Relations of the United States with Canada and Great Britain

Mr. President and Members of the Empire Club; Fellow Americans,-

I am going to ask your indulgence to-night while I read what I have to say, as I did not wish to be misunderstood or misquoted. And if what I shall say shall form a foundation for some discussion here to-night, I will feel my mission has not been in vain. My topic is "The Future Relations of the United States and Canada and the effect upon the British Empire." Mr. President, I have found upon reflection that this subject can hardly be treated as it deserves in the brief half hour to which, in courtesy to you, I must confine myself this evening. With your permission, therefore, I will do no more than outline my thought concerning the grave and delicate subject of our future relations. I will use my time chiefly in setting forth, as frankly and truly as I may, what I know and what I believe concerning the future attitude of the United States toward Canada. I have no doubt you will be interested in this phase of the discussion; and I am at least here speaking upon familiar ground, whatever you may think of my right to have opinions upon the remainder of the subject.

Let me also say that I represent no political ambition but rather a friendly American spirit. My outlook is that of a business man upon the commercial and business interests of the two countries. I have had business relations with many of you in Canada for the past twenty-five years and I am happy to say that they have been satisfactory and profitable to me and, I trust, to you as well. I hope they will so continue. I hold no official position: My point of view is simply that of a manufacturer conversant with conditions in the States and with the present attitude of our business men toward your country. My subject leads me to remark that in most respects the relations of the two countries in the past have been commendable. Notwithstanding some differences, your speakers and ours who cross the Line never fail to direct attention to the cordial regard in which each country holds the other. The recent tribute of Sir Wilfrid Laurier is reciprocated, I know, by President Roosevelt. I refer to this condition not with the claim of especial credit on our part, but as indicating the true spirit of our people. This record of 100 years of friendly intercourse surely should count for something and as an earnest of good faith in the future relations of the two countries. While we have had our differences, it can be said to the credit of all concerned, that they have been settled peaceably.

You are aware of the great disappointment in the United States over the memorable decision which gave Canada the great valley of the Columbia River and her outlet to the Pacific. More recently you have had your own disappointment in the award of the Alaskan Boundary Tribunal.

Whatever Canada may have had to complain of in the cry of "54-40 or fight," or in the personnel of our representatives upon the Alaskan Commission, this must not be charged to the spirit of the people of the United States. When we lost a large portion of what we considered to be our North-West Territory, our people accepted the verdict and refused to fight; and when, more recently, " impartial jurists of repute " were not appointed to the Alaskan Tribunal, through the influence of our overpowering Senate, this breach of faith was publicly rebuked in the United States on more than one distinguished occasion. I am sure you agree with me that this record ought to allay any suspicion or fear on your part that we of the United States have political designs on Canada. Furthermore, the treatment which your representatives have received at Washington in the past, in your endeavours to improve the trade relations of the two countries, is traceable not to the unfriendly spirit of our people, but rather to the abuses of our economic policy and to the representatives thus created and maintained in the Congress of the United States.

In order, therefore, to understand better the industrial situation in the States and its bearing upon our future relations not only with Canada, but also with other countries, it becomes necessary to review briefly the historical development of our national trade policy. This policy, as you well know, is what is called Protection. "Protection," as originally conceived and defined by Alexander Hamilton, its founder, contemplated a tax upon imports for the purpose of meeting the expenses of the general Government, but with incidental design, also, to favour the home producer. From the idea of revenue with incidental protection we have now managed to evolve a system of protection with incidental revenue -the very antithesis of the thought of Hamilton. In proof, let me quote the analysis, by one of its most distinguished representatives, of this modern view of protection. "The object of tariff taxation," he says, " is not the raising of revenue but, on the contrary, the reduction of revenue and, ultimately, the extinction of revenue, by duties to be raised to a height sufficient for the accomplishment of this end." Another distinguished economist, commenting upon this utterance, says: " Here is a confession that the aim of protection is prohibition. First, put on a tariff. If foreign goods come in raise it higher. If they still come in raise it again, `till revenue is extinguished'; that is till no goods come in at all."

Now, Mr. President, whatever we may think of such protection, this analysis truthfully represents the tendency of our tariff policy. We have reached the parting of the ways-the limit. Hitherto the tendency of tariff revision has been to increase, not to lower, the duties. Is this course defensible upon any grounds? Has it contributed to our industrial progress? Has it not, rather, restricted, hampered and limited our development-particularly our relations with the Dominion of Canada? This being so-and I believe it is so-what is the reasonable and true idea of protection and how can it be justified? There are some things which protection is not. First, it is not, or should not be, a permanent policy for a given industry. It never was intended to be. It cannot be justified except as a temporary expedient. It is designed for the purpose and for the purpose only of enabling an industry, or a branch of industry, to become established and self-supporting. The only excuse or defence for protection is, that by this means we may import a new industry which shall in time become able to compete with any like industry in the world in the production of cheap or abundant goods. When this industry reaches the point of independence, its tariff protection should be discontinued, or at the most made merely nominal. If maintained, it operates to create or promote monopoly, through the stifling of all healthful competition from abroad.

The danger of protection is, as we have learned by bitter experience, that the infant industry never admits that it has grown to independence. What really has grown is the vested interest or monopoly which it is next to impossible to shake off or control without an economic revolution. Neither does protection afford a safe and equitable basis for national taxation, for it gives away to special classes or private interests the right of the Government to tax the people for the cost of common benefits. This system of protection as it exists today in the United States has been described as " at the same time a social abuse, an economic blunder and a political evil." In the third place, it should be noted that Protection, as an equivalent balance of high wages against the so-called " pauper " labour of other countries has been discredited by the fact that high-paid labour is cheapest, when both the quantity and quality of the work are considered. Why, here in Canada you have a tariff which is protective in its purpose against the skilled or high-priced labour of the United States; while our tariff, according to the zealous defenders of the present system, is designed to protect us against the cheap labour of foreign countries-an exact opposite. Is this consistent? Is not Protection of this kind plainly indefensible?

These considerations bring us to the point where we must define the true idea and purpose of protection as we understand it-not a permanent trade policy for a selected industry, much less for the whole circle of industries; not a proper basis for national taxation; not a device required continuously to equalize labour costs.

What, then, is true protection? It is indirect taxation, plus a temporary advantage to an undeveloped industry until that industry proves its ability to stand alone against the world in quality and in abundance of product. For such protection and such protection alone does the temper of the people of the United States stand today. Protection, to be justified, must be limited in the period of its operation and in the degree of differential advantage. It must be limited also in the selection of the individual industry or industries which may temporarily require it. After a period of, say, five or ten years, the amount of its tariff tax should be gradually reduced, perhaps by a certain percentage each year. Only by this method can protection be held to its original beneficent purpose and be prevented from promoting monopoly: Let us consider how many of our industries in the States can be properly classed under this conception of a properly protected industry. Very few, we must admit. It has been conceded by the representatives of some of these industries that they no longer need protection. We know this of certain other industries which do not concede it. We would cite iron and steel and coal as flagrant examples of the case in point. In fact, we are competing today in the open markets of the world in practically all staple products.

There are industries which have justification for advancing the claim that they need support at the public expense. These claims, if found reasonable, should be allowed; under close supervision and limitation, however. You may have noticed that we are creating and adapting the machinery of our Government to provide for the supervision and limitation of some of our great enterprises; and I believe that our new Department of Commerce and Labour, under the wise directing hand of our progressive President, must find a promising field of operation in the consideration of problems relating to the tariff. There are some other industries, it may be, which have demonstrated their ability to become independent. From such the benefit of the differential advantage they enjoy should be gradually withdrawn, thus giving time for capital to re-invest on safer lines. A pauper industry, when recognized as such and as being incapable of becoming anything else, cannot be tolerated without clogging the wheels of human progress and, therefore, has no right to exist.

Now, Mr. President, the practical and difficult question in our country concerns such of our industries as enjoy a greater degree of differential advantage than is needed; a degree which, if maintained, contributes to monopoly. Not that this excess of protection is the only factor of the problem but it is a very important one. Let me say right here that I have not followed this line of reasoning for your instruction, but because the conditions as they exist with us have been an obstacle to the relations which you have desired with us, and which our people now are becoming wise enough to desire with you. What these conditions have been in the past they will become still more in the future, unless corrected. Not only this, but there is ground for saying that they threaten the very foundations of our industrial and social order. But, you naturally ask, what do you in the United States purpose to do about it? Now that is what I want to explain. The result of our late National election was an endorsement of our protective policy, but not of its abuses. The good faith of the Republican party is pledged to a revision, or re-adjustment, of the tariff schedules, whenever necessary. Hitherto, as I have pointed out, the tendency has been to increase the degree of protection. This is no longer the cage. We have reached the limit of such protection in the United States, for it is false to the true idea of protection, and the people are waking up to the fact. We have reached the point of monopoly and extortion and where we realize their existence.

What has made the United States industrially great? We concede that the tariff has done much, but has it been the whole thing? M. Pierre Leroy-Beaulieu, the French economist, in a recent exhaustive study of conditions in the United States, makes no reference to the tariff as a factor of our astonishing prosperity. The principal causes he regards as our agricultural and mineral resources, the development and protection of our methods of transportation, our freedom of inter-state commerce and our emancipation from ultra-conservative ideas and from ideas inherited from the past. Representatives of the British Iron and Steel Institute recently made a tour of inspection of our country and were most impressed with these seven points in American industrial life and economy: (z) The vast scale on which the iron and steel industry is carried on; (2) the high quality and comparative cheapness of American ore and coke; (3) the extent to which labour-saving machinery is everywhere called into service; (4) the large and ever-growing output of the plants; (5) the cheapness and efficiency of rail and water transport as compared with transport cost and efficiency in England; (6) the extent and character of the home market for the products of the steel plants; (7) the high wages of skilled and unskilled labour.

The visitors attributed our high wages to the tariff and to the enormous demands of the home market. They admitted, however, that England had neglected to avail herself of the advantage of labour-saving machinery because of the cheapness of labour; and they noted that, although we paid higher wages, we employed less men per process than at home, and that the cost of the finished product was much less than in Great Britain. They found, too, that the American never hesitated to instal new and improved machinery even before the old was worn out, if he could thus effect a material reduction in the cost of his product. I have said that we in the United States have reached the point of monopoly and extortion and are alive to the fact. You naturally ask me, what are you going to do about it?

I would answer that the most progressive and generous element in the United States demands a change the element which seeks your friendship and co-operation as well as your trade. I tell you, Mr. President, that our people have reached the point where they will insist on a square deal on the tariff question. We demand this primarily for ourselves, but we cannot re-adjust our trade relations with the world without benefiting every customer on our list. We will begin with Canada, in my judgment--unless Newfoundland gets in ahead of you--and I think we naturally will move along the lines which mark the boundaries of the British Empire. It is evident that Canadian tariff legislation has been chiefly with respect to the United States. We on our part have framed our schedules almost always with reference to some section of the British Empire. Our main thought has been, it would seem, to prevent the sale of British goods in our country; to keep the home market so securely to ourselves that our people must patronize home industry, whatever the cost. We are alive to the folly of much of this programme. We see that it has checked our progress and burdened us, in many instances, with needless expense. We see, too, that in ignoring the prosperity of our customer we have menaced our own; that he must make a profit somewhere, and if he cannot at home or from some other country, as Canada makes it from Great Britain, he must quit buying. This is the business view we are coming to take of the international situation. It is nothing new to you, but it marks a distinct departure with us.

You cannot at present look to Washington for this new spirit, for Washington opinion is notoriously inaccurate as a reflection of public sentiment. I would qualify this statement a little, however. I would say, rather, that you cannot look far beyond the White House for symptoms of the change which is impending for the signs of a broader, a more tolerant, a more progressive spirit in the conduct of our fiscal policy. In Theodore Roosevelt we have a statesman keenly responsible to the voice of the people, ready to grasp opportunity when it comes. In Roosevelt you have a better friend than you know. This broader view, this belated recognition of the importance of our commerce, is more widespread than you might gather from reading some of our stalwart newspapers. It is not confined to Massachusetts, as our Home Market Club would have you think, and it is not peculiar to the Democratic party. President Roosevelt, while elected by the party of high protection, yet had the confidence and support of the progressive element. I am convinced that he appreciates the importance to all concerned of cultivating the closest and most friendly relations with Canada. The jingoes cannot alarm him and the monopolists cannot intimidate' him. He is honest, progressive and open-minded. Like his great predecessor, whose death threatened a distinct loss to other nations as well as our own, he is in step with the march of events; and the friends of international good-will and prosperity are looking to him.

With the conditions as I have stated them-with the birth of a new spirit among our people which promises a wider and a more liberal view of men and things the world over, what will be the attitude of Canada toward the United States? Will she meet us half way, as she has been more than ready to do in the past, or will she seek a Provincial isolation? Will she respond to the best that is in us, as it goes out to her, or will she ignore it? We understand thoroughly your position in the matter of tariff concessions, from the present basis, and cannot criticize it. Our people are beginning to recognize that gross inequalities, if not injustice, exist. They are now ready, I believe, to remedy these conditions without asking much of you. We already are formulating a plan which contemplates the immediate removal, or a material reduction of, the restrictive duties on many of your most important products. We intend to propose nothing which, while making for our own welfare, does not also contemplate corresponding benefits to Canada. In all I ever have written or said upon the so-called Canadian question I have studiously kept in the forefront of my argument this thought-that whatever we of the United States may propose, whatever we may do, we must consult your interest and prosperity even as our own.

Your Government, while standing for the doctrine of protection, yet takes the view that there are many things which it is not well for Canada to try to make. This is sound economics. The people of the United States are today grievously taxed to support certain unnatural industries. There are certain things, and a great many of them, which you can raise, which you can manufacture, which you can traffic in to better advantage than we in the States. In those lines you will sell and predominate and control. It would be impertinent for me to do more than generalize along this line, but I have the right to say that a recognition of the principle is extremely important, if not vital, to the success of Canada. It is better to avoid our mistakes than to imitate them. You have avoided most of them so far, but the pressure upon your Government is strong, and I recognize the plausible strength which underlies the arguments. You have to deal, however, with questions of fact rather than of theory, and the practical question relates to the class of business you can develop that will attain the greatest success and bring you the most profit.

In the United States we have, in some cases, attempted to build up unnatural industries and thus foster pauper enterprises; and have forced the whole country to pay the bills. We have done more than protect against unfair foreign competition-we have refused our people the opportunity to invest and spend their money to the best advantage to themselves. The result has been the creation of trust and monopoly; evils from which you are comparatively free. In my judgment, events are tending toward a political revolution in the United States, for our over-protected special interests have over-played their game. The recent election result in Massachusetts is only a 'symptom. They oppose fair play for you, moreover because they fear for themselves. Your new " dumping-clause " is a wise one, and I hope you will make it effective. I notice that Hon. J. Israel Tarte, in a recent interview, stated that Reciprocity between the two countries is impossible because we are rivals. It seems to me this is the best reason why we should get together. In this way can the interests of both countries be best protected-most assuredly so in certain important lines. Whatever the old theory as to competition, the modern tendency is toward consolidation; and every business man knows that rival businesses in the same community generally result in the survival of the fittest.

Now the idea advanced by Dr. Montague in his recent eloquent speech before our Home Market Club, when he pictured the Dominion of Canada as populated by 100,000,000 people, raising 500,000,000 to 900,000,000 bushels of wheat yearly, and supplying her own needs and those of Great Britain and the rest of the world--this theory is a very ambitious one, but it raises several grave questions. It is ideal, but some of us see some dangers in it. Hundreds of millions of people of the same race, same religions, of the same civilization, producing the same things, competing in the same markets--this conception fills the cup of laudable ambition to the brim, but in the nature of things is it possible? Can such an aggregation of human nature, with the millennium so far off, continue to live on both sides of this imaginary line in peace and good will? I do not like to say this, I do not like to think it. I hope my implied deduction is all wrong; but we are Anglo-Saxons, and I cannot forget the facts of Anglo-Saxon history-of the welding of the United Kingdom itself.

Dr. Montague says: "Let us alone. We are all right. We are working out our own destiny as you have worked out yours, and if we can only continue on this line we shall become a larger, powerful nation, in numbers and wealth the rival of the United States." I honour this sentiment and the ambition from which it springs. I am second to no man in my appreciation of Canadian statesmanship and ability. but all the facts of the material world confirm my belief that the United States is destined to be the dominant factor on the American continent. It is not that you or I wish it so, or that our children's children may wish it so-it is, as far as human judgment can foresee, the Fact Inevitable. It is not because I am a citizen of the United States that I predict this of my country. Rather is it because I am and must be, from the point of view of so tremendous a future, a citizen of the world. Do not misunderstand me. We respect your ambition to become a great nation, industrially, commercially and politically. We have no desire to slaughter your industries and make you a pastoral people. Such a course, while immediately profitable to a few of our manufacturers, perhaps, would be short-sighted. We wish you the same development that has come to our several States. Some of these are agricultural, some industrial. Very few of them are self-contained. A prime factor of their development has been freedom of interchange-affording a natural play of force and energy. We would upbuild your country as we have upbuilt our own.

No commonwealth of all our forty-five has suffered in material prosperity from being a member of the great family of commonwealths, and, by the same token, the same privileges can be extended to Canada without menace to her loyalty or integrity. The great events of the future must take care of themselves. We can concern ourselves now only with the problems of industrial and commercial development. If you believe your ambition. can best be served by hostile tariffs, of course you will enact them; but the overwhelming fact that a natural community of interest exists between the two countries cannot be denied. The comparative failure of your preference to Great Britain emphasizes this. Only by extreme measures, bringing hardship to your own people, can you divert the natural course of trade.

I cannot believe that we, the elder child, are less loyal to the Mother-country than you. I profoundly believe that if the time should ever come when England needed help, the United States would offer it as freely and spontaneously as Canada herself. We are bound together by such common interests that the English-speaking peoples must stand together, not only in war, but also in peace. Anything that would injure England industrially would hurt us. England and her Colonies take from us more than half of all we sell abroad. If for no other reason than this alone we should be friends; but there are reasons stronger and finer than even that. I believe that a commercial union between Canada and the United States would be only the first step in a compact with Great Britain, which would insure not only the industrial but the political peace of the world.