New Rules, New Roads

The news had come too fast for quick digestion. Not until Canadians had a chance to study last week's historic pronouncements did they realize that their government had boldly set the Dominion's economy on a new course. The trip would be risky, the destination uncertain.

The $300 million credit loan from the U.S. Export-Import Bank was not particularly disturbing, nor were the new restrictions (a limit of $150 a year) on pleasure travel in the U.S. Restrictions on imports from the U.S. were harder to take. Finance Minister Douglas Charles Abbott said they would be "temporary." But for the time being (best estimate: three to five years) Canadians would do without U.S. cars, radios, refrigerators, jewelry, candy, fresh fruits and vegetables. Even less welcome was the new 25% excise tax on goods manufactured in Canada out of U.S. parts.

Hardly a day after Abbott's announcements, shortages appeared and prices spurted. Overnight, cars were up as much as $500. In Montreal, spinach jumped from 12-c- a lb. to 28-c-, green beans from 30-c- to 43-c-, lettuce from 16-c- to 29-c-, electric toasters from $12.50 to $15.63, refrigerators from $350 to $437. The spurt brought back price ceilings this week on processed foods.

Expansion. The new restrictions were only temporary cures for the unhealthy gap between Canadian imports from the U.S. ($1 1/2 billion in 1947's first nine months) and Canadian exports to the U.S. ($733 million in the same period). What about a permanent cure? Finance Minister Abbott had the beginnings of one. Under a new order-in-council, which will be shored up and clarified at the coming session of Canada's Parliament, the government is going to try to make a dream come true. The dream: a more highly industrialized Dominion that will make many of the goods now bought abroad, chiefly from the U.S.

Canada, once an almost wholly agricultural country, has been growing industrially for years. There were 25,000 manufacturing companies in Canada in 1939; there are more than 30,000 now. This year, Canadian firms are spending $443 million on plant expansion--nearly 50% more than they spent in 1946. Most important, Canada has a wealth of iron. While deposits in the famed U.S. Mesabi range run steadily lower, Canada has begun to exploit vast new iron ore deposits in northern Ontario and on the Quebec-Labrador border.

Direction. To expand this industrial economy, the government granted sweeping powers to Reconstruction Minister Clarence Decatur Howe, a 61-year-old, U.S.-born engineer who bossed Dominion industry during the war.

As economic czar, Howe can grant permits for the importation of manufacturing machinery. He will be able to force Canadian branch plants of U.S. companies (there are 2,000 of them in Canada) to stop importing parts, begin making their own with Canadian raw materials. He will be able to shut any plant that does not cooperate. He will have the power to step up exploitation of Canadian resources. Gold mines, for example, will get a $7-an-ounce subsidy for every ounce they produce over their output in the twelve months ending last June 30. Coal production will be stimulated. Under Minister Howe, Canada hopes to build more paper mills, make high-grade paper stocks at home instead of sending wood pulp to the U.S. to be processed.

With the help of the new multilateral trade agreement (TIME, Nov. 24) and a brand-new tariff arrangement with the U.S. (negotiations are under way), Canada hopes to build a new two-way trade with the U.S., thus bring her commerce with the U.S. into better balance.

Submission? How all this can be done--and whether it can be done--before Canadians and their economy get sick & tired of their austerity program, was Topic A in Canada last week. Plenty of Canadian businessmen did not think it could be done at all, and said so in a snowstorm of angry telegrams to Ottawa. But the government was going to try.

Meanwhile, Canadians were summoned to submit to regimentation as drastic in many ways as that which they knew during the war. Whether they would do so might be answered in the next Dominion-wide election.

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