Let's Be Friends

MR. INWOOD: This Club has in recent months, had the the pleasure of listening to renowned speakers in the fields of government, industry, finance, education, medicine, the arts and transportation. Today we have set aside for an outstanding man in the paper industry, but whose breadth of interest extends far beyond his own specialized field.

We are indeed honoured that our guest speaker has taken the time to journey here from Neenah, Wisconsin to speak to us. Knowing Mr. Parker's background, I know the motive which moved him to accept our invitation and if I might sum it up, I believe it to be because he is a most public-spirited man, and desirous of personally contributing to the goodwill and brotherhood that exists between Canada and the United States.

Mr. Cola G. Parker, Chairman of the Board of Kimberly-Clark Corporation has had a long and leading association with the paper industry, including presidency of the American Paper and Pulp Association. Mr. Parker is closely identified with a number of important Canadian industrial activities, such as being President of both Kimberly-Clark Corporation of Canada Limited, and of Longlac Pulp and Paper Company Limited and a Director of the Spruce Falls Power and Paper Company Limited. With this American and Canadian business background, I am certain that he is most qualified to talk to us on many of our mutual problems.

Born in Wisconsin, he attended the University of Chicago from which he received his "Doctor of Jurisprudence" degree. He practiced in Chicago from 1912 to 1917 when he enlisted as a private. He subsequently left his World War I service as a captain in the infantry.

Mr. Parker is well-known outside the paper industry through a broad and active participation in a number of corporations and institutions. He is Chairman of the Board of the United States Federal Home Loan Bank of Chicago, Chairman of the National Industrial Conference Board of New York, and Vice-President and member of the Board of the United States National Association of Manufacturers. He has served as Chairman of the National Sunday School Week Observance. His community service activities also include Presidency of the Board of Trustees of both Lawrence College and Theda Clark Memorial Hospital.

Mr. Parker was named by President Eisenhower to the United States Commission on Foreign Economic Policy of which a former speaker to this Club-Mr. Clarence B. Randall-was Chairman.

It gives me great pleasure to present to you Mr. Parker, whose subject is "Let's be Friends".

MR. PARKER: Perhaps at the outset I should admit that my title is obscure but excuses or explanations just as comparisons are sometimes odious, so--also perhaps--the less said about it the better. I did have in mind that Emerson definition: "A friend is one with whom I may be sincere."

I also had in mind that I have been for a number of years chiefly responsible in enterprises which have invested a great many millions of dollars in Canada: and that it is our basic policy in all of our Canadian operations that we be good Canadian citizens. (I am content to leave it to those who know us best to say whether we live up to that policy.) But on this occasion I speak in the role of a friend, which means sincerely.

Unfortunately--for me that is--I have not of recent years been able to spend as much time here as I would like to spend. However, I think I do have a somewhat better knowledge of Canada than a majority of my fellow citizens of the U.S.; at least I try to keep up with my Canadian reading, and I believe that such slightly better acquaintance also leads me to attach great importance to a better understanding between our two countries.

I am not thinking in terms of the many variants of the story one hears of the Canadian who after touring the United States reported he had visited all the states in Texas; nor of his additional report of talking with one filling station attendant who upon learning he was from Canada said to him, "Let's hear you speak some Canadian."

But stories such as that are symptomatic-almost as much so, although in an opposite manner, as that undefended border between our two countries: that "menagerie lion" the school boy called it.

I believe that few will quarrel with the belief that the future of the world is to a very major degree dependent upon what happens in North America; nor with the further belief that what happens in North America really means what happens to relationships between Canada and the United States. Perhaps many people would call that a cliche--but regardless of the term one uses, it is difficult to over-emphasize the importance of good, deeply understanding, relationships between you and us. And so by this circuitous route I came to my title--"Let's Be Friends"!

What I am talking about is not the understanding between your External Affairs Department and our State Department, or your Prime Minister and our Presidentthat I think we can take almost for granted. While our systems of government have many differences-these are in large part superficial or relate to matters of form or procedure. In the basic matters of really vital importance there are more similarities than there are differences. And 1 say that regardless of the fact that newspaper reports of a speech by your Secretary of State for Foreign Affairs indicated he was not too happy about what has been referred to in my country as the "New Look" in our defense program.

The important fact is that in both our countries the ideal is freedom--freedom and liberty for the individual and for enterprise--and our whole governmental systems are designed to assure that these are forever protected. And since those in high places in both our countries have had experience in the political arena and realize that politics is "the art of the possible," I do not doubt that each will view with sympathetic understanding the other's viewpoint and what is behind it whenever there may seem to be an irreconcilable difference in the viewpoints of our respective countries. It is not in the echelons of government that difficulties lie so much as in the lack of understanding on the part of our people as a whole. And it is there that I plead for better understanding.

Now to the extent that I may appear to be lecturing you, my hosts, I hasten to explain that I fully realize that I should be lecturing my own countrymen. Yet I have your invitation and I must go on. For I assume that just as I am, many if not most of you are in the category called, for lack of a better inclusive term, "business men." And it is my belief that the cultivation and nurturing of a better understanding is a part of our obligation as business men. We, more than any other group, can speed that process. Hence the earnestness of my plea.

Now it seems to me axiomatic that a pre-requisite of an understanding of another country is a full understanding of our own country and particularly of our business system and how it operates and why. I believe that both the Canadian Manufacturers Association and the Canadian Chamber of Commerce and your own Board of Trade as well as many other organizations here are doing a very excellent work in that regard. But there still remains much to be done here, as is the case with us, in the way of more complete figures or statistics, business fact finding as it were. And so I am very pleased that the National Industrial Conference Board has decided to establish a Canadian office to serve better its members and associates here and the general Canadian business community. And it is pleasing, too, that Mr. Monteith Douglas, after the fine work he has done with your Tax Foundation, has agreed to join the Conference Board and take charge of its Canadian activities. If that organization can do as fine work here as it has done in the United States-and I am sure it can-then I am also sure that all of you as business men will welcome its advent. Certainly too, it should be of major aid in developing a better understanding in my country concerning yours and I hope the reverse as well.

Now possibly you are wondering what all this has to do with what I imagine is uppermost in your minds. Let's get it on the table. What has this to do with international trade and what is the United States going to do in that field?

Well, that is at least a double-barreled question and I'll take the second barrel first because that is the easier to answer and explain. What is the United States going to do in that field? The answer is easy: I don't know and it would be foolish and pretentious to make any other reply. The answer lies in a major way in the field of politics and there are many more imponderables involved than just in the political field. And it isn't merely partisan politics either. I might add that the same seems to be as true here as on the other side of the border.

Of course I recognize that a flat "I don't know" is neither a satisfactory answer nor a satisfactory stopping point. So with some trepidation I shall hazard a guess; which is that the United States is preparing to move still further on the road toward so-called "free trade". That statement-or guess if you prefer-isn't expected to call forth shouts of either derision or applause. And I make no prediction as to exact or even relative time or degree of such moves. For this is an election year. And all of the members of our House of Representatives and more than one-third of our Senators face an election and many, if not most of them, a primary as well, unless they decide not to run again. (Or do you say "stand for reelection"?) That fact, fortified by the current degree of uncertainty in the business picture has an important and perhaps major bearing both on the timing and extent of any legislation that may be enacted.

But notice that I said "still further" on that road. Granting that I must at least assume the position of the devil's advocate, I stress these words because it is my definite impression from reading your media of information, newspapers, magazines and other forms, that very few in your country will believe that those words are true. And conversations with and many speeches by many of your business men, which I have read, seem mainly to corroborate that fact. And that leads me back to the first part of that question I assumed might be in your minds, "what has all this to do with freer international trade?"

Well, first of all, it relates directly to what I tried to emphasize earlier as to the great need for a better understanding on the part of the people of both our countries. This seems to me to be one area at least of greatest misunderstanding. To point it up I shall try to be more specific.

One of the great areas of misunderstanding is what is meant by freer trade. Very many people in my country, whether a majority or not I do not know but certainly a high percentage--believe sincerely that when you and our mutual friends abroad refer to free or freer trade they mean into the United States, not into Canada or into friendly countries abroad. Now you may consider that illogical but I assure you it is the fact, so it may be worth while exploring for a few minutes why that opinion is prevalent.

First of all, we operate generally upon the unconditional most favored nation policy and have for more than thirty years. This means one tariff rate applicable to a given product regardless of the area of origin. We do not have, generally speaking, a preferential rate, a most favored nation rate (so-called) and a general rate, as you and many others do. We do have some minor preferences, arising out of our special obligation to Cuba and the Philippines, but these are too minor to be dwelt on at length. If they are used as the excuse for such things as "Empire preference," for instance, I fully grant their relevance while doubting their major importance.

But the point is that when my countrymen suggest that our relationships are such that we should be put on an equality with all other nations, we find that isn't possible -that instead other nations who account for, so they say, some 30 to 40% or more of the entire world's trade have a favored status.

Your "Customs Tariff" which is its official title contains in its listing of "goods subject to duty and free goods" some 560 paragraphs called items although the actual numbering runs to 848. Many of these are broken down into sub-items, so that there are actually about 1450 paragraphs many of which of course cover a wide variety of products. Less than a third of these items define products completely free of duty. Of the remaining more than two-thirds, which are all dutiable items, almost one-half provide for free entry under your preferential column whereas duties on identical goods from United States run as high as 35%--perhaps higher; which is a rather substantial handicap to a United States producer. Of the other one-half, the duties applicable to the preferred countries and the United States and the other most favored nation countries are the same in only approximately 15% of these items. These latter include such "major" items of trade as unfinished golf heads, hair nets of human hair and pipe organs.

Another instance.

Not too long ago--the head of one of your great business groups in the course of a discussion of this subject made these statements. My quotations are from a Canadian paper.

"Our exporters have learned 'from sad experience' how quickly the U.S. Customs Authorities without waiting for Orders-in-Council, new legislation or any such red tape can and do step in and prevent our shipments from crossing their borders."

And further

"We have seen how speedily their government can and does move to set up additional barriers, quotas, etc., to protect any U.S. interest who may claim their business is being adversely affected by imports from this country"

I shan't bore you with any recitation of the steps required for legislation in our country. You know of course we do not have Orders-in-Council; but I am sure you also know that they, (Orders in Council) are far speedier than our legislative process. In fact the slowness of our processes is much more frequently the cause for criticism by students of political science. But I suggest you test this by the speed with which Canada recently amended her dumping procedure and placed it into immediate effect. And since specific mention is made of quotas--they well might be considered. With us they are of two kinds.

First, a specific quota fixed in negotiations under our Trade Agreements procedure whereby a duty is lowered on a specific volume and the statutory duty applies to imports in excess of such quota. Since the quota relates to a decreased duty and is the result of negotiation with other countries it hardly seems properly criticisable.

Second, quotas are authorized in connection with farm products that are under price support programs. Regardless of what any of us individually may think of such programs, we must admit that such supports are for the benefit of our own farmers and not for the purpose of buying the surpluses of the world. Recently I have seen the statement made that Canada now has a surplus of wheat amounting to 700 million bushels. At the same time already more than 800 million bushels of U.S. wheat are either owned by our Government or is under Government loans which means eventual ownership. Should we, instead of using a quota procedure buy that 700 million bushels at a cost of a billion and a half dollars or there about?

Let me read you another quotation from one of your local papers. Its date line is London, Ontario, January 28--by Canadian Press. It reads: "Restrictions on turkeys from New York State were asked today by the Canadian Federation of Agriculture. The federation's annual meeting approved a resolution asking that import of New York cleaned and dressed turkeys be restricted when Canadian production is recognized as being more than enough to supply the domestic demand."

If the sequel to that resolution has been published I haven't seen it; but I am realistic enough (or cynical enough, if you please) to suggest that if the turkey growers here are as relatively numerous as the wheat growers in the United States, the turkey growers in New York may not be too happy.

Now, gentlemen, if I were at all interested in or intended to criticise my counterparts here in Canada, I might go on for my full time with further quotations. I am not interested in that, and I would like to make clear that what I have said and quoted has not been in any spirit of criticism. On the contrary, you have a perfect right to say what you think. And I would like to add that even if, as many of my countrymen believe, you want us to adopt free trade but don't want it here, that is your privilege. For my part I believe Canada is, as she should be, very realistic in her own interest. It will not help the rest of the world for Canada to hurt her own economy. The same is true of the United States.

Of course mere criticism has no place here--and my quotations have a totally different purpose. They illustrate one type of misunderstanding which is not conducive to a better understanding.

There is, I believe, considerable misapprehension, or misinformation, regarding this whole trading picture and that includes trade between Canada and the United States. The following statement was made by one of my countrymen to one of your business groups not too long ago:

"No two nations enjoy a trade relationship that is less competitive and more complementary. For example, Canada sends us 30% of our newsprint, 75% of our wood pulp, 90% of our nickel. We send Canada foodstuffs, machinery, textiles and electrical appliances."

Now, disregarding mathematical errors, due perhaps to brevity, that statement may have been almost completely true in years gone by. It is certainly less true today; and I suspect it will be increasingly less true as Canada continues, as she is bound to do, her tremendous growth, and increasing industrialization and enlarges year by year her place at the table of world affairs.

Instead of becoming, and having a trade, less competitive and more complementary, we shall, I strongly suspect, do just the opposite. That is in the nature of things. To a very large extent we stem from the same sources, largely we speak a common language, although as your Secretary of State for Foreign Affairs has pointed out in substance that may be a handicap at times and may "assist us in learning more easily the wrong things rather than the right things about each other." We occupy countries largely of the same character. In a major way your farms and ours produce like products. In human and natural resources we are strikingly alike.

Is it any wonder therefore that in any given field where our own individual interests are concerned we take or advocate actions or make statements which are very much alike. Is it at all to be wondered at that each is prone to criticise the other for particular actions or policies, with never a thought that perhaps the same or similar conditions or considerations actuated the other just exactly as those conditions or considerations actuated us.

Let me illustrate once more, although this may be ground on which I should not tread. But it has an important bearing on this subject of trade.

Recently there has been much in your papers and many speeches made both here and abroad about labor rates and demands for increased wages. Even top Cabinet Ministers have joined in warnings that labor "in its insistent demands for higher wages bids fair to price itself out of employment." And a typical editorial quoted this statement by one of your Cabinet Ministers: "Industry itself must see that costs do not soar to a point that we are out of business in the export markets."

What does that really mean? It is simply recognition of the fact that in all products costs go back to labor. That is over simplified, I grant, for of course the effect of labor rates on the ultimate cost of a given product is modified by the element of productivity or the efficient use of labor. But those facts are applicable to industry in the United States just as in Canada. And it is a curious fact that some who have been most vociferous on that subject here and recently in Britain have been equally vigorous in denying that American industry has any right to use the discrepancy between labor rates or costs in the U.S. and in foreign countries as an argument opposing further reductions in tariffs.

It seems to me to be a fair assumption at least that if an increase in labor rates here will affect your competitive situation vis-a-vis the world in world markets, it is axiomatic that our labor rates which are substantially higher than yours according to your own government statistics, must be a major element in determining whether we remain competitive in our own markets if our tariffs are further reduced.

That final phrase would indicate I'm back where I started. But I use it purposely even though, as I indicated earlier, it may not be believed. As may have been mentioned, I happen to have been a member of the Commission on Foreign Economic Policy, mostly referred to as the Randall Commission. To the extent I hadn't already known their views, that experience was at the least a liberal education in the views of others as to United States Tariffs and trade policy. But the constant charge that the U.S. is a high tariff country, the constant propoganda that she had done nothing to free up trade, etc., etc., was not borne out by the facts.

In addition to many days of personal testimony there were more than 500 written submissions made to the Commission in the field of tariffs and trade policy alone. The volume in this field exceeded the aggregate of all other submissions.

In submitting the Commission's report the covering letter pointed out that every member had he been writing a report for himself alone would probably have used different language or emphasis. (This is probably a masterpiece of understatement).

However these facts did appear-and I have no time to state them more than categorically. The mild expressions in the language used in the report may have tended to obscure them.

(1) The United States is not among the higher tariff nations.
(2) She has materially reduced her tariffs. The Tariff Commission's method of computation resulted in the lowest percentage of reduction and its calculation showed an over-all cut of 50-54%. Other calculations showed cuts of up to 67% over all.
(3) More than 50% of our imports enter free of duty.
(4) Our restrictions on trade are more limited and less onerous than those elsewhere in most of the world. We have tariffs and a limited quota system which I have described. Other countries have both, with their quota systems operating much more widely and with even more complete controls, excluding dollar goods through cartels, barter arrangements, licensing, exchange controls and so forth.
(5) There are internal regulations in almost all countries. Those in the U.S. such as minimum wages, maximum hours, fair labor standards so-called, farm price support programs and so forth, create cost rigidities that do not exist at all or only to a lesser extent elsewhere.

These are just a few highlights, perhaps equally revealing for what I don't touch on as for what I do. But beyond all this it was very clear that industry, and perhaps all production, falls into three categories. Of course no clear-cut lines can be drawn and there is much overlapping between the three.

First is what is referred to as the mass production industry, perhaps inaccurately. Here, for one or more of many reasons, size of markets, methods of process, type of machinery, and so forth, unit labor and perhaps other costs are low and little or no problem exists with respect to imports.

Second is one where machinery, methods, processes, materials, and so forth, are common throughout the world; the same number of man hours goes into a unit of production almost everywhere. In some cases there may be wasteful use of man power because of its cheapness. Whether imports would be seriously damaging varies in different industries in this class; but the labor factor is the controlling element.

Finally comes the handicraft type where machinery is a minor element. Obviously with labor the major cost, elimination of tariffs could wreck such an industry unless (which is wholly unrealistic) its wage levels were reduced to more nearly approximate foreign levels.

I suspect those observations likewise hold true of Canada and her production economy.

I have not even mentioned all the other phases of the Commission's report, but one thing seems to me to be clear. The attention paid abroad to and the emphasis upon the matter of American tariffs are quite unjustified. Ever since our report this continues to be true. The Tariff and Trade policy section consists of only 10 out of a total of 76 pages of the report (110 pages including separate comments and dissents). Yet the volume of newspaper comment relating to tariffs and the other parts of the report is exactly in reverse.

There has been a great deal of discussion in papers, magazines and speeches, on the proposition that because she is a creditor nation the U.S. should, unilaterally and now, go to free trade. And of course the example of Britain from 1850 to 1920 is cited as the classical example. But somehow, it becomes apparent that those advocating that course brush aside all reference to differences in conditions between those surrounding Britain and the rest of the world then and those now surrounding United States and the rest of the world. And also it usually became apparent that such advocates were primarily thinking of the rest of the world, and only wishfully thinking of the United States. The Commission was required also to think about the United States and not just the rest of the world.

Already I have talked too long, even as I realize that I have tried to take in too much territory in too short a space to my detriment and at the risk of trying your patience. But I would like to make one more observation before I close.

As I have repeatedly said no one can quarrel with any comments anyone may care to make regarding the policies of the United States, whether with regard to tariffs, trade or what not. But sweeping generalities may not be conducive to that better understanding between our peoples, which is so vital to the world.

An analysis of the Randall report made to one group here included this statement:

"A wave of disillusion swept over Europe which Moscow had exploited by offering proposals for increased East-West Trade."

Now I don't know the facts as to any "wave of disillusion" but certainly there had been no authoritative commitments by anyone which would properly create such high hopes that a "wave of disillusion" would be justified. What might result from wishful thinking is another matter. It should be reasonably clear that even if willing to move toward freer trade, neither the Congress nor the President intends to risk wrecking any major part of our productive system in the process. And if the Randall report really brought home to the rest of the world that they too must at long last put their houses in order--it may be just as well. But the real error was in saying that Moscow had exploited this by offering increased trade. I was happy to note someone immediately corrected that error by pointing out that Moscow had been dangling the bait of increased trade long before our report was made. That action was extremely heartening to me. It was clear evidence of a growing understanding of the position of the United States, and a willingness to speak up about it.

As I see it we in my country must all do more of that; and you likewise. One of the greatest boosts this weary old world could get in the midst of all its trials and tribulations would be a more perfect understanding of each other by the people of Canada and the United States. And with Emerson's definition in mind I close as I began

"Let's Be Friends."

THANKS OF THE MEETING were expressed by Mr. R. J. Pierce.