- The Empire Club of Canada Addresses (Toronto, Canada), 12 Apr 1962, p. 262-273
- Mathers, F.D., Speaker
- Media Type
- Item Type
- "Build Industry—Build Canada" as a suggestion that makes the ultimate in common sense. The continued considerable strength of the Canadian economy. Some caution about the present upturn. Developments of enormous and far-reaching significance unfolding in the world. The resurgence of Europe and the strikes towards Old World unity. Now Europe rather than North America calling the economic tune. Some evidence and developments to support this. Where this leaves Canada. Canada as one of the most liable of the leading industrial powers to be hurt by any programme of systematic tariff reductions. A discussion of this premise follows. The specialization concept for Canada, and arguments against it. Pursuing national policies aimed at creating a viable economic climate for manufacturing industry in toto. The alternative of being absorbed by the United States. The importance of a separate identity for Canadians. An alternative that makes sense: one that accords the highest priority to the further expansion and diversification of the manufacturing industry. Signs that Canada is in the early stages of such a shift in emphasis. Some suggestions for the stimulation of industrial investment and expansion. Taxation and population. The effect of foreign competition. Protecting Canada's standard of living. The importance of freedom and the private enterprise system to Canada's standard of living.
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- 12 Apr 1962
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- BUILD INDUSTRY BUILD CANADA
An Address by F. D. MATHERS President, Canadian Manufacturers' Association
Thursday, April 12th, 1962
CHAIRMAN: The President, Dr. Z. S. Phimister.
DR. PHIMISTER: Distinguished guests, ladies and gentlemen. On Tuesday night last the Minister of Finance, Mr. Donald Fleming, brought down his budget in the Commons. Our press in the last two days has been carrying much comment about what effect the budget would have upon business. As our speaker today we have Mr. Fred D. Mathers who, as president of the Canadian Manufacturers' Association, is well qualified to assess the impact of the proposed fiscal policies upon the business community. We are fortunate indeed to have Mr. Mathers with us at this particular time.
Mr. Mathers is president of Royal City Foods Ltd. and Delnor Frozen Foods, Ltd., New Westminster, B.C. He received his schooling in the public and high schools in Vancouver, and at Edinburgh University and McGill.
Mr. Mathers was Administrator, Processed Fruit and Vegetables, Wartime Prices and Trade Board, 1942-45; Past Commissioner, International Pacific Salmon Fisheries Commission. He has served as President of three organizations, which I should like to mention, viz., Canned Foods Association of B. C., Canadian Food Processors Association, and New Westminster Board of Trade. Mr. Mathers enlisted in Queen's University 46th Battery in 1915, served in France and was promoted to Lieutenant in the field. He served in the Second World War, Reserve Artillery, Ottawa, 1942-45, as Captain, 33rd Field Regiment, R.C.A.
Mr. Mathers pilots his own private plane, and this has enabled him to move about in Canada to visit many cities during the course of the last few years. We welcome him here in his own right and as President of the Canadian Manufacturers' Association, and we look forward to hearing his speak now on the subject, "BUILD INDUSTRY -BUILD CANADA."
MR. MATHERS: The nation-wide organization of which I have the honour to be president has chosen a most important economic exhortation as the slogan for its annual meeting this year. I decided, when I received the kind invitation from your officers to address this great Club here in Toronto today, to steal a march on my colleagues and use the same slogan as the title for my remarks. I hope that, when I have finished speaking, you will agree with me that "Build Industry-Build Canada" is a suggestion that makes the ultimate in common sense.
Now that we are entering the second quarter of 1962, it is quite apparent that the Canadian economy continues to show considerable strength. The winter that has just passed saw much less unemployment-both seasonal and nonseasonal-than was the case in the preceding two or three years, which is something we can all be glad about. What's more, at this point there is every reason to expect that the gross national product in 1962 will show its biggest real jump in several years. On the surface, then, the immediate economic picture is quite a cheerful one.
Significantly, the improvement in the employment figures reflects busier factories. The Dominion Bureau of Statistics has noted that strength in the manufacturing sector of the economy is largely responsible for the decline in the number of those without jobs.
Does this current upsurge mean that we have mastered those chronic problems that have so sorely beset us in recent years? It would be pleasant to think so, but I do not for one moment believe that we dare risk any such assumption.
The truth is that the present upturn, encouraging as it is, is not so deep-seated or fundamental as to provide real insurance much beyond the present year. What we are witnessing is in fact the normal operation of the business cycle and, because this is true, the current upturn may well prove temporary and taper off.
Meanwhile, in the greater world of which we are but a part, economic developments of enormous and far-reaching significance are unfolding. The most important of these is the resurgence of Europe and the breath-taking strides towards Old World unity which has followed the ending of the Second World War and the disintegration of colonial empires. This has now reached the point where, for the first time in fifty years, it is Europe rather than North America which is calling the economic tune.
In the course of this explosive half century and through two world wars, it was the political and economic decisions of the U.S.A. which were decisive in terms of the consequences for good or ill on Europe. Within the past decade, however, there has been a gradual but increasingly perceptibe turnabout until today when it is North America which is reacting to economic decisions made in Europe.
Evidence of this was to be found in the fact that the two North American business recessions of the past half dozen years had no appreciable effect on Europe's boom, galvanized as it was by the formation and subsequent success of the European Economic Community. It is even more apparent in two recent developments.
The first was the decision of Washington and Ottawa to join with the eighteen European O.E.E.C. members in the establishment of the Organization for Economic Cooperation and Development, which had its inaugural meeting just six months ago under the chairmanship of our own Minister of Finance, Mr. Donald Fleming. The O.E.C.D., as you know, has evolved from the old Organization for European Economic Co-operation.
The second and probably more important development was the recent decision of President Kennedy to seek from Congress rather far-reaching powers to lower traditional U.S. tariff barriers and negotiate reciprocal arrangements with Western Europe and other nations.
As to the second development, nobody can say how co-operative Congress is going to be in this a U.S. election year. But there can be no doubt that, if the President does get most of his way, the ensuing liberalization of world trade will have truly tremendous implications for Canada.
Where does this leave us? It is tempting perhaps-and certainly easy-for Canadians to welcome the prospect of freer trade between the free nations. Unfortunately for us, however, Canada, of all the leading industrial powers of the west, is the one most liable to be hurt by any programme of systematic tariff reductions. As it is, our tariffs in general are far from being the highest maintained by member nations of the O.E.C.D., and any scaling down would assuredly call into question the ability of many a Canadian manufacturing concern to even survive, much less prosper, if comparable foreign-made products from low wage, mass production countries, and most notably from our mighty neighbour to the south from whom we already do twothirds of our buying, are to be allowed to flood the limited Canadian market.
With manufacturing industry directly employing one in four of the working population and indirectly supporting a great many more Canadians working in various service and other industries, no one need doubt that the effect on the national economy of any exceptional close-down of our factories would be dire indeed. It is no use pretending: that, even if U.S. tariffs against Canadian-made manufactured goods were greatly reduced or even completely eliminated, our manufacturing industry would be sitting pretty in relation to the U.S. market. It would not. Like it or not, we cannot escape the fact that the largest Canadian manufacturing concerns are for the most part U.S. subsidiaries, one of whose main reasons for coming here in the first. place was the existence of Commonwealth preferential tariffs.
They were certainly never established in order to compete with the parent company inside the U.S. market itself and it is hardly reasonable to expect that they would be kept in being for any such purpose. President Kennedy, of course, has recognized that some U.S. industries will be badly hurt by tariff reduction and, by way of compensation, proposes various incentives and other measures designed to prevent extensive unemployment. In the event that Canada becomes a party to tariff cutting, it seems obvious that Ottawa will be obliged to come up with some similar plan.
Be that as it may, the inescapable truth of the matter is that, for the most part, the unit cost factor and low volume runs inherent in production within the confines of a limited domestic market-and a highly scattered one, at that!plus our insistence as a people on a high standard of living, have already created a most serious cost-price problem for Canadian industry in relation to its foreign competition.
It is no exaggeration, I think, to say that our national tariff structure has been the most important single factor in the development of manufacturing industry to the point where it is the nation's leading industry, the largest productive employer, the greatest wealth producer and the biggest taxpayer.
As a people, we have for some time past pre-empted a standard of living about thirty years ahead of our time and, to speak bluntly, at this stage of our national development I cannot see how we can possibly hope to maintain it without adequate tariffs to enable our industries to compete with some degree of equality of opportunity in their most important market, the domestic market.
I don't believe that such things as subsidies from the general pool of taxation would be desirable or acceptable on anything other than a stop-gap basis.
Subsidies and similar alternatives to tariffs would all unquestionably be industrially disruptive and nationally divisive, because they would necessarily entail planners at the highest level making decisions as to which industry should get how much, and the like.
We have, I believe, already moved quite far enough in this direction, most notably in the field of agriculture. Extending this policy to various manufacturing industries, whatever yardstick be used, would foreshadow a degree of government control and intervention incompatible with the workings of the free market economy. I know that there are influential Canadians who argue in favour of specialization, by which they mean that we should, as a matter of national policy, apply ourselves to the gradual elimination of certain of our industries. Replacing tariffs with subsidies would clearly facilitate such a policy, and I suspect that this will be the line taken by those who, out of a misguided sense of idealism and internationalism, may propose the dismantling of our national tariff structure.
Superficially, this specialization argument-this plan to make us a North American Sweden or Switzerland-may seem to make a lot of sense. In actuality, I can think of no more regressive step for Canada. We are not Sweden and we are not Switzerland. We are a vast nation in area, in potentiality of our natural resources, in everything except, at this time, a population to match.
But small as our population is in relation to our other assets, it grows, not nearly as fast as it should or as fast as we would like it to do, yet still it grows. It comes close to having doubled in the last thirty years and may well double in the next thirty and again in the thirty after that. Why should it not? Unlike the Swedns and the Switzerlands some people would have us become, we are able to support a population many times larger than theirs. Nothing is more certain than that one day we shall do so.
So let us be wary then of the siren voices that, for whatever apparent good reason, would have us embrace holusbolus a policy of industrial contraction. There is no greatness for Canada in such a policy and little future either. Indeed, if we want to return to the frontier economy of sixty years ago, I can think of no more likely road to take than that of deliberately and systematically destroying established industries whose difficulties are in the main attributable to a limited domestic market.
Surely, it is the beginning of wisdom to pursue national policies aimed at creating a viable economic climate for manufacturing industry in toto. This is the road to growth and greatness, not by killing off industries, which may be weak only because the national population at the moment is small, and salving our conscience with shabby handouts which are the precursor of industrial suffocation. There is, of course, yet another way out of this whole problem. It is one which has long been open to us and just as long been rejected by us-that of voluntarily throwing overboard our national identity and becoming absorbed in the mighty United States of America. I do not know if the minority of Canadians favouring this course is any larger now that it ever was, but I am quite sure of one thingthose holding this view are very definitely still an inconsequential minority. Notwithstanding the high admiration in which we hold our close friend and ally and regardless of any possible advantage which might accrue, most of us Canadians, even in this day and age, have no wish to see Canada drop like a ripe plum into the melting pot of American union.
Our separate identity, our political and judicial system and all the other traditional and evolving symbols which distinguish us from our cousins to the south are even more important to us than the many things we rejoice to have in common with them. Such, at any rate, is my belief.
Rejecting these alternatives, the only policy that makes any sense in terms of a secure and prosperous future for Canada is one that accords the highest priority to the further expansion and diversification of manufacturing industry.
Despite the impressive progress of recent years, we remain economically vulnerable for having failed to develop nearly enough industries manufacturing end products. Too high a proportion of our plants deal in raw and semiprocessed products. Important as this kind of extractive activity is to the nation's well-being, of its very nature it is not nearly as labour-intensive as end product manufacturing and distribution. More of this kind of manufacturing is what we must have if we are to provide the right kind of employment for the hordes of Second World War babies who will be leaving school and entering the labour market in the next few years.
Manufacturing industry has been told that, as an absolute minimum, it will have to find new jobs for an estimated one million of these new entrants into the labour force between now and 1980. I tell you quite frankly I see no prospect of us doing so unless the emphasis of our national policies shifts more decisively in the direction of unequivocal recognition of manufacturing as the bulwark of the economy.
I am happy to acknowledge that there have been definite signs that we are in the early stages of such a shift in emphasis. The discounting of the Canadian dollar some ten months ago, some extra capital cost allowances, export credits, minor tax concessions to small companies-all these things were distinctly helpful. More recently, we have had the announcement of proposals aimed at promoting increased research in Canada, something we in the Canadian Manufacturers' Association have strongly urged. The National Productivity Council and the brand-new Economic Council just established here in Ontario are further evidence of governmental concern with the health of manufacturing industry and our ability to compete at home and abroad.
These things in themselves are encouraging, yet they are but no more than first steps along the road we must travel in the stimulation of industrial investment and expansion.
Taxation and immigration policies, however, offer the greatest incentive to such investment and development but, unfortunately, our performance in both these allimportant fields has been disappointing.
The taxation burden in the shape of a federal government take of roughly 50 per cent of profits is onerous to the point of being oppressive. Huge sums of what would otherwise be productive capital are lost to industry each year and reinvestment of earnings in new plant and new jobs is inevitably retarded.
The proportion of national income going into taxation of all kinds rises inexorably and, even more significant, the rate at which it has been rising in recent decades is accelerating ever more sharply. Thus, whereas in 1939 one-fifth of national income was gobbled up by the tax collector, the proportion today is one-third. Between 1950 and 1960 alone, federal government spending actually trebled.
Of course, it is said that the national income is also rising. True, but, unfortunately for us, it is not rising nearly so fast as taxation and in this same decade-1950 to 1960 -it did not even double.
The effect of this trend has been to act as a brake on national growth. A less burdensome rate of taxation, by increasing the available total of productive capital, would have made for more industry and more jobs and in so doing would have generated a higher national income with a proportionate increase in taxation revenues. We would then have been in a much better position to afford the expensive social services implicit in heavier and heavier government expenditures.
As with taxation, so it is with population. The past decade saw Canada's population increase from about 14 million to 181/a million. This nearly 30 per cent increase looks impressive and, of course, it is. But the past two or three years in particular have seen a serious falling-off in this rate of increase and furnish little support for the belief that we will show a comparable percentage gain in the Sixties. The national birthrate, while still high, has been falling, while successive annual totals of immigrants have declined alarmingly to the point where last year the figure sank to a ten-year low of 71,000. When you set against that figure the more than 50,000 Canadians who emigrated, the net gain is negligible.
The combination of a declining national birth rate and a virtual erosion of our net gain from immigration is hardly conducive to the further manufacturing expansion so essential to a dynamic economy.
We must hope that this trend will be reversed. By the same token we must recognize the fact that it is much harder to get the kind of skilled people we want and need than it was a few years ago. But given the kind of dynamic economy I mentioned a moment ago I believe we can attract them in sufficient numbers, provided our immigration programme is both realistic and vigorous.
The whole point, of course, of a growing population is that it will create a bigger domestic market, making us economically and politically stronger in the process. All this presupposes increasing consumption of the products of Canadian factories, without which there would not be that further industrial diversification which is so essential. Here again, the record to date is a disappointing one, for our national appetite for foreign-made products comparable with those made in Canada has been and continues to be voracious in the extreme. Excessive consumption of competitive foreign-made goods on this scale further contracts the already limited market available to our own manufacturers, thereby contributing to higher prices and a lower level of employment than would otherwise be possible. On these grounds alone, the national "Buy Canadian" programme makes the greatest good sense.
There is no doubt that Canadians generally are much more aware than they were even two and three years ago of the effect on jobs and living standards of intensified foreign competition. Management certainly has every reason to appreciate what is at stake, and I am hopeful that organized labour also is coming to the same realization. The obligation to produce a quality product at a competitive price is essentially management's, but management cannot deliver without the co-operation of labour.
I have emphasized the extent to which our industrial costs are influenced by such fundamentals as our limited and scattered domestic market and heavy taxes. Wage pressures unrelated to productivity are, of course, the other principal ingredient of our high costs.
Industrialists like myself are sometimes criticized for bemoaning heavy taxes and high wages. But, you know, this is very much an over-simplification. I am certainly not against high wages, provided they are earned wages in the sense that they reflect in part a real gain in output. It would make no sense for me or any other industrialist to be so opposed, and it is in the interests of all of us to sustain the consumer's purchasing power at the highest possible level.
In a democracy we accept the decision of the majority and I, for my part, am prepared to foot my share of the bill for reasonable social services, provided these celarly are the wish of a majority which realizes in advance that governments can give the people nothing that the people do not pay for. In other words, everyone in favour of bigger and better social services should be willing to pay for them in direct taxes. The present practice of disguising the real cost of these things by making industry carry a large share of the burden is both indefensible and self-defeating in the sense that it jacks up industrial costs and, therefore, prices, making us less competitive and reducing employment and expansion prospects.
This is the message that somehow must be got across to the Canadian public at large. It is a message which in this election I would like to think our politicians were sufficiently forthright and courageous enough to carry to the hustings.
We are living in a time of great change. Within the past decade, we have seen a mass migration from the farm to the city. We have seen the white collar worker become the majority as the numbers of blue collar workers decline in the face of advancing technology. The age of coal and the steam engine is passing. Great new industries like oil and gas are taking over. The diesel and the jet between them are shrinking distances as never before.
In this same decade, the living standards of the Canadian people have risen appreciably. It is enough to note that no fewer than one million, two hundred thousand new houses have been built, which is to say that one out of four families in this country today is living in an ultra-modern home with all the attendant blessings of push-button gadgetry. Make no mistake about it, this is good living.
Of course, everyone is not so affluent that they could not put another dollar to good use and certainly some have benefited more than others, but progress on this scale can never be uniformly equitable. There will always be black spots in the most affluent societies and, of course, there will always be problems, too.
Those of us who realize how deeply our much-envied living standards are rooted in freedom and the private enterprise system, which for so long has served us so well, must do much more than we have yet done to communicate this essential truth to the people of Canada. Nor should we delay much longer.
The siren voices of the socializers and the advocates of a government-directed economy are to be heard in the land. In the name of doing good, they could do great harm if they were to get their way and stifle that sense of private initiative and private enterprise so fundamental to our national economic health. We must see to it that they do not get their way. Such is the challenge before us.
THANKS OF THE MEETING were expressed by Mr. Harold G. Gillingham.