RELATION OF AMERICAN TRADE AND INVESTMENT DOLLARS TO CANADA’S ECONOMIC FUTURE
J. HERBERT HODGINSMay11924
RELATION OF AMERICAN TRADE AND INVESTMENT DOLLARS TO CANADA’S ECONOMIC FUTURE
BUSINESS & INVESTMENT
J. HERBERT HODGINS
WHAT is this apprehension that has arisen, afresh, as to the menacing significances of Canadian-American commercial relations? Dr. Berger, whom the Canadian daily newspapers have ranked as “a noted financial expert of London, Eng.,” has been amongst us stressing his fears that Canada’s increasing purchases from the United States may cause the latter country, in twenty-five years, to possess a very strong voice in determining Canada’s future trade and status, political and otherwise.
Dr. Berger in his economic dusting should have discovered long since that this little Dominion of ours exercises small sentiment in trade. Canada trades chiefly in the most convenient market. Canada’s most convenient market, from the geographical angle, obviously is the United States. “Canada for many years has been buying more from the United States than from any other country, but there is no evidence of any growth in the sentiment for annexation,” says the Toronto Globe, and in this it is not far astray in its conclusions.
I recall a discussion, during the early months of the war, in the New York Timen, in regard to our national destiny after the war. An unnamed American jurist offered three alternatives for the Dominion, imperial federation, independence, or alliance with the LYited States in one great North America. “Canada must draw closer either to England or to the United States,” he wrote at the time. “Tradition would reconcile the British part of her population to the proposed scheme of ‘imperialistic federation with England and her dependencies’ but their personal interests
In 1911, Canada rejected reciprocity with the United States chiefly because of fear that it might tend toward a political wedding. The very next year our imports from the United States rose from $275,000,000 to $331,000,000. In the fiscal year, 1921, our American purchases constituted 63.4 per cent., which is about the present relation of our American imports to total imports.
American Buying in Canada
TF OUR buying in the United States 1 constitutes the bulk of our foreign purchases it is equally significant that American buying in the Canadian market continues of substantial proportions to the extent of being Canada’s best foreign customer. Our sales to the United States are more than twice as great to-day as they were prior to the war.
Canadian exports to the United States reached a peak point of $542,000,000 in the 1921 fiscal period, but have been upon a lower scale in the succeeding three years. This is chiefly attributable to the deflation in general business. It was accompanied by a lessening of our purchases in the United States. Our imports from the United States reached top level in the fiscal year 1921, at $856,000,000. In the following year they were $341,000,000 less. For the 1924 fiscal year they will approximate $600,000,000, or about twice the volume of pre-war days.
The vital problem of Canadian-American trade, from this country’s viewpoint, exists in the continuance of a substantial “adverse balance.” In other words, for a small nation we continue to purchase unduly in American markets.
ANALYSIS OF CANADIAN-AMERICAN TRADE
P.C. Can. Per Cent. Excess Imports
Exports to Imports from to Canada over
Fiscal Exports to U.S. to total Imports U.S. to total exports to
I Year U.S. Can. Exports from U.S. Imports U.S.
1870 $ 30,361,300
I 1890 36,213,300
51.4 $ 21,697,200
32.4 $ 8,664,100t
* -Eleven months to February, 1924.
t— Excess exports from Canada over imports from United States
dictate that Canada should draw closer to the United States.”
Seven years have passed since the American jurist made his forecast. Along comes Dr. Berger with his predictions. Meanwhile, Canadian-Amerman economic i relations continue int ¡mate, but politically the two countries appear as widely apart I as they ever were. There was considerably more sentiment toward annexation j thirty years ago than there is to-day, in I spite of the present dominance of ! American imports upon our foreign trade, ! and in spite of America’s increasing I capital investment, in this country.
During the war when we depended to a very considerable degree upon American raw products for munition-making, this “adverse balance” rose to the alarming aggregate of $384,600,000. This was for the fiscal year 1917. The “adverse balance” was $375,600,000 for 1918 but dropped to $295,300,000 in 1919, presumably due to the cessation of Armageddon. Last year the adverse balance had declined to $171,800,000 and for 1924 it will approximate $160,000,000. The smaller balance against us is due to the increasing ratio of our exports but it is yet large enough to constitute an economic^)!.
Railing at Canadians, and calling upon their patriotism, however, has béen ineffective, or largely ineffective, in curtailing Canada’s purchases from Uncle Sam. Made-in-Canada campaigns have proven a partial remedy. What then is torbe done?
Hidden Reserves to Retire Debts
CANADA’S untapped resources—her hidden sources of new wealth—once developed, may be counted upon to retire obligations which Canadians may accumulate. The astounding 'progress, for instance, of Canada’s pulp and paper industry with its vast sales to the United States is a notable example in this relation. But Canada must not overindulge in that unwise pastime of counting chickens before they are hatched. Canada has another asset, whose subtle influence is yearly becoming of increasing power, an “invisible balance,” which tends greatly to offset our American importations. This “asset” is Canada’s ability to attract the free-spending American tourist. Our tourist trade with the United States is known to create a “balance” heavily in this country’s favor, and this “trade” becomes of increasing importance, annually.
Thirty years ago the commerce of the two neighbor countries, annually, ammounted to no more than the current monthly rate of barter. In 1890, the year’s entire business over the border was less than one hundred thousand dollars. In 1920, the annual business had reached the vast total of one billion and a quarter dollars. Presently the volume of trade is about one billion dollars, per annum, which amount is coming to be accepted as the normal trend.
U. S. Attachment for Canada
“TT GOES without saying,” to quote 1 Thomas Lamont, eminent American banker, in a speech made a few years ago to the Canadian Society of New York, “that if we Americans have increased our business with you and our investments in your great country, we have at the same time studied you more, studied your resources and the character of your development, and I want you to appreciate that the increase in our attachment to Canada must not be measured simply in the cold figures of our growing trade and in the increasing investment with her. On the contrary there has been an expansion of our respect and of our affection for Canada, far more important than that indicated by the barometers of trade.”
This must not be dismissed as the utterance merely of one American. It was said by one man, it is true, but it represented observations of a man big in the affairs of America, a partner in the great financial house of J. P. Morgan and Company.
Sir Henry Thornton’s Observation
CIR HENRY THORNTON is con^J vinced of the economic friendliness of America for Canada. “We used to hear,” said the president of the Canadian National Railways, recently at Guelph, Ont., “of the Whisper of Death, but there is a greater optimism for the future of Canada, among the people of the United States than among Canadians themselves.”
Sir Henry Thornton believes that United States capital will continue to flow to Canada because “capital knows no flag; it always goes where the greatest return is to be secured.”
A group of thirty-two men, representative of New York, Philadelphia and Buffalo bond and investment banking firms visited Toronto last month, and, following a survey of northern Ontario, forecast a new gold flow from the United States for development of Ontario’s mineral resources. Which would appear to bear out Sir Henry Thornton.
United States Investment Vast
THE Bankers’ Trust Company of New York in a recent analysis of the flow of American capital to the Dominion computed United States investments in the Dominion at the remarkable aggregate of $2,500,000,000, of which only $750,000,000 was loaned prior to the war. Canada’s acceptance of Uncle Sam, as banker in John Bull’s stead, is based
upon the Dominion’s policy of an open door for capital.
When the vicissitudes of war compelled Canada to finance elsewhere than in Canada, America was found ready and willing to see Canada through, to “big sister” Canada, as a New York banker described it. In the pre-war days the Dominion borrowed almost exclusively from the United Kingdom.
American capital is undoubtedly welcome in Canada. Intolerance may exist among many _ Canadians toward reciprocity as applied to trade and commerce, but not as applied to dollars and cents. The Canadian field is open to the capital of every country.
Why does this great flow of American capital to Canada continue? It has been said that American financial and industrial leaders see Canadian conditions more accurately than Canadians themselves. This is, however, rather coloring the argument. Canadians, undeniably, are equally alert to the possibilities within their country. The vital difference is that investment capital exists in vastly greater amounts in the United States.
The Minneapolis (Minn.) Journal gave us a succinct compliment, as a nation, when it recently said: “American investors are still wary of putting their money into foreign ventures, even British ones, whereas they feel no such hesitation regarding Canadian opportunities.” Perhaps they are like the old man who always insisted upon loaning his surplus funds for near-by farm mortgages. He had a feeling that he could make a personal foreclosure, if required.
America’s Withdrawal Inconceivable
MERICA’S investment in the Dominion has now become so vast that its withdrawal is inconceivable. Indeed
there is every reason to expect that the present investment will be further pyramided as the business ventures, already embarked upon in this country, continue to expand. As a matter of fact, in the first three months of 1924, according to a compilation of A. E. Ames and Company, Uncle Sam has continued to finance Canada’s up-building, upon a considerable scale. In this quarter, Canadian bond sales, government, municipal, corporation, and railroad, totaled $107,085,800, of which amount $26,193,500 was financed by the United States, $77,142,200 secured in Canada and $3,750,000 in Great Britain.
The question is often asked regarding the possibility of London regaining prewar status as Canada’s banker. The solution clearly is dependent upon the recovery of the pound sterling. When the pound sterling more nearly approaches par there is certain to be an influx of British capital destined further to speed up Canadian development. In the meantime, it cannot be expected that Canada will stand still; nor need there be fear that the penetration of American dollars will tend toward financial conquest or the loss of Canada’s separate identity.
Even so eminent a Canadian as President Beatty of the C.P.R. had made it entirely clear that the flow of Canadian capital into Canada will in no way interfere with Canada’s politics or patriotism. While in England last autumn, it may be recalled, Mr. Beatty pointed out that much as Canadians would welcome British money there was no Imperial preference upon capital in Canada. President Beatty’s attitude may be accepted as that of thinking Canadians, and this is the viewpoint which has been mirrored, from time to time, in the influential press of the Dominion.
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