CANADA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A001700050001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 75
• Document Creation Date: December 27, 2016
• Document Release Date: February 14, 2013
• Sequence Number: 1
• Publication Date: May 5, 1950
• Content Type: REPORT

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FOR THE DEPUTY DIRECTOR
tlEICee-REIra4 OF
CENTRAL INTELLIGENCE
CANADA
SR-49
Published 5 May 1950
opt_
CENTRAL INTELLIGENCE AGENCY
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STAT
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WARNING
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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SR-49
CANADA
TABLE OF CONTENTS
SUMMARY
CHAPTER I?POLITICAL SITUATION
1. GENESIS OF THE PRESENT POLITICAL SYSTEM
2. PRESENT GOVERNMENTAL STRUCTURE
a. Constitution
b. The Executive
c. Legislature .
d. Judiciary .
e. Provincial Government
f. Government of the Territories
g. Civil Service
h. Civil Rights
3. POLITICAL PARTIES AND CURRENT ISSUES
a. Liberal Party
b. Progressive Conservative Party .
c. Cooperative. Commonwealth Federation Party
d. Social Credit Party .
e. Labor Progressive Party .
f. Union Nationale Party of Quebec Province
4. OTHER INFLUENTIAL GROUPS .
a. Labor Organizations in Canada
b. French-Canadians
5. STABILITY OF THE PRESENT ADMINISTRATION
CHAPTER II?ECONOMIC SITUATION
1. GENERAL CHARACTERISTICS OF THE ECONOMY
2. AGRICULTURE, FORESTRY, AND FISHERIES
a. Agriculture .
b. Forestry
c. Fisheries
3. FUELS AND POWER
a. Electric Power
b. Coal .
c. Petroleum and Natural Gas
4. MINING AND MINERAL INDUSTRIES
a. Iron Ore
b. Steel .
c. Non-Ferrous Metals .
d. Non-metallic Minerals?Asbestos
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5. MANUFACTURING 29
a. Food Processing Industries . 29
b. Textiles - . 30
c. Chemicals and Allied Products . 30
d. Machinery and Related Products 31
e. Other Industries 32
6. FINANCE . 32
a. Currency . 32
b. Central Banking 33
c. Commercial Banking 33
d. Other Banks 33
e. Government Finance 33
7. FOREIGN TRADE AND FINANCE 34
a. Foreign Trade . 34
International Finance 36
8. ECONOMIC OUTLOOK . 37
CHAPTER III?FOREIGN AFFAIRS
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1. GENESIS OF PRESENT FOREIGN POLICY 39
2. FOREIGN POLICY SINCE WORLD WAR II 40
3. CANADIAN-US RELATIONS 41
4. CANADIAN RELATIONS WITH THE USSR 42
5. CANADA AND THE FAR EAST . 42
6. CANADA AND THE PAN AMERICAN UNION 43
CHAPTER IV?MILITARY SITUATION
1. GENESIS OF PRESENT MILITARY POLICIES 45
2. WAR POTENTIAL 46
a. Manpower . 46
b. Natural Resources and Industry 46
c. Science 47
d. Finance 48
3. BASIC POLICIES AND PRACTICES 49
a. Mission of the Armed Forces 49
b. Favored Arms and Techniques 49
c. General Military Organization 49
d. Training . 50
e. Officers . 51
f. Mobilization Plans 52
4. STRENGTH AND DISPOSITION OF THE ARMED FORCES 52
a. Army Strength . 52
b. Navy Strength . 52
c. Air Force Strength . 52
d. Disposition and Structure of Forces 52
e. Quasi-Military Organizations 54
5. ESTIMATE OF MILITARY CAPABILITY 54 ?
a. Adequacy of Present Forces 54
b. Maximum Military Capacity 54
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CHAPTER V?STRATEGIC FACTORS AFFECTING US SECURITY . 55
CHAPTER VI?PROBABLE FUTURE DEVELOPMENTS AFFECTING US SECURITY . 57
APPENDIXES
APPENDIX A?Terrain and Climate . 59
APPENDIX B?The Population 65
APPENDIX C?Chronology 67
APPENDIX D?Transportation and Communications 69
APPENDIX E?Biographical Data 73
MAPS (in preparation)
Canada
Canada: Agriculture, Forests and Mines, Waterpower
Canada: Climate
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SUMMARY
For obvious reasons of geography the se-
curity of Canada is of vital concern to the
United States, and the stability of Canadian
political, economic, and social life is of the
highest importance. Canada has long been a
friend, and is now also an ally, closely asso-
ciated with the US in trade, finance, defense,
and general political outlook. Any substan-
tial change for the worse in this relationship
would pose most serious problems to the US
Government and people. No indications of
such change exist, however, and there is at
present no reason to expect any lessening of
Canadian stability, any weakening of demo-
cratic convictions, or any substantial diminu-
tion of Canadian regard for the US.
The strategic importance of Canada to the
US is due not only to its proximity and to the
extreme dangers which would exist if it were
hostile, but also to its location on US commu-
nications to Alaska and to its advantages as
a site for air and naval bases. In World War
II the principal anti-submarine bases for the
Western Atlantic were in Newfoundland, and
that island is still an essential way-station on
air routes to Europe. Transpolar aviation
and further developments in arctic warfare
will probably in the near future lend added
significance to other Canadian bases and in-
crease the importance of Canada to US se-
curity.
Canada is a constitutional monarchy; its
King, George VI, is represented in Ottawa by
a Governor-General. Like the United States,
Canada is a federation, but the ten constitu-
ent provinces have somewhat fewer independ-
ent powers than do the states of the US. The
federal government, located in Ottawa, is con-
ducted mainly in accordance with British par-
liamentary and administrative practices. At
present it is in the hands of the Liberal Party,
which won a very large majority of seats at
the election held in June 1949. There are no
current political controversies of serious con-
sequence; both government and Opposition
are moderate in their attitudes. Communist
and other subversive influences are negligible.
A prime requirement in Canadian domestic
affairs is to maintain a balanced and har-
monious relationship between the English-
speaking part of the population and the
French-speaking minority, which comprises
30 percent of the total and is largely concen-
trated in the province of Quebec. French-
Canadians as a whole are conservative, paci-
fistic, isolationist, and tenacious of their na-
tional characteristics and traditions. They
refuse to accept conscription, and they are un-
enthusiastic about a dynamic foreign policy.
They are wary of the cultural impact of the
United States, though not actively unfriendly;
and while anti-imperialist, they have in the
past favored limited constitutional ties with
Great Britain because they have felt that Lon-
don would prevent their English-speaking
neighbors, both in Canada and across the bor-
der, from undue interference with their reli-
gion and customs. The French-Canadians
could and would make serious trouble for any
Canadian government which should disregard
their peculiar interests, but the problem is
well understood in Ottawa and it is extremely
unlikely that any government would risk such
trouble.
The country's rich endowment in natural
resources makes it one of the most important
producers in the world of strategic and other
raw materials. Canada's grain and other
food products are of importance chiefly to
Western Europe and itself; but a number of
its forest products and non-ferrous metals
have for years represented the principal US
sources of supply for those commodities.
More recent developments of strategic impor-
Note: The intelligence organizations of the Departments of State, Army, Navy, and the
Air Force have concurred in this report. It contains information available to CIA as
of 1 October 1949 except where otherwise noted.
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tance to the US are the mining of uranium
and the exploitation of high-grade iron ore
reserves which will be coming into production
there as the US's own high-grade reserves run
out. Canada's industrial establishment has
been growing rapidly, particularly since the
outbreak of World War II, and hence par-
ticularly along lines of strategic significance.
Because of this fact and also because of the
large and growing US investment in Canadian
manufacturing, Canada's industrial establish-
ment may strategically be considered as sup-
plemental to that of the US, adding signifi-
cantly to the American defense potential.
Canada's foreign trade, per capita, is the
largest in the world; the typical prewar pat-
tern of this trade consisted in selling goods to
Europe (especially to the UK) and purchasing
from the US. Inconvertibility of European
currencies since the war has rendered this
pattern increasingly difficult to follow; only
large Canadian and US loans to Britain, and
offshore purchases under ECA, have made it
possible at all. Hence Canada has tended to
run short of US dollars, and has had to intro-
duce import restrictions. The devaluation of
European currencies has made it even more
difficult for Europeans to afford purchases in
Canada; Canada's own 10 percent devaluation
does little to ease the situation. It is likely
that a considerable readjustment of Canadian
foreign trade will be required to meet the
world conditions of coming decades; but a
country so sparsely populated and so richly
endowed cannot be expected to suffer eco-
nomic difficulties comparable with those of
older countries.
In foreign affairs Canada bears a special
relation to the UK by reason of its member-
ship in the Commonwealth, and to the US be-
cause of the manifold influences of proximity
and of similarity of outlook. Membership in
the Commonwealth does not mean any les-
sening of Canada's freedom of action, nor has
proximity to the US produced any significant
Canadian desire to amalgamate with its
American neighbor. Because of its special re-
lationship with the two countries, Canada is
to some degree a mediating and interpreting
agent between the US and the UK. In inter-
national controversies Canada is a dependable
associate of the Western Powers. It was one
of the principal initiators of the North Atlan-
tic Treaty.
The military policy of Canada is to main-
tain small forces of high quality. French-
Canadian attitudes, especially the strong op-
position to conscription, would make impos-
sible any extensive military establishment in
time of peace. In war Canadian forces have
always proved to be of very high quality.
Though founded on British traditions and or-
ganized primarily along British lines, the Ca-
nadian forces work increasingly in close co-
operation with those of the US. The indefi-
nite continuation of this cooperation may be
expected because of general recognition that
the security of both countries depends on it.
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CHAPTER I
POLITICAL SITUATION
The Dominion of Canada is a stable and
growing democracy with a cultural and polit-
ical heritage paralleling that of the United
States. For more than a century and a quar-
ter no serious menace of war has threatened
the Canadian-American border. As decades
accumulated during the nineteenth century
free from threats of invasion on either side,
confidence and friendship, and finally mutual
need in defense in the twentieth century, came
to characterize the relations between Canada
and the US. Yet the transition of each to
independent nationhood followed a different
pattern, the one being of a revolutionary char-
acter and the other evolutionary. While for
the US independence came after a sharp
struggle of a few years' duration, for Canada
sovereign independence and equality with
Great Britain, the mother country, took a cen-
tury and a half to accomplish, culminating in
the Statute of Westminster in 1931.
Canada is today not only a North American
nation, but also a member of the British Com-
monwealth, and thus linked spiritually and
culturally with an association whose peaceful
aims and heritage of democratic institutions
coincide with those of the United States.
1. Genesis of the Present Political System.
While approximately one-half of Canada's
present population is of British stock and only
about a third of French, the early history of
Canada until the Treaty of Paris in 1763 was
that of a French colony. This fact is of great
importance since it has left modern Canada
with an ethnological minority problem, sig-
nificant in her political development. If
union and harmony are to prevail within the
Canadian Confederation, the potent force of
French-Canadianism must always be recog-
nized.
The white man's first contact with Canada
goes back nearly a thousand years to the time
when Leif Ericsson, a Norseman, is reputed to
have led an expedition to the northeastern
shores of the North American continent. But
the first effective contacts date from John
Cabot's discovery and claim for England of
Nova Scotia and Newfoundland in 1497-98, fol-
lowed by Jacques Cartier's expedition for the
French up the St. Lawrence River in the
1530's. Neither of these ventures left perma-
nent results. It was not until the early sev-
enteenth century that settlement and trade
began as the result of the explorations of an-
other Frenchman, Samuel de Champlain, who
founded Quebec in 1608. From that time the
French foothold in North America was estab-
lished, and during the seventeenth and eight-
eenth centuries the French King extended
his dominion over the St. Lawrence region
and down the Mississippi valley, pinning the
English colonists in North America between
the Appalachian mountains and the seacoast.
The beginning of British acquisition of Can-
ada was marked when, as a by-product of the
Anglo-French European wars, the French ac-
knowledged British claims to Hudson Bay,
Newfoundland, and Nova Scotia under the
terms of the Treaty of Utrecht in 1713.
The radical difference in character and or-
ganization that existed between the French
and British settlements in North America
still exists between the French-Canadian and
English North American 'cultures today. The
French settlers came out at the instigation of
their absolute government, and their affairs
to the last moment of their colonial history ?
were regulated by officials of the King of
France under a paternalistic form of govern-
ment. British settlers, on the other hand, mi-
grated to the American colonies largely be-
cause of religious, economic, and political con-
ditions at home, and, carrying with them his-
toric ideas of liberty, developed a strong self-
reliance and interest in self-government. For
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this reason when France finally capitulated to
the British in 1763 at the end of the Seven
Years War, the French colonists accepted rule
from London calmly once they were assured
by the Quebec Act of 1774 that their language,
Catholic religion, and civil law would be re-
spected. In essence, the French-Canadians
themselves had not been defeated, but rather
the army and fleet of royalist France. Al-
though the English settlers made insistent de-
mands for the establishment of English law
in the newly acquired French territory, the
British authorities in Canada and London
held out strongly against these demands, the
granting of which they saw would destroy any
possible fostered loyalty of the French-Cana-
dians to the British Crown. Because of the
increasing numbers of English-speaking set-
tlers * and the growth of their political
strength, there developed among the French-
Canadians a strong distrust of their fellow
colonists, and a reliance for protection on the
London authorities?attitudes which persisted
in a reluctance, until the late 1940's, to see the
power of amending the British North America
Act transferred from Westminster to Ottawa.
The second phase in the history of Canada
was a period of evolution toward self-govern-
ment culminating in Confederation under the
British North America Act of 1867. This de-
velopment was not easily accomplished; it was
accompanied by strong English-French racial
frictions, internal rebellions against privilege,
and a struggle of English-Canadian reform-
ers for complete responsible government with
an adaptation of the English Cabinet system.
From 1791 to 1840 the two great divisions of
Canada (excluding the Maritime Provinces) ,
called Upper Canada (mostly English and to-
day Ontario) and Lower Canada (French in
* At the time of the French surrender in 1763
there were estimated to be 60,000 French of Catho-
lic Norman stock in Canada. The real start of
English immigration into British North America
came with the American Revolution. In 1766 the
English in what is now Ontario and Quebec num-
bered only 600 and in 1774 they were estimated at
about 2,000 or 3,000. During the Revolutionary War
and following, refugees and Loyalists migrated to
Canada from the US to the total number of about
35,000 by 1785. These included also Dutch, Scots,
and Germans.
population and now Quebec province) had
separate representative legislatures under the
British Parliament's Constitutional Act of
1791, which gave a measure of self-govern-
ment though limited by the control of the
Governor's Councils. This arrangement
proved to be an inadequate half-way measure,
and after rebellion in 1837 the necessity of a
revised constitutional system for Canada was
recognized. In 1838 Lord Durham, a bril-
liant English statesman, was sent out as gov-
ernor-in-chief of the Canadas, Nova Scotia,
New Brunswick, and Prince Edward Island,
and was directed to prepare a report on the
situation. Among his recommendations were
(a) the union of the two provinces of Upper
and Lower Canada; (b) the ultimate union
of all of British North America; and (c) the
granting of responsible government. In 1840
the British Parliament, in pursuance of Lord
Durham's findings, passed the Act of Union,
forming the two provinces into a govern-
mental unit called "Canada" with a single
legislature in which each province had equal
representation.
While Canada thus won a redress of griev-
ances and the right to run its own affairs in
matters of colonial concern, with Britain re-
taining control of public lands, the constitu-
tion, foreign commerce and foreign relations,
the union of the two provinces gave rise to
endless trouble and political instability for
the next quarter of a century. There were
jealousies and political deadlocks. The
French were suspicious of union; they used
their power in the Assembly to protect their
way of life, maintaining that their inheri-
tance was endangered by the desire of the
English-speaking commercial element for
rapid exploitation of all resources. The Eng-
lish element regarded the French-Canadians
as obstructionist and unprogressive.
By the end of the 1850's many forces besides
those of politics and of race were impelling
the provinces of Canada toward a new system
of government which should meet the needs
of the times. Responsible provincial govern-
ment having been won, the next stage was the
welding together of a nation. With the mid-
century came a period of rapidly expanding
industrialism, westward expansion, and the
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building of railroads. British North America
felt the influence of European movements of
nationalism; traders and investors, driven by
economic considerations, sought wider mar-
kets and a broader field for their activities with
government protection and aid. Continental
expansion was furthered by transportation
and discoveries of gold in the West. In ad-
dition, the British North American provinces
were stimulated toward a wider unity by
mixed admiration and jealousy of the United
States. There was also some fear of absorp-
tion by the United 'States, an expansionist
southern neighbor with a formidable military
potential. The US also offered an example
of successful federation and of a thriving free
trade area within its wide borders. Further-
more, it was becoming plain that if the colo-
nies hoped to retain their rights against the
US in fisheries and other matters, and secure
their development, they must cease to depend
on Great Britain, which tended to give way
to US pressures, and find their own economic
and political strength. Public opinion stoutly
opposed annexation to the US, and Confed-
eration appeared to be the best possible solu-
tion to the expanding needs of the country
despite the racial cleavages and sharp ten-
sions within Canada.
Confederation therefore sprang from many
circumstances besides English-French dead-
locks within "Canada's" one legislature under
Union. In 1864 the opportunity for change
came when the isolated Maritime Provinces of
Nova Scotia, New Brunswick, and Prince Ed-
ward Island were considering a federal union.
''Canada" suggested a wider plan to include
itself, with the result that in the same year a
conference was held at Quebec where a plan
of Confederation was outlined. This subse-
quently, with slight modifications, was passed
by the Imperial Parliament in London as the
British North America Act of 1867, and is the
basic written constitution of Canada today.
Initially the Confederation was made up of
four provinces?Upper and Lower Canada,
New Brunswick, and Nova Scotia. The third
maritime province, Prince Edward Island, did
not join until 1873. The West had had no
part in the original negotiations, but by 1869
terms had been made with the Hudson Bay
Company to bring in its great territory
stretching to the Rocky Mountains. Mani-
toba entered the Confederation in 1870, while
the provinces of Alberta and Saskatchewan
were not established until 1905. In 1871 the
Pacific coast province of British Columbia
joined the Confederation; and in 1878 the
British Government formally transferred to
Canada all of British North America save
Newfoundland, which remained outside the
Confederation until 1949. Canada now com-
prises ten provinces, the Northwest Territo-
ries, and the Yukon.
The political evolution of Canadian democ-
racy since Confederation in 1867 has followed
the British pattern of parliamentary govern-
ment based on a two-party system, although
the depression of the 1930's led to the forma-
tion of several lesser parties. Parallel with
the internal political evolution has been grad-
ual development from a position of depend-
ence on Britain in foreign policy to one of in-
dependence in all affairs and equal status
within the Commonwealth of Nations, as
enunciated in the Statute of Westminster of
1931. Thus by a process of evolution and not
revolution Canada attained full nationhood,
and today has a dual position as a member
of the British Commonwealth of Nations and
a separate personality in the world of states.
2. Present Governmental Structure.
a. The Constitution.
The federal structure of the Canadian Gov-
ernment was designed to meet the problems
imposed by the ethnic and geographic con-
siderations of a country larger in area than
the United States and Alaska combined, and
composed of two distinct groups?the English
and French, with widely differing cultural
heritages. The Canadian constitution con-
sists of two parts: one being the British North
America Act of 1867 which lays down the di-
vision of powers between the federal and pro-
vincial governments, and the other including
procedures of parliamentary government,
much of English common law, Magna Carta,
the Bill of Rights, conventions drawn up at
Imperial Conferences, and the 1931 Statute
of Westminster. The framers of the British
North America Act copied the federal idea
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from the US, but combined this concept with
the practice of responsible parliamentary gov-
ernment inherited from Great Britain, which
was established within the framework of fed-
eralism.
Under the British North America Act the
Dominion Government exercises authority in
matters which concern the nation as a whole,
such as foreign policy, defense, regulation of
trade and commerce, and currency. The
provinces, on the other hand, have jurisdic-
tion in matters of local concern; their powers
are enumerated in the Act under sixteen
classes. Residual power rests with the Domin-
ion Government and not as in the US with the
State governments, since it was the intention
of the Fathers of Confederation, who had
witnessed the states rights struggle in the US,
to build up the authority of the Dominion
Government. They did not want the prov-
inces to have constitutional powers any
greater than those necessary for purely local
matters and for preserving the special institu-
tions of Quebec. In accord with this theory
the Dominion Government retains the right
of veto over all new provincial legislation
through the powers of the Lieutenant-Gover-
nors of the provinces, who can refuse assent
to provincial bills or reserve them for the de-
cision of the Governor General. The Domin-
ion Government also has the right to disallow
or set aside any provincial law within a year
of its passage. Since the end of the nine-
teenth century, however, the use of this power
has been rare.
The British North America Act contained
no special provisions for its amendment.
Since 1871, therefore, when a constitutional
alteration has been needed it has been the
practice to proceed by an address from the
Canadian Senate and House of Commons to
the King, requesting passage through the
British Parliament of an amending act. Ad-
vocates of provincial autonomy in Canada, es-
pecially French-Canadians in Quebec, have
until recently opposed a change in this
method, fearing an expansion of the federal
power in Ottawa. Since World War II, how-
ever, this opposition has decreased, and in the
autumn of 1949 legislation was passed by the
British Parliament giving Canada power to
amend the British North America Act in
purely federal matters without reference to
the British Parliament. Canadians are pres-
ently working out a formula for Canadian
amendment of the Act in matters of provin-
cial or joint Dominion-provincial concern;
when this formula has been agreed, the Brit-
ish Parliament will put it into force by an-
other act.
b. The Executive.
Canada is an independent constitutional
monarchy whose sovereign, George VI, is King
of Canada as well as King of Great Britain
and Northern Ireland. The Crown is re-
garded as the source of governmental author-
ity throughout Canada. The British North
America Act provides that the executive au-
thority shall be vested in the Sovereign, and
carried on in his name by a Governor-General.
The Governor-General's appointment has the
approval of the Prime Minister of Canada, and
his duties in relation to the Canadian Parlia-
ment correspond to those of the King in re-
lation to the British Parliament in Westmin-
ster. His term of office is customarily five
years, though it has been as long as seven
years. While the Governor-General has up to
the present been selected from Great Britain,
a Canadian may equally well be chosen. The
Governor-General is assisted in his functions,
according to the provisions of the British
North America Act, by a Privy Council. By
custom the Cabinet or Ministry constitutes
the active part of this Council, and the Gov-
ernor-General acts entirely on the advice of
his Ministry, which is responsible to Parlia-
ment. As the acting executive he summons,
prorogues, and dissolves Parliament, and gives
the royal assent to bills.
The executive machinery of the federal gov-
ernment, located in Ottawa, is centered in the
Prime Minister and his Cabinet of which there
is no mention in the British North America
Act. The Cabinet is composed of the Prime
Minister and nineteen other members, each
of whom is responsible for the administration
of his department. The Cabinet positions are
as follows:
Prime Minister and President of the Privy
Council
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Minister of External Affairs
Minister of Finance
Minister of National Defense
Minister of Trade and Commerce
Minister of Justice
Minister of Agriculture
Minister of Mines and Resources
Minister of Labor
Minister of Public Works
Minister of Transport
Minister of National Health and Welfare
Minister of National Revenue
Minister of Veterans Affairs
Minister of Fisheries
Minister of Reconstruction and Supply
Minister without Portfolio
Secretary of State
Solicitor General
Postmaster General
To give recognition to the factors of federal-
ism, regionalism, and the racialism of English
and French Canadians, each province is gen-
erally represented in the Cabinet, with the
largest representation coming from the most
populous provinces of Ontario and Quebec.
A few portfolios have been commonly recog-
nized as the special preserve of certain areas;
the important Ministry of Agriculture nor-
mally goes to someone from the Prairie prov-
inces, and Fisheries to someone from the
Maritimes or the West Coast province of Brit-
ish Columbia. Following the usual Parlia-
mentary conventions the Government in office
is drawn from the party which commands a
majority in the House of Commons, and may
retain its power without a general election for
a legal period of five years. The party in
power may, however, call a new election be-
fore the expiration of its term if it deems it
politically expedient to do so, or a general
election may be forced upon it by a vote of no
confidence, which results in its inability to
conduct affairs. The Prime Minister and his
Cabinet are responsible for formulating gov-
ernment policy and legislation.
c. Legislature.
(1) House of Commons.
The Canadian Parliament is a bicameral
legislature consisting of an elected House of
Commons and an appointed Senate. The
House of Commons is the chief legislative body
of the federal government. It is elected by
the people, with the franchise possessed by all
Canadian citizens, men and women, of 21
years and over, who have resided in Canada
for one year and are resident within the elec-
toral district at the date of issue of the writs
ordering the elections. By an amendment to
the British North America Act in 1946 a re-
distribution of seats was made, based on the
1941 census, which raised the membership of
the House from 245 to 255, with 83 seats allot-
ted to the province of Ontario, 73 to Quebec,
and lesser numbers to other provinces, down
to four for Prince Edward Island. Newfound-
land's entry into confederation with seven
seats brought the total membership up to
262. In structure, rules, procedures, and
ceremonial the House of Commons follows
British Parliamentary customs and usages
unless specifically modified by the decision
of the House itself. Under present statutory
qualifications members of the House of Com-
mons must be Canadian citizens, at least 21
years of age. There are no property qualifi-
cations. Members do not necessarily reside
in their constituencies, although such resi-
dence is preferred; they even occasionally
represent constituencies in other provinces.
(2) The Senate.
The Senate, unlike that of the US, is with-
out effective legislative power; its members
are appointed for life by the Governor-General
on the nomination of his Ministers. With an
original membership of 72, the Senate has
now a total of 102 members; provincial repre-
sentation is as follows: Ontario 24, Quebec 24,
Nova Scotia 10, New Brunswick 10, Prince
Edward Island 4, and the Western Provinces
24, with Manitoba 6, Saskatchewan 6, Alberta
6, British Columbia 6; Newfoundland, which
entered the Confederation in 1949, has also
six Senators. All Senators must be residents
of the provinces they represent.
Senators have historically been appointed
according to the spoils system; they include
former members of Parliament, retiring Min-
isters, or those who have served the party well.
Appointments to the Senate are also used to
give representation to economic, racial, and
religious groups in the provinces. Organized
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labor and other economic interests have been
given special, although very uneven, repre-
sentation. At the present time the political
composition of the Senate is as follows: Lib-
erals 79, Progressive Conservatives 15, vacan-
cies 8.
Senatorial representation and influence in
the Cabinet has become less and less, because
of the responsibility of the Cabinet to the
House of Commons. Today it is customary to
have only one Senator in the Cabinet, who is
a Minister without Portfolio and at the same
time the government leader in the Senate.
While there is much competence in the Sen-
ate, it possesses only a limited chance for
effective work. The Senate is constitution-
ally prohibited from originating money bills,
and in practice Ministers have tended to in-
troduce all other measures in the House of
Commons. The Senate's actual role has
therefore become one of revising and amend-
ing bills received from the lower house. Al-
though it may also vote down bills, in practice
its use of this power is generally only a delay-
ing tactic, and it ultimately yields to the Com-
mons as representing the electorate. Con-
sequently, as a result of the working out of
the democratic principle, the part played by
the Senate in Canada's legislation has been
steadily decreasing, the chief responsibilities
in legislation being assumed by the House of
Commons.
d. Judiciary.
The British North America Act did not es-
tablish for Canada a dual system of federal
and provincial courts as might have been ex-
pected; instead, under the Act, the adminis-
tration of justice falls largely within the
sphere of the provincial governments, with ap-
peals lying to the higher federal courts of
which there are two: the Supreme Court of
Canada established in 1875, and the Court of
Exchequer and Admiralty. The former is a
court of appeal with civil and criminal juris-
diction; it concerns itself among other things
with appeals from provincial courts and from
the Exchequer Court, with questions demand-
ing constitutional interpretation and with the
validity of Dominion and provincial statutes
in dispute. The Court of Exchequer, which
became a separate entity in 1886, has original
jurisdiction concurrent with the provincial
courts in cases involving the revenues of the
Crown, and exclusive jurisdiction over suits
brought against the Crown in federal affairs.
It also hears cases concerning patents, copy-
rights, and certain other matters. This Court
also acts as a Court of Admiralty with original
and appellate jurisdiction.
Canada has but one system of criminal law,
which comes within the cognizance of the
Dominion Parliament, but it is significant in
connection with the two national heritages
that the French-Canadians of Quebec have
retained French civil law. As noted above,
this was guaranteed to them by the Quebec
Act of 1774; it differs in many ways from the
English Canadian civil law which obtains
throughout the rest of Canada.
Until very recently the Judicial Committee
of the Privy Council in London was the final
court of appeal for Canada in civil cases. In
January 1947, however, the Privy Council
ruled that the Canadian Parliament was
legally entitled to declare the Supreme Court
of Canada to be the final Canadian court of
appeal. As a result of this decision the
Canadian Parliament, in October 1949, passed
an act abolishing appeals to London and es-
tablishing the Supreme Court of Canada as
the final court of appeal in all cases. This
legislation, together with action being taken
to transfer constitutional amending power to
Canada, represents the severing of vestigial
legal ties with Great Britain, which even
though nominal were, in the eyes of the world,
technical limitations on full Canadian sov-
ereignty.
Provincial justice is handled through the
provincial Supreme Courts, county courts,
and minor provincial courts such as Surrogate
and Magistrates' Courts.
Dominion judges and judges of higher pro-
vincial courts are appointed by the Governor-
General in Council; they hold office for life
or during good behavior and can be removed
only by the Governor-General in Council,
following a joint address of both Houses of
Parliament. The process of removal is, how-
ever, hedged about with many formalities.
Judges of minor provincial courts are ap-
pointed by the Lieutenant Governor in Coun-
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cil and paid by the provincial governments.
Judges have no vote and take no part in poli-
tics.
e. Provincial Government.
Each of the ten provincial governments has
a separate legislature and administration with
a Lieutenant Governor, appointed by the Gov-
ernor-General in Council, as the nominal head
of the executive. Following the pattern of
the Dominion Governm,ent, the Lieutenant
Governor governs with the advice and assist-
ance of his Ministry or Executive Council
headed by a premier who is responsible to the
Legislature and resigns when he ceases to en-
joy the confidence of that body. The legis-
latures of all the provinces except Quebec are
unicameral, consisting of a Legislative As-
sembly elected by the people. In Quebec,
there are two Houses?a Legislative Council
as well as a Legislative Assembly. The pro-
vincial governments have full powers to regu-
late local affairs as enumerated in Section 92
of the British North America Act, provided
they do not interfere with the action and
policy of the Dominion Government in
Ottawa.
Provincial governments may amend their
constitutions by statute, except as regards the
office of Lieutenant Governor.
f. Government of the Territories.
The Yukon, formerly a District of the
Northwest Territories, was made a separate
Territory in 1898. It is governed by a Com-
missioner and an elective Legislative Council
of three members with a three-year tenure of
office. The Northwest Territories are gov-
erned by a Commissioner, Deputy Commis-
sioner, and five councillors appointed by the
Governor-General in Council. Both Terri-
tories are administered under instructions
from the Governor-General in Council or the
Minister of Mines and Resources. The Yu-
kon-Mackenzie River district is entitled to
one representative in the House of Commons.
There is as yet no parliamentary representa-
tion for the rest of the Northwest Territories.
g. Civil Service.
Canada has a permanent civil service with
appointees normally recruited by open com-
petition. Wartime expansion of government
9
services necessitated greatly increased num-
bers, chiefly on a temporary employment
basis. In March 1948 there were 118,370
civil service employees whereas in March 1938
the total was only 44,102.
h. Civil Rights.
Canada does not have a formal Bill of
Rights in the Constitution, but the rights of
the individual, assured to British people in a
body of law and precedent that has grown
through centuries of usage, have been con-
sidered adequately secured. The few consti-
tutional guarantees which do appear in the
British North America Act were designed for
a peculiarly Canadian problem, namely to
protect the rights of the French and Roman
Catholic minority in Canada, and of the Eng-
lish Protestants in Quebec. The Act specifies
that the English and French languages are
to be used in the Canadian Parliament and in
the Quebec legislature, and in Quebec and
Canadian courts established under the Act.
The statutes of Canada and of Quebec are to
be printed in both English and French.
Other citizens' rights are not touched upon
by the British North America Act, but receive
protection under various statutes and the
common law. However, there is a growing
conviction in Canada that certain civil liber-
ties should be incorporated in a Declaration
or Bill of Rights. Minority agitation for a
constitutional amendment has not advanced
far, although a Parliamentary Committee of
Inquiry was set up in 1947 to consider the
question of a written Bill of Rights embody-
ing Canada's heritage in precise terms. By
the enactment of such an amendment the
present supremacy of the provincial legisla-
tures in the field of civil rights would be cur-
tailed, thereby inaugurating a distinct de-
parture from traditional Canadian practice.
Serious constitutional difficulties and anti-
pathetical public attitudes would also be en-
countered.
3. Political Parties and Current Issues.
The national political life of Canada has
been dominated from the time of Confedera-
tion in 1867 by two great parties, the Liberals
and Conservatives (now called the Progres-
sive Conservatives), thereby paralleling the
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two-party systems characteristic of the UK
and US. However, during the depression
years of the 1930's two new parties came into
existence?the socialist Cooperative Common-
wealth Federation (CCF), and the Social
Credit party. The old-line parties thus find
themselves currently faced with rivals. The
party position in the 262-member Dominion
House of Commons after the general election
of 27 June 1949 was as follows:
Liberals 193
Progressive Conservatives 41
Cooperative Commonwealth Federation 13
Social Credit 10
Independent Liberals 1
Independents 4
A characteristic of Liberal and Conservative
leadership in Canadian political life has been
the longevity of tenure of outstanding states-
men?Sir Wilfred Laurier and Mackenzie
King for the Liberals, Sir John A. Macdonald,
Sir Robert Borden, and Richard Bennett for
the Conservatives. In the latter part of 1948
the leadership of both major parties passed
into new hands, Prime Minister Louis St.
Laurent of the Liberals and George Drew of
the Progressive Conservatives.
While the Liberals or Conservatives have
maintained their dominant position in federal
politics, they have not done the same on the
provincial level. The following list shows the
state of party control in the provinces in
September 1949, and reveals that three prov-
inces are no longer governed by either of the
two major parties.
Parties in Power in the Provinces
New Brunswick?Liberals
Nova Scotia?Liberals
Prince Edward Island?Liberals
Newfoundland?Liberals
Ontario?Progressive Conservatives
Saskatchewan?Cooperative Com-
monwealth Federation
Alberta?Social Credit
Quebec?Union Nationale
British Columbia?Coalition: Liber-
als and Progressive Conservatives
(Liberals leading)
Manitoba?Coalition: Liberals and
Progressive Conservatives (Liber-
als leading)
a. Liberal Party.
The Liberal Party is the dominant national
party in Canada today and has, under the
leadership of former Prime Minister William
Lyon Mackenzie King and his successor Louis
St. Laurent, been almost continuously in
power since 1921. :Fn the general election of
1949 the Liberals were returned to office by
49.5 percent of the popular vote, and an over-
whelming majority of Parliamentary seats.
This endorsement forecasts a period of effec-
tive and stable government, and the continua-
tion of a middle-of-the-road course between
the conservatism of the Progressive Conserv-
atives and the socialism of the Cooperative
Commonwealth Federation Party. Although
the size of the victory may lead to the de-
velopment of schisms within the Liberal ranks,
the combination of an immensely popular
Prime Minister, who as a French-Canadian
has the special support of that powerful mi-
nority, and a strong Cabinet, should enable
the Government to secure passage of any rea-
sonable legislative program.
The Liberal Party goes well back into the
nineteenth century for its roots. At the time
of Confederation in 1867 it consisted of diverse
political units taking their origin in earlier
decades, and its national strength did not
emerge for some years. In 1896 the Liberals,
under the eminent French-Canadian states-
man Sir Wilfred Laurier, began their long
periods of power. At this time they won the
allegiance of the French-Canadian province
of Quebec, which has generally remained loyal
for fifty years. This fact is of significance
since substantial support from Quebec is nec-
essary to any party in power at Ottawa. The
Liberal Party has been in office from 1896 to
the present time, save for the periods 1911-
1921, three months of 1926, and 1930-1935.
The Liberal Party is the only one com-
manding general support throughout all the
provinces of Canada. In the Dominion elec-
tions of June 1949 the , Liberals routed the
Progressive Conservatives and Cooperative
Commonwealth Federation in their strong-
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holds of Ontario and Saskatchewan, increased
against threatening odds their representation
in Quebec (winning 68 of 73 seats) , and made
gains in all other provinces except the small-
est one, Prince Edward Island, where the rep-
resentation remained the same (Liberals 4,
Progressive Conservatives 1) . In the provin-
cial legislatures the Liberals are well repre-
sented though they are in strong control only
of the three Maritime provinces and New-
foundland. In Manitoba and British Colum-
bia they form the major segment of coalition
governments with the Progressive Conserva-
tives (PC's). In the Ontario legislature they
hold 13 seats as against the Progressive Con-
servatives' 53 and Cooperative Commonwealth
Federation's 21. In the Cooperative Com-
monwealth Federation home province of Sas-
katchewan the Liberals are the official opposi-
tion and regained substantial strength at the
1948 provincial elections; in Social Credit-Con-
trolled Alberta they are weak. Although the
Liberals enjoy the strong support of Quebec
province in Dominion elections, provincially
they are a small opposition to the young Union
Nationale party of Premier Maurice Duplessis.
Although the Liberals appeared before the
1949 general and provincial elections to be
threatened not only by a revivified Progres-
sive Conservative Party but also by the grow-
ing socialist Cooperative Commonwealth Fed-
eration, which hoped to strengthen its posi-
tion at the expense of both the old-line parties,
the election results showed a reversal of this
trend. As the result of the eclipse of the Co-
operative Commonwealth Federation at the
federal polls, Canadian politics have for the
present returned to a predominantly two-
party system. The Liberal Party's power
arises from the weakness of the three opposi-
tion parties; from its control in federal politics
of the crucial province of Quebec, and from its
adaptability to changing conditions. It made
a good record during the depression years and
in successfully carrying the country through
the dangerous and complex World War II
period into a postwar era of great prosperity
and high employment.
The Liberals have always placed national
unity and cooperation between English and
French-speaking Canadians at the forefront
of their national policy. In domestic affairs
the party, historically standing for minimum
government interference but faced with de-
pression in the 1930's and war in the 1940's,
has been moving somewhat in the direction of
increased federal power and social reform. It
has sought to fashion a middle-of-the-road
policy between the out-and-out free enterprise
system advocated by the Progressive Conserv-
atives and the socialism of the Cooperative
Commonwealth Federation. Nevertheless, as
again pledged in its last convention, the party
publicly stands for maximum individual free-
dom, respect for the constitutional rights of
the provinces, and a minimum of federal in-
tervention.
On foreign trade the Liberals are histori-
cally a low-tariff party. They continue to
advocate tariff reductions and non-discrimina-
tory, multilateral trade practices, despite the
fact that shortage of US dollars has forced
the government temporarily to follow an op-
posite policy of import restrictions. The Lib-
eral Party stands for the further develop-
ments of social security programs involving
collaboration between the federal and provin-
cial governments.
In foreign policy the Liberal Party is a
strong supporter of the United Nations, a
major promoter of the North Atlantic Pact,
and friendly to the US.
b. Progressive Conservative Party.
The Conservative Party, today known as the
Progressive Conservatives (PC's), is the second
major party in Canada, and constitutes the
official opposition in the House of Commons.
The party originally assumed leadership in
the Dominion Government upon the establish-
ment of Confederation in 1867; under the dis-
tinguished Prime Ministership of Sir John A.
Macdonald it was in power for nearly a quar-
ter of a century. During this important pe-
riod in the life of the new nation the federal
government machinery was established and
the Dominion economy expanded. Subse-
quently, the Conservatives held office from
1891 to 1896, from 1911 to 1921 (the years
1917-21 under a Unionist administration pre-
dominantly Conservative), and again from
1930 to 1935.
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Beginning in 1896 when Quebec trans-
ferred its primary allegiance to the Liberals,
and especially since 1921 with the advent of
Mackenzie King, the Conservative party has
been declining in influence and today holds
only 41 seats as against 193 for the Liberals.
The Progressive Conservatives received a
startling set-back in the 1949 general election,
polling only 30 percent of the popular vote,
losing 28 seats, and failing to win more than
two seats in the crucial province of Quebec,
where it had hoped to upset Liberal domi-
nance, through an unnatural alliance with
the isolationist and anti-imperialist Union
Nationale party. Even in the party's chief
province of Ontario the Progressive Conserv-
atives' representation in the House of Com-
mons was cut from 48 to 25. This election
verdict appeared all the more remarkable in
view of the fact that under the vigorous new
leadership of George Drew, ex-Premier of
Ontario, the party had reason to consider
itself a significant challenge to the Liberals.
Provincially, the Progressive Conservatives
control only Ontario, the industrial heart of
Canada and the most populous province, but
even here they lost seats in the 1948 provin-
cial elections to the socialist Cooperative Com-
monwealth Federation. In the British Co-
lumbia and Manitoba legislatures the Pro-
gressive Conservatives are the lesser partners
with the Liberals in coalition governments;
in the politically important province of
French-Canadian Quebec the party has vir-
tually no strength. In all other provinces it
is weak.
The decline of the Progressive Conservative
Party prior to Mr. Drew's taking over the
reins in October 1948 was largely owing to the
poor leadership of earlier party chiefs; it has
also resulted from the party's failure to make
clear any distinctive principles for which it
stood or to offer any positive alternative to
the things already provided or promised by
the Liberals. The fundamental difference
between the two major parties appears, there-
fore, to be one of emphasis and degree rather
than of substance. Both believe in provin-
cial rights (though the Progressive Conser-
vatives harp more ardently on this theme) , in
individual freedom, free enterprise, maximum
production, and social security programs.
The Progressive Conservatives, however, con-
sider their party to be the true defender of
free enterprise against the Liberals' remnants
of wartime controls, against the threats of
the Communists and the socialist Cooperative
Commonwealth Federation Party, and against
what they consider to be too much Liberal
centralization and direction from Ottawa.
Despite the Progressive Conservative Party's
present weakened position, it still remains the
major opponent to the Liberal power and is
the only other party which can command sig-
nificant votes in every province of the Do-
minion. Under Mr. Drew's leadership in the
House of Commons the party will prove to be
an active, if impotent, critic of the govern-
ment's policies. The party's future will de-
pend in large measure on a rejuvenation and
clarification of its party principles to dis-
tinguish them from those of the Liberals.
The Progressive Conservatives are histori-
cally a party of high tariffs and "big busi-
ness," and represent the governing economic
class of Canada. They have also traditionally
been the most pro-Empire party in Canada.
Fear of American economic domination, ris-
ing at times almost to the point of anti-
Americanism, high US tariffs and hereditary
pro-British sympathies as well as long-stand-
ing economic ties with Britain provided the
basis for this stand. In the present postwar
period, however, confronted with the threat of
socialism and Communism, certain members
of the party have evinced increasing realiza-
tion that Canada must look to the US as the
last citadel of old-fashioned free enterprise and
the best protection against the USSR. Along
with the Liberals it therefore calls for closer
economic ties with the US to compensate for
loss of markets in the UK and other countries,
and desires close defense relations with the US
as well as the continuation of "loyal partner-
ship" with the British Commonwealth of Na-
tions and of good markets in the United King-
dom. In the field of international trade the
party policy also now parallels that of the Lib-
erals, since the Progressive Conservatives
have reversed their traditional advocacy of
high protection to one of trade agreements
and a reciprocal lowering of tariffs.
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c. Cooperative Commonwealth Federation
Party.
The Cooperative Commonwealth Federa-
tion (CCF) is the socialist party of Canada.
It ranks after the Liberals and Progressive
Conservatives as the third party in national
politics and appears to be both permanent
and effective. Before the general election of
1949 the party, excellently organized and
ably led by M. J. Coldwell, a moderate social-
ist, reached its peak with 32 members in the
Dominion House of Commons. It had hopes
of obtaining enough votes to prevent either
of the two major parties from obtaining a
clear majority in the House. Instead of these
results, the Cooperative Commonwealth Fed-
eration received a crushing setback at the
polls, with only 13 members returned and a
strong previous representation from its home
province of Saskatchewan drastically reduced
in favor of the Liberals. It polled 13.7 per-
cent of the national vote.
On the provincial level the Cooperative
Commonwealth Federation has representa-
tion in six legislatures, but has shown waning
influence in Saskatchewan and British Co-
lumbia. Only in industrial Ontario did the
Cooperative Commonwealth Federation ob-
tain a marked gain of 13 seats in the 1948 elec-
tions, and on this and several successful fed-
eral by-elections it based its hopes for the
1949 general election. In the key province
of Quebec it has thus far failed to win either
French-Canadian labor or small farmers,
owing to the French-Catholic aversion to
socialism and to the strength of French-Cana-
dian nationalism which rallies to the provin-
cial Union Nationale Party.
The party had its origin in the progressive
movement of the 1920's, although it was not
until 1932 that it took shape. During the
depression years it brought together progres-
sive farmers' groups of the Prairie Provinces
with a small labor group, and also drew sup-
port from Fabian intellectuals of the middle
class, who still furnish the party's leadership.
Unlike most small parties arising out of hard
times, the Cooperative Commonwealth Feder-
ation did not disappear or lose its identity
when conditions improved; it attracted the
urban industrial vote in addition to its origi-
nal rural support, and today about half of its
strength lies in urban areas. The Cooperative
Commonwealth Federation has now become a
recognized arm of the Canadian Congress of
Labor, which was in need of a political vehicle
to promote its cause. Many leaders of the
other major labor organization, the Trades
and Labor Congress, are also sympathetic to
the party.
The focus of the Cooperative Common-
wealth Federation's attention originally was
and, in large measure, still is, in domestic af-
fairs. The party's program follows the usual
socialist pattern calling for the establishment
of a planned and orderly socialized economy
attained through peaceful, democratic, par-
liamentary procedures. It includes the so-
cialization of the banking, credit, and financial
systems, national minimum wages, federal
financing of low cost housing, an extended
system of social security and the planned di-
rection of foreign trade.
On international policies the position of the
Cooperative Commonwealth Federation Party
has gone through a transition. Its outlook
towards Great Britain and the Common-
wealth altered from suspicion to warm ap-
proval when the British Labor Party came to
power; the party leaders now support close
ties with Britain, particularly economic.
With respect to the US, the attitude of the
Cooperative Commonwealth Federation has in
the past been anti-American, based on dis-
trust of the US as a nation dominated by
"monopoly capitalism" and the evils thereof.
Confronted by the Soviet and Communist
threat, however, the party's suspicion of the
capitalistic motives of the US seems to have
shown some decline. It now supports many
foreign policies of the US and of the western
democracies about which it formerly had
serious reservations, although it continues
strong aversion to the existence of large US
investments in Canada, favors the encourage-
ment of trade with the UK at expense of that
with the US, and on nationalistic grounds
continues to oppose any "foreign" control
over Canadian resources. The right-wing
party leadership favors the European Recov-
ery Program so long as it does not become an
instrument of American capitalistic domina-
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14 SECRET
tion, and this it watches carefully. It recog-
nizes the necessity of a united front against
the Communist imperialism of the Soviet
Union, and consequently supports Canadian
military and economic cooperation with the
US, so long as any military arrangement does
not impinge on Canadian sovereignty. It
supports the UN, and endorses Canadian mem-
bership in the North Atlantic Pact despite the
opposition of the party's left wing.
While the Cooperative Commonwealth Fed-
eration has made significant gains in its gen-
eral position in recent years, despite the 1949
election debacle, it cannot hope to offer any
really formidable challenge to the two old-
line parties until it increases materially its
present feeble voting strength in the provinces
lying east of Ontario, which return about two-
fifths of the House of Common's membership.
If the present internal farmer-labor conflict
which is alienating some of its rural voters is
not checked, the dual basis of the party's sup-
port may be destroyed. Furthermore, if its
present trend toward becoming solely a labor
party continues at the expense of the western
farm group, there seems little likelihood that
the Cooperative Commonwealth Federation
will be able to gain control of the Dominion
Government in the near future. Of utmost
significance as an additional weakening factor
is the open conflict between the moderate
right wing in control of the party and the
small and noisy left-wing group which is well-
organized, particularly in British Columbia
and Manitoba, and which denounces the
North Atlantic Pact and ERP. The Coopera-
tive Commonwealth Federation setback in the
general elections can be attributed in part to
this split in its ranks over the North Atlantic
Pact and to the defection of its rural support-
ers on account of the growing influence of the
labor unions. It cannot hope for progress as
a diluted combination of non-socialist farm-
ers, socialist labor, and Communist fellow-
travellers. Over and above the necessity of
ironing out its internal difficulties, the Coop-
erative Commonwealth Federation's future
appears to depend to a considerable extent on
the economic position of Canada. A prosper-
ous Canada repudiated the party in 1949, but
if a severe economic recession should occur,
the Cooperative Commonwealth Federation
might gain rapidly in industrial areas.
d. Social Credit Party.
The Social Credit party, the fourth of the
national political parties in Canada, finds vir-
tually no support outside of the predominant-
ly agricultural province of Alberta. Here it
holds 51 out of 57 seats in the provincial legis-
lature, with the Liberals and Cooperatiye
Commonwealth Federation holding only 2
seats each and the Independents the remain-
ing 2. In the 1949 general election the Social
Credit Party was the only one of the three op-
position parties to win a majority of the seats
of a province in the Dominion Parliament; out
of 17 MP's from Alberta, 10 are Social Credit-
ers. Any marked extension of the party in
national importance appears unlikely despite
its attempts to win new fields.
The Social Credit Party came into being in
Alberta during the depression years as an ex-
pression of rural revolt, under the leadership
of William Aberhart, a high school teacher
filled with religious zeal, who promised Uto-
pia to the hard-pressed farmers. In 1935 the
Social Crediters won the provincial elections
from the United Farmers Party, and have re-
mained in office ever since. While the party
originally advocated social credit money the-
ories as a solution of economic ills, the at-
tempted application of radical monetary re-
forms has generally been allowed to lapse with
the prosperity of the 1940's and following the
declaration of unconstitutionality of some of
the legislation enacted. In theory the party
stands for easy money, direct monetary pay-
ments to individuals in amounts commensu-
rate with the rise and fall of commodity prices,
and old age and other social security benefits.
In practice the present administration in Al-
berta under its popular Premier is conserva-
tive and an advocate of free enterprise. It
has established a reputation for efficient gov-
ernment and in general has followed finan-
cially orthodox policies to attract business
men.
On foreign policy the party warmly sup-
ports the principle of collective security
through the United Nations, advocates a re-
alistic defense policy, close cooperation with
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the US, the British Commonwealth, and West-
ern European countries, and is strongly anti-
Communist. Only on the question of inter-
national finance does it depart on a tangent
by denouncing the US for its so-called fal-
lacious monetary principles, naming Wall
Street as a tyrannical force, and warning that
Canada should beware of absorption by the
US.
e. Labor Progressive Party.
The Labor Progressive Party (LPP) is the
Communist Party of Canada. Although po-
litically aggressive, it is not an important fac-
tor in Canadian politics today and does not
present a threat to the stability of the coun-
try. The party has had no members in the
House of Commons since the conviction of
Fred Rose in the Espionage Trials of 1946, and
it has in the ten provincial legislatures a total
of only three members, two in Ontario and
one in Manitoba. Furthermore, it has suf-
fered severe setbacks in municipal elections
during the past several years. In the 1949
general election the Labor Progressive Party,
which ran 16 candidates, failed to win a single
seat in the House of Commons. Out of a to-
tal of 5,856,307 votes cast, the Labor Progres-
sive Party secured only 32,633, a sharp reduc-
tion from its 1945 total of 111,892.
The activities of the Communist Party in
Canada go back to 1921 when it was organ-
ized as part of the Communist International.
Between 1931 and 1943 it was during several
periods declared illegal, and its activities were
continued through front organizations. In
1943, however, a new party, called the Labor
Progressive Party, was formed by the Com-
munist leaders in Canada under the leader-
ship of Tim Buck, a former member of the
Executive Committee of the Communist In-
ternational, and since that time the party has
been serving as a cloak for the Communist
movement. Its headquarters are located in
Toronto, Ontario. It is currently estimated
that there are about 23,000 Communists in
Canada. Additional strength is given the
Labor Progressive Party through infiltration
into labor unions and various foreign lan-
guage organizations of Ukrainians, South
Slays, Poles, Hungarians, Russian Canadians
and other foreign language minority groups
in Canada. The party also advances its pro-
gram through six English language and
twelve foreign language publications with a
total circulation of about 70,000.
As a unionized industrial province with
large foreign groups, Ontario is a main target
for Communist penetration, with British Co-
lumbia a second major center. Communist
support in the Maritime provinces is small,
the heart of their political and economic ac-
tivity being in the important seaport of Hali-
fax and the mining center of Sydney, Nova
Scotia. In the French-speaking province of
Quebec, Communists have achieved little suc-
cess because of the fundamental opposition of
the Catholic Church,. but have made some
headway in the labor unions of Montreal,
where are found virtually all the non-Catholic
unions in the province. In the Prairie prov-
inces they have had little success either polit-
ically or in labor unions.
The Labor Progressive Party concentrates
attention on immediate issues and aggressive
reform action. On political and international
policy it consistently follows the Communist
Party line on all major issues. It tries to
undermine Canadian-American friendship by
attacking the Canadian Government's so-
called complete "capitulation to Wall Street,"
asks for the removal of American troops from
Canada, and denounces Marshall Plan aid as
an attempt at world domination by the US.
Strong anti-Communist feeling exists in
Canada. Battles are being waged against
Communist infiltration into a few powerful
labor unions. All other political parties are
watchful and give the government the fullest
support in combatting Communism in its va-
rious guises. At the present time a measure
is being studied, which if adopted would pro-
vide penalties for persons engaging in Com-
munist, Fascist or other anti-democratic ac-
tivities.
f. Union Nationale Party of Quebec Prov-
ince.
The Union Nationale Party is purely a pro-
vincial party of French Catholic Quebec,
which has succeeded under the clever and
powerful leadership of Maurice Duplessis in
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replacing the Liberals' political dominance in
the province. The party first came into
power in 1936, and, except for a Liberal Party
return to office during 1939-44, has been in
control since that time. As the result ,of the
1948 provincial elections, the Union Nationale
controls 82 of 92 seats in the Quebec legisla-
ture. The party is strongly nationalistic in
defense of French-Canadian culture, institu-
tions, and religion. It stands for provincial
autonomy as against the abandonment of any
of Quebec's prerogatives to Ottawa, and is con-
servative and anti-Communist.
In the 1949 general election the Union Na-
tionale came into the national political arena
by lending its party machine and support to
the Progressive Conservatives. This strategy
proved a dismal failure and redounded to the
further discredit of Duplessis, who has also
recently by his labor policies aroused the an-
tagonism of labor and a section of the power-
ful Catholic hierarchy. With these reverses
of the Union Nationale in mind, the Liberals
take heart for recapturing the Quebec govern-
ment at the next provincial elections.
4. Other Influential Groups.
a. Labor Organizations in Canada.
The Canadian labor movement has marked-
ly increased its political articulateness during
the past decade, and trade union membership
has grown nearly three-fold, thereby greatly
augmenting the power and influence of labor
in Canada both industrially and politically.
In 1939 membership figures were 359,000; by
the end of 1948 they had jumped to 978,000.
Roughly one-quarter of all Canadian workers
are members of trade unions, with the great-
est concentration of about 54 percent located
in Ontario and Quebec provinces. Almost
one-fifth of union membership is concen-
trated in the metals industry; the next larg-
est groups are in steam railway transporta-
tion with approximately 15 percent, and in
services with 12 percent. The largest nu-
merical gain during 1948 was in the construc-
tion industry where almost 20,000 new mem-
bers were added.
Canadian labor does not speak with one
voice as does the British labor movement.
There are: (1) three major federations of
unions; (2) four independent international
railroad brotherhoods; (3) the Canadian Fed-
eration of Labor, formed as the result of a
break in the ranks of the Trades and Labor
Congress to bring together all the purely na-
tional labor organizations; and (4) a number
of independent unions. The majority of Ca-
nadian unions are affiliated with the three
principal national federations in the first
above-mentioned category. Of these the
Trades and Labor Congress (TLC) is the old-
est labor organization in Canada. It is made
up primarily of long-established craft unions,
and three-fourths of TLC membership are in
AFL international unions. The TLC has 439,-
000 members in 2,779 locals, or about 45 per-
cent of total union membership in Canada.
The Canadian Congress of Labor (CCL) is the
second most important labor organization and
has 338,000 members in 1,187 locals or about
33 percent of total union membership. It
consists of industrial unions of which roughly
two-thirds are in international unions which
are Canadian branches of the Congress of In-
dustrial Organizations. Together these two
organizations account for more than three-
quarters of organized labor. About two-thirds
of Canadian trade unions belong to interna-
tional unions with headquarters in the US.
The third labor federation is the Canadian
and Catholic Confederation of Labor (CCCL) ,
a purely Canadian organization confined prin-
cipally to the province of Quebec. With 93,-
000 members in 428 branches it accounts for
less than 10 percent of total union member-
ship and includes both craft and industrial
unions. These French-Canadian "syndicates"
are not of significance nationally; the TLC
and CCL also have a large French-Canadian
membership. The four Railway Brother-
hoods claim 41,126 members in 376 locals.
In economic policies and in structure the
labor movement of Canada has developed
along lines similar in many respects to those
obtaining in the US. It has also been influ-
enced by British labor, from which it has in-
herited traditions imported by British immi-
grants. Although there is no labor party as
such in Canada, there is increasing independ-
ent political action by labor, but it has not
yet reached the point of voting as a bloc. On
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the whole, Canadian labor until recently has
confined its political action ito lobbying, sup-
porting its friends in established parties, and
carrying on public campaigns for improved
labor legislation. At present the only labor
organization which has formally espoused the
cause of a party is the CCL, which has within
the past five years officially endorsed as its
political arm the socialist CCF party, dedi-
cated to the cause of labor. The 1948 CCF
provincial election victories in Ontario owed
much to CCL trade unionists. The TLC has
thus far retained its official non-partisan at-
titude and its opposition to any direct political
action, although in the 1945, general election
it publicly supported the Liberal Party, while
in the Ontario 1948 provincial elections the
TLC unionists gave their votes to the CCF
trade union candidates.
The leadership of Canadian unions recog-
nizes the danger to labor of Communist in-
filtration and has taken action to combat it.
While Communism does not easily win a foot-
hold in Canada, it is present in labor unions
to some degree even though the rank-and-file
of workers are anti-Communist. In 1947, 14
unions were listed as Communist-dominated
out of a total of 101 international and na-
tional unions. These 14 included the Cana-
dian Seamen's Union (TLC) , the United Elec-
trical Workers Union (CCL) , the Interna-
tional Woodworkers of America (CCL) , and
the International Union of Mine, Mill and
Smelter Workers (CCL) . After an aggressive
campaign the anti-Communist majority of the
CCL, at the 1948 convention, succeeded in ad-
ministering a sharp defeat to Communist
leadership of pro-Communist member unions.
Voting at the convention indicated that Com-
munist strength had been reduced by about
30 percent and CCL convention resolutions
were consistently anti-Communist. The TLC
leadership has been more easy-going in its at-
titude, holding to the theory that political be-
liefs of union members are of no concern to
the organization. But following a revolt in
1948 against this attitude by high officers of
23 international unions representing 175,000
members out of the TLC total membership of
439,000, the anti-Communist group intensified
its fight against the Communists, and the Ex-
17
ecutive Committee has now been won over
from its apathetic stand as the result of the
Communist-dominated Canadian Seamen's
Union strike and AFL pressure. In its Sep-
tember 1949 annual convention the TLC
passed strong resolutions aimed at checking
any Communist leadership in unions.
In the event of an emergency, Communists
in Canada would probably be able to foment
strikes and labor disorders in the few Commu-
nist-controlled unions, and to engage in some
sporadic sabotage. However, in view of the
strong anti-Communist policy of the govern-
ment, the nature of popular sentiment in
Canada, and the anti-Communist action be-
ing taken by labor leadership, intensive and
doubtless successful efforts would be made all
along the line to eliminate any subversive ac-
tivity and to bring sporadic sabotage under
control.
Generally speaking, industrial relations in
Canada are amicable and the number of
strikes much reduced from 1946. In 1947
there occurred 236 strikes involving 104,000
workers, while in 1948 this number had
dropped to 148 strikes (41,230 workers) , and
during the first six months of 1949 prelimi-
nary figures show a total of only 63 strikes
and lockouts involving 18,700 men.
b. French-Canadians.
The French-Canadians are a powerful mi-
nority group in Canada which exerts a sig-
nificant influence on many major political de-
cisions. With 77 percent of the French-Ca-
nadian population concentrated in the prov-
ince of Quebec and the rest in Ontario, New
Brunswick, and Manitoba, this minority group
makes up nearly one-third of the total popu-
lation of Canada. These three and one-half
million French-Canadians, who are a proud
and sensitive race, descendants of the original
Norman settlers, have refused to be assimi-
lated. They have preserved unimpaired not
only their racial qualities but also a habit and
philosophy of life which are completely for-
eign to those of the English-speaking citizens
beside whom they exist. Their chief aim is
cultural and racial survival; and with a birth
rate considerably higher than that of English-
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Canadians they count on continuously
strengthening their position.
This preservation of cultural identity stems
from the Quebec Act of 1774, whereby the
British Government guaranteed the French-
Canadian people security in their religion, lan-
guage, and civil laws. The French language
is official equally with English in Quebec prov-
ince, and in all proceedings in the Federal
Parliament and Federal courts throughout
Canada. The French-Canadians also main-
tain their own Roman Catholic school sys-
tem. The ascendancy in French-Canada of
the Roman Catholic clergy, who have always
been the intellectual leaders of the people, has
accounted for the preservation of French-
Canadian cultural traditions and for an out-
look almost unchanged during more than two
centuries. Untouched by the French Revo-
lution, the French-Canadian culture differs
greatly from that of twentieth century France,
which is predominantly secular. French-
Canada has never developed a secular intel-
lectual group to provide a counter-balance to
its clerical leaders.
The political consequences of this difference
in culture and of a consciousness of their mi-
nority position have led French-Canadians to
function as a unit in national politics and to
give support to whichever national party
seems likely to pay more attention to their
particular claims and most respect to their
objective of ethnic survival. At first, French-
Canadians supported the Conservatives, but
since their switch over to Laurier in 1896 as
the new Liberal leader, they have given their
allegiance chiefly to the Liberal Party. Cleav-
ages came among them in 1911 over the naval
and military preparedness measures which
caused the downfall of the Liberals, and in
1917 the conscription bill alienated them.
But since 1921 they have kept the Liberals in
federal power except for an interval of five
years. Currently they take great pride in the
Prime Ministership of their own Louis St.
Laurent.
The French-Canadians are always watchful
of any English-Canadian interference. Op-
posed to becoming involved in Britain's "im-
perialist wars," they condemn any form of
conscription. In addition they are isolation-
ist, conservative, and strongly anti-Commu-
nist. With a lower standard of living than
the English-Canadians, and only gradually
shifting their higher education from the hu-
manities to engineering and scientific fields
which will enable them better to compete in
the higher management of the Quebec econ-
omy, they tend to be jealous of the dominat-
ing position of English-Canadians in industry
within the province. They also view with
disfavor any federal centralization policies
which run counter to or endanger their pro-
vincial rights and their religious and cultural
identity. Their nationalism is at present
finding expression through Premier Duplessis
of Quebec and his provincial party, Union Na-
tionale, and it is vocal also through a series
of small extremist parties which wax and
wane within the province.
5. Stability of the Present Administration.
The government of Canada presents no in-
dications of instability. As in the US, cur-
rent issues may cause strong popular debate
but will not lead to political changes except
by due democratic procedures. There is no
question of such interference by foreign gov-
ernments which could lead to instability, and
at the present time Communist influence
within Canada is negligible. From the point
of view of racial harmony, eighty-two years of
satisfactory cooperation within the Confed-
eration between English and French-Cana-
dians have proved that the two dominant ra-
cial groups can live together despite minor
frictions; only one major issue, that of con-
scription, offers some threat to the unity of
the land. As long as the dominant group of
English-Canadians continue their established
practices of tolerance and respect for French-
Canadian autonomy, social and religious in-
stitutions, and attitudes toward conscription,
inter-racial stability is assured.
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CHAPTER II
ECONOMIC SITUATION
1. General Characteristics of the Economy.
No foreign nation has a more direct eco-
nomic importance for the US than Canada.
Indeed, in many respects the Canadian econ-
omy is simply an extension of the American.
Each country is the other's best customer; the
transportation systems of the two countries
are interlocked; normal sources of supply for
factories in one country are frequently found
in the other; many Canadian business enter-
prises are subsidiaries of US firms; there has
been, and is, considerable movement of man-
power in both directions across the border;
economic institutions in both countries are
closely parallel. Geography has to a marked
degree made the two countries a single eco-
nomic area. The relationship has been under-
lined recently by the growing importance to
the US of certain strategic raw materials in
Canada?uranium for one and, for another,
the iron ore of the Lake Superior region and
of Labrador-Quebec which is coming under
development as the US's own high-grade re-
serves run out. Canada has, of course, long
been the principal US source for such other
strategic minerals as nickel, asbestos, and
platinum.
Canada's economy, nevertheless, has a life
of its own which in some ways is strikingly
different from that of the US. For one thing,
Canada is still primarily a producer of raw
materials. Despite the growing significance
of manufacturing, the country's economie im-
portance derives principally from its rank
as a great world producer of grains, meat,
and fish, of timber and wood products, of
nickel, copper, zinc, and a variety of other
minerals. Many of Canada's manufacturing
establishments, moreover, are, like its pulp
mills, devoted to the preliminary processing
of raw materials. More than of most coun-
tries on its general level of prosperity, the
story of Canada's economy is the story of its
natural resources.
For another thing, Canada is highly de-
pendent on international trade. With only
some 13.5 million people, Canada ranks third
among the nations of the world in value of
foreign trade. On a per capita basis Canada
actually tops the list. Its minerals and wood
products largely seek markets in the US; its
wheat and some of its other foods go to Brit-
ish buyers and only secondarily to consumers
in Ontario or Quebec. For much of its coal
and oil, its machinery and its iron and steel
products, on the other hand, Canada must
look abroad?mainly to the US. Thus the
prosperous functioning of the Canadian econ-
omy always has a slightly precarious aspect,
based as it is on the willingness and ability of
foreign countries to continue buying Cana-
dian products. In the year 1948 about 30 per-
cent of Canada's production was exported.
The Canadian economy is somewhat less
prosperous than that of the US, though a
highly prosperous one in comparison to most
other countries in the world. Rough esti-
mates of 1948 per capita income show Canada
somewhat closer to the UK than to the US
level, the figures reading: US $1,531; Canada
$990; UK $774. The Canadian national in-
come for 1948 was $12.8 billion and with some
qualifications, Canada may be said to be cur-
rently enjoying boom times. The index of in-
dustrial production (1935-39=100) averaged
181.5 in 1948, compared to 175.5 during 1947
and a wartime peak (1944) of 198.8. In par-
ticular, 1948 saw marked production gains for
all the main commodities, an unprecedented
peacetime capital expansion, a record labor
income in manufacturing, and practically full
employment. In June 1949, though indus-
trial expansion was being more cautiously
undertaken, general business conditions were
still buoyant.
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Geography has imposed handicaps on the
Canadian economy, however, along with its
endowment of natural resources; and special
effort, particularly in the field of transpor-
tation, has been necessary to surmount these
obstacles of temperature and topography.
The productive areas of the Maritime prov-
inces, with their coal and iron mining, their
fishing, orchards, and general farming, are
separated by many miles of sparsely settled
woodland from the industrialized and well-
populated parts of Quebec and Ontario. The
latter area is itself devoid of coal and has had
to turn to extensive hydroelectric develop-
ment (along with US coal) for the power to
run its pulp and paper mills, textile plants,
and other factories. Between these indus-
trial centers and the wheat and cattle-raising
Prairie provinces there intervenes another
great strip of empty country, scarcely even
crossed by roads. In much of the Prairie
provinces themselves wheat growing has been
possible only through the development of spe-
cial strains adapted to the short growing sea-
son. Finally, the barrier of the Rockies tends
to cut off from the rest of Canada the rich
province of British Columbia with its varied
minerals and forest products, its fishing, fruit-
raising and general farming.
The enterprising management, the skill and
good morale on the part of labor, which have
been responsible for the overcoming of Can-
ada's geographical handicaps, have been par-
ticularly evident in the recent and rapid
growth of manufacturing in Canada. Very
largely a phenomenon of the twentieth cen-
tury, manufacturing had expanded so greatly
by 1947 as to surpass agriculture in the em-
ployment statistics for that year. Of 4.8 mil-
lion Canadians gainfully employed, about 27
percent were listed in the category of "manu-
facturing and utilities" as opposed to some 23
percent under agriculture. Manufacturing is,
however, still closely concerned with the pro-
cessing of agricultural products or those of
the important extractive industries, as is seen
in the following table of the estimated net
value of Canadian production in various in-
dustrial groups for the year 1947:
Industrial Groups
Wood products and paper
Iron and steel products
Vegetable products
Textiles and textile products
Non-ferrous metal products
Animal products
Chemicals and allied products
Non-metallic mineral products
Miscellaneous industries
Net Value
(Millions of
dollars)
988
909
648
473
406
324
235
195
66
Total 4,244
Economic organization has in general fol-
lowed the same lines of private ownership and
modified free enterprise found in the US, de-
viations being due in the main to special con-
ditions not duplicated south of the border.
Thus the fields of transportation, communica-
tion, and electric power, which for reasons of
geography are deemed to have unusual im-
portance for the national interest, are the
sphere of operations for such large govern-
ment corporations as the Canadian National
Railways, Trans-Canada Air Lines, the Cana-
dian Broadcasting Corporation, and various
provincial telephone and electric power com-
panies. Largely induced by wartime pres-
sures and postwar international trade dislo-
cations, there has been a tendency toward
somewhat greater economic controls than in
the US. During and immediately following
World War II economic controls were highly
effective, but by the end of 1948 most of them
had been removed. Import controls, travel
restrictions, and foreign exchange controls
were again imposed in November 1947, pri-
marily to solve trade problems and remedy a
shortage of US dollars.
The Canadian economy also reflects in
marked degree Canada's intermediate position
between the US and the UK. Historically,
British economic influence was paramount
there and for many years prior to World War
II the standard pattern of trade relations was
a triangular one by which Canada sold raw
materials (principally food) to the UK and
took payment very largely in manufactured
products from the US. The inconvertibility
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of sterling has seriously disrupted this pat-
tern now but not entirely destroyed it. In
1948 Canada sent 23 percent of its exports
(by value) to the UK and obtained 11 percent
of its imports there, while the US took 50 per-
cent of Canadian exports and supplied 69 per-
cent of Canadian imports. US capital in-
vested in Canada has steadily grown while
British capital has proportionately declined.
By the end of 1947 total non-resident invest-
ment in Canada was divided as follows: US
$5,187 million; UK $1,642 million; other coun-
tries $346 million. By another count made at
the end of 1946 there were 2,015 branches of
American and 475 branches of British firms
operating in Canada. Citizens of other for-
eign countries opened some 75 factories in
Canada between the end of World War II and
the end of 1948, but effective influence from
these sources may be considered almost neg-
ligible. As of the latter date, however, 37 per-
cent of the total investment in manufacturing
companies in Canada was in US-controlled
companies.
2. Agriculture, Forestry, and Fisheries.
a. Agriculture.
Farming, the occupation of nearly a quar-
ter of all gainfully employed Canadians, ex-
hibits a pattern of grain and livestock produc-
tion in the three Prairie provinces, and dairy-
ing, horticulture, and mixed farming in the
Eastern provinces and British Columbia. The
principal agricultural zone is a belt generally
less than 400 miles wide along the southern
edge of the country, within which the mean
temperature during July ranges from 60 to 70
degrees Fahrenheit, and rainfall is for the
most part adequate. The three Prairie prov-
inces are the main crop lands, though vari-
able rainfall from year to year causes fluctu-
ations in production. In British Columbia
and the eastern Maritime provinces agricul-
tural production is limited by mountainous
terrain; moreover the poor soils of the Cana-
dian Shield, covering 70 percent of the total
land area of Canada, are relatively unproduc-
tive. Nevertheless, owing to the concentra-
tion of population in the east, part of the
Shield is farmed despite the poor quality of its
soils. The census of 1941 reported a total ag-
ricultural area of 175,000,000 acres, of which
about 60,000,000 were crop land, 20,000,000
planted in rotational summer fallow, and 95,-
000,000 in pasture, farm wood lots, and waste-
land.
Although farm labor, transportation, farm
machinery, and fertilizer have been scarce
since the war, great progress has been made
towards filling these needs; moreover some
of these shortages have been overcome in part
by the development of new agricultural tech-
niques and by modernization. The trend to-
wards diversification is also significant, par-
ticularly since mixed farming is a more stable
pursuit than grain production, which is sub-
ject to the unreliability of the prairie climate.
An increase in irrigation farming could be
carried much further, particularly in Alberta,
and also could be expanded somewhat in Brit-
ish Columbia. The growth of mechanization
is shown by the census figures: between 1921
and 1941 there was a 234 percent increase in
tractors (to 159,000) and a 150 percent in-
crease in cars and trucks on farms (to 392,-
000). These trends have greatly increased
the number of acres the average farm hand is
able to manage. Co-operative buying, mar-
keting, and distribution, plus results from
scientific experimentation, have also aided in
improving the efficiency of Canadian farm-
ing.
During World War II Canada achieved a
high level of production of agricultural com-
modities and was a major source of Allied food
requirements. This contribution was made
possible largely by the Canadian Government,
which provided economic security for the
farmer by its system of price controls, mar-
keting agreements and subsidies, and guid-
ance by yearly production programs based on
food contracts and on needs indicated by vari-
ous international boards and committees. In
the early war years, mainly because of ship-
ping deficiencies, bread grain production was
reduced and feed grain production increased,
thus making possible a greater output of live-
stock and dairy products.
Since the war the agricultural pattern has
been readjusted, the principal consideration
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being Canada's future market for farm prod-
ucts. Each year's production of various com-
modities is based on decisions of the Domin-
ion-Provincial Agricultural Conferences which
meet in December. Without government co-
operation and support given to the farmer,
the transition to postwar agriculture would
not have been so easily effected.
Although part of the British market has
now been lost, Canada continues to place re-
liance on British needs as a basis for planning
agricultural production. During the war
Canada and the UK negotiated a series of food
contracts; the principal? products involved
were wheat, bacon and pork products, beef,
evaporated milk, eggs, poultry, and processed
fruits and vegetables. The principal contract
now in effect with the UK is the four-year
wheat agreement for 1946-50. It specifies a
price of $2 per bushel for 140 million bushels
to be exported to the UK in 1949-50. Other
major UK contracts are for bacon, cheese, and
eggs, but the quantities involved are generally
smaller than in previous years. The few food
contracts presently in effect are in marked
contrast to the number of approximately
twenty existing in 1945.
Canada's role as a major source of offshore
purchases under the ECA program has tem-
porarily eased the postwar marketing prob-
lem, which has also been alleviated by in-
creased exports of cattle and beef, dairy prod-
ucts, poultry and eggs to the US. In some
cases where new markets for agricultural
products could not be found, it was only by
increased domestic consumption or decreased
production that the situation was relieved.
Canadian wheat and flour are sold principally
to the UK, and when ECA funds were tem-
porarily unavailable for their purchase, a
major problem arose. Although the British
intend to honor the wheat contract in its last
year, aided by US release of ECA funds at the
Washington Conference, Canadian marketing
prospects in the UK for 1950-51 under the In-
ternational Wheat Agreement are not certain.
The following table summarizes the produc-
tion and export of major agricultural com-
modities in Canada during prewar and post-
war years.
CANADA: Estimated Production and Trade of Major Food Commodities in 1947 and 1948
Compared with the 1935-39 Averages.
Production
Exports
1935-39
average
1947
1948 1935-39
average
1947
(thousand metric tons)
Wheat
8,501
9,163
10,703
4,925
5,306
Oats
5,214
4,298
5,534
216
139
Barley
1,935
3,078
3,375
305
22
Rye
233
336
644
66
267
Potatoes
1,752
2,046
2,303
14
45
Meat *
643
966
917
88
186
Creamery butter
116
132
128
3
1.4
Cheddar cheese
54
54
39.2
36
25.2
Canned milk
45
113
133
10.9
27.1
Powdered milk
12.2
31.7
37.1
2.5
9.2
Eggs (million)
2,640
4,484
4,214
87
1,074
* Excluding edible offal, lard, and poultry meat.
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Livestock Numbers in Thousands as of 1 December of Various Periods
(except as noted)
23
1935-39
average
/947
1948
Cattle
8,246
8,944
8,251
Hogs
4,078
5,381
4,604
Sheep
2,650
1,587
1,322
Poultry
40,077*
47,310
40,000
* Average 1934-1938.
The 1949 crop output is expected to be some-
what below the 1948 harvest principally owing
to a summer drought and abnormally high
August temperature which caused premature
ripening of grain over large sections of the
Prairie provinces. Total 1949 production of
the four principal grains was estimated as
of September 1949 at approximately 17,749
thousand metric tons compared to the 1948
harvest of 20,256 thousand metric tons, or a
reduction of approximately 12 percent. In
addition to the decrease in feed grain produc-
tion, August estimates of the 1949 hay crop
indicated a total 1949 output approximately
one-third below that of 1948. These reduced
grain and forage supplies are expected to
cause a decrease in the exportable surplus of
these commodities as well as declines in pro-
duction and exports of livestock products.
Canada, with large exportable surpluses of
grain, meat, and dairy products, has a high
domestic nutritional standard. Civilian con-
sumption has increased over the prewar levels,
owing partly to greater production as well as
to the higher incomes of the Canadian people.
Food imports are principally of commodities
not well adapted to production in Canada:
fresh fruits 'and vegetables, sugar and sugar
products, coffee, tea, and some fats and oils.
The kind and quantity of food imports are
of such nature, however, that Canada can be
considered self-sufficient in time of an emer-
gency. In the event of war a higher output
of food could be effected, as in World War II.
b. Forestry.
Canada's forests are at present one of its
most productive assets. Wood, wood prod-
ucts, and paper rank first both in net value
of production and in net value of exports, in
1948 contributing 31 percent of the latter.
The largest single export is newsprint, in the
production of which Canada leads all coun-
tries; it is estimated that three-fifths of all
newspaper pages appearing in the world are
on Canadian newsprint. In 1948 Canada ex-
ported 80 percent of its 4.6 million ton produc-
tion of newsprint to the United States, while
shipments to other countries, 72 in all, were
decreasing because of the world shortage of
dollars. Canada is also the world's second
largest producer and exporter of pulp; in
1948, 1.7 million tons were exported out of a
total production of 7.4 million tons.
Productive forests cover 813,000 square
miles, of which 435,000 square miles are
economically accessible at present. The
largest amounts of accessible merchantable
timber are in Quebec, Ontario, and British
Columbia, in that order. Approximately 95
percent of the Canadian timber cut consists
of softwoods?principally spruce, Douglas fir,
pine, hemlock, and cedar.
Nearly every division of the wood, pulp, and
paper industries has been increasing produc-
tion in the past few years, mainly by modern-
ization and expansion of existing plants
rather than by building new ones; few new
paper mills are being erected because of high
building costs, the idle capacity existing in
other nations, and the uncertainty of sus-
tained demand. Decreased prices and fall-
ing export markets are expected to affect the
industry's future.
In the less important field of lumber pro-
duction 1947 was the peak year; 1948 unoffi-
cial estimates show a slight production de-
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crease. Normally about 50 percent of Cana-
dian lumber production is exported, but in
1948 reduced UK purchases and a decreased
demand for lower-grade lumber increased the
available domestic supply. Although lum-
bering prosperity is expected to continue in
Canada, a diminishing supply of high-grade
lumber, the UK's dollar shortage, and the
tendency to convert wood to pulp and paper
are having an effect on the industry. The
1949 cut is expected to be less than in recent
years.
c. Fisheries.
Commercial fishing in Canada antedates
the period of European settlement. Though
its relative importance in the Canadian econ-
omy has inevitably declined, fishing has con-
tinued a major industry, and Canada today
ranks about fifth in world fish production.
On the Atlantic Coast the principal catches
are cod and lobster, and on the Pacific Coast
salmon, herring, and halibut. The fresh-
water fish industry, centered in Manitoba,
normally produces about one-tenth of the
total.
Both employment in the industry and the
marketed value of catches have increased since
before World War II. Immediately after the
war there were fewer vessels engaged in fish-
ing than in the prewar period, but they were
in general much larger and better equipped.
The number of sailing vessels and small boats
had decreased. Canada has thus been placed
in a better competitive position as other major
fish exporting nations continue to increase
their production.
The principal export market for Canadian
fishery products is the US. The UK has in
the past received a large proportion of canned
fish exports, but exchange difficulties have
necessitated a restriction in these purchases
since 1947. Salt fish markets are found
largely in Latin America and the US.
3. Fuels and Power.
a. Electric Power.
Electric power is of central importance to
Canadian industry. With Canada's own coal
deposits located at the extremities of the
country, the industrial region of Ontario and
Quebec is mainly dependent for its power on
coal imported from the US and on electricity
generated from Canadian water resources.
These resources are vast in extent and have
been greatly developed in recent years; but,
as of the end of 1948, some four-fifths of the
estimated minimum potential resources still
remain to be exploited. Installed hydro-
electric capacity at this date was approxi-
mately 8,109,000 kilowatts; and the annual
per capita production of all electric power was
over 3,300 kilowatt hours compared to about
2,300 in the US and about 900 in the UK.
Thermally generated power is an insignificant
factor in Canada, accounting for only 2.9 per-
cent of the total as contrasted with 74.2 per-
cent in the US. Electric power development
has taken place much more under public
auspices than it has in the US.
Hydroelectric development in Canada has
been rapid over the past decade but still has
not kept up with industry's growing demands.
Average monthly production in 1948, for ex-
ample, was 57 percent greater than in 1939.
About 1,492,000 kilowatts were added to the
developed water power capacity during World
War II and, after a lull in 1945 and 1946, con-
struction of new power plants began to in-
crease again in 1947. Undertakings pres-
ently planned for the next five years will prob-
ably increase over-all capacity about 20 per-
cent above that installed at the end of 1948.
Ontario and Quebec, which last year con-
sumed 81 percent of all Canadian electric
power, still suffer from deficiencies in the so-
called "acute fuel zone" of their southern in-
dustrial region. To alleviate this situation
these provinces have planned the largest ex-
pansion programs in the Dominion and con-
struction is under way on some of the projects,
thus promising material improvement in the
situation in the near future.
Despite this increasing capacity, a severe
shortage necessitating restrictions on the use
of power existed in Ontario in 1948 owing to
lack of planning for increased industrial use
and to low rainfall in 1947 and 1948. It is
estimated that Ontario, which produces about
43 percent of Canadian industrial products,
was losing about $50 million annually because
of power shortages. On 30 November 1948
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an increase in power quotas for southern On-
tario went into effect and has temporarily
given relief, but the harnessing of the St.
Lawrence River may be the only long-range
solution. Canadians are awaiting the de-
cision of the US Congress on such joint de-
velopments as the St. Lawrence project.
b. Coal.
Canada currently produces only about a
third of its requirements in coal. Annual pro-
duction, which reached 18.4 million tons in
1948 (a 16 percent increase over 1947 output),
has in the past decade failed to keep pace with
rising industrial needs, as is seen by a com-
parison with the prewar period when only
about half of requirements were imported.
Canada's coal deposits are, however, exten-
sive: it is estimated that, at an average an-
nual production of 18 million tons, reserves *
would last 2,700 years. The present low pro-
duction is due to the location of the coal de-
posits in the western and eastern provinces,
principally in Alberta, British Columbia, and
Nova Scotia, at such distances from the indus-
trial centers of Ontario and Quebec that these
provinces, lacking any coal themselves, find
it cheaper to import the bulk of their require-
ments from the US. By improvement of
domestic marketing and production methods,
greater shipments to central Canada, and per-
haps exports to western states in the US, Ca-
nadian coal production could be boosted with
a tremendous saving in US dollars, even
though imports of certain types of coal from
the US would continue. While government
subsidies and special freight rates have helped
to further these objectives, the present sub-
sidies would have to be greatly increased and
freight rates further lowered before Canadian
coal could compete seriously with imported
US coal in central Canada.
c. Petroleum and Natural Gas.
Despite a rapidly rising domestic produc-
tion, Canada is still heavily dependent on im-
ports for its oil supplies. Though the 1948
production of 12.3 million barrels was 60 per-
cent greater than that of 1947, it still met
only some 14 percent of Canada's rising con-
* Estimated at 49 billion net tons recoverable and
99 billion net tons available.
sumption requirements. It is hoped, how-
ever, that 1949 production may approach 20
percent of requirements.
The bulk of the imports are in the form of
crude, the refining being done in Canada. In
1948 Venezuela was the principal supplier of
Canada's crude oil imports, with the US the
second most important source. The volun-
tary decrease in imports from the US has in-
tensified a trend toward increased imports
from Latin America and other sources.
The rich Alberta oil fields, moreover, are
becoming an increasingly important factor.
These fields have been producing at the rate
of more than a million barrels a month since
June 1948 and could produce much more if
economical transportation facilities were
available to move the oil to the main areas of
consumption in central Canada, or if there
were greater refining and storage capacities
in the Prairie provinces. Even at the Janu-
ary 1949 production rate, these new fields are
estimated to be responsible for savings of for-
eign exchange amounting to $40 million per
year. Alberta produced 88 percent of Cana-
dian production in 1948 and Saskatchewan
and the Northwest Territories most of the re-
mainder; exploration and development work
goes forward, some $50 million being spent
for this purpose in 1948.
A huge supply of petroleum is located in
the bituminous sands along the Athabaska
River near Fort McMurray in Alberta. Esti-
mates of these deposits range up to 250 billion
barrels. Although not all of this oil would
be recoverable, the above-cited estimate is over
three times the rest of the world's presently
proved reserves. Current research is expected
to develop eventually techniques making the
economical exploitation of these reserves pos-
sible.
Natural gas, still relatively unimportant as
a fuel, is gaining more significance. Produc-
tion in 1948 was estimated at 58.9 billion cubic
feet, approximately 84 percent of it in Alberta,
with Ontario, New Brunswick, and Saskatche-
wan producing small amounts. Large known
reserves of natural gas exist in Alberta, and
several companies are trying to arrange ex-
ports to the US. The province of Alberta,
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however, wishes first to assure that adequate
supplies are available for its own use.
4. Mining and Mineral Industries.
a. Iron Ore.
US-Canadian interdependence is particu-
larly evident in iron and steel production.
Aside from the extensive low-grade produc-
tion of the Wabana mines in Newfoundland
and the steel mill at Sydney, Nova Scotia,
which depends on them, the Canadian indus-
try forms a sort of small-scale complement to
the American on the other side of the Great
Lakes, shipping most of its own ore to US
mills and relying largely on American ore to
supply the Canadian mills. This situation is
due mainly to the fact that the most economi-
cal furnace mixture consists of high-grade Ca-
nadian and lower-grade US ore. In concrete
terms, the Helen and Steep Rock mines in the
Lake Superior region now send to the US
about four-fifths of their annual production
(1,206,829 tons,* according to preliminary
figures for 1948) ; while Canadian mills,
mainly in southern Ontario, imported in 1948
3,025,720 tons from American mines, this
being about three-quarters of total imports.
Though Canada's self-sufficiency on net bal-
ance is increasing as iron ore production
steadily rises, this mutually beneficial traffic
across the Great Lakes will continue to be a
heavy one.
The upward trend in Canadian iron ore pro-
duction is very marked. The rich Steep Rock
mine has not yet reached full production;
with the $8 million of new capital it has re-
cently obtained, it plans to triple its annual
output to three million tons within a few
* Tons are long tons in this entire section.
years. The Wabana mines in Newfoundland,
with their low mining and transportation
costs, are also capable of producing much
more than the 1948 record of 1,486,056 tons;
but this development is of little significance
to the US, since the ore's comparatively high
silica and phosphorous content restricts its
use in most US and Canadian mills. Of much
greater importance is the development just
getting under way in a 30,000-square-mile area
of Quebec-Labrador which contains large de-
posits of high-grade iron ore. By the end of
1948, 300 million tons of ore were proved, the
minimum considered necessary to warrant an
investment of about $250 million to put the
existing concessions into production. Con-
cessions are held by six companies, including
the M. A. Hanna Company of Cleveland, Ohio,
associated with the Hollinger interests of
Canada. A charter has been granted by the
Dominion Government for a 360-mile railway
to carry the ore to the St. Lawrence. Full
development of the deposits, however, will pre-
sumably depend on construction of the St.
Lawrence waterway, and the assurance of
markets for approximately nine million tons
of ore annually.
Canadian reserves of iron ore are known
to be extensive and further prospecting still
goes on. In addition to the fuller exploration
of the Quebec-Labrador area, there are gov-
ernment and private drilling operations going
on in Ontario, and in 1948 an aerial magnetic
survey of a large area in eastern Ontario was
made by the Department of Mines and Re-
sources. A recent estimate of reserves runs
as follows, the figures being in millions of
long tons:
Actual
Total
Newfoundland
1200
2500
Quebec-Labrador
300
300 -I-
New Brunswick (Bathurst)
0.6
0.6
Ontario
32.0
547.6
British Columbia (Texada)
1.5
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b. Steel.
Out of some 50 firms in the industry, three
steel corporations, centered in different parts
of the country and engaged in all stages of
production from ore to finished steel, are the
principal basic steel producers. The Steel
Company of Canada's mills in the Hamilton
area on Lake Ontario depend primarily on
their own ore mines in the US; Algoma Steel
Corporation runs its plant at Sault Ste. Marie
at the head of Lake Huron largely on ore from
the Ontario mines operated by a subsidiary of
the company; and the Dominion Steel and
Coal Corporation at Sydney, Nova Scotia, gets
its iron ore from the company-owned and
operated Wabana mines in Newfoundland,
supplemented by high-grade ore imported
from overseas. Considerable expansion took
place during World War II, both in the pri-
mary steel industry and in such secondary
steel industries as shipbuilding, aircraft, and
motor vehicles, in order to meet Canada's de-
fense needs.
Although the 1948 basic steel output of
3,150,758 tons reached an all-time peak and
production in the first six months of 1949
was at an even higher rate, the Canadian in-
dustry has nevertheless fallen behind the gen-
eral industrial development of the country.
Net imports totalling about one-fourth of
domestic production were in 1948 necessary
to meet Canada's requirements. Canadian
steel production, indeed, is on a rough per
capita basis only one-third that of the US.
Some expansion is being effected, but the in-
dustry is disturbed by rising costs and the
fear of overproduction, and no vast enlarge-
ment is planned. Even the offer of govern-
Mineral or metal
ment loans in January 1949 failed to induce
any company to develop new primary units of
production.
c. Non-Ferrous Metals.
With few exceptions production of the
major non-ferrous metals has followed a
fairly consistent pattern, having reached a
wartime peak, decreased through 1946, and
from 1947 to the present shown an upward
trend. Since Canada is such an important
source of many of these non-ferrous minerals,
its production will continue to reflect world
demand.
During the war years 1942-1945, Canada
accounted for seven percent of the total vol-
ume of US supply of strategic and critical
minerals, excluding iron ore and petroleum.
Significant percentages of US supply of spe-
cific minerals which were met by imports from
Canada are shown in the table below.
Canadian metals are of great importance
to the US, which has been purchasing nickel,
copper, lead, zinc, and cadmium for stockpil-
ing purposes. Throughout World War II
Canada was able to help supply the Allied
countries with these and many other metals,
and the strategic value to the US of rich Ca-
nadian minerals is great. The well-equipped
Canadian base metal mines and metallurgical
plants are capable of a production increase as
in World War II should a future emergency
arise.
(1) Nickel.
Canada has been the world leader in mine
production of nickel for many years, output
(in terms of metal content) averaging about
three-quarters of the world total. The In-
ternational Nickel Company of Canada, Ltd.
Percentage of US World War II
Supply Accounted for by Imports
from Canada
Aluminum
15
Asbestos
89
Cobalt
8
Mercury
8
Nickel
85
Platinum Group Metals
49
Selenium
18
Zinc
9
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and the Falconbridge Nickel Mines, Ltd. are
the two most important producers, the nickel-
copper mines of the Sudbury district of On-
tario providing nearly all the Canadian out-
put. Production is largely governed by world
demand; average consumption of refined
nickel by Canadian foundries amounts to only
about 1,800 tons annually. Increases in ex-
ports to the US have resulted from US stock-
piling and increased consumption in the steel
industry.
(2) Copper.
Canada's position in world copper mine pro-
duction varies from third to fourth, depend-
ing in part on the current level of nickel pro-
duction, since approximately 50 percent of
Canadian copper is obtained from the Sud-
bury deposits mentioned above. From 1941
through 1946 mine production steadily de-
creased, but since then it has climbed to about
three-quarters of the 1940 peak production.
Most of Canada's primary copper production
is refined domestically. Greater domestic
consumption of refined copper in recent years
has made the export surplus smaller than in
the prewar period. The UK is the principal
customer for Canadian copper, although the
US took a slightly increased proportion during
the war. In 1946 and 1947 virtually all Ca-
nadian exports went to the UK. In 1948,
however, British imports being smaller, the
US has been able to purchase copper in line
with its stockpiling objectives.
(3) Zinc.
Canada ranks second in world zinc produc-
tion (mine output), and 1948's 12 percent in-
crease in mine production over 1947 was a re-
versal of the otherwise steady production de-
creases since 1943. The demand for Cana-
dian high-grade zinc is increasing in both
Canada and the US. Before World War II
the UK was the largest importer of Canadian
zinc but in the later war years the US took
the largest share. In 1948 Canada was the
primary source of US imports.
(4) Lead.
Canada is the fourth largest mine producer
of lead. In 1948 mine output was 4 percent
above 1947 but considerably below the war-
time level. Domestic consumption has nearly
tripled compared to 1938. The US and the
UK together in 1948 imported about 96 per-
cent of Canadian exports of refined lead.
(5) Aluminum.
Although Canada must import bauxite and
other raw materials in order to produce alumi-
num, the Canadian aluminum industry is the
world's second largest, a situation made pos-
sible by the abundant low-cost hydroelectric
power in Quebec. In fact, aluminum is one
of the few metals the world price of which
tends to be set by Canada as the world's
lowest-cost producer. Canadian production
in 1948 was less than that during the wartime
peak, but Canada has over 20 percent of esti-
mated world capacity, which is capable of
more rapid expansion than that of the world's
principal producer, the US. The Canadian
aluminum industry is largely devoted to ex-
ports, domestic consumption utilizing only a
small part of Canadian output. The UK has
for many years been the largest purchaser of
Canadian aluminum, current imports being
ECA financed. During the war the US took
a larger share of Canadian exports than ever
before, and recently, because of increased US
needs, imports from Canada have risen. The
US takes nearly all of Canadian aluminum
scrap exports and substantial supplies of
aluminum bars and ingots.
(6) Platinum and Platinum Group Metals.
Accurate statistics for the USSR are not
available, but Canada is apparently the prin-
cipal world producer of refined platinum and
platinum group metals, a position held since
1934. The US is the largest consumer of
platinum metals; in 1948 Canada supplied
nearly one-half of US imports.
(7) Gold.
Canada ranks about third in world mine
output and since 1930 gold has been the prin-
cipal contributor in value to Canadian min-
eral output. Yet this industry faces the prob-
lems of rising production costs and increased
labor payrolls, while the fixed selling price of
gold remains at $35 an ounce. The return of
the Canadian dollar to parity with the US
dollar in July 1946 added to the industry's
difficulties at the same time that expansion
was being aided by lifting the restrictions on
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development work. Marginal mines have
been aided in meeting inflated costs by govern-
ment financial assistance and the labor situ-
ation has been helped by the importation of
displaced persons, yet the industry is still
operating below capacity. Production in
1948, although showing a 14 percent increase
over 1947, was 35 percent below the record
1941 output; production in each of the years
1936 to 1943 inclusive exceeded that in 1948.
(8) Silver.
Canada is among the world's leading silver
producers. Production of silver (bullion and
ores in concentrates) increased 25 percent
in 1948 compared to the previous year after
having decreased each year since 1940, yet
exports declined 15 percent from the 1947
level. The principal customer for Canadian
silver is the US.
(9) Uranium and Other Non-Ferrous
Metals.
One of the world's principal uranium mines
is located in Canada. During the past year
active exploration has taken place and Canada
is presumably one of the two leading pro-
ducers of uranium ores.
In addition to the metals described above,
bismuth, cadmium, chromite, cobalt, mag-
nesium, molybdenum, pitchblende products,
titanium, and tungsten are among the im-
portant non-ferrous metals found in signifi-
cant quantities in Canada.
d. Non-metallic Minerals?Asbestos.
Canada is, and has been for many years,
the world's principal producer of asbestos, and
its proximity to the world's largest market,
the US, has obvious advantages for both coun-
tries, particularly since the US is greatly de-
ficient in this strategic material.
Production in 1948 set a record and was
about' two-thirds of the world total, but a
five-month strike ended in July 1949 will un-
doubtedly affect 1949 output. The industry
is centered in Quebec, the asbestos mined
being principally of the chrysotile variety.
With the present world shortage of raw and
manufactured asbestos despite increasing
world production, the outlook for Canadian
asbestos producers is excellent. Well over 90
percent of the Canadian output is exported,
and although the US is the principal market,
it goes to all parts of the world.
Canadian deposits of asbestos are the larg-
est known in the world. Prospecting, expan-
sion, and improvement of present plants and
new plant construction now being undertaken
are adding to Canadian productive capacity
and decreasing dependence on imports of cer-
tain manufactured asbestos articles. Al-
though most exports are at present in the un-
manufactured state, in the future Canada will
be an important source of manufactured as-
bestos products as well.
5. Manufacturing.
The chief development of Canadian manu-
facturing has taken place in the twentieth
century. Even before 1939, Canada was the
second largest manufacturing country in the
British Commonwealth. As far back as World
War I the gross value of manufactured prod-
ucts had begun to exceed the gross value of
primary commodities. World Wars I and II,
the latter in particular, created a situation in
which Canada became an important source of
food and armaments and in which the basis
for peacetime industrial development was laid.
World War II led to a tremendous expan-
sion and diversification of Canadian manu-
facturing, industrial production reaching its
height in 1944. The change from war to
peacetime economy adversely affected manu-
facturing production and employment in
1945 and 1946, and major labor disturbances
in the latter year added to the difficulties.
Canada has now entered a new manufactur-
ing era; industrial expansion has been rapid
in the past two years and industrial produc-
tion as a whole now exceeds that of any former
peacetime period. Manufacturing employed
the largest group of workers in 1947, 27 per-
cent of the total, having now passed agricul-
tural employment for the first time in Can-
ada's peacetime history. The US stake in
Canadian manufacturing is important; US
direct investment accounts for over 20 percent
of the total capital in Canadian manufactur-
ing plants.
a. Food Processing Industries.
Food processing industries have expanded
considerably during World War II and the
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postwar years, and at present contribute
about one-quarter of the total output of manu-
factured products. Exports of agricultural
raw products in 1947 were two and one-half
times the 1939 level; whereas exports of agri-
cultural manufactured products have in-
creased fivefold.
The leading industry in this group is
slaughtering and meat packing. The 1948
estimated animal slaughterings were above
the prewar averages, yet have decreased from
wartime peaks and in 1949 a decrease from
1948 levels is expected.
With the lifting of the embargo on exports
of beef cattle to the US, 1948 marketings were
heavy but the 1949 total of live and slaugh-
tered cattle exports to the US is expected to
decline. Canned meat exports in 1948 were
considerably above prewar, but less than one-
half of the 1947 figure.
Other important industries are flour mill-
ing and the processing of dairy products.
Most types of packaged foods are also pro-
duced in Canada, and tobacco, fats, oils and
oilseeds are processed from domestic stocks
and imports.
b. Textiles.
Although this industry is important, Can-
ada is not self-sufficient in textile production.
Industries in this group do, however, repre-
sent nearly all stages of manufacture. Mod-
ernization and expansion in the industry and
the comparatively low prices of Canadian tex-
tile products have put them on a much better
competitive footing with foreign nations than
in prewar days. Many mills now have the
most modern machinery available.
The year 1948 was one of achievement in
the textile industry, yet left the industry still
uncertain of its position because of foreign
competition. Although production is below
wartime levels and backlogs of postwar orders
have been largely filled, the industry is still
operating above prewar levels. Since April
1949, output has decreased because of heavy
imports, particularly from the UK. Yet the
UK, whose textile and textile products exports
to Canada earn nearly one-half of the dollars
earned by British sales in Canada, has not
in the past been able to fulfill its export target
in textiles in Canada, partly because of high
prices. Under present conditions Canadians
have been meeting outside competition by in-
creased quality and efficiency, but expansion
of facilities has been cautious lately because
of the uncertainty as to the extent of future
foreign competition.
c. Chemicals and Allied Products.
The extensive and growing chemical indus-
try of Canada is mainly concerned with the
processing of primary materials and will be
dependent on large imports until such time as
other domestic industries expand greatly. In
a few chemical industries, location, raw ma-
terial availability, or cheap fuel give Canada
an advantage but these are the exception.
One of the striking features of the Cana-
dian chemical industry is its physical and
financial dependence on the US. Nine-tenths
of Canadian imports of chemicals currently
come from the US as well as most imports of
chemical industrial machinery; the US is also
Canada's best customer for chemical exports,
taking two-fifths of the total. The industry
is largely US owned; over two-thirds of the
total investment is estimated to be controlled
in the US. Much of the remainder is con-
trolled in the UK. Through this foreign con-
trol, however, Canada gains ready access to
extensive chemical patents.
Nearly all phases of the industry are at
present expanding, aided in the past few years
by reconversion of government wartime chem-
ical projects. The monthly index of indus-
trial production of chemical products in 1948
(1935-39 equals 100) averaged 182.2 com-
pared to 410.2 in 1943 and 112.7 in 1939. The
gross value of production of chemicals and
allied products in 1948 was $554,000,000.
The manufacture of fertilizer is important
to Canada's agricultural production. In the
case of nitrogen fertilizers, at present in short
world supply, Canada is the world's third
largest exporter. Phosphate rock, used in the
production of superphosphates, and potash
must be imported from the US although pot-
ash discoveries in Saskatchewan will probably
change the picture in regard to that mineral.
The heavy chemicals industry in Canada is
strong and diversified, supplying about 70 per-
cent of Canadian needs and also many im-
portant exports. Peacetime operations in
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this industry have already absorbed much of
the wartime expansion. Sulphuric acid pro-
duction has expanded greatly but is mainly
dependent upon imports of sulphur for its raw
material, although Canada .is an exporter of
pyrites. Salt production is continuing to in-
crease, but substantial imports are still
needed.
In the organic chemicals field, much expan-
sion and new development has taken place,
particularly in the production of acetylene
products, coal tar derivatives, synthetic rub-
ber, resins, and plastics. This expansion is
decreasing Canada's hitherto great reliance
on imports of these products.
The wartime-constructed plant of the Poly-
mer Corporation in southern Ontario pro-
duces two of the most important types of
synthetic rubber, as well as the principal com-
ponents for them. Production of synthetic
rubber reached a peak of 50,981 long tons in
1946 and has decreased to an estimated 40,455
long tons in 1948. Although present rubber
consumption in Canada is two and one-half
that of 1938, consumption of synthetic rubber
has decreased from three-fourths of total con-
sumption in 1946 to one-third of the total in
1948. The US was the largest foreign cus-
tomer in 1948.
Canada is a major world producer in the
field of plastics and the industry of plastic
materials and plastics manufacturing is one
of the fastest growing in the country. Sales
in the Canadian plastics industry totaled
$62,300,000 in 1948, which is nearly nine times
the 1939 value. Approximately 90 percent of
the Canadian plastics industry is controlled
by subsidiaries or branch plants of US firms.
Although important in dollar value of pro-
duction, medicinals and pharmaceuticals,
paints and varnishes, and soaps and deter-
gents are produced principally for domestic
use and in some cases the supply produced
does not meet demand. Furthermore, al-
though these industries are expanding, they
are not of as great importance to the US and
other countries as the ones considered in
greater detail.
? d. Machinery and Related Products.
Although machinery is still one of Canada's
major imports, the domestic development in
this strategic field is going ahead rapidly and
the capability exists for still further expansion
in wartime. The latest available statistics on
the machinery industry in Canada are for
1947, but output for 1948 was above that of
1947. The value of 1947 production of indus-
trial machinery was $200.8 million, 28 percent
above that of 1946.*
1948 was a record year for the railway roll-
ing stock industry and at least during 1949
this capacity business is expected to continue,
bolstered by both large foreign and domestic
orders. Had more Canadian steel been avail-
able and more hard currency obtainable by
Canada's customers, 1948 would have been an
even more successful year.
The farm implements and machinery in-
dustry, operating at peak capacity, was not
able to meet demand during 1948. This in-
dustry, continually expanding with large ex-
ports, nevertheless is dependent on the US
for many parts and also for supplying a large
portion of Canada's domestic requirements.
Production of farm implements and machin-
ery (not including large tractors) in 1947 was
valued at approximately $80 million, 35 per-
cent above the value of 1946 production. In
1948 Canadian sales of agricultural machin-
ery to the US totalled $67 million and imports
from the US $128 million. A most significant
increase has taken place in the past two years
in the tractor industry; in 1948 the US was
by far the largest customer for Canadian trac-
tors.
The electrical apparatus and supplies in-
dustry is one of the principal manufacturing
industries in Canada. Electronic and nu-
clear research at present being conducted in
Canada, and the fact that Canada is one of
the world's largest uranium producers, may
be expected to place Canada among the lead-
ers when new developments in this field are
utilized industrially.
Canada is a leading producer of crude arti-
ficial abrasives such as aluminum oxide and
silicon carbide. The production value of
crude artificial abrasives in 1947 was $21.6
million, two-thirds of which was exported,
principally to the US.
* Excluding agricultural and electrical machinery.
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e. Other Industries.
Production in the shipbuilding industry in
Canada has declined greatly since the war
years, the major consideration at present be-
ing a contracted world market for merchant
vessel tonnage. Deliveries of new merchant
vessels in 1948 totaled 161,664 gross tons,
nearly 50 percent above 1947 deliveries. Nev-
ertheless tonnage under construction in the
last quarter of 1948 had dropped 53 percent
from the first quarter. It is estimated that
a total of only 85,000 gross tons will be de-
livered in 1949, partially attributable to ac-
celerated, subsidized construction programs in
other countries and sharply increased Cana-
dian construction costs coupled with a short-
age of dollars experienced by many Canadian
customers. In May 1948, the government an-
nounced a long-range plan of granting con-
cessions to encourage shipping companies to
sell out-of-date vessels to foreign governments
and have replacements built in Canadian
yards as a solution to the problems of sus-
taining Canadian shipbuilding activity and
modernizing Canada's merchant marine.
Present high shipbuilding costs will preclude
many shipowners from, taking advantage of
the program.
The automobile industry produced 267,760
passenger and commercial vehicles in 1948,
only a slight increase in production over 1947
because of: (1) the steel shortage; (2) a pro-
tracted strike in a leading auto parts plant;
and (3) restrictions on imports of parts from
the US. Total Canadian imports of vehicles
declined steeply, particularly from the US.
Canadian exports of vehicles also declined be-
cause of exchange restrictions imposed by
Canada's principal customers.
Construction awards totalling $954 million
in 1948 were 33 percent above 1947 awards,
constituting an all-time record. Material
and skilled labor shortages have been largely
overcome and in 1949 the industry is expected
to operate a peak capacity. Other important
Canadian industries include a wide range of
consumers' goods produced mainly for domes-
tic consumption.
6. Finance.
a. Currency.
The Canadian dollar, the monetary unit of
Canada, was devalued on 20 September 1949
to $US 0.90. The unofficial value at New York
had long been at a discount with US cur-
rency. At the beginning of World War
II the official selling rate of the Canadian
dollar fell to a discount at New York; the
Canadian Government pegged this rate in
September 1939 and it remained unchanged
until 15 October 1945 when it again fell. On
5 July 1946 the Canadian Government ap-
preciated, the Canadian dollar by bringing
its official rate to a parity with the US dollar,
and a corresponding adjustment was made in
relation to sterling.
As to the issuance of currency, Canada has
had three types of note issues, but Bank of
Canada notes will soon become the only type
of paper currency in circulation in Canada
since by government action they are the only
notes issued since 1 January 1945. The Roy-
al Canadian Mint produces the coins used in
everyday business transactions. Canadian
paper currency and subsidiary coins gener-
ally resemble in size and weight US currency
of similar denominations.
During 1948 the usual inflationary forces
of an expanding postwar economy were oper-
ating. It is estimated that this inflation
cost Canadian consumers approximately one
billion dollars during 1948. One of the prin-
cipal causes has been the increased price of
imported raw materials used in Canadian
manufacturing. Other factors causing price
increases were increased labor and produc-
tion costs, the pressure of expanding pur-
chasing power in relation to the availability
of goods and services, and the removal or re-
duction of subsidies. Indicative of inflation,
the amount of money in circulation in April
1949 was 5 percent more than one year pre-
viously and over four times the 1939 average.
Money supply was also 5 percent above the
comparative figure for one year previously
and over three times the 1939 average. Nev-
ertheless Canada's inflation has not been so
severe as in many other countries partially
because of the success of wartime price con-
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trol and gradual and orderly postwar decon-
trol.
The Dominion Government budget policy
in the past two years has somewhat countered
inflation (see below) , as has the arrival of
a buyers' market for a few Canadian prod-
ucts. Nevertheless the first decrease for 23
months in the cost-of-living index (1935-39
equals 100) took place in December 1948
when it dropped slightly to 158.9. At present
it is again rising slightly and reached a
record level of 162.8 in August 1949.
b. Central Banking.
The Bank of Canada, the government-
owned central bank since 1935, functions as
banking agent and financial adviser to the
Dominion Government. This bank does not
compete with chartered banks in the field of
commercial banking and does not accept de-
posits from individuals. It may buy and sell
securities in the open market, discount securi-
ties and commercial bills, buy and sell bullion,
and deal in foreign exchange. The Bank of
Canada may vary the amount of reserves re-
quired of the banking system to be held
against deposits, thus controlling the total
volume of bank credit. The controls exer-
cised and advice given by the Bank of Canada
greatly influence the lending operations of
the commercial banks, the latter having few
regulations to govern them. The head office
is at Ottawa and it maintains an agency in
each Canadian province. A subsidiary of the
Bank of Canada, the Industrial Development
Bank, supplements the activities of other
leading agencies by making loans only to in-
dustrial enterprises under certain conditions
and is prohibited from engaging in deposit
banking.
c. Commercial Banking.
Unlike the US, where thousands of sep-
arately owned banks exist, there are only ten
chartered banks in Canada at present, with
3,385 branches and sub-agencies in the
Dominion in 1948 and extensive representa-
tion abroad. These banks have in general
the same facilities and services as do US
banks.
A great expansion of assets and of bank
activities has taken place since the beginning
33
of World War II. The monthly average of
total assets of chartered banks in 1948 was
$8,140 million compared to $3,592 million in
1939. The principal origin of this increase
in assets was the acquisition of government
securities during the war, the vast wartime
economic expansion being achieved with a
minimum of additional bank credit in the
form of loans and discounts. In the postwar
period the upward trend in bank holdings
of the government debt has ended. The rate
of increase in bank loans to business and in-
dividuals, evident since 1945, is now leveling
off.
The branch banking system has an im-
portant effect on the soundness of banking
activity. In Canada there has been no bank
failure since 1923, although there have been
five major tests of the strength and adapta-
bility of the Canadian banking system since
then.
d. Other Banks.
In Canada the great bulk of the current
savings of the people is deposited in the Cana-
dian chartered banks described above and in
trust and loan companies. Special savings
banks include the Post Office Savings Bank,
Provincial Government savings institutions,
and two savings banks in the Province of
Quebec. In 1945 there were also 2,219 credit
unions in Canada. These various savings
institutions are controlled by either the Do-
minion Government or the Provincial Gov-
ernments under whose jurisdiction they
operate.
e. Government Finance.
During the war years, Canada's expendi-
tures were greater than its revenues, and
this deficit spending was financed largely
through the sale of bonds, of which 84 percent
were sold to the public and 16 percent to
banks. High taxes and heavy surpluses were
maintained as a government policy for the
1947-48 and 1948-49 budgets in order to re-
duce the debt and counter inflation. This is
in line with the announced government policy
of high taxation and budget surpluses in
times of prosperity and lower taxes and, if
necessary, budget deficit in less prosperous
times. The 1949-50 budget proposals aban-
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don this cyclical budget practice in favor of
a tax decrease.
The principal sources of Canadian Govern-
ment revenue are income and excess profits
taxes, customs duties and excise taxes, and
the sales tax. Principal items of expenditure
are interest charges on the debt, departmental
costs and payments, veterans' payments, fam-
ily allowances, and military expenditures.
For the fiscal year 1948-49 total revenue
was estimated at $2,771 million and total ex-
penditures at $2,175 million, leaving an esti-
mated surplus of $595 million. This was $81
million less than the surplus of the previous
year. The budget for 1949-50 proposes exten-
sive tax reductions, and the decreased rev-
enues and increased expenditures would leave
a surplus of about $90 million.
The estimated debt on 31 March 1949 was
$11.7 billion. This is approximately 3.7 times
the 1939 debt, but a reduction over the net
debt of the past three fiscal years, the internal
war-incurred debt having been reduced by
utilization of budget surpluses for that pur-
pose. Canada has made large postwar loans
to foreign governments (see Foreign Trade
and Finance) and is thus a creditor nation in
external indebtedness.
7. Foreign Trade and Finance.
a. Foreign Trade.
The value of Canada's foreign trade per
capita is the highest in the world; the total
value ranks third among nations, and was in
1948 equivalent to approximately 45 percent
of the national income, which may be com-
pared with the figures of 39 percent and 9
percent in the UK and US, respectively.
Canada is predominantly a surplus pro-
ducer of primary materials?grain and other
agricultural products, forest products, metals
and minerals. Supplementary manufactured
items, heavy machinery, some basic commod-
ities, and certain products not indigenous to
Canada must be purchased primarily by ex-
ports of this surplus. During recent years a
great industrial expansion has occurred,
which was at first aided by a highly protective
tariff, but the trend in recent years has been
toward the lowering of trade barriers and an
emphasis on development of industries able
to compete in a world market.
Principal Canadian exports are newsprint
and other forest products, wheat and wheat
flour, minerals, fish and fish products, and
grains other than wheat. Canadian food
products are marketed principally in the UK,
as are small quantities of minerals, forest
products, and fish. The sale of pulp and
paper products (principally newsprint) ac-
counts for approximately 40 percent of the
total value of Canadian exports to the US;
other important Canadian exports to the US
are minerals, cattle, and small quantities of
other agricultural products.
Principal Canadian imports are machinery
and vehicles, petroleum and petroleum prod-
ucts, iron and steel and their products, coal,
and cotton, wool, and textiles. The US is the
principal supplier of most of these imports,
the UK providing mainly wool fabrics, manu-
factured cotton and textiles, autos, and cer-
tain luxury items.
At present Canada faces difficult trade
problems the understanding of which necessi-
tates a review of Canadian trade history. Be-
fore World War II Canada engaged in tri-
angular trade, financing the import surplus
in its merchandise trade with the US by an
export surplus to the 1.4K and other countries.
During World War II two factors helped more
nearly to balance Canadian-US trade by in-
creasing Canadian exports to the US. There
were first the Hyde Park Agreement, in pur-
suit of which the US placed large orders for
Canadian war goods, and second the in-
creased filling by Canada of US import re-
quirements for goods such as wood pulp and
minerals, as traditional European sources of
supply were cut off. This was particularly
important since Canada required military and
capital equipment from the US.
After the war, however, the old trade pat-
tern of a great excess of imports from the US
developed, intensified by a backlog of Cana-
dian consumer demand and a great capital
expansion program. This resulted in a de-
crease of the reserve of gold and US dollar
holdings from $1,500 million at the end of
1945 to about $500 million by November 1947.
This fact, plus the inconvertibility of sterling
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and the necessity of financing Canadian ex-
ports to Europe largely on credit, compelled
Canada to take emergency action to build up
the dwindling reserves of US dollars. There-
fore in November 1947 the Canadian Govern-
ment announced a dollar conservation pro-
gram with the twofold purpose of restricting
expenditures in US dollars by means of import
restrictions and exchange controls, and of in-
creasing earnings of US dollars by expanding
exports to the US. The success of this pro-
gram has been marked. In 1948, the value of
Canadian exports to the US increased 45 per-
cent and the value of imports from the US
was reduced 9 percent. Canada's exchange
position was further aided by the expenditure
of ECA dollars in Canada to the amount of
nearly $600 million in 1948. Canadian hold-
ings of gold and US dollars increased by De-
cember 1948 to $998 million (including a $150
million US loan) , more than double such hold-
ings a year previous.
The Canadian-UK trade pattern has also
been readjusted since the war. In spite of
ECA aid and a Canadian loan, Britain's dollar
difficulties have precluded as high a level of
buying in Canada as formerly, especially since
alternative supplies have become available to
the UK in the sterling area. British bulk pur-
chase contracts for agricultural commodities
have been cut in variety as well as in quantity
of products purchased. The effects of this
curtailment in British buying have been felt
by segments of the Canadian economy, and
the Canadian Government is attempting to
bring UK-Canadian trade nearer to a balance
by encouraging increased importation of UK
products. Failure in some cases of the UK
to deliver (e.g., in the case of textile orders),
plus consumer resistance to high 'UK prices in
many lines as a buyer's market . approaches,
have made this readjustment somewhat diffi-
cult, but progress is being made. (See Table
below.) In 1946 Canada made a loan of $1,250
million to the UK to stimulate purchases. By
April 1948, Canada found it necessary to
freeze the balance of $235 million of this loan
remaining to be drawn; in January 1949, this
unused portion was unfrozen with the provi-
sion that $10 million could be drawn monthly.
35
Since Canada is dependent on imports from
the US, Canada has no choice under present ?
payments difficulties but to increase its de-
pendence on the US market. It is recognized
that this increases Canada's vulnerability to
economic conditions in the US but the neces-
sity of balancing trade on a bilateral basis
outweighs this consideration. Furthermore,
the government feels that Canada cannot af-
ford additional aid to European nations by
granting more export credits than at present,
and Canadian exports are largely of goods not
easily marketed in Latin America.
The following table demonstrates the effec-
tiveness by the end of 1948 of the govern-
ment's trade policy:
CANADIAN TRADE
Trade with the US, UK, and other countries
as a percentage of total Canadian for-
eign trade (based on dollar value)
US
UK
Other
countries
Total
Etports ( % )*
C7:3? 00
0.3
07.)
V.4 V.4 V.4
37 39 50
37 28 23
26 33 27
Imports (70)
00
.4:ti