Progress and Stability in Ontario

MR. KENT: It is a great pleasure to have as our guest at the first meeting of The Empire Club this season, the Prime Minister of Ontario, the Honourable John P. Robarts, Q.C.

In his letter of resignation as the leader of the Conservative Party in Ontario, the Hon. Mr. Frost said:

"The time has arrived to re-assess the leadership of the Party and develop the very great talent it possesses."

As you remember, that is precisely what has since occurred. Some 1,780 delegates from all ridings in the Province, in a most democratic convention, selected our honoured guest, and he assumed the mantle of leadership less than a year ago.

During World War II, Mr. Robarts served with distinction in the Royal Canadian Navy. This included service in the Atlantic, the Mediterranean and in the Pacific. For distinguished service in connection with the landing at Salerno in 1943, he was mentioned in dispatches.

Although born in Alberta, our young Premier was raised and educated in Ontario. Only four years after he became qualified to practise law, he was elected as an Alderman on the London City Council and also as a member of the Legislative Assembly, representing London North. That was 1951. Since then, he has been a member of the Ontario Water Resources Commission, Chairman of the Select Committee on Toll Roads and Highway Financing, Minister without Portfolio in the Cabinet, and, in 1959, he assumed the most important post of Minister of Education, which post he still retains.

Mr. Robarts is an Anglican, married to the former Miss Norah McCormick of London, and they have two boys, 9 and 6 years of age. As Prime Minister he has demonstrated his keen interest in the economic development of our Province and therefore in the welfare of all its people. Recently he has been travelling throughout Ontario, including its Northern Area. Thus as a young and vigorous leader, he has fitted himself for the great responsibilities he has been chosen to assume. I am delighted to present to you the Honourable John P. Roberts, Q.C., Prime Minister of Ontario.

MR. ROBARTS: I am delighted to be here at the opening meeting of your programme for the Fall and Winter of 1962. The long summer and holiday period having concluded, it is perhaps appropriate that we should pause to assess our accomplishments for the first half of the year and to take stock of our economic position. I would like to review briefly our present position, outline to you the challenges which we foresee ahead and to describe to you the policies which we have evolved to meet these challenges. I am extremely pleased to be able to report that Ontario is on the way to a record year. This spring our economists forecast that the Gross Provincial Product would increase by about 6 per cent in 1962, and with more than half of the year now gone it looks as though we are going to achieve this rate of growth. Ontario, therefore, is heading for a record-breaking year in terms of production, employment and incomes. In fact, I am confident that 1962 will be one of the best years in Ontario's history.

Undoubtedly, the most encouraging development of 1962 has been the remarkable improvement in the fortunes of our manufacturing industries. In the first seven months of the year shipments of manufactured goods from Ontario industries reached a total value of $7.5 million-12 per cent higher than in the same period last year. The expansion in the manufacturing sector has been led by steadily increasing production in Ontario's motor vehicle industry. There is little question that in Ontario the automotive industry sets the tempo for manufacturing as a whole, and with an extremely good year in the automotive industry almost every other manufacturing concern moved ahead. During the first eight months of 1962 production of motor vehicles was about 30 per cent higher than in the same period of 1961. Figures available on the production of other consumer durables such as refrigerators and washers indicate improvements over last year for the first seven months. Even though our steel industry ran at record levels last year production has been increasing. Production was up 11 per cent for the January-August period. On the basis of the evidence available it would appear that manufacturing in Ontario will set new records in production during 1962. This is particularly encouraging because of the effect that the expansion in the manufacturing sector has had on employment. For the first time since 1957 a significant number of new employment opportunities were opening up in the manufacturing sector.

The news from the farm front is also good. With a few exceptions, production of our field crops was up this yearwell above the ten year average. Prices of animals remained high during the year, mainly as a result of increased feed prices caused by drought conditions in Western Canada last year. With firm prices and high production levels we can expect to see farm incomes in the province approximate or exceed the record levels established last year.

One of the most heartening signs in the economy has been the recovery of new capital investment. Expenditures on new structures, machinery and equipment for 1962 will approach the $3.2 billion level-comparable with the record year of 1957. As a result, the construction industry as a whole is enjoying a modest boom. One of the best indicators of the improved conditions in this industry has been the increase in employment in construction. Most of the strength has been concentrated in business and institutional projects, with the Ontario school building programme being one of the major influences. There has not been any marked improvement in residential construction although completions this year are running well ahead of last year for the first seven months. On the whole, the outlook in the residential field is one of modest growth until the family formation rates recover in the mid-1960's.

Pulp and paper production has been maintained at near record levels. Mining output has also been maintained at a fairly high level. The most marked improvement was in shipments of iron ore which were running almost 75 per cent above last year for the first six months. The slackness in Ontario's primary industries has been caused primarily by the uncertainty of future economic conditions felt by many industrial consumers in the United States. Another indication of weakness in demand was the decision on the part of the International Nickel Company to cut back production for the remaining months of 1962. It is extremely difficult at this time to estimate the total gross value of production of our resource industries for the year. However, we do expect that there will be no large-scale decline in output and there may well be some improvements. A great deal depends on the direction of the United States economy-Ontario's chief customer of natural resources.

The general expansion in the productive sectors of the economy means that the incomes and expenditures of Ontario residents are rising. The rate of increase of labour income in Ontario has accelerated during the year. The major factor here has been the new employment opportunities opening up in manufacturing. This increase in incomes, however, has been partly offset by a general rise in the consumer price index. If present trends continue, consumer prices will be up more than 2 per cent during the year.

On the expenditure side, retail sales were running at about 3 per cent higher in the first seven months of 1962 than they were in the same seven months of 1961. While the actual volume of sales has not risen as much because of a price increase, the outlook for retail trade is promising for the year.

Another significant feature of the year has been the marked improvement in the level of corporation profits. Most companies have been reporting significant increases in sales and profits in the first six months of the year and we can expect this to be maintained in the last half. Certainly an improvement in the profit picture has been reflected by the fact that most companies are now saying that they will carry out their anticipated 1962 capital investment programmes.

As a result of the expansion in the economy, the employment situation on the whole has improved during the year. In the period from May to August, 1962, employment in Ontario was maintained at over 2.3 million workers (on a seasonally adjusted basis), a record level. The rate of unemployment stood at 4.6 per cent of the labour force, seasonally adjusted, in August. It is somewhat discouraging that an increase in employment opportunities has not been sufficient to reduce materially the level of unemployment in Ontario. While unemployment in Ontario is still below that in Canada there has not been any large-scale reduction in the rate of unemployment throughout 1962. Most of the improvement in employment this year has been concentrated in the services, manufacturing, transportation and construction. As I pointed out before, the fact that manufacturing has been employing more people this year is particularly encouraging. There is no question that we still have an unemployment problem but the magnitude of this problem has been drastically reduced within the last year. However, present indications suggest that we can expect an increase in unemployment influenced primarily by seasonal factors in the coming months.

A full account of our economic position should not ignore the short and long run problems with which our economy is faced. In the short run there is a danger that the rate of increase in production, employment and incomes that we have had during 1962 will not continue in 1963. Several economists in Canada have already gone on record stating that the Canadian economy will take a cyclical downturn sometime late in 1962 or early in 1963. The timing and duration of this recession would depend for the most part upon economic conditions in the United States. There is no question that if the American economy slips or fails to maintain momentum Ontario will be adversely affected. On top of this there are some signs that the rate of expansion in Western Europe has been decelerating in recent months. As far as the Ontario economy is concerned, it is difficult to make any firm forecast on the basis of statistical data relating to Ontario. Most of the major economic indicators for the Province have shown mixed trends which have been overshadowed by a general bias towards expansion. One of the major leading indicators, the Industrial Stock Index, has fallen off sharply indicating to a certain extent a general lack of confidence in business prospects over the next 12 to 18 months. This has been a common feature to North America as a whole. As a result, it is extremely difficult to make any firm forecast about the direction the economy is now taking. We are confident that the general favourable conditions now exhibited by the economy will last until the end of this year. Beyond that, we will have to wait and see.

There is no question that the balance of payments situation which has led to the devaluation of the Canadian dollar and the austerity programme is one of our most difficult current economic problems. By saying this, I do not wish to imply that the Ontario Government is not concerned with unemployment and growth rates. We are. However, we do feel that in order to attack the problem of a slow-down in growth and unemployment we must first put our international financial affairs in order. Fortunately, we do not have to divorce the balance of payments problem from the economic growth and unemployment problems with which we are now faced. They are all intimately interconnected, and in our view can be attacked by a simple and comprehensive programme. Let us pause for a moment and examine this problem.

Basically, the balance of payments problem has arisen because Canadians as a whole have not produced and sold in international markets enough goods and services to pay for the goods and services which we have imported. As a result, we have had to borrow money to pay for the deficit on our current trading account. In the last ten years we have had to borrow approximately $9 billion.

What has happened is simply this. We have been expanding our credit at an increasing rate without doing enough to raise our incomes from sales abroad. In a period of slow growth, foreign capital suddenly becomes unavailable and we have had to face the fact that we can no longer afford the luxury of continuing deficits in our merchandise account. Our creditors have at last presented the bill. What is needed, then, is a programme designed to expand our exports of goods and services, and decrease our imports of goods and services so as to give us sufficient revenues with which to meet our enormous foreign debt. In other words, what we should aim for is a surplus on current account. The question that should be asked is whether a programme designed to increase our exports and decrease our imports will have any effect on growth rates in our economy or on our unemployment situation. The answer is, of course, that such a programme will have a tremendously stimulating effect on both these areas. Increased exports and decreased imports mean more jobs for Canadians, larger incomes, and more spending in Canada.

What is needed, therefore, is a positive policy for growth directed primarily towards external trade. What is needed is a public awareness that increased trade is one of the chief methods by which we can get the Ontario and Canadian economies moving ahead rapidly once again. Here in Ontario if we are to obtain the 60,000 new jobs needed every year in the next decade to accommodate our rapidly growing labour force we will have to work harder at promoting a favourable trade balance.

We welcome the constructive programme of the Federal Government set out in the Speech from the Throne. Many of the policies mentioned there have been advocated for some time by the Ontario Government. But, we in Ontario cannot rest and say it is all up to Ottawa. It isn't. We in Ontario must play our part in economic development. We in Ontario must have a constructive programme-a programme and a policy of growth.

Gentlemen, it is my belief that the Ontario Government has such a programme. I do not want to review the whole programme here, but I do intend to point out those portions of the programme which we are pursuing actively at the moment to take advantage of the present dollar devaluation and the new tariffs. This is what we call our Trade Crusade. We have launched an information and education programme to urge the public to support our efforts to increase exports and reduce imports. The consumer will be asked to increase domestic consumption of Canadian goods by reducing consumption of comparable imports. Industry will be asked to get out and sell-to export-to use more Canadian-made parts in their production in place of imported components.

We are extending the services in the United States and abroad that the Ontario government offers to our manufacturers. We have strengthened our foreign offices in New York and Chicago and at Ontario House, London, England. We have opened a new trade office in Dusseldorf, Germany. A second trade office will be opened in Milan, Italy, later this year. These trade offices are manned by Canadians who know what Ontario has to offer and local commodity officers who know the local market. They operate as a team to promote Ontario goods and help Ontario salesmen.

We are establishing Manufacturers' Cooperative Agencies to foster the export of products from small and mediumsized Ontario companies-manufacturers who for various reasons are not in a position to support an export programme themselves. I don't think this particular project has ever been carried out before in any jurisdiction. A group of manufacturers in a related field, but not producers of the same product, will be represented by an agent commissioned to sell their products. Our trade offices and foreign offices will give these Cooperative Agencies every assistance, such as introductions to likely distributors and suggestions on possible market areas.

We are preparing a number of Services Publications to keep our manufacturers, municipalities and interested organizations informed of the varied services offered by the Ontario Government to keep our economy growing at an adequate rate. At least three of these will be printed in French, German and Italian as well as English, which means that we will reach the main populations of the European Common Market. Thus, for the first time, the facilities available. at our foreign offices and at the department's Industrial Development Branch, the proper way to contact an Ontario firm for the purpose of negotiating a manufacturing arrangement, and other vital matters will be explained to the European businessman in his own language. We are sending Sales Opportunity Missions to the United Kingdom, Europe and the United States. Two such "order book" missions are in the U.K. and Europe at the present time. The business people on these missions are a crosssection of Ontario industry and each work on a separate schedule. Upon arrival home the tour members will go on a circuit throughout the province to speak to Chambers of Commerce, service clubs, industrial development groups and others, telling of their experiences and offering pointers on how to sell abroad.

We have established a Marketing Division in the Department of Economics and Development to aid Ontario manufacturers in establishing sales contacts at home and abroad, to develop foreign agency or distributor contacts, to provide location services for sales offices or manufacturing branch plants outside of Canada, and to give assistance in the matter of licensing arrangements in a foreign country. This division is also responsible for constant analysis of world marketing conditions, of the relationships and prospects for Ontario manufactured goods and technical services m world markets. In this way do we hope to stimulate, encourage and promote steady increases in exports from our manufacturing industries.

In the field of imports, Ontario is attempting something brand new. We believe that Ontario manufacturers can manufacture many of the component parts and goods which are at present being imported into Ontario. This is particularly true today with a devalued dollar and the special tariff surcharges. We feel that what is needed is a long and careful look by individual companies into their purchasing policies and practices to see where they can buy goods in Ontario rather than in foreign countries. In this regard, we are holding a Manufacturing Opportunities Show and Conference in Toronto on November 5-6. At this show, companies which are now importing component parts or fully manufactured goods will be able to sit down and discuss business with Ontario manufacturers who are willing and able to produce these goods. Millions of dollars of imported items will be on exhibit.

Response from Ontario manufacturers regarding this first show has been extremely encouraging. Invitations to exhibit and attend the show were sent to about 6,000 of our manufacturers employing 10 or more persons, and so far about 1,500 businessmen have indicated they will attend. All present available space has been sold and it is expected that additional display space will have to be provided. Unsolicited letters praising the show have been coming in regularly from companies all over the province-both from those firms which are desirous of finding an Ontario manufacturer as a supplier and from those firms which are seeking to increase their production and reduce surplus plant capacity.

This Manufacturing Opportunities Show is the first of its kind in Canada and will set the pattern for other similar shows. Subsequent shows will be held in the official economic regions of the province. The regional shows will not only have displays of imported products which could be manufactured in Ontario, but in addition will have members of our Sales Opportunity Missions in attendance to tell their story and provide first-hand information about the European market. These shows will have a double-barrel effect in that they will give our manufacturers an insight into ways and means to extend their operations in both the domestic and foreign markets.

This, then, is our Trade Crusade. These are the measures we in the Ontario government are taking to help increase the growth rate of our economy. How successful we shall be will depend on the hundreds of thousands of little decisions that people from all walks of life make every day. Our Trade Crusade will succeed if the people of Ontario understand that by supporting it they are helping themselves to achieve new employment opportunities and a higher standard of living. By such positive policies do we hope to maintain our province in the forefront of growth and economic expansion, to provide the jobs which our people will require, to help ourselves in maintaining the prosperity of our province.

THANKS OF THE MEETING were expressed by Dr. Z. S. Phimister.