WHAT CANADA CAN GIVE FOR A BRITISH PREFERENCE.
Address by Mr. Archibald McGoun, M.A., B.C.L., K.C., Professor of Civil Law in McGill University, Montreal,
before the Empire Club of Canada
on Dec. 7th, 1905.
Mr. Chairman and Gentlemen,
In examining the Census volume describing the manufacturing industries of Canada, and in comparing these with Trade and Navigation tables, it can be conclusively demonstrated that not more than 25% of the manufacturing industries have anything at all to fear from the freest possible competition with the United Kingdom. I can give the fullest details on this subject, but the whole result may be generalized in a very brief statement.
Including the cotton and woollen industries, and all the men's and women's clothing made in any establishment employing more than five hands; including also hosiery and knitted goods, linen manufactures, tanned and finished leather, gloves and mittens, hats, caps and furs, cutlery and edge tools, and even iron and steel products; including also malt liquors, glass, earthenware and china and sugar refining, which comprise the only industries employing more than one thousand hands each and a long list of others which employ less than that number of hands; I find that the total number of hands engaged in all the industries in which the competition of the United Kingdom appears to have any importance number 86,000 hands out of over 340,000 employed in all the manufacturing industries.
It appears, moreover, that those dependent upon all the manufacturing and mechanical industries form rather less than one-fifth of the population of Canada, and if we take for granted that every employee represents the same number of persons dependent upon him that the people engaged in other occupations represent, we find that very considerably less than 300,000 people out of 5,300,000 people are all that would be affected by British competition. The remaining people to the number of 5,000,000, including three-quarters of our manufacturing industries, would be very greatly benefited by any change in the tariff that would reduce the duties on imports from the Mother Country.
But let us look at the question. What rate of duty would reasonably suffice to protect even those engaged in the industries I have named from such competition, resulting either from a difference in rate of wages, or from any duties that they may require to pay upon their raw materials. The difference in rate of wages can be ascertained by taking the Census returns upon the principal industries above named, and comparing them with the statistics published (33 Enc. Brit., 716) showing the corresponding rate of wages in the United Kingdom.
Taking all of these statements together, and selecting the figures showing the greatest difference I can find in respect of the rate of wages, it appears that the difference between Canada and the United Kingdom amounts to slightly under 31%, or to be exact, 3088%, the weekly wages being equal to $5.64 for men in the United Kingdom, against $8.16 for men in Canada, a difference of $2.52 a week. The figures for women and children need not be added, but they rather accentuate the same general conclusions. The proportion which the cost of labour bears to the output of the factories in all the industries is 23.55% of the products, including not only wages proper but also the salaries paid to those employed on salary, and including also amounts paid to owners themselves for whom allowance is made by way of salary, and assuming that the difference in salaries is at the same rate as the difference in wages.
Applying this to all industries, it appears that a rate of 7.27% upon the value of the products is all the duty that is required to meet the difference in wages. Applying this percentage to textiles alone, the rate is 8.78%, while in iron and steel products the rate comes to 10.44%.
The manufacturers even go the length of pretending that the country ought to protect them to the extent of the difference in the rate of interest they have to pay for borrowed capital, and for the cost of fuel and other incidental expenses resulting from difference 0f climate and other causes. These are also stated in the Census, and to cover these items for all the industries would increase the average rate from 7.27% to 10.58% When I mentioned these figures to the Tariff Commission, I told them that I thought they covered everything except the duties that might be paid by manufacturers in Canada upon the materials used in the manufactories, and Mr. Paterson asked me whether I had made any estimate of these. I had not done so at the time, but I have since gone into this point with respect to two of the most important industries, namely, cottons and woollens.
COTTONS.-As to cottons, the Census returns show the value of the products of the Canadian mills is something over $12,000,000, while the materials described as crude are of the value of about $5,000,000. These apparently represent raw cotton or cotton wool and waste, of which the import in the several years between 1900 and 1904 amounted to sums varying from $3,500,000 up to $6,400,000, all of which are admitted duty free. If the whole of the materials thus described as crude are admitted free of duty, then there remain the materials described as partly manufactured, and these amount to about $900,000. Assuming that these have been charged with duty at the average rate upon all dutiable imports, namely, 26.24%, we find that the duties charged amount to about $105,000, which represents a percentage of 0.87% upon the $12,000,000 of goods produced.
Adding this 0.87% to the 8.78% required for protection against difference of wages in the textile industry, we get a rate of 9.65% as the duty required to put the Canadian manufacturer on a par with his English competitors in the matter of wages and salaries and for the payment of duties of raw materials.
If the whole $5,000,000 described as crude materials were not admitted free 0f duty, these figures would have to be modified, and it will have to be ascertained as accurately as possible what the amount of duty actually is collected upon the raw materials used in the manufacture of cotton.
WOOLLENS.--As to woollens, the Census shows the value of the products as something over $7,000,000, the crude materials slightly over $3,I00,000 and the partly manufactured materials about $700,000. (Census p. 146.) The crude materials are apparently made up of wool imported without any other change except being washed, of which the import in 1900 was $1,300,000. If we add to this the wool grown on the farms in Canada, amounting to over $1,800,000, we get a total of $3,200,000, which is slightly in excess of the crude materials mentioned as employed in the woollen factories. Besides these there were nearly $300,000 worth of cotton, woollen and linen rags imported in 1900 free of duty. It appears pretty certain, therefore, that the crude materials mentioned in the Census were all admitted free of duty. As to the woollen materials partly manufactured, these apparently include woollen yarn imported by manufacturers amounting in 1900 to $175,000 on which the duty is given. Assuming that the remainder of the raw materials, partly manufactured, paid duty at the average rate of 26 .24%, this would amount to about $160,000 levied as duties which would be a rate of 2 .24% on the value of the products of the woollen materials, namely, on $7,000,000. Adding this to the rate estimated as representing the difference in rate of wages, 8.78%, we get a rate of 11.02% as sufficient to protect the woollen manufacturers from difference in rate of wages and to enable them to pay the duties upon their raw materials.
I imagine that each item in the list of industries would have to be examined separately in order to arrive at a general result, but this could only be done by ascertaining the amount of duties actually paid upon raw materials, and taking the ratio which this bears to the value of the products in the materials.
The above results are mainly illustrative of the method by which a fair estimate can be made of what constitutes an offset to the alleged disadvantages under which our manufacturers operate. Anything above such rates cannot in fairness be imposed on imports from the United Kingdom, which does not charge duties on imports from this country. And if she should elect to charge such duties against our foreign competitors, so much the better for us.
FARMERS' CONSUMPTION.-It is very commonly pretended that the farmers of Canada are more anxious for the 'admission of articles of American production than for those coming from the United Kingdom. It is particularly insisted upon that the farmers are anxious to have the duty low on agricultural implements, as this is a very large item in the management of their farms. It is perfectly true that agricultural implements form a very large item in the classes of goods used by the farmers. The statistics show that more than $ioooo,ooo is the annual consumption.
Of these the production of Canada according to the Census in 190i was $9,597,389; and the import, 1904, was $--,638,691, total $12,236,080. Less export, $2,600,000, of which $1,700,000 to British and $900,000 to foreign countries. If we add to this carriages and waggons, which are also imported from the United States these amount to the following sums: Canadian produce $6,650,912, the import, 1904, $1,428,716, total $8,079,628. Export, 1904, about $175,000. These two items, which might be grouped together, amount to an annual consumption of more than $18,000,000.
There is, however, a very good reason for not admitting American agricultural implements free of duty, and that is, that our manufacturers are excluded from the American market. The farmers must have a sense of fair play, and they would not consider it fair that United States agricultural implements should be imported freely into Canada while Canadian articles are excluded from the American market.
Nor would it be fair to the rest of the country that agricultural implements alone should be put on the free list, because if the Americans are to be allowed to select a few items in which they have a special advantage, they may very well grant reciprocity in these and still maintain a very high duty upon other Canadian manufactures and produce. Nor is there very grave danger of Canadian manufacturers charging unreasonable prices in such articles, because competition in Canada is pretty keen in this article. There are 114 different establishments in operation, and no combination can prevent some of these from bringing the price down to one that will give simply a living profit. The reason is that some of them are sure to be men of comparatively small capital, who cannot allow their stock to accumulate in order to keep up the price. They must make quick sales and therefore they must be content with reasonable profits. But, however important agricultural implements may be, it must not be lost sight of that the articles in which the United Kingdom, which is our best customer for the purchase of farmers' products, is able to furnish us with our supplies, are of very much greater importance to the farmers than agricultural implements.
Thus against $18,000,000 paid for agricultural implements, including carriages, our people pay considerably over $100,000,000 for certain articles of large consumption, the farmers as the largest class in the community taking their full share of these.
In men's and women's clothing our annual consumption is $26,531,990, of which $24,314,000 is made in Canada and $2,237,000 imported.
In carpets, Canadian, $633,192; imported, $1,159,000; total, $2,152,000. This import is mostly included among woollens mentioned below. The other items are distinct from one another as far as can be made out from the Census and Trade tables.
In cottons we consume $20,498,021, of which $12,033,052 is of Canadian produce, and $8,464,969 imported.
In cordage Canada produced $2,212,663; imported, $248,169; total, $2,460,852.
In cutlery and edge tools, Canadian produce, $1,295,980; imported, $650,780; total, $1,947,760.
In drugs, Canadian produce, $1,380,905; imported, $2,203,032; total, $3,583,937.
In flax, linen, etc., Canadian produce, $338,176; imported, ,$2,411,530; total, $2,749,706.
In glass, Canadian produce, $995,401; imported, $1,983,781; total, $2,279,182.
Gloves and mits, Canadian produce, $1,024,245; imported, $943,706; total, $1,967,951.
Hats, caps and bonnets, Canadian produce, $5,876,467; imported, $2,183,174; total, $8,059,641.
Hosiery and knit goods, Canadian produce, $3,857519 imported, $1,098,874; total, $4,956,393
Leather, tanned, curried and finished, Canadian produce, $12,068,600; imported, $879,053; total, $12,947,653 Oils, Canadian produce, $3,519,493; imported, $3,082,027; total, $6,601,520.
Rubber clothing, Canadian produce, $401,000; imported, $360,846; total, $761,846.
Pottery; earthenware and china, Canadian produce, $380,000; imported, $1,611,356; total, $1,991,356. Sugar, 13,169,000, which includes $574,000 refined imported (Trade Tables, page 134, item 9) and $12,595 000 produce of the Canadian refineries. The latter includes $10,546,500 of material, chiefly raw sugar and sugar partly refined (Census, page xxiii.).
Wire, Canadian produce, $1,693,995; imported, $394,889; total,, $2,088,884.
Vinegar and pickles, Canadian, $56x,682; imported, $279,014; total, $840,696.
Woollen goods, Canadian, $7,359,541; imported woollens, $15,159,383; imported worsted, $4,109,179; total, $26,619,103.
RESUME OF PRINCIPAL ITEMS.
Woollen goods............................. $26,600,000
Men's and Women's clothing...............26,500,000
Leather: tanned, curried and finished....... 13000,000
Hats, caps and bonnets..................... 8,000,000
Hosiery and knit goods.................... 5,000,000
Drugs, etc................................ 3,600,000
Flax, Linen, etc.......................... 2,700,000
Pottery, earthenware and china...... ...... 2,000,000
Cutlery and edge tools..................... 2,000,000
Included in Woollens............ 1,500,000
The general conclusion is that Canada should be prepared to respond to any preference in her favour upon agricultural and other produce by making very large reductions in the rate of duty upon imports from British countries. This would be an advantage to merchants engaged in this traffic, to the shipping interest, and to the railways running east and west, but the greatest advantage would be to the consumer in Canada, while at the same time it would tend to foster intercommunication between British countries and would form an important material bond uniting the Mother Country and the Colonies together.