Only Atlantic free trade can start us growing again

BRUCE HUTCHISON February 11 1961


Only Atlantic free trade can start us growing again

BRUCE HUTCHISON February 11 1961


Only Atlantic free trade can start us growing again


ODDLY ENOUGH, it was in Germany that I began to understand for the first time the dilemma, and the hope, of my own country.

A few miles west of Cologne I climbed a lonely hill, pushed through a welter of new brush and stumbled upon the concrete ruins of the secret bunker from which Hitler directed the conquest of France. In this overgrown and forgotten spot the conqueror's life reached its brief triumph.

Next day I found myself at Bonn in the palatial office of Dr. Ludwig Erhard, the plump, ruddy professor who built the modern German economy on genius and, as I observed at first hand, on unlimited draughts of plain soda water and cigar smoke.

Here was a parable, if one could only decipher it. Within fifteen years the business system of a nation wrecked by Hitler had become the most dynamic in the free world. Whence this prodigy? What did it mean to Canada?

The exception: Europe’s Six

The prodigy came from the sort of economic principles that Canadians must adopt if they wish to maintain a prosperous nation, or any nation at all. The meaning of events in Germany, as the mainspring of the booming European economic system, is that Canada must navigate on the broad waters of the North Atlantic community or suffer shipwreck on the shoals of North America.

With one exception, the economy of the Western nations has suddenly ceased to grow-—as it must grow, and soon, if it is to have a Chinaman's chance in the struggle with a growing Communist system. The single exception is ihe European Common Market—the six nations dominated by Germany and France that are steadily reducing tariffs among themselves and erecting a common tariff against the rest of the world. They are growing fast, almost unbelievably, until their immediate problem is a shortage of labor while ours in America is a surplus.

West Germany, indeed, is exporting so much more than it imports that its accumulating stocks of foreign currencies congest and imperil the free world's whole exchange mechanism.

Britain, highly prosperous at the moment, is moving toward another balance-of-payments squeeze, one that probably will compel it to reduce both necessary exports of capital and imports from such countries as Canada.

The United States, once drowning like Midas in gold, is losing it at an appalling rate and will have to cut down vital foreign aid, restrict imports or vastly increase exports, or do all three things together. Any or all of them would damage everybody

else, and Canada especially. Every day the headlines of debts, deficits and unemployment inform us that the native Canadian situation is becoming intolerable. Such is the disjointed anatomy of the so-called North Atlantic community, which owns most of the world's productive apparatus, conducts most of its trade and enjoys its highest living standards.

Apart from the Six of Europe, all the Western nations find themselves standing still, or going backward, while the Communist system grows stupendously because it is a community—brutal, aggressive, unified by force but. in great decisions, unified just the same.

In the common dangers thus arising the danger to Canada is unique. We built our whole economic system from the start to fit a world economy of many nations trading abundantly together. and now requiring more and more trade every year as their productivity and labor force increase.

Today, as the Atlantic region is split by the European trade blocs of the Sixes and Sevens, as the Communist world already forms another bloc, as another is forming in Latin America and yet others are projected elsewhere, we find that our Canadian system is not designed to fit into any one of them.

There is one obvious way out for us — obvious, perhaps economically logical but, I would think, lethal.

We could form a bilateral North American trade bloc, common market, free-trade area or whatever we cared to call it, with the United States, if it would take us in. Once we had abandoned our hedges outside America and thus committed our whole business system to our huge neighbor, our nationality would follow, soon or late. And in this sellout we might not even buy prosperity.

On the other hand, we cannot commit our economy to Europe and overseas markets by discriminating against our incomparably largest market, the United States, at the cost of losing it. or even a large part of it. Just as surely, we cannot hive our economy within the Canadian market, which is far too small to absorb its production.

Ihe way out for us will not be found in any of these choices, for all of them are blind alleys. We can escape only by a bold advance into a larger transAtlantic market and a stronger community, economic and political. If we are wise, we will expand the successful tariff-reducing experiment of the European Common Market to include all the North Atlantic nations and any others that care to join.

This, I am convinced, is what we shall all have to do in the end anyway but we can avoid a deal of trouble in the meantime if we make a clear deCONTINUED ON PAGE 32


For the sake of argument continued from page 6

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Communism, by a sublime irony, is teaching us our own doctrine

of fruitful competition

cisión now without waiting for a crisis to bring us to our senses.

Now is the right moment. A new administration is taking power in Washington. one known to be sympathetic to this bold approach. Not since the early days of Franklin D. Roosevelt have the chances been so good that a strong initiative from Canada would get a friendly rejoinder. Indeed, the initiative may come from the United States — but if it does, will it get a friendly rejoinder in Ottawa?

Wherever I have discussed such a project with responsible statesmen and officials—in London, Bonn, Washington and Ottawa—it has been accepted as a remote ideal but certain “insuperable” objections have been raised against it. All of them, I believe, are false or, if not false, are at any rate not insuperable.

First, it is said that when Britain and its partners of the European free-trade area (the Seven) refuse even to join the Six of the Common Market, what hope is there for any larger grouping?

Actually, as everyone in London realizes, the Seven will be compelled later on to make a deal of some sort with the Six, despite the Canadian government’s haunting fear of the resulting effects on our overseas exports. Britain simply must have full access to the Common Market, the fastest-growing trade grouping in the world. The only questions are: When will this junction occur, on what terms, and with what damage to Canada?

Most British statesmen are naturally reticent about a delicate problem touching the overseas Commonwealth nations so vitally. They foresee several years of quiet bargaining on terms before the deal is completed.

Ludwig Erhard, a blunter man, told me that an accommodation between the Six and the Seven was an "absolute necessity.” He agreed that Britain could enter the Common Market without surrendering its preferential tariff system in favor of the overseas Commonwealth nations like Canada. He also proposed, as a second stage, the creation of a general North Atlantic market that would

include Canada and the United States.

All the immense technical difficulties before this scheme, he said, could be negotiated. There was lacking only “the political will.” And no one knows better than Erhard that even the opulent Six cannot long continue in opulence unless they find more elbow room and outlet for their bursting energies in much wider trading arrangements.

The second argument for doing nothing is that any reduction in the tariffs of the North Atlantic nations would embarrass some of their less efficient industries. Of course it would. The same thing happened to some of the industries of the Six when the tariffs between them started to fall.

But the proof of this bitter pudding was in the eating. Compelled to compete as never before, to modernize their methods, increase their productivity, concentrate on their specialties and sell in a broadened market of nearly two hun-

dred million people, the industries of the Six were soon so prosperous that British and American capitalists poured investments into them and unemployment virtually disappeared.

All this happened because the Six began to produce the goods that each was best fitted to produce. Together they are reaping the advantages of specialization, efficiency, lower costs and greater collective wealth.

It will take some ten years to eliminate the remaining internal tariffs of the Six but already we see here not a textbook theory in the value of freer trade but a practical proof. The theory has become a working fact among one group of prosperous nations but the group is too small for the purposes of the North Atlantic. Standing alone, it can damage the whole community by using a common external tariff to discriminate against all outsiders, Canada in particular, as Donald Fleming, our minister of finance, says.

The third argument for inaction is that a North Atlantic free-trade area, by definition, would discriminate in its commerce against the rest of the world, would gravely injure such non-members as India, Australia, Japan, Latin America and many others, would play havoc with the alliance of the free world and probably destroy it. As thus stated, the argument is valid, for the states of the North Atlantic assuredly cannot afford to undermine their distant friends. But this is a mis-statement of the whole proposition.

To begin with, no one is proposing an economic system precisely like that of the European Common Market. You cannot extend across the Atlantic the exact methods used among the adjoining and interdependent Six. Just as within the Six themselves the theory of free trade is cut through with many exceptions and contradictions (in the field of agriculture, for instance), so there can be no strict logic or consistency in a larger trade area. The logic choppers would have wrecked the Common Market at the start.

For similar reasons the North Atlantic nations cannot suddenly eliminate

their tariffs. But they can agree to reduce them, by gradual stages, as the Six are doing, and give their industries plenty of time to readjust themselves to new conditions and wider opportunities. Besides, the Six have found that it is not so much the actual tariff reduction already made as the promise of much freer trade in the future that has forced the rationalization of industry, produced new wealth and attracted foreign investors.

If the North Atlantic region agreed to adopt the general principles of the Six it would vary them to suit its different needs. Also, it must open its club of gradually falling tariffs to any outsiders who care to accept the rules. Those rules would have to be flexible, pragmatic and enforced with reasonable latitude, as they now are within the Six. Any number of practical compromises and workable arrangements can be made if, as Erhard says, we have the will to make them.

It doesn’t matter much how we escape from the jungle of technicalities, what organization we use or whether we can see all the road ahead. For the problem is not basically technical at all, not a dispute of methods, not the obsolete classic contest of Free Trade versus Protection, and certainly not the partisan charade of slogans that usually serves for debate in the Western parliaments.

Instead, we face here mainly a psychological test, a crisis of will The sovereign question, as Erhard toid me, is whether the North Atlantic peoples have the will to rationalize their business, to increase their trade, to direct their investments to the right places, to take care of the underdeveloped nations overseas and, by coherence in place of chaos, to make their total economy grow again.

Nothing less can meet the challenge of communism, which, by a sublime irony, is beginning—and only beginning—to teach us our own doctrine of fruitful competition.

We can grow in wealth, power and freedom if the North Atlantic community is built into something more than a name and a politician’s platitude. Not otherwise, if