ANGLO-CANADIAN TRADE (Hansard, 28 February 1963)

§ Mr. William Shepherd (Cheadle)

I want this evening to draw the attention of the House, I hope of the country and even more of the Canadian Government, to the very serious situation of Anglo-Canadian trade. I should be exaggerating if I said that the Anglo-Canadian trade problem was the biggest trade problem facing this country. Some time ago, we had considerable problems balancing our account with the United States of America, and I have no doubt that that trade will be subject to a good deal of fluctuation over the years, but we have managed, by virtue of some energy and ingenuity and as a consequence of some substantial reductions in United States tariffs, to get near to balancing our account and on occasions to having a favourable balance.

This contrasts very sharply with our Canadian experience. I want to make it clear that I am not in any way criticising the Canadians, for this is a problem which we should and must solve together. The record of Anglo-Canadian trade over the past ten years is devastating from the British point of view. I asked my hon. Friend the Minister of 1586 State, Board of Trade, a Question about this the other day and he gave me an Answer which was devastatingly uninformative. However, over the past ten years this country's adverse balance of trade with Canada has been about £1,410 million, an average of about £140 million a year, which the House will readily agree to be a massive burden for us to bear.

It would be quite agreeable for us to shoulder this burden had we not other very great burdens. If one looks at the British balance of payments one sees, for example, that we have to provide for help and assistance and military effort overseas about £350 million net per annum, after accounting for receipts which we receive from one or two sources. To balance this adverse balance of trade with Canada, we would have to be able to obtain a £500 million favourable balance with other nations, and that is clearly not a practical proposition. We have not succeeded in balancing our account, and with these burdens I do not think we shall do so.

What is the situation which faces the average British trader seeking to improve his trade with Canada? It is by no means easy. There are difficulties connected with Canadian trade which are probably unequalled in respect of trade in any other part of the world, and I repeat that these are not conditions which are the making of the Canadian Government, which, I know, wishes to help us in our trade as much as possible. The first problem which we have to face is that of mastering the distances as compared with the proximity of the Americans to Canada. We have to try to sell to a very large country with a relatively small population. The costs of selling by a British manufacturer in Canada are inordinately high, and many British firms have lost a great deal of money in a vain effort to establish themselves in the Canadian market.

The main difficulty, of course, is the vastness of the immediate American market. We see this when we look at the figures. At the moment the American market supplies about 70 per cent. of the total Canadian imports. We are supplying only about 9 per cent., and I am sorry that in the last few years our percentage has been declining. It is against this background of what have been substantial imports in the last year or so, 1587 increasing imports and declining exports, that we look at this situation of Canadian trade as being very serious indeed.

I think there are some things which hamper British exports to Canada to which the Canadian Government might well direct their attention. The first is the method by which the Customs determine the value of goods for customs purposes. As my hon. Friend knows, there is a fair market value assessed according to the value in the United Kingdom and it so happens that the Canadian Government, not unnaturally, are able to establish with greater ease what is the fair market value in the United Kingdom for a given line of goods than it is to establish fair market value in, say, Italy, or France, or Germany, or even in the United States where fluctuating values are often to be found between one State and another. So I think we can say without doubt that, on the whole, we in England get, not intentionally but by virtue of certain historical relationships with Canada, rather the worst of the deal when it comes to determining the value for customs purposes.

This is made worse by the fact that any difference in the value between the fair market value established in the United Kingdom and the value invoiced in Canada can bring into operation the antidumping duty automatically, and so the poor British exporter trying to jump the surcharge, or the high tariff, or the American competition, may find himself facing a higher duty because he has tried to cut his price to get into the market. This is one aspect about which my hon. Friend might talk to the Canadian Government and try to make the path much easier for the British exporter.

Then there is, of course, the question of the general level of tariffs which Canada raises against all exports, including our own. We all know that the Canadian economy is not in its most buoyant phase, and the Canadian Government have real problems of their own which no one can possibly deny. We also realise that having to compete with the very powerfully entrenched industries in the United States, the Canadian Government must defend their own native industries against the competition which could come in, particularly from across the border.

1588 But, having said that, there is still room for the view that some encouragement must be found in some way for British goods to flow more freely over the Canadian frontiers than they do at the present time. If some solution is not found for this problem we may well face a situation where we should, most regrettably, have to limit the amount of goods which come into this country from Canada. If our international trade situation deteriorates any further, we might find ourselves in the position where we will be incapable of providing the necessary dollars to pay for Canadian imports.

We must reflect on the fact that but for this deficit of £1,400 million in Canadian trade over the last ten years our currency reserves would have stood at over twice their present level. I repeat that if this loss of about £150 million a year, largely in dollars, continues, we may reach a situation in which we are unable to provide the necessary gold and dollars to pay for these supplies from Canada.

It is therefore necessary that the British and Canadian Governments get together and try seriously to solve the problem. It could be solved by differential tariffs, but I am sure that my hon. Friend will tell me that this is not practical under present conditions. I will accept that. But some method of improving the relationship between Canadian and Britsih trade is urgently necessary if the two countries are to get together to develop to their mutual advantage.

Nobody in England has any hard feelings towards our friends in Canada; indeed, we know that they welcome our goods and, within certain limitations, do all they can to help us. But the loss of as much as £1,400 million in dollars over ten years is much more than this country can afford. For the future, there must be an alternative trading arrangement which will provide some sort of parity between British and Canadian trade.

International trade is the exchange of goods. As things are arranged between Canada and ourselves at the moment, this exchange is not a fair and equitable one. I hope that my hon. Friend will take the opportunity of visiting Canada at the earliest possible moment, to express to our Canadian friends our concern at 1589 the situation and to endeavour to do something to put Anglo-Canadian trade on a more satisfactory basis.

§ The Minister of State, Board of Trade (Mr. Alan Green)

I congratulate my hon. Friend the Member for Cheadle (Mr. Shepherd) on selecting this subject. He is quite right to say that this is, within a difficult trading world, a particularly difficult trading problem. I am not going to try to fool him by pretending that I have a perfect and simple solution to offer him tonight. But I hope that I may reassure him to this extent; we are concerned at the problem and are seeking, in collaboration with Canada, ways of overcoming it. From what my hon. Friend has said it is clear that he knows that the pattern of our trade with Canada is very intricate. It is not a simple bilateral matter. It is particularly for this reason, as he said, that the difficulties belong as much to Canada as to us.

The first point that I must make is that the crude adverse balance is not as great as it looks, because exports are valued f.o.b. and imports c.i.f., My hon. Friend knows this, but perhaps others do not always know it. Much of the difference in these costs, f.o.b. and c.i.f., is expressed in sterling earnings. In addition, we have a surplus of invisibles with Canada. It is notoriously difficult to assess with accuracy the value of these two elements—the invisibles and the difference between f.o.b. and c.i.f.—and to attribute precise values to each separate country with which we trade. This is because services such as insurance and freight are generally of a comprehensive kind which cover several countries simultaneously and are not tied to one point of destination, as is a direct export.

I know from what my hon. Friend says that he appreciates this fact, but I hope that he will not mind my making this point in the interests of those who may not do so. The second point that we must bear in mind, if we are to go along with the Canadians in finding, a solution which is in our joint interests, is the changing nature of the Canadian economy. No country, including the United States and Britain, is a fully-developed country. The point to be borne in mind by all our people and by all Canadians is that Canada is a particular example of a developing nation. It is 1590 inevitable, therefore, that the pattern of Canadian imports and exports must be subject to change. Exactly the same considerations apply to our own economy. On both sides of the Atlantic changes in the economic pattern are inevitable, and I personally welcome them. If there are not these changes, we have a static economy, better referred to, I think, on occasions by right hon. and hon. Members opposite as a stagnant economy. Therefore, I welcome the fact that these changes are there.

All I want is for both sides of the Anglo-Canadian equation to accept change and to benefit from it. It is unlikely in the extreme that the two sets of changes will dovetail neatly into one another so that we can, even in any one decade, achieve a neat bilateral trading balance, and I am sure that my hon. Friend is not after that. But I agree with him that a truly chronic and large-scale imbalance in trade creates difficulties as fundamental for Canada as they are for us. This is the first thing to be agreed between ourselves and any Canadian Government. I believe that successive Canadian Governments have been very much aware of this. They have undoubtedly wished to see, in Canada's own continuing interest, an increase in our exports to them.

The facts of our particular trading equation are as follows: between 1958 and 1961 an increase was being achieved. Our direct exports to Canada—not our exports of invisibles and so on—rose from £188.1 million to £221.8 million. In the same period our imports from Canada rose by even more, from £308.6 million to £349.4 million. This, as I indicated earlier, is not so adverse as the crude figures suggest. One could say that in that period of time, from 1958 to 1961, there was some healthy two-way stretch in the fabric of Britain-Canadian trade.

But 1962 was a wholly different story. In that year, one of economic crisis for Canada, our imports remained about the same—£349.3 million—but our direct exports went sharply down to £187.9 million. I think it is this fact that has drawn my hon. Friend's attention to the general problem.

It was the intention of the Canadian Government that their imports overall should be reduced in 1962 because of 1591 their balance of payments problems while their exports were at least maintained. The combination of devaluation of the Canadian dollar with the imposition of surcharges was designed to produce this result, and it did for Canada's own peculiar, particular national reasons. Because of the nature of our trade with Canada the weight of the surcharges fell especially heavily on us. The Canadians assured us that these surcharges would be purely temporary and, as my hon. Friend will know, we have energetically sought their removal, and in addition the Canadians have gone quite a long way towards removing them. I hope very much that the rest will go very quickly. The Canadians, in other words, were faced with a particular and sharp variant of our own general continuing problem over balance of payments. This really was the situation. They took their own local action to correct their particular immediate problem, and we, who have the continuing problem, were, so to speak, the real recipients of the effects of Canada's own local action.

Having said that, I would just like to say a word, if I may be permitted to do so, to our own exporters, because they have a rôle to play in this, too. Canada in the true sense of the word is a developing country, both in the range and in the volume of the things she needs to import if she is to grow year by year. She is, thus, a market of present and future interest which we must cultivate. But she is also a very difficult market. The Canadian market is sophisticated and, therefore, exacting. There are, as my hon. Friend has already said, huge competitive supplies available immediately across her border with the U.S.A., and she has, in addition, the inevitable problems associated with a relatively small population in a relatively huge area. All these factors 1592 make her a very hard market—and I have some personal experience of trading in the Canadian market—but in wealth per head of the population, she is a rich market and, therefore, one worth entering.

My conclusion is that only the highest quality of goods, backed by tip-top service, will do in Canada. We in this country can, and generally do, provide that combination of quality and service. Also, I believe that it is a real Canadian interest, perceived by many Canadians, to buy that combination from us to an extent greater than she has been doing. I think that this is truly a Canadian interest, but it is up to us to provide that worth-while combination—worthwhile for the Canadians to buy.

So I suggest that what is now required is two things—final removal of the extra protective barriers erected by Canada to fend off her crisis of last year, accompanied by a renewed thrust from British exporters of goods and services to the Canadian market. This is the sort of thing that I hope to put simultaneously to the Canadian Government and to our own exporters, because this is a simultaneous operation and somebody has to do it, and it happens to fall to me at this particular moment in time to try to do this.

Finally, I should like to assure my hon. Friend that in the near future I very much hope to go to Canada. I believe that if I do go, even I will be welcomed in going there. My aim and object certainly is to go there as soon as I possibly can in an effort to achieve these two things—to encourage British exporters and to encourage the Canadians to accept British products.