OUR TRADE CHANNELS
AN ADDRESS BY WILLIAM H. MOOR, LL.D.
CHAIRMAN ADVISORY BOARD ON TARIFF AND TAXATION.
15th November, 1928.
PRESIDENT FENNELL introduced the speaker, who said : I know you are interested in other matters than those affecting the Empire, but I have a suspicion that most of your speakers have talked about phases of Empire concern. You know ail about the Empire; what then can I say ? Your invitation, I take it, was extended to me as Chairman of the Tariff Board, and presumably you wanted to know something about the work of the Tariff Board. That work has to do with evidence bearing upon the customs schedules. The tariff is a means of creating trade channels through the Empire and elsewhere, so, after all, if I talk about matters with which you are familiar, my excuse is your invitation.
Our trade channels are many and long, extending as they do, to nearly every land on the earth. To be exact, to ninety-five countries. They go back to Confederation, and within the time at my disposal, I have thought to confine myself to a rough sketch of the more important changes that have taken place in the trade channels of this country since the foundation of the Empire Club. The more I looked into the subject, the more it seemed to me I had found a good starting point. Your Club can hardly be called a venerable institution. I object to being called an old man and I remember quite well the foundation of the Club. Looking back, not quite twenty-five years, one sees that things have happened to our external trade that might have been expected only in the land of Oz, or some other country under the influence of magic.
All of us have lived through that period and we have taken these remarkable things as a matter of course. I suppose that is the way of the world. Europe had its Dark Ages and yet, I fancy that people who lived then did not realize they were living in a dark age. Britain had its Industrial Revolution and from the reading of the times one can but conclude that few people then realized that things were being done that would turn the industrial world upside down.
When the Empire Club was founded in 1903, the foreign trade of this country amounted to, roughly, $450,000,000 a year, and last year it amounted to $2,298,000,000. You will observe that I have left off the hundreds of thousands. Indeed, I shall try as far as possible not to burden you with figures, certainly not with exact figures. Some political arithmetic is necessary, but only with the idea of tracing growth and change.
Now, I would stress upon you that the headway of a country is not to be measured solely by the figures of its foreign trade. You know that, and I know that, but sometimes it seems to have been forgotten by those who talk and write upon the subject. Canada has an external trade as great as the United States had when it had seventy millions of people.
I have an idea that somebody is thinking that our external trade has not really increased five or six times in the past twenty-five years. It is money value that has increased. When allowance is made for the changing value of the dollar, the increase will be found to be much less. There is, of course, a substantial something in the thought, but we have learned at the Tariff Board that trade is not to be measured by the average buying power of the dollar. Some of our commodities have declined in value; some have increased, and to get exact measurement, it is necessary to know the specific commodities which are to be valued, and their relative importance in the trade of the country.
Our difficulties of comparison are further increased by the coming of new commodities which twenty-five years ago had no value, because they were not then in existence. I offer the radio as an illustration, and you will readily think of other illustrations.
Our foreign trade for 1926 amounted to $241 per capita. An amount so surprising that it needs an explanation. I wonder if there is anything in industrial inheritance ? We were beaten only by New Zealand with $321. Australia came very close to us with $228. Certainly the Motherland gave us a pace with a per capita trade of $190. Now these figures are only remarkable by way of comparison. The United States had a per capita trade of $77 during the same year. During the recent election Mr. Hoover thought the foreign trade of the United States a remarkable achievement. And it is. Ours is simply more remarkable. British people have followed the example of wise old Solomon who with Hiram built a navy and searched the seas for trade.
There is, of course, a further and more substantial explanation of our great per capita foreign trade as compared with that of the United States. I should not refer to it were it not so evidently forgotten by those who are wont to make comparisons between the two countries.
Our southern boundary is the northern boundary of the United States. Their southern boundary is the northern boundary of Mexico. Uncle Sam has one foot in the cotton belt and the other in the wheat belt. He is fortunate in possessing materials which all countries to industrial pretensions require. The United States is probably more completely supplied with materials for modern industrialization than any country in the world. And yet, it is not quite an industrial world within itself. There is scarcely an industry for which some material must not be imported. And the increasing complications of industry have led to increased dependence. The United States is dependent upon others in this day of universal dependence. Canada is more dependent upon foreign materials than the United States.
Yes, we have to dip south for many a thing that is produced only in the South, and it is only a partial satisfaction that the United States has to come to us for its nickel and its asbestos and several of the materials it requires.
We are dependent, but our dependence is not always to be taken as an evidence of weakness. Curiously enough, it may be a sign of strength. I doubt that many of us are wearing clothes made from wool produced in Canada, and inquiring for the reason in a Tariff Board investigation, we were told that our farmers found other things more profitable. We were told at the Tariff Board that the growing of flax and the making of linen was an industry natural to this country. When the evidence was all presented it appeared that we could grow flax of a fibre suitable for the making of linen, but it also appeared that our farmers were unwilling to undertake its cultivation, for the cultivation and harvesting of flax out of which linens are made are laborious back-bending tasks.
Men will never agree of the effects of trade channels upon national character. Many a controversy has been fought over the subject. Personally, I never felt that my nationality was going to be affected by the hat I wore.
Whatever the effect of trade channels may be, it is exceedingly important that we should bear their trend in mind. When your Empire Club was formed we traded with the United Kingdom to the value of $184,000,000 and after twenty four years, that trade is worth more than $600,000,000. A substantial increase you say. Wait. In 1903 our trade with the United States was almost $200,000,000, and twenty-four years later one billion, one hundred and fifty million. Now these figures have been brought to your attention very often. Perhaps, none of our national sums is so much discussed and indeed they deserve discussion. These figures are of national concern; of Empire concern. These figures indicate the trend of our main channels of trade and tell us with no uncertain voice that while we are trading more extensively with the United Kingdom than we did in 1903 we are trading still more extensively with the United States. True it is, that trade with our sister nations of the British Empire has increased from 16,000,000 in 1903 to 137,000,000 in 1927, and to have the real picture of the Empire trade, these figures should be added to those of the United Kingdom.
What is the explanation ? We are not going to switch more trade to the United Kingdom and sister nations by simply bemoaning that our trade within the Empire has not developed in harmony with our desires. The reasons are to be found not by alone examining trade figures with Great Britain. I suggest that they are to be had better by looking over our trade account with the United States, and we must do it, item by item, and take all the items. I have not the time to do that today. I have time to give you only a suggestion as to the direction of the inquiry.
I hesitate to blame the members of the Empire Club for our American trend of trade, but the facts have it that the word automobile crept into our tariff schedule during the very year the Club was formed, and the automobile is in part responsible for our new era. The automobile came a few years before, but the statisticians apparently did not know what to do with it, Sometimes they thought it a buggy or a wagon, and at other times an engine. It was both. None of us were quite sure that it had come to stay. However, it came and left a deep impression upon industrial, social and national life.
The automobile came from the United States. It might have come from the United Kingdom. When Watt took out inventor's patents for the steam engine in 1782, he wrote with uncertainty in his papers that it "might be applied to give motion to wheel vehicles." And it was so applied. In 1833 there were said to be at least twenty coaches operating around London upon their own power, and dozens of companies were formed fro the purpose of operating self-propelled vehicles. Most of you are familiar with what happened to prevent the motor vehicle from taking the highway. The highway or turnpikes were then owned by private companies who had also stage rights and, through their influence, was passed the famous Locomotive Act in 1836, in which the British Parliament taxed the steam vehicle out of business, and that the job be well done, stipulated a man with a red flag to walk ahead of steam coaches on the highway to warn the people of their approach.
However, the Engishmen did not do too badly out of their legislation. The steam engine took to rails, and without the railway we should not have opened our great plains in the West. In fact, we should not have had the modern world.
I should not have strayed away from my subject. The fact I am trying to bring home is that the automobiles came to us from the United States and brought with it a score of industries that contributed a huge volume to our external trade. You may think I am placing undue stress upon the automobile industry, in a talk upon our trade channels. If you think that, then think more carefully. The automobile industry gave rise to what may be called "The chain or progressive system" of assembling materials. It brought about in the true sense of the word what we know as " mass production," so often confused with large scale production. Out of that method of production came a rule that to the strong belongs the market.
Survey the newer industries that have been established in this country. Most of them are American industrial derivatives. They began as assembling plants, and out of them Canada had at first but limited advantage. When they had developed to a size where they could absorb the cost of making designs, the dies, the machinery, and the tools which were required in the production of parts, they then passed to a further stage of production, and Canada had greater benefits.
The matter is essentially technical. Perhaps I may describe my meaning by illustration. Some months ago I had occasion to visit a clock factory; a branch of an American concern, located in a Canadian city. One was struck, upon entering the factory, with the orderly manner in which the parts were assembled in their crudest form at one end of the building and came out at the other a clock that chimed, and I presume, kept fairly accurately the time. There was little machinery in that particular room, and I asked the foreman, " Where do you obtain your parts. Do you bring them in from the United States ? " " We used to bring many of them from the United States," he replied. "Now they are all made in Canada, with the exception of the hands of the clock. Those we import from the United States, because the machine with which they are made would turn out in three months more hands than could be used in Canada in the course of a year."
There, I suggest, you have a picture of mass production. There, you have an explanation of why so many of the Canadian industries working under modern methods of production desire to import materials which are not raw materials, but are semi-manufactured, and are in reality the finished products of other manufacturers.
Our increased trade with the United States is not to be accounted for wholly by a desire of American capitalists to work in this country for the sake of the home market.
For seventy-five years we have been making paper in Canada, but before the foundation of the Empire Club, we made it almost exclusively for our own use, then came Mutt and Jeff and Andrew Gump, and the demand for week-end publications. Our statisticians tell us that it takes 100 h.p. to produce a ton of paper. Fortunately the power is generally located near the woods and so our pulp and paper industry grew, and the exports to the United States grew until they overshadowed the domestic requirements and one hundred million dollars or more were added each year to that new volume of trade about which I am talking today.
And while I am speaking of hydro electric power, may I remind you that this is an electrical age and that our development of electrical power has played its part in the development of our external trade. My time is too limited to give you many examples, but I ought to refer to the aluminum industry. It will illustrate why you hear so little today about a phrase that used to be handed around pretty frequently, exotic industries. Down in British Guiana there are huge commercial deposits of a substance called bauxite. The application of electrical power is required before it can be converted into something useful. Investigation revealed that bauxite could be shipped to Canada and turned into aluminum beside a Canadian waterfall, and so at Arvida a great industry has been established. The interest is owned mainly in the United States, although we are told at the Tariff Board that Canadians have holdings in the company, and have almost from the beginning had a substantial hand in its direction.
Thus we are building the country's trade channels. Now I wonder if that is quite an accurate expression. When we use the phrase " the country's trade " we mean, of course, your trade; the trade of individuals. We mean the industry of the men who have the investments in industry and its direction.
What can a country do to direct the channels of trade ? I assume that I am not trespassing upon dangerous ground. "What should we do ? " may be a matter of controversy. What we can and cannot do is a matter of record. All Canadians would build Canada; none would destroy it; all would have its industries and resources developed. Our differences are only as to the means and the sacrifices, and their incidences.
The markets in which we buy our materials out of which to create goods for export, would appear to be beyond our effective control. When a manufacturer says, " I am going to compete with the world, I must buy my materials wherever I can buy them best," Parliament has said the request was a reasonable one. The principle of giving drawbacks upon duties paid upon materials that enter into the export trade is generally accepted. No one questions the advisability of its application to raw materials that are not produced in this country, but its application to semi-manufactured materials has bedevilled our old ideas of tariff making. Let me give you illustration. We have a considerable export trade in rubber tires. Last year it amounted to $18,000,000. Now, of course, rubber tires are made only partly out of rubber. We may import our rubber from the East Indies or the British possessions, for within the Empire, fortunately, there is to be had the major part of the world's supply of rubber. A curious situation, the United States is the greatest user of rubber and depends upon Great Britain for its supply; the United Kingdom is a large buyer of cotton and depends mainly upon the United States for its supply of raw material. Perhaps a fortunate mutual dependence.
When the tire manufacturers of Canada require materials, they may or may not require raw cotton. Some of them spin their own cotton and some of them buy cotton fabrics and, being entitled to a drawback when they place their orders with Canadian manufacturers they place that portion of their needs for export at about United States prices. There is no blame to be attached to anyone in the transaction. The need is inevitable, but the effect is that the Canadian makers of these cotton fabrics have not, by any means, the full application of the duty upon their output. That is why I say our tariff items must be scrutinized in order to understand their bearings.
The country has some control over the course of its export trade, and that control is exercised by treaties mainly with other countries of the Empire. A British content of materials and labour is required.
At its last session, Parliament gave the Government of Canada power to raise that British content, with the idea of encouraging trade within the Empire.
All Canadians, I repeat, would build industrial Canada and I like to think that all Canadians would extend its channels of trade throughout the Empire. But the making of channels is not a simple matter. Someone at Geneva figured out the other day that there are a million commodities in use under modern civilization. Under our Canadian Customs schedule, we have three separate classifications-the British Preferential, the Intermediate and the General rates. I am not suggesting that Parliament has to consider in its tariff three million separate items, but it has to make provision for all of them.
How then can the Parliament of Canada and the Parliaments of the Nations within the British Empire make their tariffs to encourage trade within the Empire ?
You will recall that before the war broke out, there came to Canada a Dominion's Royal Commission, bent upon investigating the resources of the British Empire with the design that there should be built up, as far as possible, trade within the Empire. The war disturbed the work of that Commission and delayed its report. That delay emphasized the need of other means of action, and that means has taken the form of creating Tariff Boards-Australia has a Tariff Board, and so has India. The United Kingdom has had a number of Commissions under its Safe-guarding of Industries Act. We learn from the press that they are to be converted into a permanent institution.
The work of the Board at Ottawa is only in its inception. The Board has yet to win its place among the institutions of Government. We of the Tariff Board, as you know, are not under the Civil Service. We are not judges. We hold our positions by virtue of Order-in-Council, and conduct only those investigations referred to us by the Minister of Finance. I do not say that by way of complaint. Within two years we have had from him one hundred and sixteen references. I may tell you frankly they have taxed our capacity to investigate. Our Board is a fact-finding body. When an industry comes before us there is invariably opposition and that is the genius of the Board. The strength of a good case is brought out by opposition; a weak case goes by the board; but it is Parliament decides what is strong and what is weak.
It may be that some of you think our duties are too wide; others may think them not wide enough. Time will tell which is right. We have had criticism, and we shall have more criticism, and only by constructive criticism will the Tariff Board grow into greater usefulness.
We have had co-operation, and such success as we have had has been due to the co-operation of the farmers, the consumers and the manufacturers, represented by organized bodies. They have sat around our table and disagreed, but have disagreed as earnest men anxious to find truth. Our Board table does not yet resemble the peace and harmony of a Thanksgiving dinner when someone says "After you the choice cuts."
We have the co-operation of the press, for which I express my sincere thanks. Publication of the notices of hearings was essential to success and the newspapers have published these notices gladly and without remuneration.
It may be that I exaggerate the importance of our work and the bearing it has upon Imperial channels of commerce; I doubt it. There is sentiment in trade, but blind men do not build wisely, no matter the stoutness of their hearts. Different portions of the Empire cannot build to a common plan without knowing what each can do and is prepared to do. That knowledge we seek to give; that knowledge is being given to us by other Tariff Boards in other parts of the Empire. We are doing a work which will some day lead to an industrial structure within the Empire that is built to plan; that is permanent.
MAJOR NORSWORTHY, Past-President of the Canadian Club, voiced the thanks of the audience to the speaker.