North Atlantic Trade and Industry

MR. LAWSON: Somewhere in Shakespeare it is written that some men are born great, others achieve greatness, and still others have greatness thrust upon them. Had Shakespeare lived to know Mr. Basil de Ferranti he would have realized that there are rare individuals who fall into all three categories at once. Our speaker found himself at birth a member of the famous Ferranti industrial family and, after an education at Eton and Cambridge, became at the age of 24 an officer in the Company. He achieved greatness in his own right when, at the age of 28, he was elected to the British House of Commons; and we might say that greatness of a sort was thrust upon him when he was persuaded to accept an invitation to address the Empire Club of Canada.

I have referred to the industrial complex known as "Ferranti Ltd." as famous, but I realize that it may not be too well known in Canada, particularly by those not connected with the electrical business. To fill in this gap in knowledge it might be helpful if I quote from a Financial Post report on the last annual general meeting of the Company, Sir Vincent de Ferranti, chairman, presiding. Skipping over the handsome profit picture (which was expressed in mysterious figures known as pounds, shillings and pence, and seemed mostly to go in taxes, anyway) what impressed me most was the wide range of products manufactured. We read of silicon diodes, and of electronic digital computers which bear such classical trade names as the Perseus, the Pegasus II and the Mercury, which latter has been well received internationally in the Atomic Energy Industry. We read also of guidance systems and of a guided missile called the Bristol-Ferranti Bloodhound, of inertia navigation, gyroscopes, accelerometers, inertia platforms, high-temperature transformers and precision potentiometers.

The article ends succinctly with the words, "The report was adopted," as well it might be. I now call upon Mr. Basil Ziani de Ferranti, M.P., Director of Overseas Operations for the firm, to report in person on the matter of "Trade and Industry in the North Atlantic Community".

MR. DE FERRANTI: Written on a slip inside a booklet describing our company's new staff pension scheme, which arrived on my desk a short time ago, were the interesting words, "You are due to retire in 1995." Now they always say that one must either progress or slide rapidly downhill. To address this gathering today would seem to me about as crowning an achievement as I could hope for. With not much further to go, therefore, and thirty-five years to get there, it seems to me that I may be in that downhill slide pretty soon. At all events, I shall be glad of the company staff pension scheme and be forever grateful for the honour you have done me in inviting me to address you today.

I believe that by the time I am drawing my pension, economic historians will be looking back to the sixties and saying they were the years of trade liberalization. I have tried hard to restrain my natural instincts of youthful optimism but, nevertheless, conclude that we are fortunate to be living at a time when international trade will expand at rates familiar to our Victorian forefathers and to our economic rivals behind the iron curtain. I would like to make some points this. afternoon on how this may affect the countries of the Atlantic community and what I believe they ought to be doing to help this process along. May I say at this point that in my experience dissertations on the subject of general trade problems are a pretty good way of sending people off to sleep. If I say anything offensive, therefore, please forgive me on the basis that I wasn't trying to be rude but only to keep you awake.

Before dealing with the exciting events that are taking place in Europe in the field of elementary National arithmetic, best summed up as 6 + 7 + 2 = 1, I would like to get off my chest a few highly impertinent remarks about Canada. First of all, it seems one of the post-war wonders of the world that Canada has been able to attract such huge quantities of overseas capital for secondary manufacturing, despite the difficulties encountered by those already here. The fact of the matter is that Canada is an extraordinarily pleasant country whose inhabitants combine the brisk and exciting atmosphere of the new world with the traditions and the culture of the old and who sit on top of untold natural wealth. But they sit there like sirens luring unsuspecting overseas industrialists with the chimera of untold wealth to slowly dissipate their shareholders' substance or tolerate for years a return of two or three percent on capital employed.

Now I am a sort of professional two-hat wearer. Under one hat as a British Member of Parliament I am a fervent believer in competition, free trade and everybody buying everything overseas, especially if they buy it from England; provided of course it is only damaging to industries in other people's constituencies and not in my own. When wearing my other hat, though, I become a Canadian industrialist responsible for investment in this country of approximately ten millions of dollars. It is this hat that really brings out the Dr. Jekyll in me and makes me a fervent advocate of high tariff protection for secondary industries, restricted competition, and a generous outlook among our customers.

For those countries like Britain which rely vitally for their daily bread on selling overseas, liberal trade policies are essential. For a country like Canada though, which is faced with the urgent task of encouraging secondary industries still further in order to balance the economy, the slogan "buy Canadian" should reign supreme. A prominent Canadian newspaper came out recently with a blistering attack on the Toronto Transit Commission. Its members were dubbed `parish pump protectionists' and accused of doing a disservice, not only to Toronto but to the Dominion, for wanting to buy some railway rolling stock from a Canadian firm. This makes rather despairing reading. You can't make a song and dance about the attractions of Canada to the industrialist and then go and buy your street cars from overseas. You can't solve an unemployment problem by creating jobs in other countries. Canada's balance of payments has been largely supported by the inflow of foreign capital, but this will soon dry up if Canadian industry is not supported.

Perhaps it is an oversimplification, but can one look at it this way? By all the dictums of the theoretical economists, Canada as an independent country should not exist at all. She should be a member of the United States of America. But nobody would think much of that idea. Canadians prefer to be independent and pay the price of that independence. So it will certainly cost you a bit more to buy your subway cars in Canada. But it is a small price to pay for your independence as a nation playing an important and increasingly prominent part in world affairs. By all means purchase offshore from time to time if you have evidence that you are having your leg pulled or if there is no Canadian supplier, but otherwise why not bear in mind that your suppliers are also your customers in the long run and your neighbours in this great country, and deserve to be supported and encouraged in return for the capital they have invested.

I think it is often not realized that when a European firm makes a bid in Canada the price is frequently a marginal one. That is, it is substantially lower than the prices quoted in the country's home market. It is not dumping because in fact the firm will make a marginal profit, but it is nevertheless unfair competition and certainly gives the public a false picture of the real state of affairs.

It has been suggested that one way of supporting manufacturing in Canada would be for the government to build factories and rent them free to industry. Surely this is the economics of bedlam. Those of you in industry will agree that there is no problem in finding factories; it's orders that are wanted and that's where the solution should be. I am afraid that I am giving the impression that Canada has no part to play in liberalizing world trade and contributing to the expansion that I believe we shall see in the next decade. Nothing could be further from the truth. But if Canada is to play her part, it is my opinion that she ought to do three things. Firstly, give up wanting to have her cake and eat it. If she wants to be an independent nation with a flourishing manufacturing industry, she must give orders to Canadian firms and people must stop pretending that it is always the other firm's duty to buy Canadian and not their own. Secondly, avoid having too many firms in each product line. Even though Canada is small compared to the States, industry can manufacture cheaply here provided it has the volume. I'm sure it is unwise to encourage every large firm in the world to set up a Canadian subsidiary. It is better to have a few efficient and prosperous companies than a lot of squabbling, inefficient, loss-making operations running at under-capacity. Of course, in time those who don't make a go of it shut up shop. The trouble is though that subsidiaries are like King Charles II and take an unconscionable time a-dying. Thirdly, it would be a mistake to try and make a success of every industry. Canada must specialize and support those industries which have flourished here and buy from Canada's customers overseas the items which are not made here.

While some people have been losing their shirts in Canada, manufacturers in the European countries of the Atlantic community have been doing quite well. Bearing this in mind, it can never be repeated often enough that Europe owes its present prosperity to the vision of General Marshall and the generosity of the people of Canada and the United States, who not only contributed so much to winning the war against Nazi Germany but who undoubtedly saved us from losing the peace as well. Now, Europe really has the bit between her teeth and looks like achieving greater expansion in the coming decade than in the past. Now what about this "sixes and sevens" business? Just what is Europe playing at? It can be compared to a drama in five acts and just now we are shifting scenes for the fourth act which is yet to be written. The prologue to this drama took place soon after the war and dwelt on this simple theme. Firstly, and I stress firstly, two world wars resulted from the division of Europe and the best way to avoid it happening again would be to establish a political union of the countries of Europe. Secondly, there was the glittering example offered by the United States of what could be done by modern technology with a mass market of more than 180 million people.

Personally, as an engineer, I believe this to be the most important fact of all. The politicians are always bragging about how they have raised the standard of living. But in my experience they are often more of a hindrance than a help. Surely it is the engineer with his power stations, washing machines, etc., who is raising the standard of living. Engineers know only too well how costs come down with volume and I believe in Europe today a comparative handful of far-seeing men with adequate technical knowledge have been responsible for much that has been going on.

The opening curtain of the first act in 1947 revealed the backdrop of the international monetary fund and the general agreement on Tariffs and Trade which got a big hand from the audience. The first bars of the overture were the announcement of Marshall aid and the founding of the Organization for European Economic Co-operation and the European Payments Union. Thus encouraged, the actors by the end of the first act had agreed on the Benelux Economic Union and on the European Coal and Steel Community in which France, Germany and Italy joined Holland, Belgium and Luxembourg.

The next act followed without an interval, starting off with the Messina Conference in 1956, which was called to discuss the possibilities of establishing a real United States of Europe. Great Britain, already a member of the great Commonwealth trading community and not particularly anxious for political union with countries with whom she did only one-seventh of her trade, went along to Messina as an observer only. Britain, by standing in the wings, missed an opportunity to affect the course of these negotiations and also underestimated the determination of France and Germany to achieve success. It is easy to be wise after the event, but the French especially saw very clearly the advantages of forming a close political and economic union with Germany, Italy and the Benelux countries. Industrialists in all these countries had close ties and were able to see the strength they could achieve through rationalization and economies of large scale.

Thus the end of the second act saw, quite frankly much to Britain's surprise, the signing of the Rome Treaty and the establishment of the common market. This was an event of world importance. Those countries, or rather I think one can say, this new country will forge ahead and good luck to them.

Now we move into the third act: the attempt by Britain to form what we called the free-trade area. This was a plan to abolish the tariffs between virtually all European countries but instead of having a common external tariff, to permit countries to retain their own external tariff structure. In this way Britain of course could retain the advantages of Imperial Preferences. This attempt failed for the simple reason that the French weren't' having any. The French are a very logical and practical people with a top-rate civil service. They felt that they were running quite a risk with the common market and to face British competition as well was altogether too much. However, this decision really forced the hand of the remaining countries. Rather than allow a series of disadvantageous bilateral agreements, Britain, Scandinavia, Switzerland, Austria and Portugal decided to form the so-called "outer seven" or "European Free Trade Association". The object was not just to increase trade among themselves by the removal of tariffs, but to make negotiation with the six common market countries less difficult. It should be remembered that Germany does a substantial trade with Scandinavia and that the E.F.T.A. Agreement is something of a threat to this trade. In this way Germany is more likely to persuade France to join in a new all-European agreement. Thus the end of the third act saw the signing in Stockholm recently of the Stockholm Treaty which, although yet to be ratified, will officially set up the E.F.T.A.

Incidentally, apropos of my earlier remarks about Canada, the common market countries, although determined to increase world trade, do not entertain any pie-in-the-sky ideas about buying from overseas. If one of the common countries makes a particular product, then that product will be bought without any nonsense of overseas bids. This isn't being Protectionist, it is just being sensible.

However, the curtain has now gone up on the fourth act. Furthermore, a new actor has now appeared on the stage: namely, the United States of America in the person of Mr. Dillon. The United States and Canada as well--is naturally concerned that both the six and the seven will discriminate against dollar goods, which would be very serious indeed in view of the present balance of trade. By all accounts, Mr. Dillon was reassured on this point. The result of his European visit last month though is very significant indeed. The United States will now participate in negotiations to set up an all-European association. Thus is isolationism to be finally buried and a new era in Atlantic trade to be established. Nonetheless the $64,000 question is whether France will now go along with a broader agreement. My guess is that she will. In fact, she has already made quota concessions which will have more actual effect than if Britain had signed the Treaty of Rome. If the common market is a failure, then, of course, France will not agree to more competition but, on the other hand, nobody will want to be associated with failure anyway. If, on the other hand, it is a success, France will be well placed to face competition and will have everything to gain from a broader agreement. This I believe will be what will happen.

It looks then as if we are all going to get richer and richer. What ought the Atlantic communities next step to be? I believe that the six and the seven and the United States and Canada must really go to town on helping the underdeveloped nations. It is all very well achieving a 20hour week if there is nobody starving in the world. But while two-thirds of our fellow men go to sleep hungry every night, it is surely our duty to go to great lengths together to put the situation right.

May I close by thanking you very much indeed for your hospitality and say this as well. My grandfather built the first alternating-current, high-voltage power station in the world. He also, incidentally, held the first concession for exploiting the power of Niagara Falls which, unfortunately, fell through for lack of capital. He founded the Ferranti Company which currently turns over about $70 million annually. But from my point of view, the best thing he ever did was to invest in Canada. It means I can visit your wonderful country frequently. It is not yet returning as much on the capital as it should, but it is coming along very nicely. May I therefore say that, despite all the horrid things I have said, we believe in this great country and will under no circumstances quit no matter what difficulties have to be faced. This is not just because I like coming over here, but because the Atlantic community is going to see untold prosperity and Canada is going to more than share in it.

THANKS OF THE MEETING were expressed by Mr. John Bonus.