Canada's Market in Britain—Problems & Possibilities

DR. CRANFIELD:

A hundred and one years ago on April 13, 1869, the Government of Ontario created a post in Britain to which our speaker of today was appointed on January 1, 1968 and which position he still holds. The office had gone through many transitions in the interval, for its function was originally the recruitment of farm hands for Ontario. Its first commissioner was Thomas White Jr. and he had no office from which to carry out this work. Today there is this splendid edifice called "Ontario House". As the province of Ontario became more and more involved in business and industry the emphasis has shifted from rural to urban interests so that by 1968 it was necessary to establish the Ontario Department of Trade and Development separate from other ministries. At that time the present Agent General was especially chosen to represent it in the United Kingdom.

He followed Brig. Gen. James S. P. Armstrong who had gone overseas in 1939 with the famous 48th Highlanders, 1st Canadian Division. He had been withdrawn from active service and appointed by Premier George A. Drew as Ontario's first post-war Agent General. (Colonel, the Honourable George A. Drew is known to you all as the most senior past president of the Empire Club.) Brig. Gen. Armstrong lived at Ontario House while it was under reconstruction and since bombs were still falling in London in 1944 he acted as fire watcher and night caretaker.

I cannot conceive of the present holder of this post putting out the cat and sweeping up after the day's work, though I judge he would be up to it. Over the past century this important office has served to strengthen the economy of Ontario and to give visitors from Canada a warm welcome and a feeling of real friendliness while in Britain.

Born on May 19, 1912 in Ottawa, our speaker was educated in the public schools of Toronto and the now famous Hillcrest School of Hamilton. He was early drawn into the Oil and Gas industry. He served in an executive capacity with Imperial Oil before World War II and returned to that company after hostilities had ceased. In the interval he was at sea with the Royal Canadian Navy retiring with the rank of Lieutenant Commander. Any Sunday afternoon at 4 o'clock you may find his boat riding at anchor on the Thames or tied up to the bank, for he is known to be an ardent boater and would at that hour be stopped for tea. The planners of Canada's World Exhibition (Expo 67) found him to be the most eligible appointee and he was made Director for the Province of Ontario. He served Ontario so well in this that it was only a logical step that he should represent Ontario in Britain as he does today. His charm and warmth of manner have proved this a wise choice.

In May 1969 I was his guest one morning at coffee in Ontario House and I determined, then, to try to persuade him to make this special journey to Ontario (and fittingly to the Ontario Room, as it turned out), to talk to the Empire Club. To thousands of Britons and to equal numbers of visiting Canadians in London he is Mr. Ontario. Since Britain's application to join the European Common Market is being negotiated right now in Brussels no one could be in a better position to present the topic he has chosen. "Canada's Market in Britain--Problems and Possibilities." Our speaker is Mr. Allan A. Rowan-Legg, Agent General for Ontario in the United Kingdom. Mr. Rowan-Legg.

MR. ROWAN-LEGG:

Let me start by making one or two obvious but necessary statements about the implications of what I have to say.

First I hope you will recognize a distinct bias towards Ontario. As official representative for the province in the United Kingdom and Europe, it could hardly be otherwise! On top of this, as Ontario provides about 37 per cent of Canada's exports to Britain, we have a vital interest in trade matters.

In fact, I might almost paraphrase a former president of General Motors and say . . . "What's good for Ontario exports is good for Canada"!

And secondly, I would prefer my remarks to be taken as an individual expression of opinion--rather than official policy. The past three years have given me an opportunity to view the British and European business scene from a "ringside seat" as it were and I wish to speak only as a commentator.

Now, to facts:

Though Ontario exports of manufactured products to the United Kingdom continue to grow--Britain's share of Canada's total exports have fallen from 17 per cent in 1960 to only 7 percent last year. But the U.K. remains our country's largest single overseas market.

Reasons for this large drop in exports to Britain are not hard to find.

Among the important ones are: British government policies designed to strengthen sterling; greater competition from other countries in semi-manufactured goods, caused by the Kennedy Round tariff reductions. (Canadian preference advantage here has dropped from 15 to about 7 percent and the U.S. and Japan have become important competitors.

We can add to this a further erosion of our tariff advantage through the European Free Trade Agreement: An example is that on certain pulp and paper products, Canada now has to pay a 5 per cent tariff in the British market while Sweden--one of the E.F.T.A. partners--pays nothing.

In agriculture, Britain has a declared import replacement policy on certain products, a restraint arrangement on cheese imports and the world wheat surplus has affected our sales in Britain (though this may soon change). In certain commodities--apples and dairy goods--the European countries have provided almost cut-throat competition.

Many countries seem to have discovered the United Kingdom as a potential market, and--particularly for those in Europe--ease of access and lower shipping costs compared to our own have become important factors.

As I said earlier, Ontario supplies about 37 percent of Canada's total exports to the U.K. Last year they amounted to nearly $374 million.

Manufactured products exported from the province to Britain at $53 million were nearly 15 per cent higher than in 1968.

As basic materials, like woodpulp, minerals, lumber and foodstuffs form over 80 per cent of Canada's total exports to Britain, I am glad to report this healthy rise in Ontario manufactured items; because it is in this field where we need to make greater efforts in stimulating our exports not only to Britain but in other overseas countries.

I shall have more to say in a moment about Ontario exports and our efforts to assist sales through Ontario House in London.

But no discussion of our trade problems and prospects in the British market can leave out the European Economic Community.

Negotiations are now taking place for Britain's entry. From my "ringside seat" there is a distinct separation of opinion among the British business community for and against joining. As you know, this is the third attempt. Many industrialists, and some politicians are discussing the subject in terms of "when" Britain joins, whereas it was always "if" before this year.

On the other hand, a study that gave guidelines on how much it would cost Britain to join--especially in terms of her balance of payments--gave many people a shock when it was published. It is certain that the economic argument in favour of joining is now less convincing to British public opinion.

Opinion even from U.S. sources, which has so far been favourable to Britain's entry, is showing a shift. During a recent visit to Britain, Professor Milton Freedman, one of America's best-known and most influential economists said publicly (and I quote) . . . "I cannot see any economic advantage to Britain in joining the Common Market." "I believe," he said, "it is much more desirable to move towards a freer world . . . (for Britain) . . . to lower her trade barriers with the rest of the world as a whole instead of joining what is a restrictive group." He went on to say that he did not believe the Common Market would be successful in the long run.

Both the main British political parties have made appropriate noises about the "right terms for entry", though, of course, some see this as helping to establish a strong bargaining position while talks proceed.

Obviously, until terms are known and a decision on British entry made, it is impossible to make an accurate assessment of the affect on Canadian exports to the U.K.

But there is little doubt that if Britain does join, our trade preferences will disappear and overall, about half of all Canada's export goods to the U.K. would be adversely affected. Competitively, agricultural products and manufactured items would be the worst hit--if the prevailing terms for entry are accepted by Britain.

The fact that Britain's share of Canadian exports has declined so much in recent years, makes this a much less serious problem than it would have been, say 10 years ago as the Economic Council of Canada rightly pointed out in its latest report.

Nonetheless, it is certainly in our best interests to retain and increase our share of the U.K. market. And there is no doubt in my mind that we can do so, given further progress in trade liberalisation under the General Agreement on Tariffs and Trade (commonly known as GATT). And, of course, making use of the advantages we should still possess even with Britain a full member of the Common market.

For example, in manufactured goods, the U.S. is now one of our chief competitors in the U.K. At the moment, we have three advantages over American manufacturers: lower wage rates, our dollar exchange rate and a tariff preference of around 7 percent. If Britain joins the Six, we should lose only the latter.

Experience has shown that once a Canadian company is established in the British market, it will move hell and high water to stay there. The British import deposit scheme was a good illustration. We found that Ontario companies--by increasing productivity, adjusting prices, or arranging local assembly of products--were not only able to stay in the market but increase their sales.

With this in mind, our manufacturers of industrial, food, and consumer products should move now to get established in the market before 1973--the earliest date for British entry. Even if her application is turned down or she decided not to join after all, Canadian companies would not lose out.

But whatever the outcome, in the long run, trade policies in terms of the GATT tariff agreements will be of much importance to Canada's export trade, both in the U.K. and elsewhere.

As the Common Market stands today, it has protectionist policies which are not in the interests of the greater freedom in world trade, sought by Canada.

Agriculture is a particular case. Even within the Community, the Common Agricultural Policy has been called "a disaster".

Its effect is to protect a backward system of agricultural production from free competition. Food price levels are almost double those on world markets. Costs of the policy to the Six are high: in the current year member countries will have to pay an estimated $3 billion--nearly 95 per cent of the Common Market's total internal budget. If Britain joins, a large share of these costs would have to be borne by her under the present arrangements.

All this has meant increased production, and the Community's subsidies on its own agricultural exports, especially butter and cereals, have affected many countries, including, of course, Canada. Our food exports to the Community have dropped by about 25 per cent in the five years since inception of the Market's agricultural policy, and their subsidised food products have cut into our sales in other world markets.

There is a danger that present Common Market trade attitudes will bring about a drift towards protectionist policies in the U.S. and elsewhere--clearly a situation Canada would not welcome. I am thinking also of the E.E.C. Value Added Tax--which many say gives a hidden export subsidy for goods produced in the Community--and extension of preferential trading agreements on certain commodities to non-member countries. This latter fact is directly contrary to the principle of free trade advocated by GATT.

We have to remember that a Common Market, with Britain as a member, would account for one-half of Canada's overseas sales. Our total exports to the Community have nearly doubled in the last ten years to $851-million, with Ontario's share at about $149-million.

So far this year, the trend is still upwards. In the first six months, Canada sold goods worth $543-million to E.E.C. countries, compared with $393-million last year.

Technologically, Britain is the strongest country in Europe, which is why her membership holds many attractions for the six. And it is in this field that Canada could usefully exploit the situation. Ontario has many advanced and high-technology industrial companies--communications, medical, optical, and laboratory measuring devices to mention just a few, capable of increasing exports to Europe.

A further point is that on manufactured products the Six negotiate as a group through the GATT agreements. By 1972 the common external tariff of the Six will be reduced to 7 per cent. So this is one field where increased efforts on our part will show a just reward.

The U.S.A.--by the way--has already recognized this feature of the European market. In recent years our neighbour to the south has enormously increased its investment in selected European countries--largely for establishing computer and other technology-based industries.

No country involved in international trade can afford to ignore the power of the European trading block. With a population approaching 200-millions and a gross national product of $530-billions, it has come to rival the U.S. in size and buying power. The E.E.C. represents 19 percent of all world imports and demand is still rising. It is the fastest growing economic grouping in the world.

Larger world markets mean that industries in Canada will be able to employ the economies of scale production to a much greater extent, thereby improving our competitive position. From what I see, we shall certainly need to.

This year sees the end of a transition period among member countries that began when the Community came into being twelve years ago.

The E.E.C. is now an independent economic unit. It has survived the problems of development and has come to exercise a force that cannot be taken lightly by countries involved in international trade.

This is fully recognized by the Federal Government who have been making efforts--as Ontario has already done--to adapt its trading development policies to meet the new conditions.

Trade offices overseas are being re-organized with the intention of broadening coverage throughout the world. Specialist staff is being increased to help speed the flow of Canada's exports in many countries. I believe this is a policy that deserves support.

I want now to mention something of the efforts of my province in trade development.

You will all know of the Sales Mission Programme carried out by the Ontario Department of Trade & Development. Since 1962 more than 160 missions have travelled to over 66 countries throughout the world and brought back orders estimated at over $250-million. Some 35 of these have visited the United Kingdom and booked orders there worth over $75-million.

Besides a staff of highly experienced trade counsellors at Ontario House in London, our province has established trade offices in Stockholm, Frankfurt, Brussels, Vienna and Milan; at cities in the U.S. and at Tokyo--a total of 14 offices around the world to help bring new industry, technology and investment to the province and to promote export sales.

We get involved in trade exhibitions, provide business leads, recommend agents, participate in industrial seminars, economic workshop functions, and organize business opportunity missions where teams of counsellors visit particular cities to acquaint businessmen with the advantages of locating a branch plant or starting a joint venture in Ontario.

But trade development is only part of our work at Ontario House. We are headquarters in Europe for the Ontario Department of Agriculture. And with Ontario food sales in the United Kingdom currently running at about $100million, there is a similar programme for the province's food producers to establish, develop and increase exports. A special Display Centre at Ontario House is used for demonstration and sampling of our foods to British consumer organizations and groups.

We also maintain a selective immigration service in London to match up the skills of immigrants to the needs of Ontario companies and institutions.

Last year a representative of the Ontario Department of Tourism and Information joined our Staff to oversee the province's rapidly expanding tourist market in Britain and most other European countries.

Along with economic growth has come an increased demand for long-distance pleasure travel. This is growing at something like 10 per cent each year and will grow further as more Jumbo jets come into service. Our man is there to help Ontario retain and increase its share of the tourist market, an important fact to the province, especially when we consider that of all money spent in Ontario each year by overseas visitors about 70 per cent or $40-million comes from Western European tourists.

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Then we have our press and public relations department, which provides a valuable service for Ontario companies and individuals by organizing press conferences, demonstrations, window displays; writing articles and news releases on product items of every sort, besides operating an information service for British and European news media at exhibitions and business functions.

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Finally, there is our service for visitors from Ontario businessmen, students, farmers, politicians--people from all walks of life--can, and do use Ontario House facilities conveniently located close to Piccadilly Circus--to make their stay in Britain more enjoyable and profitable. We have full information on events in London and Britain, and our staff tell me they're usually able to find an answer to any question they've been asked--and believe me, we get some Lulu's.

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I wonder how many people realize that Ontario has been represented in Britain for over 100 years? In October 1969, I had the pleasure of welcoming Her Majesty The Queen to Ontario House when she unveiled a plaque commemorating this fact before a distinguished gathering. Part of our celebrations included a luncheon in London's historic Guildhall.

I hope what I have just said will dispel any illusion as to what and where Ontario House is and our purpose in being there.

When I return home, so often I am asked by friends--is Ontario House a department of Canada house? You might be interested to know that the Government of Ontario established representation in London, England, before Ottawa or any of the other Provinces.

To end, I should like to observe that what I have said today about Anglo-Canadian trade poses more problems than it answers. I think this is inevitable within a world trading situation where rapid change is accepted as normal.

To sum up--Canada, and Ontario, must learn to adapt quickly to changing trade patterns. World growth in trade still continues at a high rate and we must be prepared to go and get our share of this.

As in life, a person either makes events work for him or gets pushed by them to wherever they lead. As an individual I know which choice appeals to me most.

I hope our country will continue to be in the vanguard of those who seek progress towards a liberal business outlook, both from motives of self-interest and for the larger prosperity of all nations.

Thank you.

The gratitude of the Club was expressed by Mr. Arthur R. T. Chetwynd.