GENERAL ARTICLES

BACKSTAGE AT OTTAWA

Ammunition All Aboard For Assault On Cartels

THE MAN WITH A NOTEBOOK December 15 1945
GENERAL ARTICLES

BACKSTAGE AT OTTAWA

Ammunition All Aboard For Assault On Cartels

THE MAN WITH A NOTEBOOK December 15 1945

BACKSTAGE AT OTTAWA

THE MAN WITH A NOTEBOOK

Ammunition All Aboard For Assault On Cartels

THE REPORT of the McGregor Commission on international cartels was tabled in the Commons quite a while before printed copies were ready, which may be one reason why the report got so little public notice. Actually it’s one of the most interesting state papers of the year—has some astonishing stuff in it.

Did you ever hear of tungsten carbide? Neither did most people. Doubtless that made it easier to tie up this valuable product in an international price-fixing deal. Tungsten carbide is the best material known for the cutting edges of machine tools—it’s been known to multiply production 500% in vital war industries.

Up to 1928 it cost $50 a pound, which was considered high. In 1928, states the report, General Electric made a deal with Krupp, of Germany, fixing sale and resale prices of tungsten carbide in North America. At once the price rose from $50 to $453, and stayed there until 1936, when it was cut to $205.

In August 1940 indictments were laid under U. S. antitrust laws. The price of tungsten carbide dropped from $205 a pound to $32.

One Ohio machine tool firm complained in 1936 that European machine shops were surpassing North American firms because they used more carbide tools, which were eight to 10 times as costly here as in Europe. Krupp sold to German plants for $1.75 a piece of carbide that sold here for $6.

THE REPORT also cites several items better known to the average consumer. It quotes deliberate decisions to make flashlight bulbs that wouldn’t last as long as the bulbs previously on the market. Radio tubes and sets cost more than necessary in Canada, the report claims, and the cheapest sets are kept off the Canadian market altogether. Canadian radio manufacturers, under the patent rights assigned to them, cannot produce for export.

The ban on export is “of considerable significance in such a rapidly developing industry,” adds the report, “particularly in view of the innovations brought to a practical stage by Canadian scientists during the war.”

Another important field is chemical fertilizer, formerly controlled by an ironclad cartel centring in Chile. During the war Canadian scientists figured out a way to make fertilizer out of ammonium nitrate, which used to be unsuitable because it caked in the bag and couldn’t be spread on the fields. Now we’re in a position to compete with the Chilean nitrates, but if the Canadian product is to stay in the market it will have to buck a potent cartel. It may need help.

The report recommends that Canada should take an active part in current plans for controlling international cartels by international action—many of them are out of reach of any one government. It suggests an office on fair business practice, responsible to the United Nations Economic and Social Council. It also asks for strengthened legislation to curb, and especially to prevent, trade combines at home.

FRED A. MCGREGOR, chairman of the Commission which made the cartel report, is an interesting character. Quiet, unobtrusive, with an old-time civil servant’s horror of publicity, he has been a keyman in Government service for most of the past 35 years.

No one else has worked as long as he in close association with Prime Minister King.

Young Fred McGregor worked with Labor Minister King on the Grand Trunk strike in

1910, and they became good friends. They used to drive out to Kingsmere by horse and buggy at week ends, when the youngish Labor Minister would keep himself in shape chopping down trees. In Mackenzie King’s political exile, when he had the labor research job with Rockefeller, he took Fred McGregor along as Man Friday. In the first Mackenzie King administration, 1921 to 1925, McGregor was principal secretary to the Prime Minister.

There’s a rumor that once, in a moment of intense irritation, McGregor threw a volume of Hansard at the Prime Minister, which missed him, but not by much. McGregor denies this, and indeed the cordial relations between the two men today are enough proof that if they ever did have a falling out it must have been temporary. But the legend lives on, perhaps because it’s so consistent with McGregor’s character.

His quiet manner is deceptive. To talk to him you’d think him the easiest man in the world to get along with. So he is, most of the time, but when he does get angry they say he’s a holy terror. And his anger never fails to glow when he’s confronted with fixers, chisellers, lobbyists, logrollers or any combination to restrain trade.

In his 20 years as commissioner of the Combines Investigation Act he has fought and licked some of the toughest organizations in Canada. It was McGregor who bucked and broke the Proprietary Articles Trade Association, which once set resale prices of drugs and toilet articles. McGregor smashed the coal combine in 1933, and got fines of $43,500 against importers wbo’d been fixing prices—three years later the H. M. Tory Commission found prices substantially lower. He broke the amalgamation that tied up the plumbing industry in Toronto, and the principals were fined $45,000. Electrical contractors, who had got together to fix bids on all contracts over $10,000, were fined $26,200.

Probably his biggest fight was with the combine that set prices of paperboard boxes. He came out with a report in 1939, showing that 19 boxmakers and five manufacturers of material had set up one of the tightest combinations in restraint of trade that Canada has ever seen. All manufacturers were members of a central association which fixed not only prices but quality, service, amounts to be sold, every conceivable detail. Any member violating the association’s rules had to pay a fine. Directors, sales managers and even travelling salesmen had to submit affidavits every month, swearing that they’d maintained prices and had not “directly or indirectly made any allowance, rebate, discount or other inducement to any customer.”

Politically, the paper box people were extremely powerful. They went to work on Norman Rogers, then Labor Minister, to prevent the enquiry. When the enquiry was completed and the report made, they went to work on Ontario (Hepburn) authorities to stop prosecution. Ontario didn’t prosecute. The law Hays the Dominion may act if the province fails to do so after three months. Boxmakers went to work again on the Federal Government.

They really moved mountains, for their claims to “influence” were no idle boast. McGregor was ready to resign if Ottawa backed down. As if turned out, he needn’t have worried Ernest Lapointe, then Minister of Justice, stood by him like a rock of ages, as had Norman Rogers when the work began. The combine was prosecuted, and members paid fines totalling $176,000.

During the war McGregor was chief enforcement officer of the Wartime Prices and Trade Board. Now he’s going back to his function as Combines Act commissioner, with a fairly well-paid staff', enlarged from its pre-war half dozen. He hopes the Government will restore to his office the power which the Senate took away from it in 1936 power to initiate enquiries, without waiting for complaints from the public or a specific direction from the Minister of Justice.

DON’T let your hopes go too high for the world trade conference planned for next June. Trade experts here are finding the obstacles to world-scale business even tougher than they expected. And if these obstacles aren’t cleared Canada will be an outstanding sufferer - at worst, our foreign trade could be cut to less than half what we’ve been counting on.

Britain and the sterling area used to take well over half of our total exports, and our postwar plans had been based on restoring and expanding that export business. Now we find that although Britain is anxious to buy our primary products and raw materials, she doesn’t want our manufactured goods even on credit.

Prime Minister Attlee laid down the official line when he said in Ottawa: “It’s

not true that His Majesty’s Government have told Canadian firms they can only do business in the United Kingdom and the sterling area if they erect plants there.” But although no such blunt warning has been or will be stated, the net effect on a good many manufacturers has been about the same.

Root of the difficulty, of course, as Mr. Attlee pointed out, is Britain’s shortage of dollars. We had known that this would force a policy of “austerity” on Britein, and that she’d import only “essential” goods. As one Briton remarked, she wasn’t going to borrow money and then use it to buy chewing gum. Lately, though,

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Canadian officials and businessmen have been horrified at the British interpretation of the word “essential.” They’re refusing to import not only luxuries, but any goods, however necessary, that they can possibly make for themselves, even at higher cost.

Massey-Harris had a typical experience with farm machinery. First they offered to sell machinery to the British at prices far below what a British manufacturer could meet. The answer was “No, not interested.”

“All right,” said Massey-Harris, “suppose we build a British plant. We want to import, say, a million dollars’ worth of production machinery.” Even this request was pondered long and carefully. At last an import license was issued—for about half the amount that had been asked! The rest of the stuff could be found, at higher prices, inside the sterling area. It had to be bought there.

This has been the experience all along the line. Import licenses are being refused, not only for luxuries like cosmetics, but for all kinds of consumer goods from fountain pens to rolled oats.

Ottawa hasn’t by any means given up hope that this situation can be altered, or at least eased. Prime Minister King himself is handling a good deal of the negotiation, directly with Prime Minister Attlee, and at that level all kinds of things can happen that the humble official doesn’t anticipate.

But at this moment the only visible alternatives are these:

1. We can ask the British to give up the policy of import control. We already know the answer to such a request would be “no”that issue was all thrashed out at Bretton Woods, and the agreement specifically permits import control and similar emergency measures for reconstruction.

2. We can ask the British to make an exception of Canada—let our goods into the sterling area without restriction. To which the British reply, “You’re a dollar country; how can we discriminate between one dollar country and another?” We haven’t any answer to that.

3. We can give up hope of a free, multilateral trading system and fall back on the old quota method, i.e., ask

Britain to allow us a certain fixed percentage of our pre-war trade, and be content with that limited but guaranteed market.

It’s perhaps significant that although hope has not been given up, a top-ranking man at Ottawa has been put on the job of planning what our quota request should be, if we have to make one.

Trade and Commerce had been sitting on that story for eight months when Ken Wilson finally broke it in The Financial Post. It was Wilson’s second scoop of the month. The first: It was he, and not, as most peoplethink, the Winnipeg Free Press, who first nosed out the story of the steel pipe tariff', and tossed Mr. Howe’s lump of fat into the fire that finally consumed it.

A correspondent writes in to say that his son, with 3,500 hours flying in the Ferry Command, is being discharged with no service decorations, and he wants to know why. Here’s the story as the Air Ministry here understands it:

Ferry Command (or Transport Command, as it has been called now for several years) is an RAF show. At the beginning the RAF hired civilians at fancy salaries to fly bombers across. Later the pay came down to a more ordinary level, but it remained civilian pay. When we started flying bombers direct to Africa, Italy, etc., the route often lay over enemy territory; a civilian pilot—because he was an enemy alien in civilian clothes ran the risk of being shot if he were forced down.

To protect R A FTC pilots, therefore, they were put into RAF uniforms — but they remained on civilian rates of pay. The RCAF had a somewhat analogous case in the instructors at private air schools. These were civilians, well paid; when the draft began to be tough the instructors got worried, and it was arranged to swear them into the RCAF, then second them back to civilian duty as flying school instructors at the same pay as before. These men, on discharge, will get no gratuity or other war service benefit.

Apparently RAF Transport pilots are in the same case. It’s pointed out that all these men were in that line of work by their own choice—they were, in effect, civilians on semimilitary duty, like merchant seamen. It was essential war work, but it isn’t considered strictly as war service.