BACKSTAGE AT OTTAWA

There's No Pleasing Washington

THE MAN WITH A NOTEBOOK May 15 1948
BACKSTAGE AT OTTAWA

There's No Pleasing Washington

THE MAN WITH A NOTEBOOK May 15 1948

There's No Pleasing Washington

BACKSTAGE AT OTTAWA

THE MAN WITH A NOTEBOOK

WITH a presidential election in the offing, Ottawa finds Washington a trifle hard to get along with these days.

American farmers are protesting indignantly against import restrictions. When the controls first went on there was no outcry because the Americans didn’t even notice them. But as more and more farmers found they couldn’t sell their winter crop in Canada as usual, they set up a loud howl.

In Washington, their numerous and efficient lobbyists got busy. Congressmen and Agriculture Department officials learned, apparently for the first time, that Canada was restricting imports from the United States. The unanimous reaction was, “Those Canucks can’t do that to us”—and official representations were thereupon dispatched to Ottawa.

At one and the same time, other Washington departments like State and Treasury are heckling us for opposite reasons. They want to know, with equal indignation, why Canada can’t “throw off a surplus,” as the current jargon goes, to send to Europe as “our share of the Marshall Plan.”

These critics subside grumbling, and only half convinced, when Ottawa explains that we can’t “throw off a surplus” and still pay American cash for American goods. Canada’s been throwing off that kind of surplus ever since the end of the war— selling to Britain on the longest-term credit and digging into our reserves to pay the bill. As a result, we’ve drained our cash well below the danger line and we can’t do it any more until we’ve got our reserve built up again.

All of which is hard to explain and Ottawa wouldn’t really mind being criticized from one side or the other. It’s only when the same Government starts attacking from both sides that Canada begins to feel exasperated.

* * *

QUITE aside from our relations with Washington, the Government is worried about the dollar situation. Not the least of its worries is the evident and unwarranted cheerfulness that seems to reign in the mind of the average Canadian so far as the dollar problem is concerned. Canada’s dollar position is not nearly as good as people think.

A good deal of the overoptimism is the Government’s own fault, for its own statements have been misleadingly bright. When an M.P. asked what the effect of our control program had been so far, Mr. Abbott replied that it was too soon to say, but that our reserve of American dollars was up to $527 millions by the end of February. At the low point in mid-December, it was only $461 millions.

If that were the whole story, it would be a remarkable achievement. All last year, Canada was losing American dollars at a net rate of about $70 millions a month. To have stopped that enormous drain and then in three short months to have built up the reserve by $66 millions would indeed have been something to crow about.

However; the same week the Governor of the Bank of Canada, Graham Towers, made a statement. to a Senate Committee that got very little notice—there wasn’t even a Hansard reporter present, so there’s no official record of what he said. But he explained to the Senators that the apparent increase in our American dollar reserve was almost entirely phony.

The February figure of $527 millions, he said, included a lump-sum payment from the U. S. of about $30 millions in settlement of various wartime accounts. And it did not take account of any dividend payments by Canadian subsidiary companies to their American parents. Very heavy dividend outlays were due in March and April. These two things pretty well wiped out the apparent gains of December to March; at the present time our net position in American dollars shows no improvement, or very little improvement, over the low point ot last December.

* * *

ANOTHER source of overoptimism was the - Marshall Plan. A good many Canadians seem to have thought that if the Marshall Plan went through Congress, the American gravy train would then take us all on a one-way ride to the Big Rock Candy Mountain.

One Ottawa exporter called on a Government

official, a few1 weeks after the Marshall Plan passed Congress, to enquire about the enormous purchases that he understood were being made here in connection with the Marshall Plan. His impression was that the Canadian Government had a field force of purchasing agents out, buying up huge quantities of goods for resale to the ERP office in Washington. He wanted to know how to get in touch with these agents so he could sell them some goods.

Officials were considerably startled by this enquiry. It was easy enough to explain to this one man that he was completely mistaken; that Canada was buying nothing and wouldn’t be buying anything for the Marshall Plan; that the only buyers would be our regular European customers who hoped to get enough American dollars from ERP to keep on buying the stuff they’d hitherto got on credit, or paid for out of their own vanishing reserves-. But they wondered how many other Canadians might have similarly fantastic notions.

The truth is, of course, that passage of the Marshall Plan hasn’t cured the Canadian dollar problem, even though it has protected us from utter disaster. The dollar-conservation program of last November was designed on the assumption that the Marshall Plan would go through and that Marshall dollars would be available for Canadian goods. Otherwise, the conservation program would have been so much tougher and nastier that our present “austerity” would look like luxury.

The most Canada ever hoped for, from the Marshall Plan, was that it would enable us to continue as we’ve been going. Last year, Canada’s accounts with all countries came out almost exactly even—we had a current account surplus of not more than $15 millions. Result was that all our credit sales, to Britain and other countries, had to be financed directly out of our own dollar reserves.

In 1948, with the help of the import-control program, Canada might achieve a current account surplus of about $150 millions. But we have already

committed ourselves to credit sides of about $150 millions for 1948 $52 millions on the British food

contracts during the first quarter and about $100 millions in assorted credits to other countries, all contracted for long ago.

The one will balance the other. If all goes well and all our plans work out, therefore, Canada w'ill just barely break even in 1948. But the big question is, will those? plans work out?

* * *

ON THE basis of early figures, the importcontrol program doesn’t look too solid. In January and February of this year, when you might have expected our “austerity plan” to have cut into the import total, our actual intake from the United States was the highest in history -$287 millions worth of American goods.

It’s true that the situation isn’t quite as bad as those figures indicate. Continued on page 71

Continued from page 15

Canada’s been cutting sharply into the imports of consumer goods, like vegetables and cotton textiles. But the Government isn’t even trying to cut down the imports of capital goods like structural steel and industrial machinery. Canada wants every ounce of steel she can get. The aim of the control program is not to reduce these purchases but to divert them from nonessential, nonproductive uses into dollar-earning production industries.

The textile industry is a perfect example. We’ve cut our imports of cotton goods from the U. S. to a third of what they were last year—as the average buyer will be finding out, any time now.

That considerable reduction won’t net us a single American dollar in 1948. Our own textile industry, called upon to step up production, has come forward with plans for expansion and renewal of its worn and obsolete plants. The new machinery will require American dollars—probably just as many American dollars as we can hope to save by cutting down our cotton imports.

But although our dollar position in 1948 will show no improvement so far as the textile industry is concerned, our long-term dollar earning position will be greatly improved. The same thing will be true in many other industries.

* * *

All in all, Ottawa is not too discouraged about our own dollar-control program, provided everything else works out on schedule. What does worry Ottawa is the practical application of the Marshall Plan. European countries can get ERP dollars to buy necessities in Canada. But how many of the goods we’re selling now will meet

Washington’s definition of “necessity”? At the moment, nobody knows. It’s true that the bulk of Canadian exports are basic things like food and raw materials. But it doesn’t necessarily follow that all foods will be rated “essential” by the Marshall Planners.

Take bacon and beef, for instance. When the British came out here last November to talk about a new food contract, they said they didn’t want any more Canadian bacon or beef. They’d take wheat and some cheese and that would be all, thanks. It took the Hon. James Gardiner weeks of the toughest battling that even he has ever seen to convince the British of their error—to explain to them that if they wanted wheat at $1.55 and $2, they’d have to take the rest, too.

ERP won’t give the British all the dollars they want, by any means; they’ll still be watching every dime. What if they suggest to Washington that this Canadian beef and bacon is hardly a “necessity,” since they don’t even want it?

What if Washington says “We’ll buy the beef ourselves; we need it?” That would blow down the Government’s embargo on food shipments to the United States. It would also crack the carefully integrated farm price pattern on which the whole Gardiner program has been based—with meat selling for American prices, it might well pay a Canadian farmer to feed his wheat to the pigs. The Canadian cost of living would take another upward zoom, the biggest yet.

These are a few of the reasons why the officials at Ottawa, and some of the politicians too, will sleep easier when the Marshall Plan really gets rolling and we find out where we stand.

* * *

As the Quebec election campaign warms up, Liberal spirits are still higher than anyone would have expected a few months ago. The Grits

are not taking anything for granted, hut they think their chances of beating Duplessis are waxing, not waning.

Recently they took an unofficial survey of Quebec seats. About a third of them, they admit, are solid and unshakeable for Duplessis. Another third are equally solid Liberal—industrial ridings, for example, where Duplessis’ thorough job of alienating labor makes his candidate a beaten man already. The remaining third are labeled, on Liberal charts, “peut gagner“could win.’’

Among the various things that cheer the Liberals in this provincial fight, the most important is the improvement in the fighting qualities of their Quebec leader, Adelard Godhout. Mr. Godhout has always been admired as a fine, decent citizen, but until lately he’d been counted “too much of a gentleman’’ to win at the kind of gutter fighting in which the Duplessis machine excels. A year ago, after he had lost a number of important by-elections, Mr. God bout’s stock with his own party was very low indeed.

Today it’s higher than it’s ever been, on the strength of Mr. Godbout’s showing at the last Quebec Legislature session. He seemed finally to have learned how to deal with Duplessis on the Premier’s own ground.

One of the issues of the session, for example, was an alleged road-building scandal in Chicoutimi. There was evidence that contracts were let without tender for a road job that was supposed to cost $6 millions; evidence that the job has already cost $12 millions, is not yet finished and the contracts are still being let without tender.

When the Liberal Opposition tried to make the record public they ran into every conceivable dodge of parliamentary obstruction; anti-Government speakers found themselves “out of order” at the most unexpected times. But in spite of these troubles, and in spite of a steady hail of most scurrilous personal abuse during the debate, Godhout and his men stuck to their guns and gave the whole deal a thorough airing.

They are still going into the election campaign with their fingers crossed and the odds against them. Duplessis has a well-oiled political machine, probably the best in Canada, and he has almost unlimited funds. He has also, on his side, the endemic nationalism of the Quebec countryside.

For one thing, his Government has authorized within the past year a flag of her own for Quebec. Thousands of lapel buttons of this flag are being manufactured, each with a portrait of Duplessis at the centre. The Liberals admit that this is prime campaign material and it may give the Duplessis regime another term in power.

All they do say—and even this wouldn't have been true a year ago—is that Duplessis won’t get back into office without knowing he’s been in a j fight;. ★