"CANADA' S CENTURY IF ..."
An Address by WILLIAM FREDERICK HOLDING
Immediate Past President, Canadian Manufacturers' Association
Joint meeting with The Canadian Club of Toronto
Thursday, January 17th, 1952
CHAIRMAN: The President, Mr. D. H. Gibson.
MR. GIBSON: Our speaker will be introduced by Mr. Thomas H. Howse, a Past President of The Empire Club of Canada.
MR. HOWSE: It is a great pleasure for me to have the privilege today of introducing our guest speaker, who is a very old friend of mine.
I have watched Mr. Holding's steady climb through past years with intense interest because it is another example of the rewards that can be secured in this fair Canada of ours by those who have ability, and are prepared to work hard.
Our speaker today--was born in New York City; educated in New York, Toronto, and later in Birmingham, England. His father was an Englishman, and perhaps we have to thank that fortunate circumstance for the fact that Mr. Holding elected to spend most of his life in Canada.
During the first World War he served in the U.S. Navy, and at its conclusion held the rank of Ensign.
In 1919 he joined the staff of Price Waterhouse Co. (Chartered Accountants) here in Toronto, and secured his C.A. degree in 1923; he was with Price Waterhouse for eight years, two of which were spent in Mexico City
In 1927 he joined his present company--General Stee Wares as Comptroller; where promotion came rapidly he was moved up to the position of Treasurer in 1933 elected to the Board of Directors; and appointed a Vice President in 1939; and 5 years later Vice-President and General Manager; then in 1946 Managing-Director, which all culminated in his election to the Presidency in 1950.
You will notice from your cards that Mr. Holding is an F.C.A. In April 1950 the Council of the Institute of Chartered Accountants in Ontario honored Mr. Holding by electing him to Fellowship.
Interspersed with his many activities, Mr. Holding has taken an ever-increasing interest in national affairs, and is the Immediate Past President of The Canadian Manufacturers Association. His term of office was highlighted by the fearless stand he took on a number of important issues, particularly on that controversial subject--illegal strikes--in fact, I remember asking him on one occasion whether he did not think it advisable to arrange for a body guard.
Last Monday evening, when speaking from Ottawa, Winston Churchill referred to the boundless future which lies before this fair Dominion, he said that when he first visited Canada the population was only 6 1/2 millions while today it is 14 millions, and he prophesied that when his grandchildren visited Canada in the years to come the population would be 30 million.
We are now going to hear an enlargement on this subject. It affords me very great pleasure to introduce William Frederick Holding, F.C.A. who has chosen as his subject "Canada's Century If---"
MR. HOLDING: Nearly fifty years ago, a great politician, statesman and patriot, declared that the 20th century would be Canada's Century. Since, at the beginning of the century, Sir Wilfred Laurier could have had small appreciation of the great store of mineral wealth locked within that vast northern region known as the Canadian Shield--or of the fuel wealth under the prairies--his prediction must have been based on something more than material values. He must have thought he perceived, in his fellow-countrymen, those qualities of leadership and resourcefulness which make for progress.
While it must be recognized that Canada has made considerable progress during the first half of the twentieth century--her development can hardly be regarded as spectacular when we consider the great natural wealth with which a bountiful providence has so lavishly endowed this country. In fact, there are those--and I am one of them--who feel that we have not taken reasonable advantage of our opportunities to achieve for our country a more secure and influential position amongst the nations of the world.
Yet Canadians' success with specific projects--the building of Transcontinental Railways--the development of Hydro-Electric Power--her contribution towards the production of munitions during the second World War--and the accomplishments of individual Canadians in the fields of Science, Engineering, Medicine, Arts and Letters--would seem to prove that the failure is not in the character and qualities of the individual Canadian--but rather in the course which they plotted for their ship of state.
We have about fifty years to fulfill the prediction that the twentieth century would be Canada's. If we would still like to establish title--(and there is time for considerable progress in that direction)--it seems to me that we will have to alter our national thinking in some important aspects of our economic and political relations with other countries.
A country's greatness, and its influence in world affairs, depends in large measure on the number of people that can be supported--at a high standard of living--within its borders. No matter how extensive are the natural resources of a nation--if such resources are not being used for the support of a domestic population large enough to provide for protection of the nation against aggressors, and to make a significant contribution towards the amenities of civilization and the support and defense of its political ideologies--that nation will be a second rate country.
Canada's progress has been greatly retarded by the conviction that it must always be a 'small population country'.
The small population theory, sprang first from the belief that Canada's natural resources consisted of a narrow belt of arable land and a large amount of forest and rock--practically useless for providing a living for more than a few thousand. This was a pretty reasonable belief up to forty years ago, but not now. Not only have we found that the arable belt is very much larger than had been thought--but that the forests and rocks contain undreamed of wealth. The most powerful country in the world, for example, is dependent on Canada's forests for its newspapers and magazines--and its defence programme would be utterly impossible without Canadian Nickel.
What are the principal materials on which modern civilization is based?--Fuel and Iron. Fifteen, even ten years ago, most Canadians thought we must be forever dependent on the U.S.A. for fuel and iron ore. Now, it is more likely the U.S.A. and Great Britain will be dependent on us for iron and--with the limited exploration already done,--we know we have oil and gas for all our needs for centuries.
I do not wish to burden you with a lot of statistics, but it will help you to form an opinion of Canada's ability to absorb population--if you will consider what other nations have done in this regard. If Canada's habitable area--please note that I am saying habitable and not total area--if her habitable area were populated on the basis of Great Britain, we would have 700,000,000 people in this country instead of 14,000,000--on the basis of Holland, 1,200,000,000--on the basis of the most prosperous nation in the world today, (the U.S.A.), 80,000,000.
The noted geographer, Dr. Griffith Taylor, in his book "Canada" published in 1947 estimated a potential population for Canada of 100,000,000 people, living at European standards--or 50,000,000 at the standards of a rich new country. That Professor Taylor's calculations gave little importance to the tremendous potentials for oil and minerals not yet uncovered in 1947--may be assumed from this quotation from his book. I quote:
"It is my experience that those in authority are wisely frowning on the rather wild statements which from time to time are made with regard to 'potentialities' of the north. Such has certainly been the case with certain oilfields and analogous mineral areas."
Read Professor Taylor's very fine textbook "Canada"--and Mr. LeBourdais' less technical but most stimulating book "Canada's Century" published in 1951,--and you must indeed be a pessimist if you still doubt Canada's ability to support a population of well over 50,000,000and on a higher standard of living than we enjoy in this country today.
So much for our ability to support a larger population--why is a larger population something to be desired?
The urge for survival is probably the most powerful force in nature. There are in the world today, countries whose natural resources are inadequate for the maintenance of a decent standard of living for their inhabitants. This constitutes a real and ever present hazard for the political independence of a 'small population' country with natural resources far in excess of the needs of its population, such as Canada. Now that the rest of the world as well as we, ourselves, are aware of the vast natural resources lying comparatively dormant within our borders--(raw materials that are urgently required for the welfare of humanity)--either we will use them to build up a strong reliant nation providing shelter and sustenance for a population in keeping with such resources--or they will pass from our control.
Surely, with the knowledge of what has happened to so many European countries during the past fifteen years fresh in our memories--we can have no doubt that there are nations who regard, with predatory eyes, the great natural wealth of Canada, (so inadequately defended) and which--under their control--could be used so effectively for the furtherance of political and social aims and ideologies quite inimical to the Canadian--the democratic--way of life.
Certainly, the United States would, in her own interests if for no other reason, try to defend us from aggressors-and, if they did so successfully--would it be surprising if they should get the idea that one national government would do a better defense job than two? At best, the acceptance of such protection would create an obligation which would almost inevitably compromise our political and economic independence.
But even if a much larger population were not essential to our survival as an independent nation,--it would still be necessary for the attainment of the standard of living which should be available to the people of a nation so richly endowed with raw materials and potential Hydro Power. The economic advantages to be derived from a larger population are--no doubt--best appreciated by the Canadian manufacturer. It is unfortunate--but perhaps not surprising--that the general public should fail to realize how important is a large market for low cost production of manufactured merchandise. A better general understanding of this matter would do much to remove the impediments to industrial development which is of such importance to the welfare of the Canadian people as a whole.
In spite of the progress we have made to date--it must be admitted that manufacturing productivity per man hour is considerably lower in Canada than in the States--and the cost of Canadian-made products is consequently higher than the cost of American products.
How does the American domestic market, being over ten times the Canadian market, account for the discrepancy in the price of manufactured goods between the two countries? The answer to this question must be thoroughly understood if Canada is to adopt international trade policies designed to foster the growth of industry in this country. While I will use the electric refrigerator to illustrate, the same difficulties are encountered in the manufacture of most products in Canada.
In the year 1950, there were 6,200,000 refrigerators produced in the United States--300,000 produced in Canada. There are at least five U.S. manufacturers who individually produced in 1950 twice as many refrigerators as were sold throughout Canada in that year. Before the manufacturer can get into production, there is expensive preparatory work to be done--research, development, designing, and manufacture of special tools and dies. The expense of such work is substantially the samewhether 30,000 or 600,000 refrigerators can be produced before consumer demands make it necessary to re-design and re-tool. Let us assume that the preparatory work cost $200,000. The Canadian manufacturer might expect to sell 30,000 before having to change the model--in which case, preparatory costs per unit would be $6.67. A U.S. manufacturer would probably sell 600,000 with the same preparatory expense--a cost per unit of only 34 cents.
Then there is the problem of actual manufacturing costs. For example, there are about 100 pressing or forming operations in making the 25 or so steel parts that make up the cabinet of a refrigerator. A large U.S. manufacturer will have a specialized machine for every one of those 100 operations. The required investment of $1,000,000 to $1,500,000 is reasonable for his volume. A Canadian manufacturer could use only 5% to 10% of the potential output of such specialized machines, and therefore cannot afford this investment. He must use all-purpose machines--and use each for numerous different jobs. His first extra cost is--that the all-purpose machine is not so efficient in operation as the specialized machine. The second, (and more substantial cost), is that the Canadian manufacturer's machines must lose a large proportion of their potential operating time while they are being changed from one job to another,--and remember--the labour cost involved in the frequent changeovers add significantly to the cost of the product.
The Canadian manufacturer pays more than the American manufacturer for much of his raw material and trimmings. This is due to the fact that, as yet, Canadian sources for such components are not always available--or available in sufficient volume--and the cost of imported materials and trimmings is higher because of import duties. I certainly do not criticize the policy of fostering Canadian production of steel and other raw materials and trimmings used by us--by imposing a duty against imported materials; but when U.S. and Canadian prices on consumer products are being compared,--the higher price paid by the Canadian manufacturer for his raw materials must be remembered.
While labour rates in Canada are, as a rule, somewhat lower than in the United States the cost of labour per unit of most articles manufactured in Canada, is, for the reasons already given, higher than in the United States.
The high cost of big Government for a small population is inevitably reflected in the cost of every article manufactured in Canada-and places the Canadian industrialist at a serious disadvantage in competing with manufacturers, operating in countries where the tax burden is shared by a greater number.
I don't suppose one person in a thousand--in comparing U.S. prices with Canadian--has any idea of the extra cost directly imposed by our Government, on manufactured goods. The 10% Federal Sales Tax alone accounts for 10% difference in price, because the U.S. Government has not now--nor has it ever had--any such tax. The 10% Sales Tax--and also the so-called Luxury Tax of 15%, levied against such common household necessities as Stoves, Washing machines and Refrigerators--tend to be overlooked or forgotten because they are collected at the manufacturer level--and the consumer therefore does not see how much tax he is paying in the purchase price.
If Canada's population is to be expanded sufficiently to assure her political and economic independence, it will be possible only through her development industrially. She must provide adequate employment, (not only for immigrants to our shores), but for the Canadian youth who have, in the past, been compelled to migrate to the United States to secure suitable employment.
And surely the most implacable free trader must recognize that to provide sufficient employment for a larger population we must produce in Canada, with Canadian labour, our requirements of manufactured merchandise--to the fullest extent possible. This holds true, particularly, where the consumer article can be fabricated from raw materials obtainable in this country--or, (as in the case of aluminum)--where cheap Hydro Electric Power is a significant factor in the cost of manufacture. In following this practice, it will be inevitable that, for a time, we will pay a somewhat higher nominal price, for some articles,--because they are made in Canada instead of being imported.
But the purchase money will not be going out of Canada. It will be used here to pay for wages and services in Canada--wages which in turn will be spent on the products of Canadian farms, and on clothing, homes, dental, medical and legal services, or newspapers, magazines and other goods manufactured or otherwise provided by Canadian residents--and to help pay the operating cost of Government in Canada.
The phenomenal development of the great American nation, was predicated on these general principles of international trade--regardless of the domestic cost of production, never purchase anything from abroad which can be manufactured in the U.S. with American labour--endeavour to obtain needed foreign raw material with a minimum of processing by the country of origin--and, so far as possible, confine U. S. exports to products having a high labour content.
Has this policy worked well in the U.S.A.? The evidence is this:
1. The U.S.A. has attained for its citizens by far the highest standard of living in the world.
2. The U.S. Government is so firmly convinced that the policy is the right one that they pursue it constantly. There only has to be the least threat to any American industry, and up goes the tariff. They don't wait for Congress to raise rates. The U.S. Government has power to raise them, (but not lower them), by edict. They also have their customs regulations so drawn that they can apply any rate of duty that suits them. Any manufacturer proposing to export to the United States has to face the hazard of raised duties without warning and without a public hearing of any kind. Furthermore, the U.S. importers have the constant threat of having the U.S. Customs Department come after them for extra duties months after importation--because the U.S. Customs--(as a result of protest by some U.S. manufacturer)--has decided to change the classification of the goods retroactively.
But hasn't the U.S. lowered its tariff rates in recent years? Yes, on certain materials it could not produce in sufficient quantity, at home. Yes, on certain manufactured goods where it was an empty gesture.
Well, aren't there quite a few cases where the U.S. duty is the same as the Canadian duty, and isn't that fair? Yes, it is true in a certain number of cases that the U.S. duty rate is the same as the Canadian. As to fairness, it is about as fair as a foot-race between a giant and a midget with each limited to taking the same number of steps.
Particularly in the comparatively early stages of its development, no country can, (without seriously impairing its chances for industrial growth), import in significant volume manufactured goods of a class or kind which can be produced in adequate quantity in the home market. Trade agreements should aim at the objective of having our exports contain as large a labour content--and our imports as small a labour content--as possible, so as to provide--in the case of exports--for the largest possible employment in Canada, and, in the case of imports, for the least possible subtraction from possible employment in Canada.
During the past several years, Canada and the United States have participated in International Trade Agreements at Geneva, Annexy and Torquay. The United States has not carried out her undertakings under these agreements. I refer to her commitment to simplify U.S. Customs regulations that have been even more effective than her high tariff wall, in excluding goods of foreign manufacture. Only within the last six months the U.S. has further breached the trade agreements by excluding the importation from Canada of fat milk products (Cheese, etc.).
Our Government has protested these breaches, but, in the meantime we continue to give the concessions we undertook--while being deprived of the advantages we were supposed to get. Under the circumstances, I suggest that we would be entirely justified in taking any steps we consider necessary to exclude, or discourage, the importation of certain manufactured goods from the States, which are causing unemployment in Canadian factories.
I do not intend that any of my remarks about the American practice of excluding foreign-manufactured goods from the U.S. market should be construed as a criticism of their policy in this respect.
On the contrary, I admire and respect the U.S. Government for following a course which has proven of tremendous value to the citizens of that country,--and which--if adopted in Canada and stream-lined for Canadian use--would, (I believe), greatly accelerate our industrial growth.
Most Canadians, while they would really like to see more manufacturing in Canada, have a terrible fear that--if our tariff rates are such as to keep out foreign goods--then Canadian manufacturers will become inefficient or make too large profits.
As to efficiency, Canadians should look to the U.S.A. and ask themselves--"have high tariffs made the U.S. manufacturers inefficient?" The answer is, of course, No. It is well known that the U.S. output per man hour is the highest in the world. High tariffs helped to bring this about by ensuring that the U.S. manufacturer had the whole U.S. market. In Canada,--the Canadian manufacturers' efforts towards similar efficiency are handicapped, (not only by the smaller size of the Canadian market), but also by the fact that he has to share that market with foreign manufacturers.
Canadian Electric Refrigerator Manufacturers spent at least $10,000,000 between 1948 and 1951 to expand and improve their equipment. What happened? Those facilities are, today, almost idle.
The tariff rate on refrigerators was reduced--and, (as U.S. manufacturers had run into a slump), they found the Canadian market--a convenient outlet for their surplus production. They sent into Canada, during the first ten months of 1951-106,528 refrigerators-which is equal to 46% of all refrigerators sold in Canada, (both domestic and imported), during that period. These imports have--in fact--been more than the total sales of refrigerators in Canada for the past six months.
As to high tariffs being conducive to exorbitant profits--the controlling factor is competition. Would reserving the Canadian market for Canadian manufacturers, reduce competition to the point where unreasonable profits could be earned by the Canadian manufacturer? In almost all lines, competition takes two forms,--namely, there are several manufacturers in the same line,--and there are alternative products. It would be hard to find any Canadian product on which there was not plenty of both kinds of competition right here in Canada.
But, what about the possibility of Canadian firms getting together and eliminating competition? The protection against this is our anti-combines law,--the same as it is in the U.S.A. The combines department of the government can investigate and recommend prosecution--with or without complaint.
Suppose, however, that occasionally the worst happens and--(as a result of increasing the duty on an article from 25% to 35%)--some Canadian manufacturer gets 10% more than a reasonable profit,--whatever that may be. Are we not better off in this country to pay $135 for the article when almost the whole amount is going to various Canadian wage earners who will, in turn, spend that money to buy Canadian goods and services--than to pay $100 (all of which will go to U.S. wage earners or investors who will spend all of it in the U.S.A.)?
Suppose some Canadian manufacturer is getting $10 too much profit in that $135 price? Is that a sound reason for taking $100 of buying power out of the Canadian community, especially when we consider that the government gets $5.26 extra tax out of that $10 profit anyway, in corporation tax.
I am afraid that the attitude of the average Canadian, with regard to protective tariffs and anti-dumping legislation, is much the same as it was in the horse and buggy days,--and so long as we continue in this mental attitude, we are going to make horse and buggy progress.
When Canadians were hewers of wood and drawers of water--farmers and woodsmen for more developed nations--agriculture was the main source of national income. Canada's fiscal policies were then, quite appropriately, designed to insure the lowest possible operating costs for the agriculturalist, because most of his products had to be sold abroad and he had to be able to meet competition from low price labour countries.
What we fail too often to realize is that manufacturing has taken over as the principal source of national income. It was recently reported that one-third of Canada's national income is now earned in manufacturing industries. Manufacturing now provides employment for 26% of Canada's labour force as compared with 20% employed in agricultural pursuits.
When you consider also that the taxes paid by industry are many, many times the amount of the taxes paid by agriculturists you will realize that the maintenance of government services--of old age pensions, family allowances, unemployment insurance and other social benefits,--(in fact-the maintenance of our living standards at their present level),--now depends more on the prosperity of the manufacturing industry in Canada than on agriculture.
There are those who see, in the improvement in the Canadian dollar exchange rate, evidence of progress and prosperity.
Actually,--Hasn't an approximate balance in U.S.Canadian exchange of dollars been achieved--by selling Canada's natural resources, (Canada's Capital), for the American dollars required to meet a large deficit in her trading balance with the U.S.A.? Digging Canada's natural wealth into flat cars or on to ships for export to foreign countries--in order to pay for foreign-made manufactured goods--was not fast enough. During the past few years, we have been living in part, on our principal--by selling ownership in our irreplacable oil fields and mines--(not for anything of permanent value),--but for our day to day consumer goods.
One of the stumbling blocks in the way of our industrial development is our need to find foreign markets for our surplus production--principally farm products. This situation carries through from the time when it was thought that Canada could never be an industrial nation. So long as we are dependent for our prosperity on the willingness and ability of other countries to buy our surpluses,--our economic balance will be in jeopardy.
It seems obvious that we would be in a much stronger position if we did not produce surpluses, (in excess of what is required to pay for the things we must import) but, instead, devoted our labours to growing and making the things we want to consume in our own country.
Will this be Canada's century? It can be if we are prepared to abandon or modify policies which have become outmoded with the discovery of Canada's potentials for industrial development--and to adopt policies that will stimulate dynamic growth. The opportunity is still ours, to establish,--on our half of the North American continent,--a great democracy--with a population adequate to preserve its security and to afford for its citizens a standard of living second to none.
THANKS OF THE MEETING were expressed by Lt.Col. Donald H. Jupp, O.B.E.