Continued Revival of WorldTrade

alc ilcr-iluc. the Index still remain-

line

General

»|

An I in _cdort¢5;‘i¥:eg £33k 1g? tlgova 18nd:- iiretuicflllluax 11.5.. on the 26th in “. J1 . McLeod. Presi- s "has. recent - - c mm the histoiirrri‘ r23 i Xomefilflfi B sudden clilflglgr-‘ogllicl-Sllleiggq i“

m marked by a series of ‘scares’

e eral ‘I °“f°st'<.“§§n5e§‘ an lmilfef-Bllm ‘hwhwisng confusion. While cer- of Elgevclcpments have been high- ml" nictinv, others have been l! gifiglv ‘MENU-aging. To strike a. m’ ( ‘ u; distinguish the 1011-8" hanger of

value to o; ‘ loutstanding t':ii at ‘One 0

"w"? ffilgtpgirgliiiiodnbe to the igaedmfo future of Canadian changes of which we are mos; constantly k619i 8W9" l-hmllflh me medium of the dBIIY P7555 me

broad field of inter- ‘Idlliil politics. Here, the 91cm“? “if her-n one of increasing tension ma “rqr-fgirfl. In Spain. the civil I" iris continued throughout ‘the l” " indefinite results. The have compilations arising from " though recently over-

tlis conflict. dIAdOIVBII by the war in the For

mEllIS rcflectcd Ill llllmelmls

which have intensified an drained situation. qt is idle to deny that the meth-

a‘ready

ent J. A. McLeod Future trend favo

world tradeyas aid in

m; of cdlccliile security embodied in the Covenant of the League of Nations have broken clownover large areas of the world to be N- plnced ivy a system of power politics. Indeed. it isaooarenttlwl- the world is dividing itself into armed Camry, differing little from thc situation prior to 1914. Over and against this. however. mutt be placed the wider recognition of the common interests of the three great democracies of FrancaGreat I Britain and the United States in . the maintenance of the peacefrh has bcen reflected in both official ind informal statements in all three countries and especlaly in the utterances of the President and Secretary of State of the United

5'

States.

"in the economic sphere, there has on the whole been some fur- ther improvement. Recovery con- tinued in most countries at least until tlic Autumn when. with the crctinc in prices. and the sudden rec SID“ in the United States. the ucunrrl movement was arrested. It must. hoivcvcr. be recognized that recovery. particularly in Europe. has become increasingly depend- rrit iipnn the construction of armaments. This influence result- ing from political distrust and fear has undoubtedly had a directly stimulating effect on business activity. inevitably. however, the construction of armaments has at the same time resulted in n. grow- lrii: sciisc of economic insecurity which has intensified speculative rilaliflf“. fortified nationalism and iufitatcd aziiiiis’. revival of long- tcrni invcstmciit especially of an lnicruaiiciinl character."

"One of tlic most favourable de- rclnpmcnls of -the past year has bran thc notable, expansion in the Ifilillllf‘ of world trade. Despite lhy multiplicity of economic and lrililtcal barriers. thc international niarciuciil. of goods was substanti- fllll‘ liirczcr this year than in 1938 and iiidi-cd wns close to the pre- ncprr-s ion lcyol of i929. According to tlic figures published by the Fcurinmit- Section of the League 0f Nations tlic aggregate volume of llvrlil do wns roughly I5 oer ftllt lii‘ ttcr rlivrimz the first nine months of i037 than during the mlll-“llfilldilli: period of the previ- olls year. The slow expansion of trade which characterized the early \'(‘fii‘S of revival was ac- cehralcd in the latter half of i036 and thc flrrt hull’ of 1937. By the sccanrl nuartcr of the past year. the lmaizuc of Nations‘ Index at lfhlzlh irnclied the level prevail- Ilu in 1n29. While in the third nuiirtnr- tlic upward movement was llllfllsil and followed by a moder-

Ni Slliisiiihftyfllv lllll’ iiiuc in i036 "Oin- of thc principal reasonsfor Ihis r-yyonurnlrlng increase in inter- national trade is to be found in the improvement in the relation-

liigher than at

thin belwccn the prices of raw lhatcrlals and those of finished llllllllcls which occurred in 1936

and lu tlic early part of 1931. From the middle of I930 to March of tlic rvi=t year quotations for raw lllbirrials mm substantially and n sonic crises abruptly. while prices of flnLslied products In fluted lint moderately. Thus the arse number of countries whose "llhleritv is heavily dependent llnrm the market for rawmaterlals ‘E "veil an increase in the vifue “(fl vohimi- of their exports. The l‘ rat of this dovelopmmt was in furl of improve the trade balances i’ Such countries and in part to Kllhlt a conslderable increase in “rlr imports. In this way. the o_l°“lr"r demand for raw materials Jltlui part of Europe and the lalllrrl States was soon reflected factwlrler markets for the manu- fimllfllfi products of these in- ormi" al nations in thi- raw inat- "Igbrodurlng areas of the world. ma“ ll“!!! be that this improve- Mip ll Passing. for sine-e March hula" of raw materials have been s. f‘; TI commodity markets kgvll" hon —snd recently there n???“ bean inrllcr-liors of greater vmldfl‘ the bulk of the gain mlnmtradc may well be main- em,“ 5:1 followed by further

titiibiilv '0! For-aim‘ lllxohlngel

sees busin ess in Canada well maintained “Table If not upset by disturbances '

beyond our borders.

.________. elgn exchanges. With the single exception of the French franc, the main currencies of the world have been fairly steady during thc past year. Above, all the exchange rate between sterling and the U. S. dollar and the related uIIYICXICIGS of the sterling bloc’ and those which are in the orbit of the dol- lar have shown practicary no change. The fact that the recent sharp depreciation in such an im- portant currency as that of France was accompanied by nosignificant depreciation in any other currency is a striking tribute to the ef- flcac of the 'I‘ripartlte Agree- men. Though thc decline of tlic franc below thc level originally contemplated by tlic Agreement may be unfortunate. it has taken place, nevertheless, with the min- mum of friction and disturbance in the sphere of international ec- onomics."

Need For Further Reduction in Trade Barriers

"During 193’! there was a mod- est reduction in the barriers to in- ternational trade. Some countries, of which Canada was one. made I significant if moderate decrease in their tariffs. New trade agree- ments were negotiated, of which that between the countries of tho Os‘o Convention and that between Great Britain and Canada were among the more important. Some exchange controls were relaxed and according to league of Na- tions‘ authorities the actual ad- ministration of such controls and c‘earing agreements was in many countries made less rigid. There were, however. some changes in the other direction, the most striking example of which was the adoption of a complete system of exchange and trade controls by Japan. Generally speaking, though some progress was made in the direction of freer trade the major restrictions to the international movement of goods still remained.

"Now that the recovery in trade appears for the momencto have been interrupted. it is more im- portant than ever that further steps should be taken to lower the barriers which still obstruct the f'ow of goods from one country to another. Today as formery the power of Initiative lies primarily in the hands of the great creditor nations and above all in those of Great Britain and the United Slates. For this reason, the re- cent opening of trade negotiations between these two countries is of the greatmt significance. A treaty between the United Stat/es and Great Britain would tend to reduce the barriers to trade over a very large part of the world. A truly succe-sful agreement would hold vast promise for the further re- vival ot trade and thus for theI continuance of world recovery. The price of success is a willing- ness to make concessions in the spirit of give and take. not only by the two parties directly lnvo'v- ed but also by Canada and the other British Dominions.

Recession In the United States ’

"Before turning to the state of business in Canada, I should like- to say. something about another development of major importance to Canadian business-namely the recent recessio 1 in tlic United States. As is well known, business activity in that country has de- clined sharply sznce mid-Summer. From August to November, the latest month for which complete data are available. the Federal Re- serve Boardfls Index of Industrial Production fell by no less than Z3 per cent while Factory Employ- ment. accordion to thc official lii- dex. decreased by 8 per ccnt.

"Although the busines: situation previous to last August did not suggest the possibility of such

sudden and drastic declines. ilicre was perhaps a good reason to ex- pect some interruption in tlic up- ward trend. The least ‘favourable clement in tlic situation was thc failure of private investment to increase. as was shown by the small voulme of new capital fin- ancing and the continued low level of construction work. ‘There had also been some reduction in expenditures on the part _of the Government and a pronounced de- cline in the amount of inflation- ary deficit financing. In addition, purchases of equipment and sup- plies on the part of the railways had bceii considerably rcduccd. Itivcntory loszcs resulting from tlic fall in commodity nrlccs. ris- ln-r wage costs and serious labour disturbances had indu~ed an at- titude of caution in the business community. In addition, the infla- tionary pressure of the huge vol- ume of unused banking resources had been lowered by the financial measures taken ‘ast Spring. while statements by govemmentofflcllfs accentuated uncertainty as to thc out-look for commodity prices and gold.

"In one rcsucct thcsitiialloiiwns similar to that prevailing in 1929. Raw material prices were declin- ing and certain casts were. tend- ing to increase. There was. how- ever. no serious accumulation of world stocks of row materials such at that which marked the year before the depression. In oth- er important respccts. too. tho situation was essentially different from and more favourable than that of i929. There was no string- ency in the money markets. In- deed there was still a plethora cl idle funds awaiting investment Though many of the

heavy in- du=trlea had experienced a marked improvement. there had been no sustained boom nor had lllefe] been more than a very moderate exnqnflon in Hie amount of new construction. Furthermore. the" had been no reduction Ill Illflll bu n¢ power but rather a sub- stantial increase."

gugmmm] Dana Not Indicate

Another Depression “In the light of these facts. it is

Important 1mm

“Another factor which ha! {gmllflll-‘d thi- improvement in in- ‘Pnationol trade ha; been

“Mlle-b stormy a m. w-

l

dear that the economic back~ ground was not conducive to the onset of another depression. The yefy fgnlfllty (‘I the {all In DPOGUC- lion, combined with the mainten- iancc of retail sales at oompow

Manager H. F- Patterson emphasizes importance to Canada of lightening taxation burden.

tively high levels, suggest; that inventory adjustments mag be made quickly. It is to be oped, and I believe there are good grounds for tlic opinion. that the present contraction of business in the United States will prove to be no more than a temporary if severe recession. in character not dISAImHHT to those which occurred in the latter rt of 1933 and in' the Summer o 1934."

Reflections of the Slump in Unit- ed States on Canadian Business

_“In face of the pronounced de- cline in production and employ. mcnt to thc south of the interna- iional boundary, business in can- ado. has bccn remarkably well maintained. The official indiccs of "lllllloyment and production in this country, have continued at peak levels during the period of recession in the United states, A5 an indication of the generaltrend. lIlI; Banks Cumulative Index of Business in Canada reached the peak of the recovery move- moot in September and from then until November (the latest month for which t-mpletc statistics are lWHlIRbIcI has declined by only 1 per cent.

"We should. however, be unduly optimistic if we‘ were to ‘assume that such a state of affairs could continue for long in the event, o; further deterioration in the Unit- ed States. Our business and fin. ancial ties with that country an: so close and its economic pyg- lmllderance is so great that a con- tinuance of recession in the (lllclvhbcurlng republic would rm- lopbtedly be reflected in contract. In, business here. As is well known, our domestic stock market ha". as usual fol owed that of New York while in the last few months earl ports to the United States have generally been declining. Another Slllklflfl result of the American illllllllfis to be seen in the trans- tgrmadon. almost overnight, of

c favourabe outlook for the Dllln and paper lilfillsfrv into one of__rloubt and uncertainty.

it follow: then that the fm. mediate prospects for Canadian business depend Principally upon m‘? 9°11“? 0s’ events in the United tSltates. This ‘is particulary true at l9 Dfosent time for there is little probability that_the Canadian ec- "llllmll will receive added stimulus from its other great customer and creditor, the United Kingdom. Al- though business in Great Britain has not experienced any impart- ant setback, the upward move- rnent has been arrested and ac- cording to the London Economist has been followed by some slack- Blllllir In the rate of industrial activity. If the recession in the United States is soon ha‘tod and followed by a resumption of re- covery. and this a: I have already suggested is not improbable, Can- adian bVSIIICFS _ma wel' escape some at least of the difficulties with which fl" United States is now confront ."

Pronounced ‘Improvement In Canadian Business

"Looking back over roar itls apparent that business in Canada was much better than during the previous year. Production of min- ovals. forest products and manu- factures as well as of many farm o oducls showed substantial gains. Iridccd with thc single exception of wheat. output of almost every malov commodity was greater than in i936. Prices were on the aver- age cocjirlerably higher, despite the declining tendency of recent months. As a result of this expan- sion of production and rise iri the ni-icc level. the national income of

"Canada was notably lariicr than in

i936, A provisional estimate. bas- crl nu general statistics of pro- duction and prices, suggests an imrcasc of frcm 8 per cent to 10 per (SEN; in the money income of thr- notion

“One of tlic mo.t encouraging fWil-"rfis of this general improve- "YWI. a-n- the furlhcr r-rurkrd ad- vmicn in the volume of employ- mciit and the conscoucnt reduc- tion lu tlic relief rolls. According to this Bank's estimates. which cover all industries except agri- culture and the public services. there were on the average about 7 per cent more wage-earners at work In i937 than in 1936. At the same Ilmc. there was a marked T-"dllPIIOD lo the number of per- sons receiving relief. excluding of coin-sv- farm relief which owing to tlic drought in Snskatclicwaii was much rzrcntci". The last. siatcmellt l'("IPRF"(I by thc llflliiistcr of Lah- ciir. that for Nowemher 30th, shows a tolnl of 50'1 oon p°rs0ns— potential workers. their depend- ents and uiicmviloyables -ln re- ccipt of rc‘ief. Though still very formidable Jhis tots‘ is approxi- mately one-third lower than was thc ca-c a. year earlier. In this r0l\I"'"‘II""l. "1""" credit is dl" t0 thc National Employment Com- mission which through its care- .ful studies. has indi~alvld the. precisi- naturr- of tlic problem of unemployment rclicf and has re- commended rmoronrlaie piilicies to assist in its solution."

Mining Sets Pace of Recovery "Among the main industries. mining set the pace of recovery closely followed by forestry. The official preliminary estimate paces the irros value of mineral production In I931 at a new re- cord of A452 millions, 115 per cent lilghcr than in I936. The greatest gains were shown n the base m-tul uroup. cape-tally by cooper and nickel. whlle gold production at .- new airtime peak was con- sirl~rnblv greater than in the pro- ceding year."

Other- Ilarmllnn Bil-Inca: Well Maintained

"The forssts of Canada added siibstsvilliiily to the national in- come. The out of timber was much larger than in the preced- int! year. both for pulp and for lumber. Newsprint ougput indi- cntlve of qtheufortunea‘ pulp and caper industry, in by t4 per cent and was arr-tar than in nny previous year. Whfe the market for lumber has recently weakened in response to curtailed -' from Great Britain and

PAGE NINE

THE CHARLOTTETOWN GUARDIAN

BANK 0F Nova scorn. HOLDS ITS 106th ANNUAL MEETING!”

the United Btltcl. thc total val-- u‘ °l l-lll Year's Production was well in excess of that for 1936.

In t-he field of manufacturing Itllmllv- the most striking de- velopment was the acceleration of improvement in the in industries producing durable oods. such as ‘algal’; uzdtdstegilgcita: llnery autopim.

ca cppara. us. The rise in reduction and em- Dlvllment in ls division of man- ufacturin was much more pro- holilinced at in the previous year.

Even the long depressed bulld- 1118 trades were busier, though the value of construction contracts awarded during roar was still far WWW in ression levels. In response to rising individual in- c0 es. and assisted by the Dom- in on Housing Act and the Home Improvement Plan. more houses were built and existing dwellings were improved. There was also a moderate increase in the construc- tion of buildings for busincss~ pur- Doses such as stores and offices- The Kflllttest gain, however, took

dicatlni; that long-deferred niod- ernizatlon and extension of fac- tories was at last being under-I taken. _

“From the standpoint of agri- culture the year overshadowed by the unprecedented drought in, Saskatchewan. The yield of wheat l" that Province averaged only two and one-half bushels to the acre and large areas harvested nothing whatrcever. Because of the

almost . c om rl e t e lack. o1 income over a great par-c of the Drovince .the m a 1 o r I r y

of the farm popuatlcn is now dc- pendent in varying degree on rc- llef payments.

"Y3 dl-‘slflle the sharp reduction ' in the value of the wncat crop,| mmlYFl-"E entirely in Saskatchewan. i the net income of aglaculture for the Dominion as a. whole was prob- my Estate! In 1937 than in 193s. From present indications, it up. DEB-X's that the lower revenue from “ell! "OPS was more than offset by substantial increases in receipts from the sale of livestock and dairy produce. The notable gains in the retail sales of country ."eneral stores during the last few months in 9W1‘! province except Saskatch- °Wllll Stlbnely sues-sis an enlarge- rnent of farm buying power,

While the railways were some- what busier in line with the gen- oral increase in production, Uffg im-

provement was limited by the small volume of wheat traffic. The moderate advance in the

SW55 revenues of the two great “n” "l-llnl! out of the net Increase in freight traffic was largely ab- =orbed by higher operating cxy-ops- t» As a results. there wtl be little or no reduction in the amount re- quired from the Dominion Govern. ment to cover the deficit of the. Publicly-owned system."

Canada's Foreign Tram, Am} Business Recovery

Lil-SI Year. as in the preceding years of revival, the general up. sw-IIE In busines activity was largely attributable to the effects of Increared export receipts. The greater income of the primary 1n. dustries of mining. forestry and agriculture has resulted directly from improved conditions in foreign markets. The dsburse- merit of export recipts, and me lflfze amount contributed by the tourist trade, has been reflected throughout the entire structure or business. Among the secondary 1n- dustries not directly stimulated by external demand, those menu. Illlcl-llflllf; consumers’ goods were the first to feel the benefit of ris- ing income in the export industries. With the steady increase in the national income, the need for re- placement and enhrgement of urn wlllll-VYS cliilital equipment has beenlgradually translated into ex- ‘nandmz demand with the result 'that production of durable goods, ilncluding construction work, has -rlsen considerably. As I have ai- ‘resdy pointed out. the Imiprovc- merit In the durable oods group W!“ 135i Year especia 1y notable. The recovery generated by the en- largement of our extport business has gradually tended to become cumu alive, giving rise to a sec. Ofldl-lfy expansion o! production and employment. in tlic industries which are mainly dependent on thc domestic market. 'l"hus though thc increase ln the value of cxporls was less pz-oncunceed inst year than the year before. thgre was no slfloflming in the growth of the national income.

“The spread of recovery and the improvement in tiie heavy indus- tries have been associated with a sharp rise in the value of imp-rt trade. During the first eleven months of the pest year impcrts were valued at $756 mllliom, repre- senting an increase cf no lcss than 30W ovrr the corrcaponrifiig p-Prifld of 1936. This devclopmcilt is in no sense u cause for ccnc-rn. It is. rather. a striking indication of thc broadening nature of recovery."

Imports Rise

“Canadas international position remains very strong. While im- ports rose. more rapidly than ex- ports, thereby reducing the ‘favour- able’ balance of merchandise trade. the net receipts arising from tourist expenditures increased a-ppreciab y. Over the whole field of our current international transactions, it ap- pears that there will be a heavy credit balance. Though thc credit balance over all is unlikay in bees reatra: the unprecedented total o around i300 millions in 1936. It may well be in the neigii- bourhood M1250 millions. At a time of uncertainty in economic conditions abroad. our strong in- ternatlonai aition is an asset of no small va ue.