- The Empire Club of Canada Addresses (Toronto, Canada), 19 Mar 1973, p. 313-333
- Connally, The Honourable John B., Speaker
- Media Type
- Item Type
- A joint meeting of The Empire Club of Canada and The Canadian Club of Toronto.
An historical perspective of where and how the United States finds itself, economically and politically in 1973. The end of one era, the beginning of another. A period of upheaval. Profound changes in world commerce. The ceasefire in Vietnam. A review of the post-World War II era, and the success of the last quarter century. The current state of international commerce with five great potential trading entities: the European community, the U.S., Japan, the Soviet Union, and China. The trade picture for Canada and the United States. Canadian-American conflicts on trade policy. The fears and challenges of change. The address is followed by a wide-ranging question and answer period.
- Date of Original
- 19 Mar 1973
- Language of Item
- Copyright Statement
- The speeches are free of charge but please note that the Empire Club of Canada retains copyright. Neither the speeches themselves nor any part of their content may be used for any purpose other than personal interest or research without the explicit permission of the Empire Club of Canada.
- Empire Club of CanadaEmail
Agency street/mail address
Fairmont Royal York Hotel
100 Front Street West, Floor H
Toronto, ON, M5J 1E3
- Full Text
- MARCH 19, 1973
Our World of 1973
AN ADDRESS BY The Honourable John B. Connally, FORMER SECRETARY, UNITED STATES TREASURY FORMER GOVERNOR, STATE OF TEXAS
JOINT MEETING The Empire Club of Canada and The Canadian Club of Toronto
CHAIRMAN The President, The Canadian Club of Toronto,
John E. Brent
I am a little uncertain today as to how I should introduce our head speaker when I know that all of you have heard so very much about him but maybe you can help me. Tell me, how do you introduce a man who, although he is still in the prime of his life, has already had several and varied outstanding careers-a highly successful lawyer, a several times decorated naval officer, a leader in many, many great business enterprises, Secretary of the Navy for the United States, for three terms Governor of the State of Texas, Secretary of the Treasury of the United States? I am reminded of twin brothers that came to America to seek their fame and fortune and one went to Texas and the other came to Canada and they were highly successful. They were so successful they didn't have time to meet for many, many years. And finally one weekend the Texan came to Toronto and his brother was delighted to have the opportunity to present his charming family, his beautiful house, to show him his fine cattle farm, his racing stables, his great offices and plants. But everything he showed his brother from Texas, the Texan had something much bigger and better to tell him about. So he then took him around Toronto to show him the sights but everything in Toronto the Texan could tell him something in Houston or Dallas that was much bigger and better so the Canadian was getting somewhat chagrined about this. So he took him to Niagara Falls as a last resort and as they looked at the Falls, the Canadian said "Do you realize that there are 18 billion gallons of water that flow over that Falls every second? You haven't anything as big as that in Texas!" And to his delight, the Texan said "No, you are absolutely right, we have nothing that can compare to that in Texas." But then his face brightened up and he said: "But I know a plumber in Texas that could turn that thing off."
Well, now I have to introduce our guest speaker. He started in the University of Texas and graduated with a degree in law. His first brush with politics was as a secretary to a man you may have heard of, Lyndon Johnson, in 1939. He left that job in 1941 to join the United States Navy as an Ensign and after active service in the Atlantic and Pacific war theatres, he left the navy in 1946 with the rank of Lieutenant Commander. Now I should explain to some of our American friends that here we don't pronounce things-we pronounce them in a very British and not a French way. In American they say Lootenant Commander. I can only speculate that it must have been John Connally's service on the aircraft carriers Essex and Bennington that taught him how to make waves because he soon began to make waves and they kept getting bigger and bigger and bigger. After he had launched several highly successful business enterprises, he then returned to politics as the Administrative Assistant of Senator Lyndon Johnston in 1949.
In 1960 President John Kennedy designated John Connally as the Secretary of the United States Navy. He left this post in December 1961 to become the Governor of the State of Texas and he continued to govern that great state for three consecutive terms.
Although John Connally is a lifelong and staunch and strong Democrat, President Nixon, and I haven't even heard that President Nixon has yet joined the Democratic Party, but President Nixon appointed John Connally as the Secretary of the Treasury in 1971. Now I think you will agree that it is an understatement to say that as Secretary of the Treasury he played an unusually vital and, might I even say, a dominant role in world monetary and trade realignments.
It is said that behind every outstanding man there stands an astonished woman. Now I don't believe that Mrs. Connally is astonished. I can't believe it after all these years but she is charming, she is attractive and she is here and we are delighted that she is here and I am going to ask Mrs. Connally if she would please stand so that we may all welcome her. Mrs. Connally.
It is now my great honour to present a man who has never hesitated to make waves in the things in which he really believes. Big waves!-in his state, in his country and throughout the world. Ladies and gentlemen, a great American, John Connally.
THE HONOURABLE JOHN B. CONNALLY:
I hope you know what a great privilege it is for me to be here today and have this opportunity to speak with you. As I listened to this extravagant introduction that your President gave me, I couldn't help but think of something my daughter-in-law said when I came home from my sojourn as Secretary of the Treasury. You said, I had several careers in my lifetime and my daughter-in-law after she greeted me, I thought rather affectionately, she turned and said "Too bad you can't hold a job".
And also, it was called to my mind when he was talking about my past and what little I had been able to contribute and the fact that behind any successful man stood a bewildered woman, I was reminded of the couple who went to dinner one evening and the man was being honoured, all his friends turned up in great numbers and the number of people spoke about him and what magnificent contributions he had made to the community, to the state and to the nation and he sat there aglow during all these magnificent tributes and as they were going home he leaned back in the car in the back seat and said in a rather philosophical way, "You know, dear," he said, "there really are a lot of great men in the world, aren't there?" She said, "Yes, my dear, there are but there is one fewer than you think." So, if nothing else, I assure you that my wife insists that I maintain a high degree of humility in whatever I've done.
I'm deeply honoured to be here today. I wish I could have stayed longer in this magnificent country because there is much to learn. Among other things, I learned that this Club-the Canadian Club is 77 years old and that The Empire Club is only seven years younger, being organized in 1903. And even more fascinating was the reason for the organization of The Empire Club. Now I wonder how many of you really know it? The Empire Club was organized in 1903 because a great many people in Canada felt that there were too many members of the Canadian Club that were too pro-U.S. I understand there is now a merger talk between the two and I'm not sure, I haven't found out yet, on what basis they're going to merge. But I do, indeed, want to speak to you for a few moments. I tried to be as brief in my prepared remarks as I could because we are going to have a question and answer and, frankly, I'd much rather devote time to that than to my prepared remarks, so if you will bear with me, I will get through these as quickly as I can and then implore each of you to ask any questions that you have on your mind. And don't be in the least reluctant. I assure you I will not be embarrassed by your questions. If I am, I won't show it and I certainly won't be offended, and if I am, I won't react to it. And if I don't know the answer, I'll tell you, so you will have at least a few moments while I continue with my remarks here to think up some questions you might want me to comment on.
I think all of us here today, if we thought about it at all, recognize the great drama and opportunity and the danger really of our world of 1973. Political and religious turmoil shows few signs of subsiding in many diverse areas of the world. The ceasefire in Viet Nam did not end the fighting and bloodshed elsewhere. There is relative safety now, for the people of Saigon and Hanoi, but not for the people of Belfast and Londonderry. The Middle East remains a constant fountain of violence and distrust. Moreover, profound changes are occurring in world commerce, changes which will ultimately affect far more people in far more countries than the regional warfare so common since 1945.
What we are witnessing, obviously, is the end of one era and the beginning of another. Very few historical eras come to a close without a certain degree of upheaval and this is no exception to the rule. Twenty-seven years after the guns fell silent in the second world war, the post-war era is ending for the trading nations of Europe, North America and the Pacific. That era was shaped and faithfully served by agreements, arrangements and attitudes born of another time. The new era must be shaped and faithfully served by new realities born of our time.
That was a dynamic period of history from which we have just emerged. There were glooming happenings, of course, but think of the tremendous achievements mankind made in building stronger economies and stronger societies from the shambles of war. Think also, if you will, of the unique situation in which my country found itself at the beginning of this period. The United States, protected by two oceans from the destruction visited upon Europe and Asia, stood like a military and economic giant among the rubble. Of the $40 billion in gold reserves that existed on this earth, the vaults of the United States contained approximately $26 billion. Under conditions then prevailing, men could and men did reason that the strength of the United States was strength to which others might cling as they undertook the long and demanding labours of restoring their own societies and their own economies. Furthermore, Americans could and Americans did accept as the basis for their own policies, the conclusion that what was good for the world must be good for the United States itself. Accordingly, out of that time, a quarter century ago, there came into being a world in which the United States willingly accepted responsibility that others could not bear. Willingly bore burdens that others did not share and willingly lived with competitive disadvantages so that others might build their strength.
This willingness on the part of the United States not only sparked economic recovery overseas but together with military might, it also preserved freedom for a major part of the world. What were some of the specific results of this unique period? Just to quickly remind you of a few-four centuries of colonial history came to an end and from Europe's colonies some 63 nations emerged, not one of which has chosen the communist system in a free election. The United Nations survived a generation of turmoil and nationalism and earned several stars in its crown in the quest for peace. Atomic power-once the domain of a single nation-became, spreading from country to country, not so much a weapon of war, but a deterrent to war because it is the only arms advancement in history which has been held in abeyance by the men who invented it. The barriers of ages were pulled down with the establishment of the common market. An international economic system has been created which has brought unprecedented prosperity to the developed nations and brightened the future of the underdeveloped nations. Two of your country's and my country's most bitter enemies, Japan and Germany, became our strong friends. And last, but surely not least, an American President has moved toward understandings with the Soviet Union and China which broadened the horizons for commerce rather than conflict and renews the dreams of centuries that great nations may someday lay aside their arms and join together in the works of peace.
Now this really is a success story of the last quarter century. The nations of the free world are challenged to write a chronicle that at least equals success for the remainder of this century. But it will be written in different terms and from different points of reference for the world is turned and changed and the policies of the '40s and the '50s and the '60s no longer suffice. The postwar era, a rare time indeed in man's history, has expired. May it rest in the peace it so richly deserves. What has now happened, of course, is that the world has changed while the competitive disadvantages in which the United States willingly placed itself have not changed. Long after the need had vanished, the structure of world trade and finance abandoned realism. It was based simply on custom and convenience and an occasional contrivance. By the middle of 1971 the American trade balance was in rapid decline. Moreover, we could no longer maintain the fiction that the dollar was convertible into gold when in fact those dollars increased to a ratio of six to one over our gold reserves during the 1960s and the 1970s. We had simply expended our surplus and extended our credit until both were exhausted. The American image of invulnerability was clearly a delusion. It was again demonstrated that no nation is so large and so powerful that it is invulnerable to change.
That was the backdrop for the drastic actions beginning in August 1971 when President Nixon imposed a freeze upon the entire economy, imposed a surcharge on many imported items and suspended the convertibility of the dollar. The United States recognized finally that the economic world is a world of peers. The name of the game is competition and the system must be restructured to provide more flexibility in that system. Other nations have been notified that the United States now considers its needs to be of equal importance with the needs of other countries. While post-war objectives have changed, however, the American commitment to a liberal trade and payment system has not changed. We believe that there is a truly unique opportunity for all nations to begin building a durable trade and payment structure based on equity and realism.
There are today five great potential trading entities-the European community, the United States, Japan, the Soviet Union and China. Obviously, not all of these entities will have an enormous impact this year or next. China has yet to demonstrate its power though when it moves fully into the markets of the world it most certainly will be a force to be reckoned with. The Chinese are wise, aggressive, competitive people. While the present rulers of mainland China do not like free enterprise, we cannot forget that the world's best free enterprise businessmen are Chinese. And you can prove this in Canada or in the United States or in Taiwan or Singapore or Bangkok or anyplace else in the world where you find them. The Russians and Chinese will not enjoy a massive volume of trade over the short term because their political systems are not attuned to it. The economic planning of Communist countries is usually inward looking and while huge individual transactions are becoming the order of the day, the aggregate of trading is relatively small. But sooner or later, in my opinion, even the most autocratic governments must develop procedures that will enable them to participate willfully and effectively in international commerce and finance. The insatiable human appetite for a better way of life is not restricted to the capitalistic countries. For that matter, my travels around the world have impressed upon me the fact that all of the economic thinking is not done in Toronto or in London or in New York or in Tokyo. Even the countries now classed as developing nations are largely governed by technocrats. The standard of living may be low but the people who govern many of these nations understand international trade and monetary policy and they are fighting for their place in the economic sun.
Now, what of Canada and the United States in these changing times? Our trade picture is not something painted by a contemporary artist in the wake of world war two. As far back as the 1920s, 18% of American exports went to Canada. You remain our most important trading partner by far, accounting for more than one-fourth of our imports and exports. By comparison, Japan accounts for 9% of our exports and 16% of our imports.
Canadian-American conflicts on trade policy are the result of national self-interest and no one can fault either of us for that any more than Britain should be faulted for choosing the common market over the Commonwealth. By the same token, nations should not be criticized for casting around for trading partners in recognition of changing times. I do not believe that it is premature for Canada and the United States to do some casting about on its own. Looking toward the great Pacific basin as their most likely area of activity in their sphere of interest. Japan, Australia, New Zealand, Indonesia, all of South America, Mexico-are they possibilities for partnership in tomorrow's commercial world for you and for us? Canadians and Americans have always looked east to the rising sun without fully realizing that across the Pacific to the west the sun may be setting for those who cannot and will not adapt to change.
There is a great movement in western Europe to expand and consolidate the European community into a massive economic force. That movement has the full support of the United States although, frankly, we might wonder from time to time if the special trade arrangements being offered to fifty or so nations around the world is, indeed, what we had in mind when the creation of the European community was so encouraged. But as western Europe consolidates and strengthens, my own imagination turns to the Pacific nations and their future relationship and I am intrigued by what I see there.
As for our two countries, the barriers are not going to be erased tomorrow from Victoria to St. John's. A serious proposal to eliminate all trade restrictions between the United States and Canada would create such shock that national reaction might force a retreat even from the point where we find ourselves', today. But in my humble judgement, the day is long since passed when we should begin to tear down and eliminate all of these barriers to trade. And it would be tragic, indeed, if men of goodwill are so hidebound by nationalism that they cannot explore new pathways or even express the hope that a political boundary line should not control the flow of money, materials and ideas for all time to come. Our trade and monetary systems must become flexible enough to bend to the inventions of science and the dedication of men to create new and better products and find better ways to exist in peace and harmony. Governments which attempt to forestall or repress the irresistible force of change do so at their own risk. No civilized society can thwart each succeeding generation from probing, experimenting and innovating. The earth's geographical frontiers have, indeed, been explored but the frontiers of the mind and the frontiers of commerce may well be limitless. A change is obviously disturbing to many people. We do not always like to see the mutation of our values and our traditions. But it is the responsibility of leaders to be in the vanguard of change and to give it direction. If slowed by inertia, change can become revolution. If accelerated to a pace which the people cannot understand or absorb, change becomes a fearful creature and the forces of reaction come forth. It's a matter of balance and a matter of tolerance. And in the case of the world trade, a matter of tempering our parochialism and protectionism with a good dose of liberality and internationalism. When I was Secretary of the Treasury of the United States, I was sometimes accused of chauvinism, of being too tough in negotiations. But if I reflected impatience in my talks with other nations, it was the expression of an irresistible urge to speed the process of ordering a monetary system that had crumbled and a trading system that is essentially inequitable. Neither of those systems recognizes the change that has already occurred in the world economic system much less the changes the future will inevitably bring.
My one great fear is that too many political leaders in this complex world and in these complex societies will succumb to the human instinct to maintain or attempt to maintain the status quo. To whatever level I can raise my voice as a private American citizen, I will do it for new directions and new ideas. That's why I believe Mexicans, and Canadians and Americans should begin looking together for a better way of trading with one another. We inherited the northern part of the new world and its newness has not worn off. If the older nations of Europe which gave us our customs and our languages are moving closer to each other, is it unthinkable that we in the new world can do likewise?
These are challenging and exciting times in which we live, racked by violence and yet enlightened by human achievement, torn by dissension and yet healed by men everywhere who are willing to work for an enduring peace and a prosperous world. It is a time for exploring new horizons and I suggest that we get on with it so that this generation can say with conviction that we started a new era in a spirit of hope and courage intending only that our works improve the prosperity of nations and the lives of people. Thank you very much.
The United States experienced one devaluation in 1971, she has just gone through another one. Mr. Connally, do you think this is the end or is there likely to be another. Now I am going to turn the mike over to you and I hope everybody will ask what questions you would like.
You are so right-we have indeed gone through two but something has been added, Jack. I used to, in talking with the Finance Ministers and the Governors of the Central Banks, we all used to agree that particularly Finance Ministers were expendable because they were often called upon to say things they had to eat a few days later or a few weeks later. But something new has been added now in the aftermath of two devaluations of the dollar.
The President of the United States has said there would be more and I think you can rely on that.
MR. IAN WAHN:
I am a member of the Canadian Club. If Canada were to decide to conserve its oil, gas, water, mineral and other resources and limit delivery of those to the United States, would such a decision be accepted philosophically by your country in your opinion or might we expect political, economic or military pressure to reverse it?
Did you all hear the question? Now I'd sure like to hear the answer. Let me respond to you this way. What you have is yours-you can do with it what you wish, that's your prerogative as a sovereign nation. I would assume that if you are going to deny all your oil, your gas, your water, your timber, your resources, your nickel, your gold or your coal, whatever you have in the way of natural resources, you're going to deny those to the United States in order to conserve them yourselves. I assume that you will equally deny them to other nations around the world. Under those circumstances I don't know that the United States would have any cause to complain at all. If on the other hand, if you denied them only to us and continued to market them and ship them to other nations around the world, I don't know how we could do anything but assume that this was a punitive action taken directly against the United States and then you might hear a little flap about it.
Let me also add that under those circumstances, and this is one of the things we all have to face up to, we all want to protect what we have but we all want to produce what we can and ship it to the other fellow. Now if we permit this nationalism to grow to the point where we want to husband every resource that we have, and assume we are going to live off of selling to the other guy then I think every nation as they view their own wave and rise of nationalism must be prepared to consume everything it produces because consuming nations now have rights, as we found out, consumers everywhere not just nations, they all have rights I found out to a remarkable degree. It's not just the producer but the consumer as well and what is applicable to individuals is also applicable to nations. So I think we all have to frankly use our best efforts to put down this increasing wave of nationalism that's sweeping the world. It's not just in Canada, not just in the United States, it's all over the world-in every continent.
At a time when the United States is trying to establish its position as a peer among the nations of the world, is it not possible that the developing nations, the Third World, might be left farther and farther behind in their quest for progress?
That fear always exists, of course, but I don't think that anything that your country has done or our country has done that would be a warning or a sign of disinterest or a matter of concern really to the developing world. We've done a great deal for the developing nations of the world. I assume we will continue to do so. But I think again this presupposes that all the productive nations of the world, all of them, assume their pro rata share of the burden of helping the developing world. But certainly I don't think we are going to turn our backs, you or we, on these developing nations.
QUESTION: (MR.CONNALLY REPEATS)
The comment is one of the things I forgot to mention in my remarks was the marvelous achievement and the creation of the general agreement on tariff and trade and is it now in limbo, is it forgotten or what will be its future?
I did not mention it. It has served us well. I think it is going to have to be reshaped as well, very frankly, because if it is not shaped to provide a more flexible system of self-policing, of trade arrangements, then I think the political considerations are always going to override economic considerations. This is something we must constantly keep in mind that those of you here, the business community of this country and the business community of every country in the world have a great opportunity, and more than an opportunity, you have a responsibility to bring about many of the changes that must be made in the trading systems around the world, because you operate without the pride, without the arrogance, without the fears that inevitably plague men in political life in every nation, large or small, you do it on an objective basis. And you can be in the vanguard of many of these changes and you have a duty to do it.
Is there any chance that you might be able to advise us of your Presidential aspirations?
I can answer that very easily-I have none.
Mr. Connally, have you found any change in pace of negotiations between Canada and the United States since the oncoming of the minority government in Ottawa?
No, I think, frankly, negotiations between our two countries to iron out some of our difficulties have been stalled for some time, for months and even years. I don't think we are making the progress that we should be making and I think it behooves both countries to set about doing it because these problems are not going to go away. They are going to live with us. We are going to have to make up our minds that we are, indeed, living in a different world, we are plagued by different rules than we have known. We're not going back to the same ground rules that we had in the aftermath of world war two. We are not going back to what we had as late as 1969 and 1970-the world's changed and we better recognize it. We better help try to shape it, shape it to our own benefit and the benefit of our trading partners around the world. Frankly, the problems, and there are relatively few, but the problems that exist between Canada and the United States ought to be settled and the longer they drag on the more difficult they become, for both of us.
Mr. Connally, you have said that the United States and Canada ought to be casting about for new trading partners in the Pacific. Would it be right to interpret this as the expression of a certain disappointment with your trading partners on this side of the Atlantic?
No, not at all. I think again we have to recognize the facts. What are the facts'? There has come into being the European community, the European common market. Great Britain just entered it in January. There is no question that the European common market has offered preferential trade arrangements to approximately 50 countries around the world, particularly around the Mediterranean and in Africa. There is no doubt in my mind that the European common market, not maliciously, not to our detriment or your detriment, but the European common market is going to concern itself primarily with a perfection of their economic, their financial and their political system during the remainder of this decade, and the reason I say that is simply because they are human and they're going to try to make that European common market the largest trading, the most powerful economic force in the free world. That's their objective and I have no criticism of it. That's fine. But let's recognize it for what it is. So I am not unhappy with them. We've helped them. The United States has sponsored the European common market. We did everything we know how to push them into it. Now, there it is. Now where do we look. This severs all ties. The creation of the common market changed the trading pattern of many nations of the world. The Commonwealth as it was known for centuries is no more. The relationships are changing. Now if they are going to form a common market, I simply threw out for thought provocation the idea that perhaps Canada, United States, Mexico, South America ought to join hands with New Zealand, Australia, Indonesia, China and Japan. Form a trading bloc of our own. You say well this flies in the face of internationalism. Well, let's don't wear blinders. It's fine to say we ought to have an international system, it's applicable to everybody. But show me one, where is he? You think Japan is playing by the rules of the world today You think the Soviet Union is going to play by the rules? You think that mainland China when she comes as a force into this world is going to play by the rules? They're playing by the wrong rules for the moment and I don't criticize them for that. That's their sovereign prerogative. But let's don't be silly enough to assume that they're going to be coming in and playing by our ground rules, because they're not. That doesn't mean we can't trade with them. Sure we ought to trade with them. I hope you all sell them everything you can, we're going to do the same. But let's don't kid ourselves about it.
In the past the pattern of trade and payments between Canada and the United States has tended to be one in which Canada earned a surplus on current account with third countries which did not fully pay for its deficit with the United States and had an inflow of capital to make up that difference. You expressed the view that past patterns are no longer necessarily the ones that should prevail in the future. Have you any idea as to what you think the appropriate pattern of trade and payments between Canada and the United States should be in the next period of the future?
No! I don't know what the precise pattern of trade between Canada and the United States should be. I think that's going to have to be left largely to economic forces. This is precisely what I've been trying to say. Let's let the forces of the economy work it out without too many political contrivances being brought to play. It may well be in the light of all the circumstances that we're going to run a deficit with Canada for a long time to come. Up until 1965 we were running approximately a $600 million surplus with Canada. Since that time we have been running a deficit. We may, just by the nature of things, run a deficit with Canada for a long time to come. But we can't do it with every country around the world and you can't always just let, as you well know, one product flow back and forth or even trade between two countries because we're the largest consuming nation in the world so we have to take into account our consumption of goods from all over the world, from industrial nations and the developing nations as well. But somewhere along the road, the United States has run a trade deficit now for 23 consecutive years. We're going to have to reverse that at some point. We just can't forever run a deficit because our deficit is somebody else's surplus around the world. That's all I'm saying. It doesn't necessarily mean that even in our future relationships that we have to even be equal with Canada.
One of the major problems of the last few years has been the enormous outflow of capital from the United States, and these billions and billions of dollars are now sort of knocking around loose in the world and causing a fair amount of the trouble we've seen on international currency markets. What do you foresee happening to that which is already out there and what sort of things might happen as far as the future outflow of capital of the United States is concerned?
Well, frankly, I think that we were quite unaware, as most nations were, of the magnitude of the dollar outflow over a long period of time. There is today approximately $80 billion in official hands around the world and at some point we are going to have to sop these up. You've just heard Secretary Shultz say that we were going to try to support the dollar without being specific in the manner and to the extent, it is very obvious that we are going to do it through probably a variety of means including swaps arrangements, and so forth, with other countries. We would hope that we can entice those dollars back and get them back into the United States one way or another. We don't want frankly to impose restrictions on the outflow of dollars from the United States to the rest of the world. Again we have to look back at a time just a few short years ago, the world was crying for dollars, crying for capital. There is a shortage of investment capital still in the world today. If, indeed, the United States had not permitted the outflow of dollars at that particular point in time, unquestionably the economic recovery of the world would have been retarded to a tragic degree. But like all things, you never quite see the danger points so we didn't stop it perhaps at the proper time. Dollars, they are a commodity. Money is a commodity like anything else. I don't want to see any more barriers or restrictions put on it than I do on any other commodity and I think it's in the best interests of all of us that we try to have an unrestricted flow of goods and services and commodities to the maximum extent possible, just as fast as we can and I think that's particularly true between the United States and Canada.
The question is was the automotive agreement entered into in 1965 a form of foreign aid from United States to Canada in order to try to gain Canada's support for Viet Nam and for other purposes?
Well, I think probably the best answer to that is a simple answer. No!
We will be having an election in Quebec. Suppose that the Parti Quebecois was taking over in Quebec, and having trouble dealing with the problems, they will ask the Russians for help. Now in Canada we have ten thousand fighting soldiers. Can we count on the Marines for help?
I merely comment by saying that we just extricated ourselves from a brush war. I don't really believe that you ought to anticipate getting help from us under those circumstances.
We have time for a couple more questions.
With the cessation of hostilities in Viet Nam and the withdrawal of the United States forces and material, are there going to be internal problems that will encompass the energies, the minds, the resources, the ingenuity of the American people to solve them within our own boundaries?
The answer to that is "yes", but I think with a qualified "but". Simply, that I think the amount of resources are going to be available for other purposes merely because the cessation of the war in Viet Nam had been grossly exaggerated. The United States is not now going to materially or substantially reduce its defence budget. We don't think we can. We're going into negotiations with the Soviet Union on a mutual balanced force reduction. The President has already laid out his defence budget for next year. There is not going to be any decrease, as a matter of fact he is asking for a small increase in that defence budget. I think you are going to see, until a far greater degree of progress is made in ensuring peace and tranquility insofar as it can be ensured around the world, that we are not going to drop our defences one bit. We are, of course, going to concern ourselves with internal problems. The United States is going to continue its fight against inflation. We are indeed in the middle of, as most nations are, of environmental problems, of pure water and clean air. These will proceed apace. We will undoubtedly continue in the infrastructure of the United States. It is significant that, for the first time in the history of the United States, in welfare programs 42% of the budget now goes for those purposes, for social and welfare purposes, 36% go for defence efforts of the United States. This is the first time in the history of the United States that our social programs have demanded a larger percentage share of the budget than our military needs.
We'll take one last question.
How is the United States going to protect itself against foreign investment when all of these dollars that are in foreign hands come home? Is that basically your question?
Well, frankly, we're not concerned about it. We want all of you and, incidentally, I know this is a great problem in Canada, it is a great concern here that so much of your assets, your resources are supposedly controlled by Americans. One little interesting statistic I want to give you, on a percentage basis and on a per capita basis, Canadians own more of the United States than we own of Canada. But, frankly, we want them to come home. You can invest in the United States just like any of the rest of us. We're, frankly, trying to entice countries in Europe. We want them to invest. We want them to own. We're going to have enormous balance of payments problems with the Arab world from which we are going to be buying oil. We want them to invest in the United States. They can help us build refineries and pipelines and superports or anything they want to if they'll just come and spend their money with us, we'd be delighted. That sure goes for ya' all. Thank you very much.
Mr. Connally was thanked on behalf of The Canadian Club and The Empire Club by Mr. Joseph H. Potts, President of The Empire Club.
Thank you Mr. President, Mr. Connally, distinguished guests, ladies and gentlemen:
Mr. Connally, we accept without question your answer that you have no Presidential aspirations. I think, however, for the record it's appropriate for me to advise you that Winston Churchill spoke to The Empire Club before he became the Prime Minister of the United Kingdom. Edward Heath spoke to The Empire Club before he became the Prime Minister of the United Kingdom and Richard Nixon spoke to The Empire Club before he became President of the United States. I just want you to know that so if you should happen to change your mind, this meeting will have served a useful purpose.
Last week when I was drafting the notice of this particular meeting I enquired of the Secretary of The Canadian Club as to whether or not Mr. Connally had given him a title for his address. I was advised that there was no title and that there would be no written text. That rather intrigued me-thinking in terms of a Texan without a text and even without a title.
However, in fact our guest did refer to a text but it was quite clear and obvious to all of us that he really didn't need to do so judging by the manner and the performance in handling questions from the audience.
Mr. Connally you refer to the discussion of possible merger between The Canadian Club and The Empire Club, let me assure you that that talk has gone on for seventy years just as talk of merger between our two countries has gone on for slightly more than seventy years. It might come about though.
The Canadian Club of Toronto and The Empire Club were both founded over seventy years ago for the purpose of giving their members the opportunity to hear prominent men speaking with authority upon the issues of the day. Both Clubs are firmly committed to the oral tradition. This perhaps is even more important today than in years gone by, particularly with the advent of television.
It is one thing to read in the newspaper or to hear on television what men of the stature of John Connally have said-it is quite another thing to meet him personally and to hear his words without the intervention of electronics.
We have today been privileged to hear Mr. Connally's views expressed with great clarity and great conviction. It does not follow that all of us necessarily agree with everything he said today or has said in the past but we are deeply in his debt for having taken the time and the trouble to deliver them to us. Indeed his presence here and his message are in the finest tradition of both Clubs.
The name of our guest speaker is well known in Canada. Indeed it has been associated with some rather anxious moments in our country's history. I think we all recognize that the root cause of many of our problems has often been the absence of meaningful communication and consequently misunderstanding.
Mr. Connally has communicated with us today in a most effective fashion. On behalf of every member of The Canadian Club, of The Empire Club, and our guests, may I assure you, Sir, that we all welcome you heartily and thank you most sincerely.