on the World Today
AMERICAN tourists who flooded into Canada last summer might have concluded from the uproar in Canadian newspapers and on its radios that “American” had suddenly become a dirty word. From the bitterness of the language, another logical assumption would have been that an army of Texas freebooters had invaded the Canadian mint, while other pillaging Americans were conspiring to seize the natural wealth of the country for immediate shipment to Wall Street.
The occasion for all this was the debate in the Canadian Parliament over the Trans-Canada Pipeline which will move 500 million cubic feet of natural gas daily from the rich reservoirs of Alberta into Ontario and Quebec. Never before in Canadian history, not even during the conscription debates of 1916 or 1945, has such turbulence been seen on the floor of the House of Commons. For days on end, rebellious Conservative and Socialist opposition members created endless bedlam. Even when the bill to authorize a loan of $80 million to TransCanada was finally passed, tempers did not subside. Instead the opposition took the unheard-of step of demanding the dismissal of the speaker for violation of the rules of the House.
At the height of the frenzy, only the Liberal government’s overwhelming majority enabled it to ride out the storm. Nor was the attack on the government confined to Parliament. Liberal newspapers across the country joined in denouncing the government for using public money to bail out American promoters of the big gas pipeline.
To the Conservative and Socialist opposition, the handling of the Trans-Canada Pipeline represented everything that was wrong with the Liberal Party policy. The Conservatives in particular have been disturbed at the flow of American investment capital into Canada. This inflow has swept control of much of Canada’s productive industry into American hands. It has created an external debt of $10 billion to investors in the United States. It is a debt, moreover, which is represented mainly by equity investments rather than loans. This vast increase in American ownership of Canadian equities has taken place under Liberal administration.
It has been particulurly prominent in new resources development, in oil, gas, iron ore, and asbestos, where American control is almost complete.
Trans-Canada became the symbolic repository of all the evils the Conserve! ives saw in the Liberal policy. Like Poe’s raven, it confronted the Conservatives wherever they turned. First it bad assured the country that the route through northern Ontario was feasible. Then it reneged, said it had to export gas to the United States to be able to raise money. Then it had to have approval in Washington. Then it got into a row with American gas companies. Then it had to have government assistance. Chen it needed more assistance.
A transplanted Texan summarized the public relations mess Trans-Canada got into: “TransCanada is the worst snake-bitten pipeline project in the history of gas or oil pipelining!”
Financing Canada’s boom
The Liberals hold that Canada’s present expansion cannot be financed in Canada. It has not yet generated sufficient capital. So it has to import capital or slow down its development. The Liberals regard the importation of American capital and know-how as a boon to the Canadian economy. To the Liberals, Trans-Canada was the example of how the Liberal government actively encouraged the development of the country by creating a favorable capital investment climate. Here was a partnership between Canadians and Americans for the development of huge projects which were consistent with the national policies of Sir John A. Macdonald! Here was another big dream like the St. Lawrence Seaway, being realized under Liberal leadership!
Obviously, when such an issue was joined, there could be no compromise. And for the Conservatives the Trans-Canada argument was the crucial one which they had to win. If they were to end the Liberals’ twenty years of unbroken reign in Ottawa, they had to have an issue that would rouse the Canadian people. They faced an almost impossible task. Never before had the country enjoyed such a long run of unbroken prosperity. Areas previously lost in a sort of economic backwash were being industrializeed. Newfoundland, which once depended on fish for its livelihood, had a $50 million mining project in the works. The other maritime provinces can point to similar industrial expansion.
The north shore of the St. Lawrence River in Quebec has sprung to life in a score of places as the development of vasl iron ore reserves in the hinterland has created an atmosphere of expansion. Even without its commitments for power development on the new St. Lawrence waterway, Quebec Hydro is planning a $200 million power expansion to meet skyrocketing indust rial needs.
The Seaway contracts themselves reached $150 million this summer. In Ontario and Quebec private contracts awarded touched record levels this year. So busy were all the contractors, indeed, that the Canadian government had to go looking for people to bid on its big jobs. Its advertisements for bids were being consistently ignored.
For the nation as a whole, national income broke all records; industrial contracts awarded hit the $2 billion mark by August 1, a whopping 24 per cent above last year; engineeringcontracts were 47 per cent over 1955.
By midsummer Canadian financial authorities were seriously disturbed because the boom was getting out of hand. Greater demands were being made for capital than could be supplied. Interest rates were raised and a ceiling was put on mortgage loans for housing construction. Nobody paid the storm warnings too much attention. In Alberta and British Columbia alone, the oil and gas pipeliners had more orders in hand, dollarwise, than it had cost to build, equip, and operate Canada’s first transcontinental railway seventy years ago. And more projects were in the works.
Living beyond its means
That the people of Canada were making a real gain in living standards was indicated by index figures on employment, wages, and cost of living. In August, 1956, the cost of living was a bare 2 per cent above the same month last year, while wages were up double that margin.
On the farm front, things were not so good. In its program of giving away its farm surplus, the United States had moved in on many of Canada’s cash customers. Only by vigorous selling action did the Canadian Wheat Board manage to keep Canadian wheat moving abroad. As another big crop was being harvested on the western prairie this fall, the elevators were full of wheat from last year and some from the year before.
Despite the surplus, however, there is not too much concern among farmers. They have become accustomed to delivering their crop a few bushels per acre at a time instead of getting rid of the whole crop at once. Twenty years ago such surplus would have caused ruinous prices. With the Wheat Board being the sole buyer and seller of wheat, prices have been held in the vicinity of $1.25 for top grades on the farm. Under Canadian farming methods this is a reasonably profitable level.
Canadians, in 1956, were far too busy and prosperous to listen to the Cassandras in Ottawa pointing to the flaws in the economy. Someday, the opposition shouted, there would have to be a reckoning because the nation was living far beyond its means. The trade deficit with the United Stales was running at the record rate of $1.5 billion a year. Only a flow of American capital into Canada enabled it to survive. Canada was permitting its natural resources, its oil, base metals, iron ore, to pass into American hands to pay for its day-to-day needs.
So the heart and core of the Conservatives’ attack has been the advocacy of a “Canadians first” economic policy. “Let’s own our own iron ore,” they say, “and finance it iuid process it in Canada and manufacture it in Canada and consume it in Canada. Let’s stop paying American manufacturers for doing something we can do ourselves.” It would be idle to say that such a platform does not have a wide general appeal for Canadians when they can find time to worry about such things. It was to ride with this tide that the Conservatives attacked TransCanada Pipeline. They could not have seized upon a better instrument.
Trans-Canada was a promotional dream of Clint Murchison, the Texas oil promoter. Some five years ago he sold the Canadian government, and particularly the Hon. C. D. Howe, on the idea of building a $300 million, 34-inch natural gas pipeline from Alberta through the wilds of northern Ontario to Ontario and Quebec. It would reverse the westward course of empire taken by the transcontinental Canadian railway builders.
Many months passed before the Alberta, government agreed to permit gas to be exported. Then a group of Canadians asked for the right to build a line from Alberta to Winnipeg and thence south into Minnesota to Minneapolis and possibly Chicago. Whether the northern route was feasible or not was endlessly debated. So was the question of exporting gas to the U.S. Ultimately the government sponsored the union of the Canadian and the Texas promotions in Trans-Canada. It was headed by Nathan A. Tanner, a former Alberta resources minister whose bumbling of the project’s public relations created much of the difficulty it was to encounter.
Trans-Canada, hybrid pipeline
Months passed to years as TransCanada tried first to arrange contracts for the purchase of gas and then to contract for the sale of gas. Without such contracts it could not borrow money with which to build the line. And without a line it could not get any contracts. Eventually it got into the gas business in the east by bringing natural gas to Toronto from the Tennessee natural gas line into New York State. Last winter Tennessee Gas negotiated a contract with TransCanada to take 200 million cubic feet of gas a day at the ManitobaMinnesota boundary for sale in Chicago. It also bought into TransCanada and became a voice in its management.
Meanwhile the entry of Tennessee into the picture aroused the united opposition of all its American competitors to importation of Canadian gas, just when it became certain that Trans-Canada could not finance the building of the leg through northern Ontario. The project became a matter of national dignity.
“Are the people of Ontario and Quebec to bo denied the use of Canadian gas because of a squabble between American gas companies in the Chicago area?”; “Must Canada wait for Federal Power Commission permission in Washington before it can have a gas line?” were questions for bitter debate. The Canadian and Ontario governments finally got together last winter and agreed to lend TransCanada $125 million to build the 600mile link through northern Ontario.
A long and bitter struggle then ensued in Parliament. The opposition pleaded with the government to dump Trans-Canada and to build the whole line itself if Trans-Canada could not fulfill its promises. The fact that Premier Leslie Frost of Ontario, a Conservative and a former protégé of the Hon. George Drew, federal leader of the Conservative Party, joined the Liberal deal helped to take some of the sting out of the Conservative opposition during this debate.
And in early spring it appeared that Trans-Canada was at last going to get into business. When TransCanada’s fortunes were at their lowest point, Canadian Gulf Oil and Hudson’s Bay Oil and Gas Company agreed that each would put up $3 million and become a one-sixth partner in the project. Not only are these companies superbly managed in Canada; they own vast gas reserves which they promptly committed to TransCanada. The prestige they brought to the project was almost as important as their money and their gas. With this backing the company was able to place firm orders for pipe and call for construction bids.
Parliamentary approval of the building of the northern Ontario link was scarcely obtained, however, before Trans-Canada was back on Mr. Howe’s doorstep. American opposition to gas imports, in Washington, so disturbed its New York bankers that they refused to finance the line. Efforts by Mr. Howe and TransCanada to finance it in Canada failed. If Trans-Canada collapsed now, the prestige of the Liberal government would be tarnished beyond repair.
Inside the Liberal Party, patience with Trans-Canada had worn through to the bone. The popular choice then was to get rid of Trans-Canada once and for all and proceed with the project tinder public ownership as the opposition advocated. But TransCanada was the adopted child of the Hon. C. D. Howe, whose courage balances his stubbornness. At first his proposal to ask Parliament to advance Trans-Canada $80 million, to enable it to get started this year, stunned his incredulous colleagues in the cabinet. Eventually he carried both his colleagues and his party, and the bill to lend Trans-Canada $80 million was introduced in Parliament.
There ensued two weeks of bitter debate which most Canadians wish to forget. If the Liberals were ruthlessly dictatorial in forcing the measure through the House, the tactics of the opposition damaged the dignity of Parliament and brought the democratic process into contempt.
In Canada today, it is the fashion to deplore the extent to which Americans have assumed ownership of Canadian resources and industry. What the rabid nationalists ignore is the fact that title to these properties was obtained by purchase from Canadians who were eager sellers.
A classic example was the recent swallowing by Gulf Oil of a large Canadian refining and marketing company, British American Oil. Gulf boosted its ownership of B.A. common stock from 20 per cent to 60 per cent by trading its Canadian and gas reserves for British American common shares. But so concerned was Gulf for Canadian susceptibilities that, by a masterly excursion into fiscal double talk, it announced that the British American Oil Company had bought Canadian Gulf!
Will the Liberal government reap the whirlwind when it goes to the polls next summer? There is reason for doubt. As the big pipeline is being laid, the whole national attitude toward it is changing. So eager are distributors to sign up for its gas that it now has firm commitments for all the gas it can move to eastern Canada. After being held up for years because of inability to get sales in the United States, it has discovered that it no longer needs the American market.
This is what promoter Clint Murchison in the beginning said would happen. As soon as the gas starts moving through the pipe, the turmoil that surrounded the conception and birth of the project will probably be forgotten. But the questions raised by the Conservatives in connection with resources ownership will not.