Canada & The United States—Partners in Freedom

MR. GIBSON: It is an honour to introduce to the Empire Club a distinguished American industrialist who has been steadily seeking to achieve better and closer relations between Canada and the United States, and to do this by improving the confidence and understanding between the businessmen of our two countries. Even before mutual danger and threat drew the defence efforts of Canada and the United States closer together, Mr. Hopkins was working toward this end.

As the Chairman of the Board and President of Canadair Limited of Montreal and of Electric Boat Company of Philadelphia, I am sure you will agree that your speaker can talk with authority of the subject he has chosen, "Canada and the United States--Partners in Freedom".

The Electric Boat Company has been awarded the first contract in history for the building of atomic-powered submarines. The need of secrecy will preclude much information from Mr. Hopkins on this intriguing development.

A graduate of the University of California and of Harvard Law School, he has had the honour to be Assistant Secretary to two Secretaries of the United States Treasury.

Gentlemen, it gives me great pleasure to present to you: John Jay Hopkins, Chairman of the Board and President of Canadair Limited, and President of Electric Boat Company.

MR. HOPKINS: In the dark stream of events affecting our two countries during the past six years, we have watched the distant and indistinct threat of 1945 and 1946 develop into a menace which now seems to be always with us. It is a threat that is still mounting and that shows no sign of receding, as many have hoped it would.

During this tension, which we share in common, it happens that I have personally been honoured to come into closer contact with--and to develop a high appreciation for-the Canadian people. I have come also to entertain a great respect for the tremendous industrial potential of this country.

I have mentioned the years 1945 and 1946. I was no stranger to Canada before then, for as early as the turn of the century, when a small boy living in Iowa, I witnessed a great migration from our Middle West farm states to the rich wheat lands of Manitoba and Saskatchewan. But it was in those more recent years that my awareness of Canada's industrial possibilities became crystallized into action. And this is how it came about:

Your government was at the time having some difficulty finding a qualified firm able and willing to make the necessary investment of funds, and equipped with the organizational capacity and technical skills required to place on a profitable peacetime basis under private ownership, Canadair Limited, the great government owned aircraft manufacturing enterprise then operated by a management firm of that name.

Canadair, built during World War II, had served its defence purpose well; at its peak more than 20,000 men and women had been employed there. But no Canadian industry or group of industries could be found seriously interested in taking over the huge establishment at the outskirts of Montreal and continuing it as a going concern. There was even some idea then of turning it into a warehouse or an automobile assembly plant. Happily, however, my associates of Electric Boat Company shared my feeling that our two countries should maintain their defences, and supported my own confidence in Canada as a site for the necessary industrial production. Canada's future as a centre of international aviation was obvious. Our acquisition of Canadair Limited was the result.

You are familiar with the rest of the story. The fourengine Trans-Canada Air Lines, Canadian Pacific Air Lines, and Royal Canadian Air Force 'North Star' and 'Canadair Four' transport planes which have achieved a safety record unmatched by any other civil transport, as well as the British Overseas Airways 'Argonauts', were manufactured there. The Royal Canadian Air Force is now being equipped with Canadair built jet fighters--for the F-86 'Sabre', recently dubbed by one of your magazine writers 'Canada's Sunday Punch', is in quantity production at Canadair. Large orders have also been placed with Canadair for T-33 jet trainers for the R.C.A.F., and for the newly designed T36 advanced trainer transports for the United States Air Force. This last order is an American defence contract to obtain which we exerted every effort for many months, for it will help Canada's U.S. dollar situation most substantially. Moreover, Canadair's engineering design staff was given top rank in the design competition which preceded this order.

We now foresee the early employment of 18,000 Canadians at Canadair and would not be surprised if the plant's wartime record of over 20,000 were broken.

Our submarine plant is busy and in addition to other submarine design, conversion, and production work on hand, Electric Boat Company has recently had the honour of being awarded a contract by the United States Navy for the production of the world's first nuclear-powered submarine.

I mention these things briefly to show how I am personally engaged in defence production, and especially to prove the sincerity of my statement that I have the right to speak with knowledge of the worth and magnitude of Canada's manufacturing ability. Like many other Americans my thinking has progressed far beyond the stage of considering Canada only in terms of her immense store of raw materials.

I say 'many other Americans', because about 20% of the capital invested in Canadian industry comes from the United States. May I suggest that that significant proportion clearly demonstrates American faith in Canada's economic future. Personally, I think your prospects for the future transcend your own most extravagant dreams, and I hope American investment will continue to help carry you forward. I often like to think that this is a form of reciprocity with the British Commonwealth, a continuance or closing of the development circle of this Continent, which began in earlier years when English capital flowed into the United States at a time when we were at about the same stage of capital growth at which you now stand.

Because of this personal understanding of Canada's productive capacity and of the remarkable industrial contribution she can make, I approach the subject of the industrial phase in the joint defence of Canada and the United States with deep seriousness-and, in a certain sense, humility.

We who have accepted the responsibility for industrial production in Canada and the United States should be humble, because this matter of pooling the industrial strength of our two countries is so important that it can write the ultimate destiny of the whole free world. The industrial power we put behind our armed services, as in World War II, will be a master key to triumph if all-out war should break upon us. The effectiveness with which Canadian and American scientists, engineers and production men now co-operate, can guarantee security and win a lasting peace for this free world.

We have cause for optimism. Relations between our two countries have never been better than they are today. The people of the United States have always held Canada and Canadians in the highest respect, and, in my actual experience, I know this attitude is reciprocated here in Canada. After all we spring largely from the same antecedents, our talents and resources are very much on a par. In the political sphere the pattern has been woven: it exhibits our two countries as partners in one of the most rewarding international associations in world history. Fortunate it is that that is so, for unquestionably our countries comprise the solid backbone of the North Atlantic Treaty Organization. And NATO is the Western world's rejoinder to the obvious Communist programme, which aims at wiping all semblance of individual freedom from the face of the earth.

Would there have been any North Atlantic Treaty Organization without Canada and the United States? And without NATO would there have been any effective anti-Communist organization anywhere? I believe all in this room would give a common answer to this question.

We face a common peril. It is the steadily growing threat of aggressive, militant communism--a sinister, tireless, evil force that is striving for world domination. The Soviet Union is acquiring great industrial 'know-how', through her own able scientists and technicians, as well as through the virtual enslavement of eminent German engineers and production experts. These unfortunate and valuable men were hunted down, carried off to Soviet labour camps and required to work on designing and producing Soviet war material. And the product of Skoda in Czechoslovakia and of some of the great plants of Eastern Germany is good. Make no mistake about that. For instance, our Americans and Canadians in Korea have a great deal of respect for the flying capabilities of the Soviet jet-fighters such as the MIG 15.

In this situation and faced, as the world is today, with .no fewer than eight hundred million people under the domination of and obeying the behest of their masters in Moscow, no country can go it alone. All the free nations must join together for mutual defence.

As far as Canada and the United States are concerned, might not our mutual need be reduced to this:

Canada welcomes American technical ability, financial resources, and the practical association of America's armed might. In turn, the United States needs the rapidly mounting industrial strength of Canada-needs Canadian natural resources and Canadian talents. Sometimes it seems to me that the United States has in the past drawn too heavily upon your youth in the professions, who fortunately are now, more and more, making their careers in the rapidly growing industries of their own homeland. The soundness and the keenness of Canadian thinking are something for which we Americans have a profound respect. To these things add Canada's armed aid on the vulnerable northern frontier-or wherever else required.

As your Prime Minister, Mr. St. Laurent, said recently, the United States and Canada are 'inseparable partners in the fight to uphold freedom.' Even more than that, so many other countries look to us for leadership and for aid in the form of defence materials, that we are also inseparable partners in world affairs. We did not ask for this leadership, but I am sure that none of us will shirk the responsibility which that condition vests in us.

Our response to the joint peril which we all face is our joint defence programme, which recognizes clearly our inescapable military interdependence. And the handmaiden of 'military interdependence' in defence matters is 'industrial interdependence.' You can't talk of one without the other. In both respects we are traveling a well marked trail, because co-operation and interdependence in defence matters have already been affected with marked success in the conduct of the relations of our two countries during World War 11. I refer to the founding of the Permanent Joint Board on Defence in August, 1940, and to the statement of principles enunciated at Hyde Park, New York, on April 20, 1941, by President Roosevelt and Prime Minister Mackenzie King, and thenceforth known as 'The Hyde Park Agreement.'

In briefest outline, the major principles set forth in the Hyde Park Agreement were:

1. That the war production programme of our two countries should be co- ordinated on the basis of specialization in items each was best able to produce.

2. That as heavy U.S. purchases as possible should be made in Canada, with a view to relieving the Dominion's exchange problem.

3. That Canada's 'Mutual Aid' and the United States' 'Lend Leace' should be meshed by charging to the United States the cost of the U.S. dollar components in material sent to Great Britain by Canada.

And it is well at this point to take note of the fact, in which Canadians take justifiable pride, that Canada alone among the United Nations never sought nor received Lend Lease from the United States. On the contrary, Canada produced three times her own wartime requirements, sending some 70 % of her production to other allied countries as 'Mutual Aid.'

The spirit of the Hyde Park Agreement prevailed throughout World War II, and in consequence Canada actually had a favourable balance of trade with the United States for most of the war period. Total sales of war equipment between our two countries amounting to about 5 billion dollars were consummated between 1940 and 1945.

After the end of hostilities these same principles were extended with diminishing force to cover the 'reconversion' period in the economies of the two countries. The socalled 'agreement' (which actually was only a joint declaration of policy by the President and the Prime Minister) was never formally terminated.

The present national leaders of both the United States and Canada have confirmed the intention and spirit of the Hyde Park Agreement. In an address in June, 1947, before the Canadian Parliament, President Truman stated:

'The example of accord provided by our two countries did not come about merely through the happy circumstances of geography. It is compounded of one part proximity and nine parts goodwill and common sense.'

Mr. St. Laurent, addressing the Canadian Society of New York last year, said this:

'The Hyde Park Agreement involved no gifts, no loans, no charity-nothing but plain business sense. And we in Canada cannot see why a business arrangement which produced such good results for both countries in war should not produce equally good results in providing security during this period of cold war.'

Nevertheless, it needs no word from me to bring to the notice of any group of Canadians such as yourselves the fact that in the earlier stages of the present defence programme the implementation of the principles of the Hyde Park Agreement was not entirely satisfactory.

One reason for this state of affairs--namely, the relatively small scale of purchases by the United States of defence equipment which Canada was ready and able to furnish and which would have provided Canada with the U.S. dollar exchange for an expansion of her purchases of essential equipment from the United States-was the 'Buy American Act.' I shall mention this at some length because it is the key to the problem of reciprocal defence purchases insofar as the United States is concerned, and because its true status is not well or widely understood.

In the first place, the 'Buy American Act' is not the official title of any bill but a public catch phrase referring to one section, a 'rider', of a Treasury and Post Office appropriation bill for the fiscal year 1934. In effect it provides that goods acquired for public use inside the United States must be of United States origin unless the head of the government department concerned shall determine this to be inconsistent with the public interest or the cost to be unreasonable, or unless the goods are not available from United States sources.

During the 1934 the procurement offices of all United States Government Departments, including the military establishment, adopted as an administrative working rule the principle that in deciding the 'reasonableness' of the cost of domestic products as compared with imports under the 'Buy American Act' a differential of 25% should apply on foreign purchases. This differential would normally pretty much exclude purchases from Canada as well as many other countries. Deviations from this 25% rule could be made 'in the public interest', but the decision to make such deviations could be made only by the head of the department concerned who then was faced with the necessity, usually political in nature, of justifying his decision.

The 'Buy American Act' was passed right after the depths of the business depression of the early 1930's when the government was subjected to great political pressures looking to the preservation of every domestic market for United States manufacturers. It is manifest that it was by no stretch of imagination ever intended to be an obstacle to that integration of the defence production programs of Canada and the United States which is called for by the current international situation, and that the discretionary power vested in the heads of the government departments could and should have been applied to exempt purchases of defence materials under reciprocal agreements with friendly nations. Nevertheless, for the most part it was not in practice so construed except during World War II and immediately thereafter, and the 'Buy American Act', as administered with a 25% differential applicable to imports, effectively blocked purchases of defence materials in Canada by the United States military establishment.

Ever since the inception of our present expanded defence programme it has been abundantly apparent to all in the United States who are conscious of Canada's tremendous production accomplishments in World War II, that all practicable steps should be taken to make full use of the Dominion's industrial potential. This became even more manifest with the undertaking to integrate the use of weapons in the armed services of our two countries. Moreover, informed Americans are conscious of the fact that reciprocal defence purchases, as affected under the Hyde Park Agreement and as presently contemplated, impose no burden on the United States but instead represent a mutually advantageous arrangement.

There have, therefore, been many sincere and patriotic Americans who have sought to encourage reciprocal defence purchases. Since passage of new legislation to this end would have been difficult to secure, the activity has taken the form of encouraging measures to strengthen the hand of the Executive Departments of the United States Government in availing themselves of the discretionary authority given them under existing legislation.

Progress, as you know, has been made.

On May 18th, 1950, the then Secretary of Defence, The Honourable Louis A. Johnson, announced that the United States military services had been directed to develop a programme under which fifteen to twenty million dollars worth of military equipment would be bought in Canada each year.

On July 27th, 1950, the Executive Departments were strengthened in their exercise of their discretionary powers by a statement made on the floor of the Senate by Senator Elmer Thomas of Oklahoma, Chairman of the Subcommittee on Defence of the Senate Appropriation Committee, to the effect that no amendment of existing law was necessary because purchases made under reciprocal agreements with friendly nations were well within the authority granted by the 'Buy American Act.'

On April 12th, 1949, when international conditions appeared increasingly threatening, there was established the Joint Canada-United States Industrial Mobilization Planning Committee to exchange information in case joint action should again become necessary. That Committee drew up a 'Statement of Principles for Economic Co-operation' between Canada and the United States, and on October 26th, 1950, the 'Statement of Principles' was officially confirmed by an exchange of notes between the two countries. It is now known as the Washington Declaration. It reaffirms, in essence, the Hyde Park Agreement of 1941, providing, in brief:

"That our two governments shall co-operate in all respects practicable, and to the extent of their respective executive powers, to the end that the economic efforts of the two countries be co-ordinated for the common defence and that the production and resources of both countries be used for the best combined results.'

The significance of this Statement of Principles was well measured by The Right Honourable C. D. Howe, then your Minister of Trade & Commerce, and now Minister of Defence Production, who commented:

'Traditionally Canada and the United States march side by side in time of war. The fact that in the field of military production we will march together in an effort to prevent another war will be reassuring to the peoples of both countries.'

Its practical effect is illustrated by the fact that on November 8th, 1950, the United States National Production Authority announced new regulations extending to Canadian business firms, engaged in either Canadian or American defence work, materials' priorities theretofore accorded only to United States firms. Canada at the same time assured the United States that American defence orders would receive the same treatment as Canadian the priority ratings of the two countries to have equal standing in either country.

More recently, General Marshall, then Secretary of Defence, announced that each of the American Defence Departments--Army, Navy and Airhad been asked to examine its needs with a view to purchasing up to $100,000,000 of its requirements in Canada-a total of $300,000,000 to be spent in Canada in the fiscal year ending June 30th, 1952.

I believe this record gives tangible evidence not only that the will exists--but also that we think we have found a way to implement a programme of reciprocal defence purchases on a mutually beneficial basis.

With the best of intentions and despite the merit of the cause, the results thus far accomplished would not have been achieved without staunch support from many quarters, and not the least of these has been the Canada-United States Committee of the Canadian and United States Chambers of Commerce. I speak of this group because, as an active member in its American Section, I have knowledge of its work, and because I think it appropriate that you should know something of the important part played by the Committee, and the distinguished members of its Canadian Section, in this field of reciprocal defence purchases.

The subject is one which logically and properly comes within the purview of the Canada-U.S. Committee, established by the two Chambers of Commerce in 1933 to consider problems of mutual interest in the economic field, and the members of the Canadian Section, under the chairmanship of Mr. Gordon Cockshutt of Brantford and now of Mr. C. Bruce Hill of St. Catharines, have been indefatigable in presenting the Canadian viewpoint. The Committee as a whole, being composed of practical and experienced men of affairs in the business fraternity of both our countries, is uniquely equipped to appraise the merits of the issue as a practical problem. At its meetings at Asheville, N.C., in April, 1950; at Banff, Alberta, in September, 1950; and at Irvington, Virginia, in April, 1951, the Committee adopted resolutions in favour of implementing the integration of the defence efforts of our two countries which subsequently were approved by the Chamber of Commerce of the United States and became the official policy of that great organization. The United States Chamber has with full force and vigour advocated their implementation in all appropriate quarters.

It is difficult to measure cause and effect in these matters, but I can assure you that the work of the United States Chamber in this area was productive of much good and was appreciated by the government authorities.

Indeed, the whole story is one of constructive co-operation, and representative of the best that can be accomplished by men of good will who serve in a just cause. But the situation is still such that the business groups of both Canada and the United States must keep constantly on the alert. To return to the job of meshing our two economies, there is also the matter of standardization of arms. Regarding the one-weapon plan, there will be vexing problems always-such as, currently, the rifle. But to me this first of all means co-operative development work for future equipment. Combined thinking should start at the outset, with the original design of the equipment.

There are already excellent illustrations of the kind of co-operation and standardization we require-and also proof that all Americans are not so pleased with themselves as to think that they alone have the total sum of engineering 'know-how' and designing brains. British jetengines, such as the Rolls-Royce 'Nene.. and the Armstrong Siddeley 'Sapphire', are now being produced as basic items in the United States. The American Glenn L. Martin Aircraft Company is building the British 'Canberra' light bomber. In turn, at CANADAIR, in Montreal, we are building for the Royal Canadian Air Force the same jet-fighter, the North American F86 E, which the United States airmen are flying in Korea, and shortly we will be turning out Lockheed T-33 jet-trainers and the new T-36 advanced transport trainer of Beech-Canadair design.

This points to a much freer use of each other's defence equipment than would have been believed possible even as late as 1945. I think it promises an end to the old stumbling-block of the one-weapon plan, the feeling that only 'ours' can be any good. We are all acquiring a more sensible respect for the other fellow's brains and the use to which he puts them. The result is a strong trend toward standardization in Canada and the United States, and in England as well.

The object of all this preoccupation with the mobilization of our maximum joint industrial power is not aggressive war. It is to build up the collective strength of the free world so that any aggressor will stop short of war, and so that all will bear their fair share of the common burden.

I like the interpretation given to our difficult 'cold war' situation, with all of its economic strain, by Mr. Howe.

"Preparedness,' Mr. Howe said this summer, 'is a very different thing from all-out war. The emphasis is on widening national capacity, rather than immediate military production. It is a time and an opportunity for building our strength, for putting ourselves in a position to produce more than ever before. War or no war, such industrial development will prove a tremendous permanent asset.'

This is the case with a lot of things we are being forced to do. I think it is certainly the case with the development now-of the St. Lawrence Seaway. Even if war never comes, the impetus to be given by this great enterprise to Canadian industrial expansion in steel, oil and aluminum will have an incalculable future value for the entire continent, and for that matter for much of the world.

Don't let us make the mistake of thinking that our joint defence effort will benefit only Canada and the United States. It is true that these two countries are regarded as a single defence unit within the North Atlantic Treaty Organization; but, as your Under-Secretary for State for External Affairs, Mr. A. D. P. Heeney, wrote recently of Canada's position:

'Our primary concern must be the preservation of security in the North Atlantic Area . . . if freedom survives in this area, it will survive in the outer world; if freedom is overrun here, it will not long survive elsewhere.'

What we are to create is that which General Eisenhower called 'a wall of security for the free world behind which free institutions can live.' The industrial power we create together-we Canadians and Americans in joint enterprise-will build that wall of security as nothing else can. The peoples of our respective countries have given us, without stint, and through painful taxation, every encouragement, and they look to us with confidence to succeed. We, as men who are directing industrial enterprises, must therefore accept the assignment, curb wastefulness and get the job done effectively, remembering the warning from Charles E. Wilson, American Defence Mobilizer:

'The only way the Russians can beat us is to encourage us to beat ourselves.'

And let us not forget that, in thus working together for the mutual defence of our two great resource empires, we strengthen the bonds of amity and good will which will serve us well over the long pull when the defence problems that loom so large in the immediate scene assume their true perspective as but one aspect of the limitless possibilities for friendship and co-operation wherein lie our one best hope for the future.

THANKS OF THE MEETING were expressed by Mr. Philip C. Garrett.