next 25 years. Manufacturing should rise from under $7,000 million to about $28,000 million. Mining should increase in volume by about 400 per cent. So it goes; it is a story of optimism for the future and that optimism is justified by what is happening right now in the year 1960.
The heading in so far as Ontario is concerned reads, "Leads in Industry". Then, you get the story of what is going to be done in the way of advancement in 1960. They mention the investment of new capital in Ontario which has amounted to over $25,000 million since the end of the war, and now is about 14 times the 1946 rate annually. As the new year began, the outlook was for capital expenditures to equal or exceed the all-time high of 1957 at $3,265 million.
Then, Manitoba-


George James McIlraith: Read what that publication says about the Minister of Finance.


Gordon Minto Churchill: In so far as Manitoba is concerned, the heading is "Prairie Gateway". Again, you have the optimistic view of the future for capital investment and development. Here, you have a story that mentions the growth of industry and the fact that there was a corresponding upsurge in power consumption. Construction will start in 1960 on a $140 million hydroelectric development. Then, it says mining is the north's biggest industry. There is also mention of the operations of International Nickel, the Hudson Bay Mining and Smelting Company and the Sher-ritt-Gordon Company. There is no lack of optimism there.


George James McIlraith: There was a mention of the Minister of Finance in that?


Gordon Minto Churchill: Not in this article. The Minister of Finance (Mr. Fleming) is deserving of mention on all occasions because what he has been doing for this country in the line of fiscal policy has been highly commendable and a great deal of the upsurge in Canada's economy can be attributed to the policies and foresight of the Minister of Finance.
At six o'clock the house took recess.
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[Stage Direction]
AFTER RECESS

The house resumed at 8 p.m.
Gordon Minto Churchill: Mr. Speaker, just before the break for the supper hour I was dealing by way of introduction with certain comments made by the Leader of the Opposition, who was accusing me of complacency and too great optimism, and I had indicated that I was not alone in taking an optimistic point of view with regard to Canada's position. I had read rather hurriedly the various articles in the Financial Post dealing with the provinces, showing that in the provinces right across this country there is a feeling of optimism. I started off with Nova Scotia, which by chance happened to be the page I turned to first, and I had got as far as the situation in Manitoba.
Then I notice that similar optimistic points of view are shown in the other western provinces-in the provinces of Saskatchewan, Alberta and British Columbia-where they all point, first, to the fact that 1959 was a good year and, second, that the prospect for advancement in 1960 is excellent. In each of those three provinces you get a story of capital investment in industry, whether it is in manufacturing or in the resource industries, which will lead, as the premiers say, toward greater prosperity for their provinces.
A similar story of optimism comes from Newfoundland and from Prince Edward Island, the one province which lacks some of the resources with which the other provinces are favoured. But, nevertheless, there there is a feeling and an expression of opinion that times are good and that there is no need to be pessimistic about the future. So I make no excuse whatsoever for taking an optimistic view of Canada's future during this decade of the sixties.
During the course of the remarks of the Leader of the Opposition he dealt at some length with Canada's foreign indebtedness, and I will have occasion to point out some errors in the use of language by the Leader of the Opposition, who is generally quite careful and precise in his use of language. When he was summing up his speech he talked about a record deficit in Canada's total trade, which is an inaccuracy. He talked about current transactions, which include trade plus the invisible items or the non-merchandise items. Similarly he talked about the deficit in, as he put it, our trade with the United States when he should have said our current transactions with the United States so that you can separate out from that the so-called invisible items, the non-merchandise items, and then deal with the commodity items or the actual trade items.

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When you are talking about Canada's foreign indebtedness I think it is important that the increase which has occurred in the post-war period should be seen in its proper perspective. In the first place, as foreign investment in Canada rose, so did Canadian investment abroad. Between 1945 and 1959 Canada's gross foreign liabilities increased from $8 billion to $24 billion and Canadian gross assets abroad rose from $4 billion to $8.6 billion. Thus Canadian net foreign indebtedness-that is, the gross liabilities less the gross assets-amounted to $15.4 billion in 1959 or 44 per cent of Canada's gross national product in that year.
I think it is important to relate these figures of foreign indebtedness to the productive capacity of a country as measured by its gross national product. When the war came to an end in 1945 Canada had been able to reduce some of her foreign indebtedness, and her net international indebtedness amounted to $4 billion or 34 per cent of the gross national product. This compares with a net international indebtedness of $5.5 billion in 1939, which was 98 per cent of the gross national product in that year. This means that the present ratio of Canada's net foreign indebtedness to our ability to support such an indebtedness, and that is reflected in the total value of goods and services produced, is currently less than half of what it was before the war, namely 44 per cent compared with 98 per cent.
The point, then, is that while foreign investment has been growing in Canada in the post-war period in absolute terms, the rate of the economic expansion of this country has been even more rapid, surpassing the rate of increase in Canadian foreign indebtedness.
It is also true that foreign debt service charges have risen in absolute terms in the post-war period. Interest and dividends paid to non-residents rose from $312 million in 1946 to $656 million in 1959 or by 110 per cent. During the same period interest and dividend payments received by Canadians from their foreign investments rose from $70 million to $170 million or by 143 per cent. Since receipts have risen more rapidly than amounts paid out, the net relative burden of interest and dividend payments on the economy has declined.
You can illustrate that by the following figures. The ratio of net interest and dividend payments to the gross national product amounted to 1.4 per cent in 1959, 2 per cent in 1946, 4.4 per cent in 1939, and 5 per cent in 1930; and going back as far as the beginning of the twentieth century the ratio is 3 per cent. These figures illustrate that the rapidly expanding Canadian economy has been able

to take a significant accumulation of foreign investment in its stride and that the burden of carrying interest and dividend payments to foreign investors has declined fairly consistently over the life of the last two generations. I think that is helpful, Mr. Speaker, in getting this foreign indebtedness into its proper perspective in relation to the strength of the economy of Canada.
With nations as with individuals and businesses the justification for borrowing can be judged only in relation to capability for carrying the debt and on the basis of how the resources are being used. The Leader of the Opposition attempted to leave the impression that Canada is incurring an increasingly onerous and excessive burden of debt.
Canada's deficit on current international transactions reached $1,460 millions in 1959. Considered in absolute terms, this is the highest deficit Canada has so far experienced. It is also true that the size and wealth producing capacity of the Canadian economy is greater than it has ever been before. So I repeat that a proper assessment of this deficit requires that it be considered in relation to the growth of the economy as a whole and, more particularly, in relation to the foreign earning capacity of the economy.
While Canada's current deficit increased by $36 million between 1957 and 1959, Canada's current earnings from international transactions in the same period increased by $227 million, that is, from $6,530 million to $6,757 million. As a proportion of Canada's total earnings the deficit in 1959 remains about the same as in 1957 and the present deficit in relation to our exports is far less than in earlier periods of rapid development in the Canadian economy. At the end of 1959, Canada's net foreign indebtedness had risen to $15.4 billion. This figure is well below one half of the annual gross national product whereas in 1926 our net foreign indebtedness was equal to the gross national product. Consequently, I say that our debt, considered in relation to our wealth producing capacity, is far less of a burden now than it was in the past.
Hon. members may say: have Canadians as a nation been wasteful in the use of resources while borrowing large amounts from abroad during the last five years? They may ask: has this additional foreign borrowing been used to support unwarranted levels of consumption? I think the Leader of the Opposition was attempting to give that impression. During the five-year period between 1955 and 1959, the growth of personal consumption in Canada has been little more than the growth in domestic production-24 per

cent as compared with 22 per cent-and during the five-year period total consumer outlays as a proportion of the total resources available within the economy have declined slightly from the level of the preceding five-year period when deficits were small and non-existent.
On the other hand, total capital outlays in the 1955-59 period as a proportion of total resources available have increased significantly. During this period capital expenditure in Canada exceeded one quarter of the gross national product, a substantially higher proportion than that of any other major trading nation.
These comparisons suggest that the additional resources obtained from abroad have been put to constructive purposes. The physical evidence of this is everywhere about us. From 1954 to 1959 Canada's electric generating capacity was increased by one-half, aluminum by one half, basic steel by nearly two-fifths, asbestos and copper by one-third, nickel mining by one quarter, pulp and newsprint by one quarter and petroleum refining by nearly 60 per cent. Oil pipe line mileage nearly doubled, while natural gas gathering and transmission lines tripled. The production of petroleum nearly doubled, while the output of natural gas and iron ore tripled. Chemical products increased by more than one quarter.
In short, this was a period not only of major expansion but also of the diversification of Canadian industry. In the last two years Canada has constructed two thirds of a million housing units, 50 per cent more than in the preceding five years. In the same period expenditures on new hospital facilities increased by one half, on schools by two thirds and on universities threefold. Twice as much was spent on roads. Taking into account all these factors, the size of Canada's deficit in relation to the foreign earning capacity, the size of the debt in relation to productive capacity and the trend of consumption and investment in relation to total resources there is little in this picture to substantiate the claim that Canadians have been living beyond their means.
There are differences of view as to the extent to which we should resort to borrowing from abroad and how the resources available might best be used. One course-and I do not know whether the Leader of the Opposition wants us to adopt this or not; he seemed to suggest it and then rather to withdraw-would be to maintain the pace of development by increasing domestic savings at the expense of current consumption, thereby reducing our reliance on borrowings from abroad. This would require a high degree
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of voluntary self-restraint, some change in the incentives conditioning spending or some form of enforced austerity imposed on the Canadian public or a combination of these.
Another course which has been proposed would involve limiting the rate of spending, including capital outlay, to a level which could be sustained without foreign borrowing. This would mean taking a decision as to what expenditures should be curtailed. Should Canadians be denied comfortable homes? With the school age population increasing more rapidly than the total population, should we build fewer schools? Should we spend less on highways and streets in the face of growing traffic problems? These are some of the questions which arise in relation to this suggestion. Is resource development proceeding too rapidly? Should we curtail the development of iron ore and base metal resources and other mineral products and thereby encourage the major foreign users to go elsewhere for sources of supply to meet their expanding requirements? Should we slow down the trend toward self-sufficiency in fuel?
These are difficult questions to answer. The real issue here is whether the present course of our development is sufficiently at variance with the interests of Canadians at large to warrant strong interference and control on the part of the government. The hon. member for Vancouver East (Mr. Winch) was suggesting a great deal in the way of such control and interference.
I think it is important to bear in mind that the present course of development reflects the judgment of all Canadians, individually and in groups, acting each within their respective areas of responsibility within the context of a free marketing system. The tremendous progress which has been made in Canada and which is still proceeding indicates that the course which has been followed is a sound one.
On this question of foreign investment and Canadian investment it is well to keep in mind that Canadian savings finance the major portion of investment in Canada. In the course of the speech by the Leader of the Opposition attention was focused upon foreign investment in this country. But a major portion is financed by Canadian savings. Total Canadian savings at home and abroad represent four fifths, that is 80 per cent of the total net capital formation in Canada in the 1950-55 period and about two thirds in the 1956-58 period. If Canadian savings abroad are subtracted, Canadian savings invested in Canada represented about two thirds of the total net capital formation during the 1950-55

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period and 56 per cent during the 1956-58 period when capital spending was at very high levels.
There are, of course, broad areas of the economy such as agriculture and what is called social capital, that is, government institutions and housing and so on, in which the non-resident investment is relatively insignificant. It has been estimated that the net stock of social capital, which is largely financed by Canadian funds, is not much smaller than the net stock of industrial capital, including that invested in agriculture.
The tendency of foreign investment, particularly the direct type of investment, to concentrate in certain sectors of Canadian industry has resulted in a sizeable proportion of the capital employed in these industries being owned by non-residents. Thus at the end of 1957 capital owned by non-residents accounted for the following proportions of the total capital employed in these Canadian industries: petroleum and natural gas, 64 per cent; mining and non-ferrous metals smelting, 56 per cent; manufacturing, 50 per cent. The preference shown by foreign investors for certain branches of the Canadian manufacturing industry is reflected in the proportions of non-resident-owned capital to total capital employed in these industries, as of the end of 1957: the rubber industry, 84 per cent; the auto and parts industry, 78 per cent; the electrical apparatus industry, 70 per cent; the chemical industry, 62 per cent; the pulp and paper industry, 53 per cent.
On the other hand, Canadian-owned capital is predominant in the case of railways, other utilities, merchandising and construction, and in certain branches of manufacturing. At the end of 1957 Canadian-owned capital comprised 70 per cent of the total capital employed by the railroads, and 85 per cent of the total of other utilities. In manufacturing, resident-owned capital accounted for 79 per cent of the total capital employed by the textile industry, 76 per cent of that used by the primary iron and steel industry, 73 per cent of the capital of the beverage industry, 60 per cent in the case of the agricultural machinery industry, and 53 per cent for the transportation equipment industry, excluding the automobile industry.
The total capital employed in the selected group of industries, manufacturing, mining and smelting, utilities, merchandising and construction, rose from $11.9 billion in 1939, to $37.2 billion at the end of 1957, a gain of 213 per cent. The Canadian-owned capital employed in these industries increased from $7.4 billion to $24.3 billion over the 1939-57 period, or by 228 per cent. As a result, the share of the capital employed by this group

of industries which was owned in Canada rose from 62 per cent in 1939 to 65 per cent in 1957.
In recent years Canadians have been investing substantial sums in those domestic industries in which foreign capital is predominant. Between 1954 and 1957, for example, the capital owned by Canadians rose by $607 million in the case of the petroleum and natural gas industry, from $996 million to $1.6 billion; by $439 million in the Canadian mining and smelting industry, from $814 million to $1J billion; and by $857 million in the manufacturing industry, from $4.4 billion to $5.3 billion. The rise in the investment of Canadian capital in the chemical manufacturing industry, $127 million, increased the Canadian-owned proportion of the total employed by the industry from 36 per cent at the end of 1954 to 38 per cent at the end of 1957. Canadian-owned capital in the pulp and paper industry rose from $699 million in 1954 to $771 million in 1957.
Additional investment by Canadians enabled the shares of Canadian-owned capital employed in the electrical apparatus and auto and parts industries to be maintained unchanged over the 1954 to 1957 period, 30 per cent for the electrical apparatus industry and 22 per cent for the auto and parts industry.
Facts and figures like that are essential when one is considering the capital investment in this country to avoid getting the distorted picture that unfortunately has been given to us which might lead some people to consider that the only capital in this country came from abroad. Such is not the case.
The Leader of the Opposition dwelt at some length on this problem and indicated that a record deficit of nearly $1.5 billion occurred in our total trade. I would correct that figure to read $1,460 million. That represents the current account deficit in 1959. It was made up of a deficit of $386 million on merchandise trade-that is the export picture

and a deficit of $1,074 million on non-merchandise trade or invisible items. The deficit on merchandise trade or exports of $386 million is higher than in 1958 when it was $170 million. That was a time when there was a contraction of world trade. It was, however, lower than in 1956 when it was $728 million-that is the figure the Leader of the Opposition was rather reluctant to give us this afternoon-and also lower than in 1957 when it was $579 million.
There has been a progressive decline in Canada's deficit on merchandise trade with the United States since 1956. I wish to quote



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[Stage Direction]
from the annual report of the governor of the Bank of Canada for 1946 where, at page 23, we find this statement:
Canada has had a deficit in her current account transactions with the United States in every year from 1926 to 1943. In 1944 and 1945 there were small surpluses caused by special wartime factors. The average deficit over this 20-year period was $165 millions a year and the largest deficits (for example $437 millions in 1929) occurred in years of peacetime prosperity. The only peacetime years in which there was an approach towards balance were years of unemployment, stagnation and low imports, such as 1933-36.
Unless some developments occur which would produce a major change in the character of our trading relationships with the United States, it will be normal for Canada to have a deficit in its current account balance of payments with the United States, and this deficit is likely to average higher in the future than it has in the past.
In a speech I made in the house in January and in one I made last November I drew attention to the fact that over a period of 60 years, examining the favourable balances and the deficits, if you extracted from that period the war years and the immediate postwar years which the Leader of the Opposition did not do this afternoon when he was quoting figures-those unusual intervals of export trade abroad to support the war effort-you find that in the majority of years Canada had a trading deficit. The years in which that deficit occurred happened to coincide with periods of very rapid expansion in Canada.
In the speech I made in November I posed a question to the economists, which the Leader of the Opposition raised again this afternoon, to determine whether or not having a trade balance represented prosperity in the country when we had a trade balance in the very difficult years from 1933 to 1936, as I just read from the report of the governor of the Bank of Canada for 1946. I know that economists differ but, that being the case, I think laymen are privileged to differ as well, and I am still unconvinced that a trade deficit which does not involve the country in restrictive measures is bad for the country. We have been having trade deficits over the last several years and Canada's economy has been moving rapidly ahead.
The question was raised by the Leader of the Opposition as to whether something serious might happen if some of the capital funds that have come into Canada recently should be removed, because in 1959 a somewhat larger proportion of the movement of capital funds into Canada was of a short term character. These short term movements are a particularly variable element in the total and a decline in the outflow of funds of that type would tend to reduce the premium on the Canadian dollar and thus assist Canadian producers competing in international markets. This would not inflict
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grave and serious injury suddenly on Canada, as the Leader of the Opposition attempted to point out. It would be self-corrective and the way in which things have gone along indicates that in a free enterprise society we have managed quite well. If controls are suggested why then you get into an entirely different situation.
I pointed out that the Leader of the Opposition incorrectly referred to our total current transactions as a record trade deficit, and I suggested that the figures should be separated.
Lester Bowles Pearson: On a point of order, Mr. Speaker, the minister has now for the third time corrected my reference to total trade deficits. That expression I got from the dominion bureau of statistics quarterly issue, Canadian balance of international payments, which refers in paragraph one to paragraph five to merchandise trade and non-merchandise trade. If you add the two of them together you get the total trade.


An hon. Member:: That is not a point of order.


Gordon Minto Churchill: I am reading from the statement of the Leader of the Opposition when he was concluding his remarks this afternoon. He said: "May I sum up, Mr. Speaker, by saying that our grave concern as to the deterioration in Canada's trading position arises from:
1. A record deficit of nearly $1.5 billion in total trade".


Lester Bowles Pearson: Merchandise and non-merchandise.


Gordon Minto Churchill: I am suggesting that is confusing. He should have spoken of current transactions, or separated them into nonmerchandise trade and merchandise trade.


Lester Bowles Pearson: Call on your own experts.


Gordon Minto Churchill: Our total trade deficit is one quarter of the figure of the Leader of the Opposition.


Lester Bowles Pearson: That is merchandise trade.


Donald Methuen Fleming: What do you mean when you speak of trade?


Lester Bowles Pearson: Look at your own reports right here.


John Whitney Pickersgill: What you meant in the budget debate of 1957 when you used the same words.


Mr. Harkness:: They cannot read those things at all.


Gordon Minto Churchill: After that pleasant interlude I will go on and give some valuable information to the house in regard to Canada's trading position. Our policy has been to

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expand exports in order to increase our foreign earnings and thus narrow the substantial deficit which we have been incurring in our current transactions with the rest of the world.
I am just as eager as anyone else to see the continuous growth and diversification of our exports, and I believe more can be done both by business and through the assistance of the government and its agencies to expand our sales; but I wonder whether it is correct to make exports the culprit of the piece, or to expect from our export industries more than they can fairly be asked to accomplish.
When the hon. member for Humber-St. George's (Mr. Batten) was speaking this afternoon he said that in order to correct the imbalance we would have to increase our exports by $200 million and our imports by $200 million, or if we were to correct the imbalance in the total current transactions we would have to enlarge our exports by about $2 billion a year. I do not think it can all be done by way of exports. Export earnings are but one of the many factors entering into our annual deficits and the part they play or can play should be seen in proper perspective.
In an expanding and developing economy such as our own it is natural that our savings should be supplemented by foreign borrowings and that a current account deficit should be incurred as a result of the additional resources made available through imports. There is no economic law that requires that exports should immediately and automatically rise to bridge the trade imbalance caused by additional imports. Over time exports of goods and services must be adequate to service the foreign debt assumed during the development phase and as well as to finance imports and other outward payments, and until we have reached the stage of a mature creditor country there is likely to be a continuation of capital inflows to help in the process.
I recall that in 1956, when Mr. Howe was dealing with this subject of Canada's trade and her foreign indebtedness, he thought that there would be a period of 20 to 25 years elapse before Canada came to such a position that she would be a mature creditor country. It is not correct to expect that in the short run exports should rise promptly to finance the additional imports and other payments occasioned by development needs. The exports of a country at any particular time are determined mainly by what it has available to sell, the prices at which such exports are available and, most important, the level of foreign demand. That is a factor that is not in the control of the exporting country.

To the extent that the continuation of the deficit gives rise to concern, exports have their role to play. The investment made in this country in the 1950's, in manufacturing as well as in our resource industries, has for the most part been wisely placed in relation to demands both foreign and domestic which are likely to be placed on the economy in the future; the new productive facilities which have been created, will better enable us to take advantage of the opportunities offered by expanding world demand. The new growth thus achieved should provide the means to an improved livelihood as well as the requisite earnings to meet our external financial commitments.
The Leader of the Opposition expressed some alarm over the fact that, as he suggested, there is stagnation in the volume of our traditional exports. One of the most important and interesting developments in Canadian trade over the last 30-odd years has been a change in the pattern of our trade. Had we not had the development in our resources industry and the development in our manufacturing industries that have taken place recently we would not now be in a position to compete actively in world trade and maintain our position as one of the great trading nations of the world.
I had occasion to look into this last November, and I spoke on this subject in the city of Winnipeg. This is what I said with regard to the changing pattern of Canada's export trade:
In the very early days the fur trade was dominant, succeeded by timber exports, then by agricultural produce. Now, in our period we find a gradual increase in products other than those derived from the forest and farm and a steady growth in the export of manufactured articles.
Then I looked back to the year 1927 and compared it with 1957 to see what the change had been in 30 years.
In 1927 the ten leading exports were wheat, newsprint, flour, planks and boards, wood pulp, fish, automobiles, meats, barley and cheese. Thirty years later in 1957 four of these products, namely, newsprint, wheat, planks and boards and wood pulp retained their position but the other six have been replaced by aluminum, nickel, copper, iron ore, petroleum and asbestos .. .
In that 30-year period the volume of our exports increased fourfold and the value from $1) billion to $43 billion. The rise in volume and value continues. There has been a shift in the 30-year period from the export of raw materials to processed materials. In 1927, 47 per cent of total exports consisted of raw materials; in 1957 the percentage had dropped to 31. Partly manufactured materials rose from 15 per cent to 32 per cent; and chiefly manufactured retained its position at 37 per cent.
We surely would not expect our traditional exports, if you want to go all the way back to the time when fur was the chief one, to maintain their position in this modern world

when so much emphasis has been placed on manufactured articles derived from the mineral wealth of the country. Consequently that change and shift in the pattern of our trade has continued and it has vastly improved the economy of Canada, all based on capital investment in these industries.
The Leader of the Opposition and others have attempted to create the impression that Canada is somehow or other losing out in world markets. This was the situation last year too. Yet we have retained our place as a leading exporter in the world and in 1958, as I mentioned before the supper hour, we maintained the record level of exports we had reached in 1957 and in 1959 we exceeded it. How you can deduce from that that Canada is losing out in world markets surprises me indeed.
In 1958 Canada's exports held firm, and that was in the face of a general decline in world trade. This was one of the amazing things in 1958. General world trade declined but Canada's exports held firm. In 1959 total world exports were barely back to the 1957 level while Canada's exports had increased by more than 5 per cent from the 1957 and 1958 figures. In other words, Canada's products considered as a whole had more than held their own in world markets, and this upward trend in our exports has been accelerated in recent months. In the three-month period ended in January Canada's exports were 17 per cent higher than in the corresponding period one year ago. This growth has not been reflected only in certain markets, it applies to all the major export areas. For this same three-month comparison exports to the United States are up by 18 per cent, to the United Kingdom by 15 per cent, to continental western Europe by 21 per cent, to Japan by 32 per cent and to all other countries by 9 per cent. That gives us a good start in the year 1960. Again, as I said before six o'clock, I wonder why the Leader of the Opposition made such an error in judgment as to select this period when things are going so well to launch an attack on Canada's trading policy.


Lester Bowles Pearson: Would the minister permit a question? If the figures are as he has indicated in regard to our increased exports, how does he explain that this year we have an overseas deficit instead of an overseas surplus?


Gordon Minto Churchill: I will come to that as I go along. I intend to cover the waterfront in this speech on trade. The Leader of the Opposition took an hour and a half and I want to do justice to his remarks and to the subject. I will cover all these things as I proceed.
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Economic activity in the United States, the United Kingdom and the other major industrial countries is moving steadily ahead. This will involve continued growth in the demand for industrial materials, particularly minerals and forest products which together make up nearly two thirds of Canada's total exports. Industrial material exports have increased by about 30 per cent during the past year and further improvements are indicated for such items as pulp and paper, iron ore, nickel, aluminum and other base metals, asbestos, petroleum and chemicals.
In the manufactured goods field substantial progress is being made despite intensive international competition. Canadian firms are now working on large foreign orders in such highly competitive fields as transport aircraft and heavy electrical apparatus. Opportunities for extending this type of business are good.
The statement is frequently made that we are pricing ourselves out of world markets. This deserves examination. Again I put this before the house. How can this allegation be reconciled with the fact that our export trade stands at the highest level ever known? This is occurring when our competitive position in world markets is to some extent hampered by the premium on the Canadian dollar in foreign exchange.
The great bulk of our foreign exchange earnings on merchandising account are from the sale of primary commodities in world markets. With non-ferrous metals and pulp and paper, as with wheat, sales are at world market prices and we must be and are meeting the competition of other producers. It may be true that the coincidence of advancing production costs and higher transportation costs in a commodity like lumber renders us from time to time less competitive in certain markets, for example, the United Kingdom and the continent, but at the present time the prospects of an increase in exports of lumber and wood products to the United Kingdom are more favourable than they have been for several years and this year we expect an upturn in that particular market.
It is difficult to entertain seriously the suggestion that we are pricing ourselves out of world markets where in the case of iron ore, for example, there is a heavy inflow of foreign investment to develop Canadian sources of supply for the investor, and this type of investment must surely be profitable to us since it is committing the investor to an interest in Canada as a source and it is creating new foreign exchange earning power for Canada.
At the same time I think it is essential that we should be careful that we take no steps that would bring us to a state where we

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would price ourselves out of the world market in this age when that world market is very competitive. There are some products, particularly manufactured products, which other countries produce more cheaply than is the case in Canada, but we cannot expect to be the leading exporter of all goods that move in international trade. Nevertheless, over 30 per cent of our exports are made up of chiefly manufactured articles, where we have products of interest in world markets, and important examples are newsprint electrical apparatus, beverages and agricultural equipment. There are a host of other manufactured articles which go to make up the total.
With imagination in marketing, with aggressive sales promotion and with determination to take advantage of market opportunities throughout the world, I am sure that the contribution made to our export earnings by manufactured products can be steadily increased. That is being done by enterprising Canadian businessmen this year. Now that restrictions on trade have been removed in so many countries our businessmen in the export trade and others who want to enter it are beginning to take active steps to recover the ground that they lost at the outbreak of the second world war.
I think sometimes we overlook the fact that for 20 years Canadian goods, either by reason of the war situation or by restrictions imposed by the dollar countries after the war, have been excluded from markets they formerly occupied. It is for this reason we have had difficulty in connection with exports to the United Kingdom, western Europe and the countries of the commonwealth. But now that these trade restrictions have been removed, the opportunities are there for Canadian business to take advantage of them.
A remarkable response to the entry of Canadian goods into the United Kingdom has taken place recently. You have read about it in the newspapers. Enterprising Canadian businessmen have invaded United Kingdom markets closed to them for many years and have made surprising sales. It is only a little over a year ago that the best example occurred of what happens when controls are removed. I suppose for almost 20 years Canadian salmon could not find its way into the United Kingdom market because of quota restrictions. When these quota restrictions were removed the entire Canadian salmon pack was purchased by United Kingdom importers and once again appeared in the United Kingdom market.
The reports we are getting with regard to our commodity trade are encouraging. The foreign demand has given rise to an increase in the production of aluminum and nickel

and in copper has sustained capacity production. Active demand has reappeared for zinc and the forecast high level of United States steel production promises we will do better in 1960 than in 1959 in iron ore. In the forest products field the high levels established in 1959 may be exceeded in 1960 for newprint and woodpulp. I mentioned lumber to the United Kingdom market. The January bookings of business in lumber in that market were up almost 100 per cent over the previous year's levels. In chemicals Canadian exports are reaching new peaks. Early indications are that foreign sales of synthetic resins will reach a new all-time high in 1960, particularly benefitting from trade liberalization in various countries.
With our increased production facilities for fertilizers the prospects are that exports will increase by some 10 or 15 per cent, the major market for this product being the United States. Our foreign sales of synthetic rubber will also move forward due to current high levels of demand. Our aircraft industry is making headway in the transition from military aircraft production into commercial aircraft and has successfully negotiated sales of turboprop freighters to United States commercial air lines. Negotiations are presently taking place for additional export orders on a world-wide basis. In the field of lighter aircraft, export demand has been maintained for both land and amphibious aircraft. Designed in Canada to meet Canadian requirements, these types of aircraft have a wide variety of applications such as agricultural pest control, aerial survey work and for transportation to inaccessible areas where aircraft landing facilities are limited. There has also been a considerable demand for this type of aircraft for search and rescue purposes.
The electronics industry has also been favoured by the acceptance of Canadian aircraft in foreign markets. In addition to the equipment normally included in these aircraft it has, independently supplied both navigational and direction finding equipment to foreign buyers. In the communications field important contracts have been negotiated for microwave equipment in Europe, Venezuela and Colombia. A Canadian company has obtained a substantial order for carrier telephone equipment. The electronic equipment industry has been successful in obtaining orders for a wide range of the electronic control mechanisms. Interest is keen in heavy engineering products and next year's exports will reflect the successses which were achieved in 1959 on tenders submitted for hydraulic turbines on two separate projects in the United States and another in New Zealand, and a Canadian firm has been

successful in competing for orders for heavy electrical equipment in Venezuela.
The promising possibilities are not limited to the primary materials and capital equipment fields. There has been an enthusiastic response to the liberalization of import restrictions in the United Kingdom during 1959. On the subject of getting into the United Kingdom market-and this will answer in part the question of the Leader of the Opposition-may I say that our imports from the United Kingdom in 1956 were 8.5 per cent of our total imports, or $476 million, and rose in 1959 to $589 million or 10.7 per cent. From the United Kingdom we have been receiving imports greater than was the case a few years ago, and with the dollars earned by the sale of United Kingdom goods in Canada they have been in a better position to purchase from us. Within the last three years the Canadian exports to the United Kingdom have increased from $726 million in 1957 to $794 million in 1959. For the month of January the exports from Canada to the United Kingdom increased in one month by an amount almost equal to the total increase for the previous 12 months. This gives you some idea of the expansion of Canada's trade, and the maintenance and increase of our trade with the United Kingdom.


George James McIlraith: I wonder, Mr. Speaker, if the minister would permit a question at this point. I have been trying to follow his argument that the easier condition of trade as a result of the removal of restrictions, presumably by overseas countries since restrictions were not mainly on the part of the United States, then does not that make the fact that there is in total trade a current deficit in 1959 with overseas countries of $224 million, the first deficit for a great number of years, all the more serious? Does not the whole argument he is making point up the seriousness of the situation, and if I am wrong in my deductions would he just explain the argument he is seeking to make? I have taken the figures from page 22 of the Bank of Canada report, or the dominion bureau of statistics quarterly, page 6, has the same figures.


Gordon Minto Churchill: The hon. member for Ottawa West (Mr. Mcllraith) is reading from page 22 of the Bank of Canada report where the dominion bureau of statistics figures are shown. He, again, is taking the merchandise and non-merchandise items together. I have mentioned before that what I am talking about is simply the merchandise balance, that is only export trade. I am not talking about these invisible items, these other items which deal with such things as freight, interest, dividends and things of that nature. I am
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dealing now with commodity trade. The figures that I have been looking at are the figures in the first three columns. Our deficit on imports was $386 million.


George James McIlraith: If the minister refers only to merchandise trade, if he will take the earlier column he will note in the overseas countries a very sharp decline in the favourable balance for merchandise trade.


Gordon Minto Churchill: Yes.


George James McIlraith: I do not follow his reasoning that if trade is so much easier in that territory because of the removal of restrictions there is so much satisfaction to be found in the sharp reduction even in the favourable balance on merchandise trade.


Gordon Minto Churchill: Mr. Speaker, I am showing that our export trade is being maintained and extended. At the same time there has been a shift in the trading pattern and Canada has been bringing in from overseas countries more goods than she was earlier and bringing in fewer from the United States. Whereas a few years ago our total imports on the merchandise side from the United States were 73 per cent of our total imports, that has dropped now to 68 per cent. The shift has been to bringing in imports from the United Kingdom, from countries in Europe and from the commonwealth. Actually, with overseas countries we have a favourable balance of trade for 1959 to the amount of $132 million. It has not disappeared; the favourable balance is still there. That, taken against the unfavourable balance with the United States, has left us with an unfavourable merchandise account of $386 million, and that is the figure with which I am dealing in this discussion.
Along with the export of resource material, primary products, materials from resource industries and manufactured articles, there is another aspect of Canadian trade which I have mentioned before but which should be mentioned again, and that is the work which Canadian consulting engineers are doing abroad. They are the forerunners and experts of Canadian engineering progress. We have assisted the Canadian consulting engineers to the best of our ability in their work abroad, and I have nothing but commendation for the work which they are doing because as the consulting engineers move into countries like India, Pakistan, Norway or Sweden, or any country of the world, they tend to attract Canadian products to assist in the development of the projects which they have been undertaking. Canadian industry has generally been responsive to the new opportunities which are opening up in this decade for trade abroad.

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One might ask, what are we as a government doing about it? We are giving every possible assistance. We have a foreign trade service in the department which constantly keeps in touch with opportunities abroad and informs the department here, and through the department businessmen in Canada, of trading opportunities which they may be interested in. Right at this stage, because of the change that has resulted in the United Kingdom through the removal of restrictions, several of our commodity experts, experts in the consumer goods line, will be going to the United Kingdom for short periods to gather information at first hand which they will then relay to Canadian exporters here at home, and they will assist in staffing our commercial offices in the United Kingdom. We intend to assign in the near future a second timber specialist to work in the United Kingdom, and he will be located in the newly opened Glasgow office and will concentrate on trade work in the northern and western sectors of that market.
The department has been experimenting with new techniques for promoting exports of semi-processed materials, and this is in keeping with the objective of this government that Canadian raw materials should be further processed within the country.
The potentialities of a large number of large and small wood manufacturing plants have been surveyed and their range of product classified according to possible industrial applications. The information developed is in the hands of our office in London who search out market potentialities. Little has been done in the past to develop exports of component part manufactures, such as the automobile part makers. A similar approach will be made by officials of this department in this field to see what can be done to follow on established successes of one or two firms in finding markets in secondary industry in other countries, including the United States, for their products.
With regard to the trade commissioner service, I have mentioned this before in the house but it is worth repeating. We have now more than 100 trained and competent officers stationed at 60 posts in 46 different countries. We have recently opened a new post at Glasgow. Two more new posts will be opened in 1960, one in Australia and the other at Lagos, and further new offices will be opened where it appears that there will be opportunities for Canadian business to develop. From all indications we expect that the year 1960 will be a record year for Canadian trade.
Mr. Speaker, the question of Canada's trade policy arises and there seems to be

some misunderstanding with regard to it. There is no misunderstanding in the minds of the government. We know exactly what we want done and how to go about it; and as I mentioned before the supper hour Canada's trade has been a priority engagement of ours since we took office and we have taken great steps toward maintaining that trade and expanding it, and we will continue along that line.
Canada continues to follow a trade policy which is directed to the achievement of a trading system in which Canadian exports have access to markets throughout the world on a basis of equality with all other suppliers. The structure of Canada's trade does not permit a neat bilateral balance between Canada and each of her trading partners. We hope that where there is a trading deficit with one trading partner, that will be made up by a trading surplus with another. We believe that it is to the best advantage of Canada to support a multilateral international trading system based on the principles of most favoured nation tariff treatment and non-discrimination. Trade agreements which incorporate these principles have been concluded with all the major trading nations of the world, particularly through the general agreement on tariffs and trade. Under the agreed international rules of the GATT and of the IMF substantial progress has been made in expanding Canadian export opportunities and in ensuring Canadian exporters equal treatment in world markets.
As regards tariff barriers to trade, Canada's access to foreign markets has been markedly expanded through the reduction and binding against increases on a wide range of tariffs of interest to Canada. Canada has declared its intention to participate in a further general tariff conference called for September of this year. Moreover, during the past two years and particularly during the year 1959 the United Kingdom and other countries of western Europe have made major progress in accordance with their international obligations in dismantling quantitative restrictions against Canadian trade. At the present time, Canadian exports enjoy generally unrestricted access to these markets. While Canadian exporters continue to be faced with import controls in their access to many of the less developed markets, the discrimination which has been made against dollar suppliers has been all but eliminated.
We are continuing to press strongly for the removal of the few remaining discriminations with regard to our exports to the United States market. Some 80 per cent of Canada's trade now enters free of duty or at rates of less than 10 per cent, and Canadian shipments to that market are at a record level. The

quantitative restriction on the sale of Canadian petroleum in the United States market has been removed. Apart from the quotas maintained by the United States on imports of lead and zinc, no new barriers have been placed in the way of Canadian trade, and the opportunities for export to the United States market are greater now than at any time in the past. We look forward to securing even greater access to the United States market in the course of the forthcoming round of multilateral tariff negotiations.
At the same time, vigorous efforts are being made to strengthen Canada's relation with its commonwealth partners. A trade agreement was signed recently with Canberra providing for improved trading opportunities between Canada and Australia and this agreement further expands Canada's opportunities in that market. Steps are now under way looking to the strengthening of Canada's trade relations with the West Indies. The 1958 Montreal conference contributed substantially to the improvement of mutual understanding among the commonwealth countries. As regards the development of European regional arrangements, Canada's trade policy is directed toward the production and establishment of a beneficial trading interest in that area and to secure advantages from the new trading opportunities which closer economic integration in Europe may provide. To this end Canada has at every opportunity impressed upon the participating European countries the importance of avoiding the emergence of any new barriers against Canadian trade and of developing outward-looking arrangements which would lead to the expansion of international trade rather than to its contraction.
Canada has welcomed the opportunity to participate more actively in the discussions now taking place in Europe as a further means of expanding world trade and of promoting Canadian interests both in Europe and in other parts of the world. At the Paris economic meetings in January, which were attended by the Minister of Finance and myself, important decisions were taken looking toward Canadian and United States participation with the European countries in a revised organization for economic co-operation. A trade committee was established which will have its first meeting at the end of March. Through these meetings, and through the GATT and in our direct contacts with our trading partners, the government has taken the necessary steps to further our important export interests.
New challenges and problems are arising as we enter the decade of the sixties. We intend to keep our economy and our external policies in a healthy state to meet them.
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Those are the ways in which we are approaching this important problem of Canada's trade. There is no aspect of it which is not receiving our attention. We are prepared to attend, and we have attended, these international meetings at which trade problems have been discussed, and Canada's interest has been put forward with emphasis and vigour at those meetings. We have urged countries which are forming regional trading blocs to be careful not to interfere, first of all, with their obligations under GATT and secondly with their trading relations with countries outside their regional blocs.
Fear is sometimes expressed with regard to the change in the trading pattern resulting from the formation of the common market in Europe, the outer seven, or the new organization formed among the Latin American republics. I have not shared some of the alarm which has been expressed. At the same time I think we have to be on the alert to see that these trading arrangements do not hamper and restrict world trade. I look at it this way, that western Europe is one of the great trading areas of the world; western Europe is not self-sufficient; it has to trade with other people. Just to show that it is not self-sufficient, may I draw the attention of the house to a report in the Globe and Mail of March 18 where the Netherlands ambassador to Canada was talking about these two groups. He said, and I quote from this article:
Exports of the six common market countries in 1958 remained 30 per cent within their own orbit. They went to the extent of 22 per cent to the countries of the outer seven, and 48 per cent found their way to the rest of the world.
In the case of the outer seven, 17 per cent of their combined exports remained within the group; 22 per cent went to the common market and 61 per cent to the rest of the world.
Then the ambassador went on to say:
The trade interest of the European groups in the outside world is important enough to warrant the expectation that no policies will be pursued which would seriously jeopardize these vitally needed markets.
Europe takes things from us, too. Of Canada's total exports for 1958, 8.7 per cent went to the common market countries, about one third of this being agricultural products. Of that, 65 per cent was represented by wheat. In the same year, 4.7 per cent of Canada's imports came from the common market countries. Then, of course, we do a greater business still with the countries of the outer seven, because the outer seven contains the United Kingdom. Our trade with western Europe is a substantial proportion of our external trade. Western Europe will require things from Canada in the future just as in the past, and as the standard of



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the United Kingdom also dismantled practically all of their restrictions during 1959. In addition there were minor liberalization moves in Pakistan, South Africa and Ghana. In the West Indies there were two major steps toward liberalization of imports and in the light of these developments it was decided to terminate the West Indies trade liberalization plan which was originally established in 1951 in order to provide access to the West Indies for Canadian goods which otherwise would have been completely excluded. As controls were removed the scope of the plan was progressively reduced and by September, 1959 most Canadian exports were entering the West Indies without restriction. As a result of that, Canada agreed with the United Kingdom and the West Indies to terminate the liberalization plan effective December 31, 1959 and has received assurance that the West Indies will consult Canada about licensing arrangements for products covered by the plan which were not yet liberalized on the understanding that access generally to West Indies markets for Canadian exports of these products would be on terms no less favourable than in the past.
Discussions continued during 1959 between the various West Indian territories regarding the establishment of a customs union in the new federation. These developments were followed closely. As agreed at the Montreal conference the revision of the Canada-West Indies trade agreement of 1926 will be dependent on the progress which the federation makes toward a customs union.
The new Canada-Australia trade agreement which was negotiated in 1959 in Canberra was signed on February 12, 1960 and will come into force when ratified by the two governments. We will be discussing that in this house later on in the spring.
The agreement provides increased safeguards and improved access for Canadian exporters to Australia. In addition to receiving British preferential tariff treatment on most products Canada will be accorded some important new concessions. Australia has undertaken to bind against an increase in the actual rates of duty on a number of products of interest to Canada including canned salmon and sardines, sausage casings, knitting machine needles, office machinery, some chemicals, paper makers' felts, and asbestos. Australia will bind the existing margins of preference on most products of interest to Canada. The new agreement also contains provisions relating to the suspension of margins of preference in Australia through administrative action, the use by both countries of anti-dumping duties and the establishment of machinery for consultation of trade and economic matters.
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During 1959 the proposals agreed upon at the Montreal conference for co-ordinating the existing arrangements for consultation and co-operation among members of the commonwealth were implemented with the holding of the first meetings of the commonwealth consultative economic council. The council met at the senior official level in London from May 5 to 8. A meeting of the council at the ministerial level took place on September 23 and 24, also in London. In addition, a meeting of the Canada-United Kingdom continuing committee was held on July 2 and 3 in order to provide an opportunity for discussing matters of particular interest in the relations between those two countries, and representatives of the Department of Trade and Commerce were present at all those meetings.
Now with regard to the United Kingdom membership in the European free trade association, Canada naturally has a great interest in this because the United Kingdom is our best customer in western Europe; but we do not foresee any great change in our trading relations with the United Kingdom, despite their connection with this group called the outer seven. Canada will continue to receive free entry of most of its exports to the United Kingdom.
Although in general the European free trade association does not involve the elimination of internal tariffs on agricultural and fishery products it does contain provision for negotiation of special arrangements concerning trade in agricultural products between member countries. Under an arrangement of this kind with Denmark the United Kingdom has undertaken to reduce its tariffs on Danish bacon and canned pork luncheon meat by 50 per cent on January 1, 1960, and eliminate it altogether on July 1, 1961. Then the United Kingdom has agreed to a request by Norway that frozen fish fillets should be treated as an industrial product and the tariff removed over a 10-year period. In the light of the proposal to eliminate Canada's preference in the United Kingdom because of this arrangement with Denmark, Canada made representations to the United Kingdom for the removal of the import restrictions which have been maintained on Canadian bacon for balance of payments purposes and the United Kingdom agreed to establish a quota of 25,000 tons of frozen pork from the dollar area for the year beginning January 1, 1960. This will give you an idea of the careful attention that is paid to trading arrangements entered into by our trading partners and the adjustments that have to be made in order that trade may be maintained.
The resumption of economic expansion in the United Kingdom appeared to lag behind
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that in the United States and, to a lesser extent, behind that of the major industrial countries of western Europe. In consequence, the effect of this recovery on the level of Canadian exports was relatively slight during the year as a whole-an increase of 2.1 per cent. Toward the end of 1959, however, British demand strengthened and in the last quarter of the year Canadian exports reached a record level for the period. Many of Canada's major agricultural and industrial exports to the United Kingdom remained about stable between 1958 and 1959. Wheat and flour, flaxseed, woodpulp, pulpwood, aluminum, copper and lead remained virtually unchanged in export value in the two years.
Among the more notable changes taking place, exports of uranium ores rose from $13,500,000 in 1958 to $33 million in 1959. Sales of oilcake and meal rose from $6 million to $15 million, and for the first time in many years Canada shipped a sizeable quantity of butter to the United Kingdom, valued at $6 million. Iron ore, newsprint, paper, tobacco and zinc advanced more moderately. There was some decline in value of our exports to the United Kingdom of barley, canned fish, lumber, nickel, platinum and abrasives. Purchases from the United Kingdom increased more markedly, rising by over 13 per cent in 1959 from the level established in 1958, a dollar increase of $70 million. This was highly concentrated in larger sales to Canada of automobiles and parts and other consumer durables and semidurables.
In January, 1960, Canada's exports to the United Kingdom were $13,500,000 higher than in the same month of 1959, an increase of almost one quarter. This compares with a rise of $16.1 million in sales to the United Kingdom in the year 1959 as a whole over the figure for 1958.
With improvement in the general level of prices for raw materials and agricultural products, the basic export commodities of other commonwealth countries, foreign exchange difficulties eased for most of these countries in 1959. While for the year as a whole Canadian exports to this area to those other commonwealth countries were slightly below those of 1958, they showed marked gains of 9 per cent and 13 per cent in the third and fourth quarters respectively. Exports of wheat to India were $22 million lower than in 1958, when large shipments were made under long term credit and aid arrangements to help meet the shortage situation prevailing at that time. On the other hand, South Africa was back in the market for wheat in 1959, purchasing $15,500,000 worth as against none in 1958. Wheat sales

were up to Pakistan and Ghana. Australia and South Africa purchased substantially more newsprint paper in 1959. Sales of automobiles and parts to Australia were greater in 1959, as were those of aluminum to South Africa. The general improvement in the price of bulk commodities which these countries supply to Canada-wool, tea, sugar, bauxite and rubber-was the main factor in the 12 per cent increase in Canadian purchases of these goods in 1959.
That, Mr. Speaker, gives you some idea of Canada's trade relations with commonwealth countries. Our trade is being maintained with those countries and is being expanded. Great efforts are being made through our trade commissioners abroad, and through the activities of Canadian businessmen, to enlarge Canada's trade with commonwealth countries. We have a long history of excellent trade with all of those commonwealth countries and we are going to make every effort to maintain it at a very high level. The opportunities now have been greatly widened for Canadian exporters, owing to the removal of restrictions that were imposed by those countries for reasons very largely beyond their control.
But with the general world recovery taking place we are now seeing the effects of the liberalization of trade, and I have listed tonight a great many of the articles of interest to Canada that now can be sold freely in the United Kingdom, in Australia and in other countries of the commonwealth. This is one of the reasons, among many others, why we are looking forward to a banner year in 1960; one of the reasons why in the year-end report of the Department of Trade and Commerce the view was expressed that our export position would improve and that gradually the gap between exports and imports would narrow.
We have based our forecast for 1960 on very sound grounds; it is not a blind, optimistic survey without relation to facts. The facts are evident, and I have drawn attention to them tonight. It surely follows that if markets that were closed to goods from Canada for 20 years are now open, there is a great opportunity for Canadian exports. It surely follows from experience that if some of our Canadian exporters have already enjoyed an expansion in the United Kingdom market that that opportunity can be expanded and seized by other exporters from Canada. These are reasons why we are not depressed over the Canadian trade picture at all. In fact, there is reason for confidence in the future. Canada has the resources. These markets are now open to us and yet,

during the last three years before these markets were open to us, we were maintaining our position among the great world traders.
In the year 1960 the figures for the early part of the year indicate a very important and substantial improvement in our export trade. Therefore the people who have been expressing some fear and alarm with regard to the deficit that we experienced in our merchandise balance for the year 1959 may take heart. It will not take much in the way of exports to close that gap, which was much higher in the year 1956. It was double what it was for 1959. So our trade picture, far from being a depressing one, is an encouraging one.
The Leader of the Opposition dwelt at some length on the development of the regional trading blocs in western Europe, which I mentioned casually a few minutes ago, and expressed alarm that these trading blocs might do damage to Canada's trade, and I suggested that in the long run Canada's trade with western Europe would likely be improved rather than restricted. These European trading arrangements deserve the most careful attention and we have been giving to these trading blocs just that type of attention. We have been watching them very closely. Right from the very beginning or at least from the time that we took office in 1957, in speaking at GATT conferences and other conferences we urged that these new trading arrangements in Europe should be made outward-looking rather than restrictive. We urged that no tariff barriers should be raised against trade. We urged that these western European nations should observe their obligations under GATT and we particularly stressed the importance of maintaining for Canada in these markets our position in agricultural products.
We know the importance of the markets in the United Kingdom and Western Europe for our Canadian wheat. That is where most of it is sold and of course it is of vital importance to us that that market be maintained. So there is every reason for Canadians to view these developments in western Europe and watch them with the greatest of care. The government has been doing that and Canadian officials have kept a very close eye on the situation and have kept us very well informed with regard to these matters.
The European economic community consists of six nations, France, Germany, Italy, Belgium, the Netherlands and Luxembourg. It has a population of 160 million people. Their aim is to create an economic community with free trade within the area and a common tariff and common economic policies toward the outside world. The treaty calls for the implementation of these arrangements over a period of some 12 years.
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On January 1, 1959, the first steps in the elimination of tariffs within the Six were taken with a reduction of 10 per cent in the rates of duty on trade within the area and by an increase of 20 per cent in the quotas maintained by the member countries on each other's trade. In order to reduce the extent of tariff differentiation which this move would inevitably involve at this stage some of these reductions were extended to Canada and to other countries on a most favoured nation basis. This applied in particular with respect to the tariffs now in force in France and Italy. The next stage in the reduction of tariff barriers within the area is scheduled to take place on July 1, 1960.
The Leader of the Opposition mentioned the speeding up of the program of the Six toward economic unity which is their desired goal. Let us consider what is the effect on Canada or what might be the effect on Canada. Among the major issues faced by the countries of the European economic community during 1959 was the special problem of working out the level of the common tariff to be established for a number of important items. These included the rates on a number of products of particular importance to Canada such as aluminum, lead and zinc, synthetic rubber, timber and wood pulp. These negotiations are now complete and their implications are being studied.
While these discussions were going on Canada took every opportunity to urge the member countries of the economic community to establish rates of duty on these important items of Canadian trade at levels which would not prevent the continuation and further development of Canadian trade. While that was going on with regard to these six countries, seven countries consisting of the United Kingdom, Norway, Sweden, Denmark, Austria, Switzerland and Portugal initiated negotiations among themselves looking toward a free trade area. They signed their convention on November 20 and expect to have it ratified by the governments of the member countries by the end of March of this year. They are looking toward the progressive achievement of free trade among the seven countries through the removal of tariffs and other trade barriers over a period of 10 years.
The first 20 per cent cut among the members is to take place on July 1 of this year, and unlike the European economic community the free trade association does not provide for a common tariff against outside countries. Each country will be free to maintain and to alter its own tariffs and to pursue a generally independent commercial policy.
The seven countries are all low tariff countries. One of the declared objectives of
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the Seven in forming a free trade association is to facilitate the early establishment of an association for the removal of trade barriers and the promotion of closer economic cooperation with the countries of the European economic community. The Seven have been pressing for a Europe-wide free trade area.
With regard to our trade with western Europe I will just give a few of the articles that Canada ships to western Europe and the amounts. One of the reasons for the decline in our total trade with western Europe in 1959 was that we had previously sold many military aircraft to Belgium and West Germany. Aircraft to the value of $85 million were sold to these countries and that, of course, was not repeated. That was part of a NATO commitment. There was some reduction in our exports of wheat and copper to the Netherlands in 1959. Other than these items our exports to western Europe remained steady or improved.
Aluminum sales to France, West Germany and Italy were substantially above the 1958 values. Iron ore exports to the Netherlands were almost double. Flaxseed exports to West Germany and rapeseed exports to Italy' strengthened in 1959. Asbestos and primary iron and steel showed more moderate gains.
There were few marked changes in the commodity pattern of Canada's exports to the continental members of the European free trade area, exclusive of the United Kingdom. Sales of wheat were down, with a larger proportion of the imports of these countries being supplied from other European sources. On the other hand, shipments of aluminum and nickel were up. Outside of these items commodity exports were stable. On the import side, purchases from western Europe as a whole increased. This increase was largely in passenger automobiles and parts from West Germany, France and Italy.
I cannot give all the items of the trade that goes on between Canada and these countries of western Europe but I have given some indication of the importance of that trade to us and some indication of Canada's interest in making sure that these two new regional groupings in western Europe will keep as their objective the enlarging of trade and not the restricting of trade.
I continue to hope that they will maintain their interest in world trade. I mentioned earlier this year that I had had the privilege of seeing the ministers of commerce in most of these countries of the Six and the Seven, and each one assured me that his country, just as ours, was anxious to increase trade rather than restrict it.
We have one trading partner that outranks in size of the business that which we do in trade with all others combined and, of course,

that is the United States. The United States has been Canada's best customer back for a great many years and, alternately, Canada has been the United States' best customer. Our trade relations with the United States are of the greatest importance to our country. Canada's exports to the United States reached a record level of over $3 billion in 1959 and the trend has continued into 1960. The United States continues to be, by far, Canada's largest market and to supply the biggest share of Canada's import requirements. While the trade imbalance increased substantially early in 1959, this trend was reversed in the last quarter with a notable increase in Canada's exports to the United States.
Nineteen fifty nine was marked by a further improvement in Canada-United States trade relations. There was an increasing degree of co-operation between Canada and the United States in furthering our mutual trade objectives. In this connection, United States leadership in pressing for a relaxation of restrictions and the elimination of discrimination maintained for balance of payments reasons by many other countries was particularly welcome. Canada has also welcomed the more active United States participation in discussions relating to the development of regional trading arrangements in Europe.
Early in 1959 the joint United States-Canada committee on trade and economic affairs met in Ottawa. This committee, composed of cabinet ministers of the two countries, reviewed developments in the world economic and commercial situations and examined various issues bearing on trade and economic relations between Canada and the United States. A closer understanding and appreciation of the interests of the two countries was reached and there were useful discussions on matters of common interest. The Canadian side expressed concern over United States restrictions maintained on imports of lead, zinc and petroleum. Fruitful discussions were held regarding the problems for Canada arising out of the United States program for surplus disposal of agricultural products. It was agreed that these trade matters should be kept under continuing review in an effort to reach an equitable solution. Arrangements were made for quarterly meetings of wheat experts from the two countries to deal with any problems which might arise in this field.
Detailed discussions were held in the early part of 1959 regarding the United States oil restrictions. The voluntary controls which applied to oil in the early months of 1959 were replaced by a mandatory import control system. Strong representations were made to the United States government on this matter

and as a result of these discussions Canadian oil was freed from these import restrictions by a presidential proclamation of April, 1959.
No satisfactory solutions were found with regard to the restrictions imposed by the United States in October, 1958 on imports of lead and zinc. These restrictions constituted a serious impairment of United States trade agreement obligations to Canada and their continued application is a matter of real concern. The Canadian government has continued to press strongly the United States on this serious difficulty affecting trade relations between the two countries. A further investigation by the United States tariff commission into the domestic lead and zinc industry to see what additional United States restrictions, if any, needed to be imposed was undertaken but not completed during the year, and this investigation added to the uncertainties affecting trade in these items.
Apart from the problem of lead and zinc Canada's access to United States markets was unaffected by any major adverse developments. While there were a number of United States investigations to determine whether imports were causing or threatening injury to the United States industry, no adverse action was taken. Products involved included the following of interest to Canada, mink fur skins, calf leather, hardwood, plywood, and red fescue seed. A favourable development was the withdrawal on July 1 of escape clause action taken by the United States on alsike clover seed.
On February 16 and 17, 1960 the cabinet level joint Canada-United States committee on trade and economic affairs met again in Washington. The continuing expansion of economic activity in both countries was noted, as was the substantially improved economic and financial position of most other countries in the world. The committee discussed the prevalence of special restrictions on agricultural trade and emphasized the importance of pursuing policies which would encourage an expansion of trade. The committee discussed problems and developments which had arisen in trade between Canada and the United States in important items such as lead, zinc, crude oil, natural gas and uranium. Consideration was given to problems arising from rapid increases of imports into Canada and the United States in certain lines of low cost manufactured goods. Particular attention was paid to the situation arising from the Paris economic meetings of January 12-14 dealing with the establishment of the European economic community and the European free trade association and the need to find solutions to current trade problems in Europe
Business of the House
on a multilateral basis. There was an exchange of views on other matters including development aid to the less developed countries and proposals for the reconstitution of the organization for European economic co-operation.
Just before moving adjournment of the debate, Mr. Speaker, I should like to say that I will be able to complete my remarks tomorrow without too much trouble. I want to make it clear that Canada's trade is in a healthy condition. I want to make it clear that the government has been taking every measure open to it to stimulate Canadian trade. At the same time, I should like to pay my compliments to Canadian businessmen who have continued to press for an expansion of Canadian trade with all countries of the world.
May I move the adjournment of the debate?

Lionel Chevrier: The house leader was good enough to indicate on Friday that he would give the order of the business which was then announced on Monday. I wonder if he would be good enough to do that now.


Gordon Minto Churchill: It will follow pretty well along the lines I indicated on Friday. I am hoping the house will pass rather quickly the first three items of business, two of which are to refer matters to committees and one to set up a committee. The first is a motion in the name of the Acting Secretary of State-


Lionel Chevrier: I hope it will do better than the minister did tonight.


Gordon Minto Churchill: -to refer the Canada Elections Act and other matters to the committee on privileges and elections. Item No. 2 is the motion in the name of the Minister of Transport to establish a committee on railways, air lines and shipping. The reason for doing that on Wednesday is that the heads of the organizations in the transportation field will be in Ottawa on Tuesday, the 29th, and the committee would like to be ready to discuss matters of interest with them on that occasion.
Then there is the motion in my name referring to the committee on agriculture and colonization a study of the delivery of grain to feed mills, which would not occasion any debate in the house because I am sure there would be ample scope at the meeting of the committee to discuss that. Then we would take up interim supply and pass from that, I think, to supplementary estimates.

Business of the House Mr. Chevrier: May I ask about the amendments to the energy bill which were mentioned on Monday. Is it the intention to go on with that?


Gordon Minto Churchill: If it comes forward. I did not have an opportunity today to find out what stage they are at. I have two amendments to the National Energy Board Act
which must, if at all possible, pass through both houses before March 31.


Lionel Chevrier: In any event, it will not be on Wednesday?


Gordon Minto Churchill: No, not now.


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It being three minutes after ten o'clock the house adjourned, without question put, pursuant to standing order.

Questions

Mr. Roberge: 1.	Were tenders called more than once In connection with the repainting of the federal building at Disraeli, Quebec?
2.	If so, by what method in each case?
3.	On what dates were tenders called and on what dates were they opened?
4.	What are the names of those who submitted tenders and what were the respective amounts of each tender in response to each call?
5.	To whom was the contract awarded?
Answer by: Hon. D. J. Walker (Minister of Public Works):
1.	Yes.
2.	Local public tender and invited tender call.
3.	(a) Local public tenders were called on November 17, 1959 and were returned to the tenderers unopened.
(b) Invited tenders were called on December 28, 1959 and were opened on January 15, 1960.
4.	(a) Local public tenders were received from:
Gilles Cote, Ste. Agathe de Black Lake; W. Grondin, Disraeli; J. L. Lafleur, Thetford Mines; Rene Lafleur, Thetford Mines.
(b) Invited tenders were received from: Raoul Allaire, Disraeli, $2,050; Robert Ger-vais, Disraeli, $2,150; Sylvio Fortin, Disraeli, $2,300.
5.	Contract awarded to Raoul Allaire.
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