Some Important Aspects of Canada's International Trade

MR. STARK: We welcome today to this luncheon, representatives of the Canadian Exporters' Association. This Association has just announced that its new President for 1960-61 will again be our guest of today, Mr. R. D. L. Kinsman. This is the first time that it has re-elected a President for a second term.

In choosing Mr. Kinsman, the Exporters' Association has selected an executive who is thoroughly versed and experienced in the international sales field. Mr. Kinsman's parent company is responsible for 75 percent of all the aluminum moving in international trade channels. Specifically, the company of which he is Vice-President, Alcan International Limited, is responsible for the sales management of Aluminium Limited, and he is also a Vice-President and Director of Alcan Asia, Limited. The latter company sells Canadian aluminum and related products in the Far East.

It was just over eleven years ago that Mr. Kinsman joined the Treasury Department of the Aluminum Company of Canada and held a series of posts, including Manager of the

Procurement and Priorities Division of Alcan's General Purchasing Department, which provided him a variety of experience. For six years, he was Treasurer of Aluminium Limited's chief sales company and relinquished these duties to concentrate on international sales of the Company's products.

Mr. Kinsman originally came from Wales. He received his early schooling at Christ's Hospital and was later an undergraduate at the University of Paris, studying political science. In recent years he renewed his studies and was awarded an M.A. Degree in French-Canadian history by McGill University's Post-Graduate Department. His early business experience included being articled to a firm of Chartered and Incorporated Accountants, and he was admitted as an Associate Member of the Society of Accountants and Auditors. From 1933-42, he held various positions with I.B.M. on the Continent and in North America. During the War, he held successive posts as Assistant to Machine Tools Controller, Deputy Administrator of Machine Tools for Canada, and General Auditor of War Assets Corporation, leaving to join Alcan.

His principal other activity, besides being a Director and Honorary Treasurer of C.E.A., has been that of satisfying his intense interest in the legitimate theatre, both on-stage and in the executive end. He is a member of the Board of Directors of the Montreal Repertory Theatre, and for his work over the footlights, he received the Best Actor Award of Eastern Canada in the Montreal Festival in 1953 for his role in M.R.T's. production of Moliere's play Tartuffe. He is married and has three children-two boys and one girl.

Mr. Kinsman will speak to us on "Some Important Aspects of Canada's International Trade".

MR. KINSMAN: I very much appreciate the opportunity which you have generously given me today to speak to the Empire Club in Toronto, on some important aspects of Canada's international trade.

It struck me, on receiving the invitation, that there was a significant sense of historical continuity in trade about this great Province of Ontario. This territory began to have a settled life of its own immediately after the Revolutionary War, when the first United Empire loyalists came upstream from the mouth of the Richelieu River and spilled over the western limits of the old seigneury of Longueuil into what are now the counties of Glengarry, Stormont, and Dundas. Others, moved by the same impulse, were doing the same thing in Niagara.

The impulse was not that, only, of continuing loyalty to the Crown; this could have been satisfied by residence in Quebec. There was another lure. It was that land could be held, not under the seigneurial system of the old French regime, but under the Anglo-Saxon right of free and common soccage, where men were freeholders all.

If the war of 1812 first gave to these scattered holdings a sense of common identity and mutual obligation, it also drove home the fact this was the first British Colony ever founded that had no sea coast, no direct outlet to the oceans of the world.

It is the sea which, despite its perils, has been for hundreds of years, the road to adventure and the path to freedom. Not only was it that; it was, also, the highway of commerce. It still is!

It was for this reason that the gigantic enterprise was undertaken-over a century and a quarter ago-to give this country communication with the sea by means of the St. Lawrence Canals-an enterprise so vast, for the time and for the resources of the people, that, at one point, without regard for any other public services, the entire annual revenue of the Colony was insufficient to pay even the interest on the debt contracted to build the canals.

It was out of this situation that was born the Union Act of 1840, which joined the two Provinces of Upper and Lower Canada, the grandfathers of ultimate confederation, from sea even unto sea.

It seemed contrary to all the instincts of those early settlers that free-born men of British stock could exist anywhere without free access to salt water. Their instinct was a true one.

Today, the Seaway is performing the same function. It is opening up the heartland of North America to the rest of the world, but it is also making the rest of the world more easily available to Ontario. What advantage will we take of it? Let me come back to that in a moment.

First of all, let me say something about our export trade, as such. If some of you here get an uneasy feeling that you have heard me say much the same before, let me assure you that you are probably right. I make no apology. Professor Galbraith has written "In unravelling the complex, one should be careful not to overlook the obvious."

We have trading problems. Some of them are serious, but few of them are as black as they are painted and few of them are incapable of some sort of solution if we will work together and plan together in the national interest instead of grinding our own particular axe, preferably on our neighbour's whetstone.

For the last quarter-century, Canadian policy has generally aimed at promoting exports through reducing barriers to trade-to trade both ways. There can be no one-way street in international trading, and the lowering of foreign barriers to the entry of Canadian exports must inevitably include the lowering of Canadian tariffs against foreign imports into Canada. In combined imports and exports, we now rank fourth in the world--just behind Germany--while in total foreign trade, per capita of population, we rank proudly first. This is what foreign trade-both imports and exports-means to Canadians.

But now the complaint might arise that I am talking about "total" foreign trade and not imports and exports separately. Some imply that while our export trade is limping along, the country is being flooded with cheap imports from low-wage countries which take the bread out of the mouths of honest Canadian working men.

Growing unemployment is causing the gravest concern to all thinking Canadians. It continues to grow worse, it may tend to become an important factor in the political life of the country. As you know, the Prime Minister has recently held a conference in Ottawa on the subject, with the representations of various National Associations. Several remedies will be tried; there is to be a Productivity Council.

I know that all of us in Canadian business-or simply as Canadian citizens-are deeply worried, but we can bring no real help to the idle Canadian worker by engaging in double-talk, self-deluded or not.

Where does Canada's foreign trade play its role in this picture? In standard dollars (the value of 1948), our total imports of goods and commodities were at the index of 110.3 in 1950 and at the index of 114.5 in 1959-an increase of under 4 percent. Our exports, in 1950, were at the index of 108.3 and, in 1959, at the index of exactly 123--an increase of over 13 percent.

Turning now to actual dollar figures at current values, the picture is not quite as rosy. Our export prices have not quite kept par with the prices we pay for our imports. While in 1950 our foreign trade was in approximate balance -in fact, $10,000,000 to the good-we have had trading deficits (in current dollars) in seven of the succeeding nine years.

This looks bad-and it is certainly not good. But how does the merchandising deficit arise? In those ten years we had a trading surplus, excluding the United States, of over $4,000,000,000. With the United States, we had a trading deficit of nearly $6,000,000,000. In other words, in the last ten years we not only handed over to the United States all that we had earned overseas but gave them nearly $2,000,000,000 to boot.

We could, perhaps, some years ago, flatter ourselves that our imports from across the border represented, in large measure, the purchase of capital goods destined to the industrial development of Canada. This is still partially true, of course, but people of prudence are not now normally anxious to expand idle plant capacity.

Let us look at consumer goods for a moment. In 1959 we imported consumer goods from all of the rest of the world, excluding the United States, for $685,000,000. From the United States alone, we imported consumer goods for $1,115,000,000. This is nearly double our imports of consumer goods from all of the rest of the world combined. I hear no claims as to low-wage rates in the United States.

And what about the so-called cheap labour countries? As I stated just now, we have had a trading surplus with these countries of over $4,000,000,000 in the past ten years. In 1959 it was a surplus of $132,000,000-and that includes West Germany, the United Kingdom and Japan (our balance with Japan was $37,000,000 in our favour) .-while we were in deficit to the United States for over $500,000,000.

To point up fallacies in thinking does not solve a problem but, at least, it clears the site for building operations to begin on a surer foundation.

It was reported, during the recent election campaign in the United States, that the two principal candidates appeared nonplussed when asked about their attitude to Canada. They appeared to consider that there was no need for an attitude because there was no problem. Perhaps they were right. Perhaps there is nothing that divides us, as Bernard Shaw said about the British and the Americans, but the language.

Nevertheless, it seems to me that U.S. sales to Canada of $32,000,000,000 in ten years should demand a little concern. Customers are not so easy to come by in these days. It will be up to all of us, and particularly up to the Government of Canada, to see that the new Administration in Washington is educated as swiftly and completely as possible, to the realities of our present trading situation with the United States. The means for this already exist; I trust that they will be fully used.

If we could educate the new Administration efficiently and well, we might do more for employment in Canada by the negotiation of lower and simpler tariffs for Canadian products entering the United States than by talking about an increase in the Canadian tariff against low-wage countries -where we have had an average annual trading surplus, over the past ten years, of over $400,000,000, and invite their immediate retaliation.

Not only have we had steady trading surplusses with the rest of the world, but our total trading position is moving into balance. This does not mean that our deficit with the United States is significantly less, but that our favourable balance with the rest of the world is significantly larger.

During the first nine months of this year, our exports increased by 8.2 percent over 1959, while our imports were up by about only 1 percent. Our trading partners overseas accounted for all of the increase in export sales. The United Kingdom and other Commonwealth countries were up by 20 percent, Western Europe by 30 percent, and Japan by 28 percent. Shipments to the United States were slightly lower.

Our total trading deficit for the nine months was only $121,000,000. This, at what the statisticians call "seasonally adjusted annual rates"--to allow for the rush of last-minute shipments of wheat and other commodities before the close of navigation--represents a balanced position for the year, 1960, as a whole.

Exports up 8.2 percent! We exporters are plugging away. There is another problem facing us, in the creation of the two trading blocs in Europe. Although honeyed words are being sung by their proponents, their existence could have considerable results on Canada's foreign trade. As they now stand, they represent fresh barriers to our exports, particularly as regards the European Common Market. If the current GATT negotiations do not succeed in erasing the worst effects of the threatened trade discrimination by Western Europe, there might be disastrous consequences for the Free World.

Discrimination in trade provokes strong emotional reactions. Permanent discrimination by Western Europe is almost certain to evoke retaliation elsewhere. It could well encourage the formation of other regional blocs and the raising of tariffs everywhere in retaliation.

Trade, instead of being encouraged, would be discouraged or diverted. At a time when the countries behind the Iron Curtain are pressing a long-range economic offensive against them, the countries of the West will be squandering their economic and political resources in mutual recrimination and "parish pump" politics on the international level.

The particular danger of the European Common Market arrangements is that internal prices will tend to become fixed for internal reasons without regard to world prices.

This is particularly true for agricultural products. Detailed plans published to date allow for the unilateral fixing of minimum prices for products produced within the Community with no regard to world supply. To make these artificial prices effective, the planners contemplate the use of import levies and quantitative restrictions. As local production will be thus artificially encouraged, the old supplier--the one who could produce more efficiently and sell more cheaply-will be displaced. Canadian wheat, which has underwritten the national economy for over a century, is a prime example. This is the ultimate in the forced diversion of trade.

It is all the more disheartening to see this dismal process in development because much of the agricultural products concerned are of tropical or semi-tropical produce.

Bananas, which would effect mainly the Caribbean area and Central America, are an example. Coffee is another. On tea, the contemplated duty is, I believe, 35 percent. No significant commercial quantity of tea is grown in any territory to be included in the Common Market.

In cocoa, Ghana would go, and some French West African colony would be its replacement. The Iron Curtain countries would be delighted to take Ghanian cocoa at distress prices in return for the monopoly of the industrial development of the country and the preponderant influence in its political philosophy and international actions. Ghanian cocoa should certainly blend well with Cuban sugar.

At the very moment when the underdeveloped countries of the world need our united and intelligently planned help more than ever before, the African applecart is not only being upset, but overturned.

If we are not to lose a continent-perhaps two of them -we have to give urgent attention to what Sir Oliver Franks has called "The North-South Problem". The problem is that a small minority of white people living in the temperate regions of the North Atlantic, is living in comparative wealth, while an enormous majority to the south of them is desperately poor. And this gap in living standards is getting larger-the rich, despite cyclical trade recessions, are getting richer; the poor remain poor.

In the past decade, the world balance of power literally hung by the thread of the economic recovery of Western Europe. This recovery-sparked, inspired, encouraged, and, in fact, made possible by the genius of the Marshall Planhas been, like the Emperor Frederick, stupor mundi, "the Wonder of the World". The fate of the future may well lie in an ever-increasing prosperity of the Southern peoples. The former colonial powers of Continental Europe have not shown a large measure of wisdom in their post-war policies-and those powers do not stand alone in this respect. Revolt is widespread in some of the independent, but impoverished countries of the Caribbean and of Central and South America.

These people are really in revolt against their economic, political, and social inferiority to the Northern peoples. If the peoples of the North Atlantic countries-as a whole -fail to meet this challenge, it is inevitable that the Southern peoples will turn elsewhere. The world balance of power will decisively shift and the masses of the monolithic states will catch a glimpse of the countries of the West, only in the glint of their setting sun.

As Mr. Adlai Stevenson said at McGill Convocation last year, "Nothing would be more appropriate than that the European beneficiaries of U.S. and Canadian aid ten years ago should now join with the U.S. and Canada in making a comparable effort to help the South."

A rapid increase in the standards of living of the Southern peoples, in turn, requires a substantial increase in their export earnings and imports of capital. It is important to to note at this point that export earnings are more important than imports of capital. During the past few years the foreign exchange earnings of the Southern countries comprised 85 percent export earnings and 15 percent imports of capital.

A substantial increase in export earnings for the poor South will require the North Atlantic countries to do two things

First: Provide a steady and rapidly growing demand for the exports of the Southern countries. This, in turn, requires the North Atlantic countries to maintain a rapid pace of healthy economic growth.

Second: Improve the availability of access to the markets of the North Atlantic countries for the exports from the South. This improved access must cover raw materials, semi-processed materials, and manufactured products.

These two points may seem upsetting to some but if we lose the South, we lose the world. There will not be any trade balance at all, favourable or otherwise. We will simply take in each other's washing-if there is any soap. People, perhaps, do not realize what a rich opportunity lies southward. Between 1950 and 1958, the Southern countries increased the volume of their exports by 32 percent. These increased export earnings, coupled with loans and grants, enabled them to increase the volume of their imports over the same period, by 45 percent. In 1957, over 40 percent of these imports came from the developed North and totalled more than $21,000,000,000. Let me repeat that figure, in case you feel that you did not hear it aright$21,000,000,000. 80 percent of this, in turn, was for manufactured goods.

The United Nations estimates that the merchandise imports of the Southern countries from the North over the next ten years, could total $440,000,000,000. How about it, manufacturers of Ontario?

It is at this point, when we need vitally to increase our exports and to encourage the exports of the South, when Canadians need to take the largest possible world view, that the purblind or parochial cry of "Buy Canadian" is being raised afresh.

Of course, when one is asked if one is against buying Canadian, it is difficult to answer. It is like the question, "Have you stopped beating your wife?" Not being in favour of buying Canadian is like the clergyman not being against sin-on the surface.

What makes the slogan-if it is one-so dangerous is that it implies that the British should buy British and the Japanese, Japanese. Or do the proponents naively assume that we can blandly slash our imports without immediate retaliation to cut our exports?

What makes it an unhappy slogan is that it seems to betray a wrong state of mind-not the state of mind that built either this Province or this country. It is negative thinking which betrays an attitude of defeat instead of positive thinking with the will to win. It seeks to lay the blame on the wrong person-the consumer.

Here is someone saying, in effect, "I make a product. Do not buy it because it is good or better than competing foreign products, or cheaper, or is better made, or looks more handsome, or does the work more easily. Buy it, simply because I am the guy who made it." The implication is that if you don't, you are un-Canadian and a "Bad Thing".

"The fault, dear Brutus, lies not in our stars, but in ourselves, that we are underlings." We all have to re-examine our attitude, all of us, labour as well as management. Management seems to imply that if it cannot produce a suitable article, at a suitable price, based on an efficient cost, it must remain in that business, even if the competitive product has to be bludgeoned out of the market. If the Canadian exporter finds foreign markets barred to him in retaliation, that is simply his problem.

Labour's wage demands are not always unjustified, of course. But here again, the effect on the price of the product does not seem to enter into account. That is somebody else's worry. That friend, the customer (whom it now seems old-fashioned to consider), let him foot the bill.

I referred earlier to grinding our own particular axes. Can we not start to grind the national axe? At the Annual Convention of the Canadian Exporters' Association in October, I urged some national planning in the national interest. I urge it even more strongly today.

A general start seems to have been made, but we shall need to go further, faster. Regarding exports themselves, the forthcoming Foreign Trade Conference, called by the new Minister of Trade and Commerce, Mr. Hees, is an imaginative step forward into the future.

Established exporters, who have their own export channels well established, may feel that they do not need to go to Ottawa on December 5th to meet Canada's Trade Commissioners from all over the world. If they take this attitude, I think they will be wrong. If the business community of this country does not take full advantage of this conference, it will be hard to pin the blame elsewhere for lack of export opportunity.

If I may mention aluminum for a moment, the Aluminum Company of Canada, Limited, is certainly an established exporter. Through Alcan International Limited, and its associated companies, the group most certainly has a widespread net of export outlets. We shall take full advantage of this conference, not only to learn something from the Trade Commissioners, but also to keep them up to date about ourselves.

We have found that, just about once in a hundred times, through a contact established or information supplied by a Trade Commissioner, we make a sale that we would not otherwise have made. Although we may have made the other ninety-nine sales ourselves, an incremental sale of 1 percent is a highly valuable and profitable bonus to the industry.

But seeing Trade Commissioners is not enough-and I address this remark particularly to exporters here today. No one can sell sitting behind his desk, at home. In the end, as you know, you have to go into the market and do the ultimate selling job yourself. That is what we really need more than anything else-a good old-fashioned selling job.

Slogans or catchwords, as I said just now, are not as important, perhaps, in what they say as the attitude or state of mind which they reveal. I seem to remember one famous one--"Fifty-four-forty or fight". The gentlemen concerned failed to reach fifty-four-forty-and there was no fighting. But it was a meaningful slogan nevertheless.

In the same way, I offer you, today, a better slogan than "Buy Canadian". It has more fight in it. It has more guts in it. It has more truth in it. It reveals, I think, a better state of mind. It is, perhaps, more Canadian. I offer you, instead, the positive challenge of "SELL CANADIAN".

THANKS OF THE MEETING were expressed by Mr. Palmer Kent, O.C.