Government and Private Enterprise

LT. COL LEGGE: In the expert view of the Financial Post, the production of Canadian uranium in 1958 was worth approximately two hundred and ninety million dollars, which was therefore Canada's most valuable metal product. Furthermore, over the next four years the contract output of uranium will be three hundred and fifty million dollars a year. The wealth of these figures does not mean that future markets for Canadian uranium are guaranteed because there are many uncertainties which must be made sure for the peaceful marketing of atomic power reactors and for the acquisition of nuclear weapons. As the President of the huge Rio Tinto Mining Company, the Honourable Robert Winters has the burden of dealing with these problems and of leading an organization which produces the bulk of Canada's strategic material. He is, in fact, the proud Nova Scotia skipper of a great Canadian and Commonwealth development which looks to the future for still greater and more exciting days.

Mr. Winters came to his business command after an uncommonly brilliant political career, which began with the General Election of 1945 and ended in the unpredicted changes of 1957. For ten of the twelve years which Mr. Winters represented the constituency of Queens-Lunenburg, he was in the Cabinet as Minister of Reconstruction and Supply, Resources and Development, and finally of Public Works. To these posts he brought the benefit of an excellent scientific education obtained at both Mount Allison University and the Massachusetts Institute of Technology. In addition he had broadened his engineering training by serving with the Royal Canadian Electrical and Mechanical Engineers during the War and had attained the rank of Lieutenant-Colonel.

In politics he found an exacting life which demanded concentration throughout all the hours of every day and every week. As a business leader he has a similarly strenuous schedule, and this is not surprising because beyond the Presidency of Rio Tinto, he is a Director of the Canadian Bank of Commerce, The Crown Life Insurance Company, The Toronto General Trusts Corporation, Triarch Corporation Limited, the Royal Liverpool Insurance Company, the Bathurst Power & Paper Company Limited, and of Devon-Palmer Oils Limited. In short, Mr. Winters is the living example of the maxim that there is lots of room at the top for a good man, and he simply exchanged a Government pinnacle for a business summit. In these days when business is becoming infinitely complex and when governmental activity and regulation is vast and increasing, it is fortunate that our speaker can talk to us as one who has served both as an important member of the Government of Canada and as a powerful protagonist of the responsible business community.

Gentlemen, I am most pleased to introduce to The Empire Club of Canada the Honourable Robert Winters who will speak to us with the authority of experience on "Government and Private Enterprise".

MR. WINTERS: It is a distinct honour to be invited to address the Empire Club of Toronto. Your membership comprises men who find in our great and proud traditions a source of strength and inspiration to be used in helping Canada achieve its high destiny in the world family of nations.

"Hold on to those things that are good" is an old admonition; and there are few amongst us who do not regard the British Commonwealth in that light. This free association of nations with a common regard for the Crown has overcome problems of race, colour, creed and geography to remain the greatest united force for peace the world has even known. The structure changes from time to time but the foundation of friendship and common purpose upon which the Commonwealth is built is the best guarantee that it will endure and continue to set an example of unity, peace and achievement.

Today I would like to speak briefly about some developing trends in the relationship between Government and private enterprise with emphasis on trade, a field in which Government policy makes its impact felt perhaps more quickly and with greater effect than in most other phases of its activities.

In the inevitable process of democracy, Governments change. Both the science and philosophy of Government change too. We have come far from the days when all power flowed from the Crown or whoever was powerful enough to seize it. But, although we take pride in our democratic form of Government, there are really very few nations whose Governments, even at this stage of development, are completely democratic in the sense of being fully elected by the people.

In the United States, the members of the Cabinet, for example, are not elected. They are appointed by the President and even though the policies and actions of the Government are subject to the control of Congress, the individual Cabinet Secretaries exercise both broad and important powers in the field of Government.

In the United Kingdom, which is the cradle of modern democratic Government and which has achieved great maturity in this field, members of the House of Lords do not take their seats as the result of a public mandate. They receive their authority by appointment, position or heredity.

In Canada one of our legislative bodies, the Senate, is fully comprised of appointed people. I am not saying that it is good or bad, desirable or undesirable to have one arm of our Government appointed rather than elected. I am merely asserting that notwithstanding our substantial progress in the direction of democracy and our devotion to democratic principles, there is still inherent in Canadians a reluctance to trust the voters `all the way' in determining who shall conduct our public affairs. In fact, there is room for further and progressive development towards fuller democratic Governments in the countries of the free world and I believe that this is inevitable.

While the system and form of our Government has been changing in a progressive development toward more and more democracy, the importance of Government has also been changing in relation to our private lives, our business activities and our country's well being.

Even as late as just prior to World War I, there was little Government did outside of its tariff policies to influence the welfare of either business or private citizens. But the war required heavy expenditures which in turn brought on income taxes which have now taken on the aspect of permanence and inevitability. Forced by public demands, Governments today have developed an enormous appetite for revenues which is matched only by the public's even greater appetite for services of all kinds.

Now I have always believed that the real role of Government should be to enact legislation designed to create the type of economic climate under which private enterprise can flourish by using its own initiative and that the benefits therefrom should flow to all our citizens. This concept envisages the lowest possible corporation and personal income taxes so as to generate maximum incentive and initiative.

But the socialist influence has been strong and the resulting paternalism has permeated the policies of all political parties to a greater or lesser degree. In this atmosphere Governments are inexorably drawn on by the cumulative and manifold demands of private enterprise and individuals alike. The demands are virtually irresistible for more social services, public housing, subsidized farm incomes, more roads and greater development of our natural resources. These are all fine unless they are financed by shrinking the value of the dollar and making the tax burden cumulative on business and individuals who are deemed to be able to pay, while at the same time forcing more hardship on the man whose salary is relatively static, or who lives on a pension.

This matter of a shrinking dollar or inflation concerns all of us, but it is something that is most difficult to cope with because, generally speaking and within reasonable limits, people like the feeling of expansion and buoyancy that goes hand in hand with inflation. This is one of those cases in which the cure is far more distasteful than the disease.

Governments have striven over the years to prevent further depressions. Unemployment insurance, old age pensions, veterans' benefits and other social measures support spending power. In fact, having in mind the 1930's we, as a nation, have built into the economy better protections against depression and unemployment than we have against inflation; largely, I presume, because measures to protect against the latter are not popular but they are just as important.

Over the past generation the cumulative effect of these trends has been a pronounced growth in the activities and scope of Government to the point where the Federal Government alone today spends one dollar out of every $5 Canadians are able to produce in the form of goods and services.

I do not think anybody is entirely happy about the increasing scope of Government but much of the growth has been both necessary and good. For example, much of the increased activity resulted from steps taken to improve the position of various groups of our society, the aged, the unemployed, the war veterans, the sick, children, farmers, fishermen, the less wealthy provinces and to defend our society as a whole. It is only when it takes place in fields which can be developed more advantageously for the public generally by private enterprise and initiative that there can be serious criticism.

But as I said a moment ago, one important field in which the relationship between the Government and private business is most sensitive to changes in Government policy is that of trade.

Even when the economy is booming the Government is under pressure to raise tariffs on various imported products so as to provide protection to domestic industry; but when slackness develops the demands for higher import duties intensify as is the case at the present time. Because a high volume of international trade is vital to Canada's economy I would like to devote the balance of my remarks to this topic.

Now trade is a broad subject and to set the tone for a brief discussion, let me state my general point of view. Most of us are conditioned by environment and upbringing. I am a deep rooted Nova Scotian from a primary producing area which is greatly dependent upon world trade. Therefore, when I think about trade, I begin by asking: what is the justification for restrictions on trade which are apt to hamper the export of Canadian products?

Someone else, brought up in an industrial area close to the United States border, would probably begin by asking just the opposite question: what is the justification for permitting imports which compete with goods made in Canada?

These differences in point of view are natural and understandable. The important thing in considering questions of national policy is not the individual's particular starting point, but his ultimate aim. When formulating any broad policy, the national interest must take precedence over regional or sectional requirements. If we all keep before us the principle that what is good for Canada is good for all parts of Canada, we shall ultimately arrive at the right decision regardless of the point from which we begin.

Canada is a country built upon balance and compromise. A hundred years ago when the foundations of our national life were being laid, there were many who doubted that the northern half of the North American continent could survive as a separate independent country. How could an area so vast, with meagre communications, including two distinct racial groups, two languages, two major religions and cultural groups be formed into a nation that could survive alongside the United States? And yet Canada did survive and is now recognized as one of the leading middle powers.

It survived and prospered mainly, I believe, because of our genius for compromise and accommodation; because of our ability to deal successfully with the conflicts of interest that inevitably arose between areas, between races and between economic groupings.

That is the corner-stone of our history and it remains the key to our future. We must continue to strive for balance in our national life in all its phases and not least in the realm of economics.

As I see it, the main question with respect to Canadian trade policy is not the choice between free trade on the one hand and protectionism on the other. No reasonable Canadian is going to ask for a choice between those extreme alternatives. Complete free trade is not being seriously advocated and protectionism if, in fact, it means anything at all, is pretty well discredited.

What we in Canada have to decide is the direction in which we move. Are we to move towards greater freedom of trade or towards less freedom of trade? This is a crucial issue, not only for Canada but for the world as a whole and particularly for the free people of the world.

It is extremely difficult for Governments and peoples to co-operate on the political level if they are at cross purposes on the trade level. The European countries have recognized this fact. It has taken a long time but it is highly significant that six of them have now joined in an European Economic Union by which they will, over a period of several years, gradually eliminate customs, tariffs and other barriers to trade between them.

These six European countries are making a serious effort to put trade and economics ahead of politics. They are proceeding on the principle that as trade barriers are eliminated, it will be easier to attain their common political purposes. And I think they are right.

This is just one piece of evidence--but I could bring more--to support my contention that responsible men in all parts of the world have come to realize that the world would be a better and safer place in which to live if there were fewer restrictions on legitimate trade.

It would be foolish, of course, to suggest that all the countries of the world are moving steadily in that direction. This is by no means the case. There is a good deal of backsliding from time to time even by countries that profess to believe in freer trade. However, no one in authority in any important country now seriously contends that the free world is better off as a result of higher tariffs or other barriers to imports from their friends and neighbours.

Here in Canada our people have as much of a stake as any other people in the strength of the free world and in the preservation of democratic institutions. Indeed, because of our dependence upon access to foreign markets there is no country with a greater stake in world trade than this country of ours. Our high standard of living, second only to the United States, is the result of the fact that the output of the average Canadian is correspondingly high. This is simple and obvious, but it is essential to an understanding of our position and that is why I mention it here, even if it is obvious.

Our high productivity in turn is the result of the fact that we do things on a big scale with plenty of machinery and equipment. The amount of capital per employed person in Canada is about as high as it is anywhere in the world. If we were to produce only for our own needs, we could not, of course, do things on a big scale. We can only operate as we do because we produce surpluses for sale to the world and buy from the rest of the world the goods that it is not economical for us to produce in Canada, given our high standard of living and high wage levels. So it is not an exaggeration to say that the high standard of living in this country is the direct result of our ability to produce big surpluses of things like wheat and cattle and minerals and lumber and pulp and paper and fish, which make up the bulk of our exports, and to sell them abroad.

Some people do not like this dependence upon exports of large quantities of foodstuffs, and primary materials. As they put it, they do not like Canadians to be hewers of wood and drawers of water. They would like to see more of our raw materials processed here in Canada. I share this desire, but before jumping to conclusions I should like to make a point that is often overlooked; namely, that Canada has now become the sixth most important industrial nation in the world. One out of every four persons employed in this country works in manufacturing establishments. We are far, indeed, from being hewers of wood and drawers of water. Our industrial growth in recent years has been little short of phenomenal.

And it is important to remember that all of this vast development took place, without any appreciable increase in tariff protection in any direction for many, many years and with many reductions in Canadian tariffs negotiated by the Government in return for similar reductions in tariffs by other countries, thereby giving us better access to their markets.

As I said, I share the desire to see more processing of our own raw materials here in Canada, notwithstanding the enormous strides that have taken place in that direction in recent years. But I also want, and I am sure all of us want, to maintain and increase employment and living standards in Canada.

I said at the outset that we must strive to achieve a balance in our economic life. Let me go further now and add that I believe we should seek that balance at as high a standard of living as possible.

This means, as I see it, that we should look hard and critically at proposals that would involve further restrictions on imports. Every time we add a new tariff barrier against imports we do two things; first, we add to the cost of living and the cost of production in Canada and, second, we reduce, directly or indirectly, the markets for our export staples.

When I was in Ottawa as a Nova Scotian I naturally took a great deal of interest in trade matters. But in addition I had the honour to be Acting Minister of Trade and Commerce when that great Canadian, C. D. Howe, was required to be absent from Ottawa. That was an interesting experience from many points of view. One of the lessons I learned is that nearly everybody complains about the barriers erected by other countries against Canadian goods. They protest against such barriers very strongly, as they should. Very seldom, however, did delegations descend on us asking for the removal of barriers to goods entering Canada. On the contrary, we did receive many delegations urging higher tariffs or quotas or prohibitions against imports. Once it has heard these submissions the Government then has the responsibility of weighing the pros and cons and of reaching decisions about trade policy in the light of what is best for the nation as a whole.

I am not arguing in favour of free trade or against all forms of protection for Canadian industry. For one thing, I believe there are some industries that are basic to our economy and that we must develop them even if this involves some protection against imports from the neighbouring United States and elsewhere.

We should, however, not let such exceptions become the rule or divert us from our march toward our national economic objectives. And we must take care not to jeopardize our position in world markets by pushing these kinds of considerations too far. Many countries have in the past ruined themselves by disregarding the effects of a policy of excessive protection. They priced themselves out of world markets and came face to face with most painful problems of readjustment.

In one sense our dependence upon foreign markets is declining as a result of the growth of the Canadian market--our population is rising at an extraordinary rate and our buying power per head of population has risen markedly in the post-war period. But this does not mean that foreign markets are any less important than they were.

It is as true of Canada as it is of other countries, in process of development and drawing large amounts of capital from abroad, that exports provide the moving force and the foundation for growth and expansion. The industry with which I am now associated, uranium, for example, is one that would not have been possible without export outlets and it is indeed fortunate that today uranium is moving out of the country in such large amounts, offsetting declines in the export of other metals and minerals and thus helping to maintain Canada's financial and economic stability.

With all these considerations in mind, I believe that Canada should always be in the forefront of the world wide effort to reduce barriers to trade and we cannot be in that position unless we practise what we preach. Some risks are involved in such a policy and I am not in favour of indiscriminate cutting of tariffs. Every case must be carefully considered on its merits and there may, on occasion, be justification for some upward adjustments in individual cases.

There should, in my opinion, be no doubts of the direction in which we are moving. If our free institutions are to survive, there must be fewer barriers to trade throughout the free world. From the particular Canadian point of view we should be part of that collective approach not only because we are part of the free world, but because it is in our own selfish interest to gain increased access to foreign markets.

I conclude by re-asserting my belief that greater freedom of trade is a necessary ingredient of our national welfare and that it will become increasingly so in the years ahead.

THANKS OF THE MEETING were expressed by Mr. Ian Baxter.