Depression, recovery and trade prospects
Canada’s approach to the global economy during and after the Second World War was shaped by experience, including the devastating impact of the Great Depression, as well as hopes for a prosperous future. No country in the world had suffered more than Canada from the breakdown of international finance, the erection of trade barriers and the collapse of markets and prices for food and natural resources in the 1930s. Canada’s gross national product (GNP) had fallen by 42 per cent at market prices, or 29 per cent in real or constant dollars, from 1929 to 1933; economic output fell by about 40 per cent in those years, with industrial production less than half of what it had been. Unemployment increased as much as tenfold (figures were inexact and unreliable) – affecting an estimated one-third to one-quarter of Canada’s non-agricultural workforce. The agricultural economy of the prairie provinces was devastated, with an extraordinary sequence of accumulated surpluses, lost markets and crops depleted by drought and ravaged by pests. The impact of this collapse was particularly significant in the transportation and construction sectors, as well as associated manufacturing and industrial fields.
Recovery in Canada had been slow and incomplete, so that on the eve of the war, the previous heights of 1929 had still not been scaled. The demands of war revived agricultural and industrial production, with effective full employment in the Canadian economy. The national budget grew sixfold as the war effort replaced unemployment relief and public works as the focus of government expenditures. By 1944, government spending had reached the unprecedented level of $4.4 billion, or 37.6 per cent of GNP, with remarkable popular support for the significant role of government in the wartime and post-war economy. Meanwhile, Canada’s GNP had more than doubled in six years of war.2 That positive wartime experience and the apparent determination of the victorious Allies to reconstruct the global economy after the war prompted a hopeful perception of post-war possibilities.
Before, during and after the Second World War, Canada’s prospects for international trade and consequently its potential prosperity were largely determined by its financial and commercial relations with the United Kingdom and the United States. As the report of the Rowell–Sirois Royal Commission on Dominion–Provincial Relations so memorably put it in 1940:
Canada’s position in both her world trade and other financial relations with the outside world is largely that of her position in relation to the United States and the United Kingdom. This position is similar to that of a small man sitting in a big poker game. He must play for the full stakes, but with only a fraction of the capital resources of his two substantial opponents; if he wins, his profits in relation to his capital are very large, and if he loses, he may be cleaned out.3
Before the war, Canada had offset a chronic deficit in merchandise trade with the United States with a surplus largely earned from exports to the United Kingdom. As R. S. Sayers so aptly put it, Canada’s ‘pre-war economy was based on bilateral imbalance within a balanced “North Atlantic Triangle”’.4 Of necessity, the Canadian government pursued a wary and pragmatic approach to external economic policy. Bilateral measures to deal with immediate needs often trumped multilateral aspirations for the longer term.5 In fact, that dualistic heresy was shared with the British and American governments.
Thus, during the Second World War and in the uncertain peace that followed, the Canadian government employed bilateral methods to maximise Canada’s exports. There were commitments to finance British imports from Canada, including the Billion Dollar Gift of 1942, Mutual Aid from 1943 to 1945, and the Reconstruction Loan of $1,250 million which was negotiated in March 1946.6 On a lesser scale, credits to Western Europe and Asia also underwrote Canada’s exports to specific countries. Under the Export Credits Insurance Act of 1944, the Canadian government attempted to restore its trade and diversify its markets through loans to actual and potential trading partners. More than $500 million was expended by 1948, with France as the single-largest recipient.7 The post-war financial measures were depicted as interim expedients to assist reconstruction for wartime allies and to ease the transition to freer global commerce. As for financial dealings with the United States, the continental understanding was symbolised by the Hyde Park Declaration of April 1941 and sustained by subsequent bilateral arrangements, so that Canada’s reserves of gold and American dollars actually increased during the war and cross-border trade soared to previously unheard-of levels.8
The need for secure markets for Canada’s key exports likewise shaped Canadian commercial policy. During and after the war, to assure Canadian producers of sales abroad, bulk purchase contracts were signed with the United Kingdom, most famously the multi-year wheat contract of July 1946. Other commodities, including bacon, beef, eggs and cheese, were also covered by bilateral deals between British and Canadian authorities. ‘From our point of view’, Canadian Prime Minister William Lyon Mackenzie King observed in December 1944, ‘the whole business [of bilateral finance and contracts] relates back to making sure of our holding a place in the British market’.9
Canada and Anglo-American talks about the post-war world
At the same time, the Canadian government professed its abiding faith in the multilateral creed and collaborated closely with its North Atlantic trading partners to reach common aims in external economic policy. Throughout a period of fundamental change and uncertainty, what mattered most in Ottawa was achieving and maintaining a high level of exports, seen as the key to Canada’s prosperity, by whatever means were available. Moreover, its commitment to the multilateral ideal was bolstered by fear of any serious split between the British and the Americans. ‘No country stood to gain more than Canada’, A. F. W. Plumptre has observed, ‘from the reduction of prewar and wartime trade barriers, from the establishment of codes of rules for international trade, payments and exchange rates, and from the introduction of more stable arrangements for international lending.’10 That quest for better order and greater stability governed the Canadian approach to global finance and trade.
Motivated by enlightened self-interest, therefore, Canadian policymakers devoted considerable attention to multilateral instruments in wartime plans and policies for peacetime. With respect to global finance, that prompted keen attention to and support for the development of the so-called Bretton Woods institutions, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) or World Bank. To facilitate world trade, the Canadian government was actively engaged in the negotiation of the General Agreement on Tariffs and Trade (GATT) as well as the ill-fated International Trade Organization (ITO).
These were the most prominent bodies in an elaborate alphabet of international agencies dealing directly or indirectly with the global political economy in wartime and after, including the United Nations Relief and Rehabilitation Administration, the Food and Agriculture Organization, the International Labour Organization, the International Civil Aviation Organization, the World Health Organization, the International Wheat Agreement, the United Nations Economic Social and Cultural Organization, the United Nations International Children’s Emergency Fund and others, most of which were associated with the development of the United Nations, first as the wartime title and then as the peacetime reincarnation of the victorious alliance.11 In the formation, elaboration and implementation of these various bodies, Canadians and their government played significant roles, individually and collectively.12
Not only did the pre-eminent commercial and monetary bodies originate in Anglo-American discussions and commitments, but also Canada defined its approach to this concerted effort to restructure international economic relations primarily on the basis of the potential impact of these multilateral instruments on Canada’s transactions with its principal economic partners, the United States and the United Kingdom. Moreover, as one scholar has observed, ‘a multilateral global economy founded on Anglo-American cooperation would allow Canada not to have to choose between its two most important markets and its two most important relationships’.13 So long as the United States and the United Kingdom both aimed and collaborated in that direction, multilateralism was effectively also the only option available to Canada to further its external economic interests and thereby to secure its prosperity.14
Canadian policymakers welcomed the Anglo-American emphasis on rebuilding and reordering the international economy and attempted to influence attitudes and plans in a direction favourable to Canada’s interests. The Roosevelt administration initiated this reassessment of global economic policy – beginning with the Atlantic Charter, to which the American and British leaders subscribed in August 1941. That declaration pledged the neutral and the belligerent under Point 4 ‘to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity’ and, under Point 5, ‘to bring about the fullest collaboration between all nations in the economic field with the object of securing for all, improved labour standards, economic advancement, and social security’.15 As Canadian Under-Secretary of State for External Affairs Norman Robertson advised King, ‘there is nothing very new or spectacular’ in the text, though ‘it is clearly well worth while at this particular juncture having an authoritative restatement of the general principles of international relations which will have to govern any tolerable post-war world’. Overall, he regarded it as effective propaganda, though with one conspicuous flaw:
To my mind its most serious defect is the reservation in Point 4, under cover of the phrase ‘with due respect to their existing obligations’, of the whole system of Imperial Preference. This must weaken the force and scope of the promise of free access for all countries to markets and materials, and makes it difficult to say much about the free trade implications of the Declaration.16
Robertson’s doubts were evidently shared in Washington.
When the commitments in the Atlantic Charter proved insufficient to bind the British government to what they regarded as a favourable course in international trade, American authorities supplemented its provisions with the more firmly worded Article VII of the Mutual Aid Agreements in January 1942, the ‘consideration’ for Lend–Lease. That stipulated that the settlement for Lend–Lease
shall be such as not to burden commerce between the two countries, but to promote mutually advantageous economic relations between them and the betterment of world-wide economic relations. To that end … [the terms and conditions] shall include provision for agreed action by the United States of America and the United Kingdom, open to participation by all other countries of like mind, directed to the expansion, by appropriate international and domestic measures, of production, employment and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all peoples; to the elimination of all forms of discriminatory treatment in international commerce, and to the reduction of tariffs and other trade barriers.17
Although the overall aim of attaining the economic objectives of the Atlantic Charter was welcomed by Canadian ministers and officials, one financial adviser condemned what he regarded as ‘vicious Chicago tactics to attach non-discrimination as a consideration to lease–lend rather than to discuss it as part of all trade policy’.18
As British and American ministers and officials attempted to translate the lofty rhetoric into specific and practicable proposals, the Canadians were keenly interested. ‘We need both the UK and the US as customers but we need them both under a multilateral arrangement whereby neither can apply undue pressure to us,’ one Canadian economic adviser observed as the plans developed. ‘There would be no net gain in any move which would merely substitute one market for the other. A multilateral convention is also our best chance of re-entry into the European market from which we would probably be excluded under regional arrangements.’19 There was also some anxiety in Ottawa about ‘the disposition on the part of the United States to determine, by bilateral negotiations with the United Kingdom, questions of policy intimately affecting us’. Even so, there was hope ‘that these Lease–Lend negotiations could be used in order to secure an agreement helpful in resisting the onset of post-war economic nationalism’.20
Canada was not a direct recipient of Lend–Lease, so it was not initially a signatory of a Mutual Aid Agreement nor obliged by its provisions. However, the aims of those accords, particularly the commitments in Article VII, were sufficiently in Ottawa’s interest that its agreement was conveyed in an exchange of letters with Washington that was seen by the Canadian government as formal justification for its participation in discussion of the post-war economic world.21 ‘We are the extreme case of the effects of the repercussions of U.K. and U.S. relations,’ insisted the Deputy Minister of Finance W. C. Clark. ‘We can do more to help those relations and much more to injure them than any other country. We are a substantial industrial power.’22
At key points in the Anglo-American talks, Canadian experts attempted to sway their British and American counterparts. Before and after a British delegation travelled to Washington, Canadian experts met with colleagues from the British and other Commonwealth governments in London.23 In late October 1943, on their way back home, some of the British delegates visited Ottawa to brief Canadian economic officials about their lengthy talks in the American capital.24 In early 1944, after the Anglo-American discussions on the implications of Article VII, Canadian and American officials met in Washington and New York. Those talks attested to a broad sense of common purpose, with the Canadians keen to sustain the progress of post-war planning.25 ‘In general, the exploratory discussions of post-war international economic policy began on a hopeful and courageous note and were based on a broad international approach,’ a Canadian commentary observed. ‘However, a number of important difficulties have been encountered, particularly in the vitally important field of commercial policy.’ The Canadian interest in a positive outcome was stressed. ‘The alternatives for Canada to timely action on a broad international basis are not attractive. Canada would have to look principally to special bilateral arrangements with the United States and the United Kingdom.’ In neither case would the benefit to Canada match that potentially available in a multilateral agreement.26
Thus, the Canadian perspective was distinct – not surprisingly, it was a compromise between the British and American views – and it was articulated gradually as policymakers in Ottawa responded to stances adopted in Washington and London and contemplated the significant change in the international economy which was anticipated for the post-war world.27 In other words, the Canadian government developed a North Atlantic perspective which responded to the plans of its economic partners and to the prospects for transatlantic finance and trade in the aftermath of the Second World War.
Sterling, dollars and a new global financial order
On financial policy, Canada’s interest as a trading nation was to avoid the corrosive phenomenon of competitive devaluation of currencies, which had exacerbated the effects of the pre-war depression. That threat to Canadian prosperity was compounded by the possibility of sterling–dollar convertibility problems after the exceptional wartime financial arrangements came to an end. The need to overcome exchange barriers through generous assistance to the United Kingdom and other countries in the sterling area had already been demonstrated to the Canadian government, so that any multilateral regime which could help to avoid the division of the economic world and the disruption of Canada’s familiar triangular pattern of trade would be welcome to authorities in Ottawa.
During the war, Canada had become the second leading international creditor, after only the United States, so it sympathised with the American preference for a regulatory institution (Harry White’s Stabilization Fund) that favoured lenders. At the same time, its hopes to export to the British market, as well as its long-standing ties with the United Kingdom, prompted an understanding of the British concern about the vulnerability of borrowers and the need for a well-funded institution to help maximise global commerce (represented by Lord Keynes’ International Clearing Union).28
Not surprisingly, the convertibility of currencies and monetary questions generally were viewed by Canadian policymakers principally through the lens of sterling–dollar relations. At the same time, Canada identified its self-interest with a positive outcome, necessarily involving Anglo-American agreement and thus likely a compromise between the stances of its most important trading partners.29 ‘Canada’s diplomacy reflected its need for a postwar monetary regime that included both the United States and the United Kingdom.’30 At a relatively early stage in the deliberations, Canadian officials put forward ‘General Observations of Canadian Experts on Plans for Post-War Monetary Organization’, which were designed to bridge the differences between the American and British schemes.31 However well intentioned, that initiative was apparently resented in London, where it was perceived as undermining the prospects for acceptance of the plan advanced by Keynes.32
That appreciation certainly characterised its approach to the institutions created at Bretton Woods, New Hampshire – the IMF and the IBRD. The Canadian delegation of key ministers and senior officials in July 1944 strove to bridge Anglo-American differences, serve Canada’s interests and bring order and stability to international financial transactions through a multilateral accord.33 From a British perspective, the Canadian experts, most notably Louis Rasminsky of the Bank of Canada, sided most often with their American colleagues. That difference of views, interests and tactics memorably culminated in a ‘fierce’ clash between Rasminsky and Keynes, though ultimately the North Americans drew back from a damaging ‘break’ with the British.34 A distinguished and effective group of representatives from Canada ‘contributed forcefully and incisively to the technical deliberations’ during the conference.35 A British delegate reported that ‘the Canadian Delegation included some of the most competent technicians at the Conference’, who ‘earned the highest praise from all sides’. Their performance at Bretton Woods had ‘served once again to demonstrate that Canada is fully alive to the responsibilities of her newly-found status as an almost-great Power, and that she possesses officials with breadth of vision and intellectual equipment equal to the role which she is assuming’.36 Ultimately, however, it was the American government and its representatives who exercised decisive influence on the IMF and the IBRD. ‘The British could not afford to disagree’, Robert Bothwell has observed, ‘and so the conference reached an accord on what were basically American terms.’37
As the Canadian minister of finance, J. L. Ilsley, observed one year later, the Canadian government was convinced that the IMF and the IBRD ‘can play a very important part in facilitating the economic reconstruction of the world. They can minimize economic friction among nations and can help to provide the monetary conditions necessary to attaining a high level of world trade on a non-discriminatory basis.’ That would be especially helpful in the immediate task of post-war reconstruction. Ilsley acknowledged that Canada’s interest was ‘not solely altruistic’ and his explanation of the potential benefit to Canada was firmly situated within the North Atlantic Triangle. ‘When the Fund is fully functioning’, he forecast,
it should be of assistance to us in enabling us to use our surplus with the United Kingdom to cover our deficiency with the United States. To attempt to balance our accounts bilaterally with both the United Kingdom and the United States would only result in great economic disorganization and a lower standard of living in this country.38
Consequently, as Ilsley’s successor, D. C. Abbott, argued, ‘“multilateral convertibility of currencies” is of special significance to Canada’, and the ‘new international institutions’ promised ‘a practical approach to a solution of our problems’.39
Curiously, in the early years of the IMF, Canada’s conduct did not conform to its earlier rhetoric. Though Canada’s economic stature as a major creditor had earned it a seat on the board for the IMF, and consequently it was intimately involved in its proceedings, the Canadian government failed to notify the IMF before it revalued the Canadian dollar to parity with the American dollar in July 1946.40 When that evaluation ultimately proved unsustainable, the Canadian authorities arbitrarily revalued Canada’s currency in September 1949 in association with British and American authorities but again without prior IMF sanction. Instead, the Executive Board of the IMF was simply informed of the Canadian government’s decision to reduce the par value of the Canadian dollar by 10 per cent on the eve of its implementation.41 That decision was overshadowed by the devaluation of the British pound, which had dominated tripartite discussions in Washington.42
That straying from the true faith of multilateralism was compounded when Canada floated its dollar in 1950, once more with minimal notice or consultation with the IMF, and on this occasion without the gloss of tripartite discussions, as a ‘temporary’ expedient that lasted 12 years.43 Of course, there were much greater problems for international exchange in the 1940s and 1950s than Canadian infidelity to the agreed rules, but the willingness of the Canadian government to go its own way certainly indicated the limits of its multilateral zeal when it came to monetary policy. Moreover, the circumstances that prompted Canada’s transgressions were inextricably linked to its own shortage of American dollars, as well as British convertibility problems.44
The quest for markets: wartime plans for post-war commerce
A similar contradiction between word and deed marked Canada’s approach to commercial institutions and trading policies. As was the case with financial institutions and monetary policies, Canadian expectations were not met with respect to the immediate impact of the new external economic regime, whatever its longer-term significance.
When British officials first proposed a comprehensive approach to international trade, the Canadian government’s principal economic advisers firmly endorsed the initiative.
The Advisory Committee on Economic Policy is of the opinion that the negotiation of a multilateral convention of commerce, providing for tariff reductions and limitations and the removal of other barriers to the exchange of goods, is the soundest method of securing satisfactory conditions of trade between nations after the war. It is especially in Canada’s interest, first, because our trade extends over many countries and it would be difficult, if not actually impracticable, to achieve any pattern of bilateral agreements which would serve our interests so effectively, and, second, because the United States will undoubtedly press for the removal of preferences, even though under the Trade Agreements Act, should it be renewed, there is comparatively little she can offer as a quid pro quo to Canada.45
Unfortunately for the Canadian government, the Anglo-American negotiations on global trade soon foundered on the shoals of fundamental political divisions in the British government and American fidelity to familiar but conservative methodology (bilateral bargaining) for reducing barriers to international commerce.46
Before the meeting of Commonwealth Prime Ministers in May 1944, Canadian officials learned that the government of Prime Minister Winston Churchill was ‘stuck, split and in recession on Commercial Policy’, as the President of the Board of Trade, Hugh Dalton, put it. At a reception associated with the conference, Dalton met Robertson, ‘who is very sad at what he calls the “confused and ignoble end of the Commercial Policy proposals”’.47 As Robertson informed his colleague, Hume Wrong, the British government had
circulated a very cautious and non-committal paper summarizing without endorsement the conclusions reached by the meeting of experts in March. Internal political divisions within the United Kingdom Government which are not likely to be resolved during the next few months make it unlikely that resumed conversations with United States officials could lead to concrete and useful results.48
In February 1945, informed and disturbed about the increasing influence of protectionist sentiment in Britain’s coalition government, the Canadians attempted to sway British commercial policy in a more favourable direction with an offer of post-war financial assistance as well as a generous settlement of wartime obligations.49 However, the fate of that initiative, as well as the decisive influence on the external economic policies of the United Kingdom, would be determined in Washington, not Ottawa or London. Ultimately, the administration of Harry S. Truman would use its own financial clout as an inducement to commit the peacetime Labour government to a course which the Americans regarded as consistent with the wartime pronouncements.50
From the Canadian perspective, the approach of the United States to commercial policy was also disappointing, as its emphasis, in contradiction of the wartime discussions but designed to appease congressional attitudes, was on selective rather than horizontal tariff reduction. In July 1945, Canadian officials learned that this domestic political bargain would necessitate a cumbersome, complicated, and likely less effective and comprehensive process. The American minutes of the meeting convey the Canadian reaction.
The Canadian officials had had definite hopes for the horizontal formula because they considered it as the most practicable method, politically and economically, of solving the trade-barrier problem. The proposal for horizontal tariff reduction would represent a fresh approach designed to concentrate emphasis on expanded world trade and international cooperation. Its very magnitude, and the fact that it would deal with all tariffs in all countries with an even hand would assure for it strong support and would weaken the vested minority interests in every country.
The revised American approach would instead bolster protectionism in the United States and elsewhere, and it would stall progress on the liberalisation of global trade. For Canadian policymakers, this abdication of leadership by authorities in Washington would necessitate ‘a complete reappraisal of what could be expected to be accomplished in the trade-barrier field as a whole’.51
When bilateral consultations resumed in Ottawa, Norman Robertson stressed ‘that the Canadians were deeply disappointed and dismayed by the change in the American position’. For their part, the visitors emphasised that ‘legislative approval of the plan for horizontal tariff reduction could not be obtained and that it would be virtually useless to make the attempt’. When alternative means were then explored, the Canadian officials favoured negotiation of ‘substantial tariff reductions’ by bilateral agreements within a ‘nuclear group’ of perhaps a dozen countries, with concessions generalised.52 Although it was clear that this was seen as an inferior alternative to horizontal tariff reduction, there was at least the prospect of some improvement in international trade.
As a consequence of the fundamental differences in outlook and strategy between British and American authorities, there had been little advance in wartime with respect to commercial policy. Not until the lengthy and acrimonious Anglo-American loan negotiations were concluded in December 1945 did an agreed document dealing with international trade emerge. Under the circumstances, Proposals for Consideration by an International Conference on Trade and Employment bore the taint of a concession extracted under duress by the American negotiators from a vulnerable British government.53 Even so, a course was charted for further progress. The initiative was endorsed by the Economic and Social Council of the United Nations and then elaborated by a Preparatory Committee in Geneva, which produced a Draft Charter for the ITO and negotiated the GATT prior to a world trade conference in Havana.54
Implementing ideals: the post-war framework for global trade
Predictably, the guidance for the Canadian delegations to Geneva and Havana stressed the implications of the deliberations and the possible outcome for Canada’s trade with the United Kingdom and the United States. ‘In normal times, the surplus of our exports to the United Kingdom has been used to pay for the deficit in our balance of payments with the United States,’ the Secretary of State for External Affairs, Louis St-Laurent, was advised. With the ‘breakdown of multilateral exchanges’, Canada favoured the establishment of the ITO ‘to pave the way for the restoration of multilateral trade’ and to avoid the division of the world into ‘a number of trading blocks’, with sterling and dollar countries separated.55 The head of the Canadian delegation in Geneva, Dana Wilgress, affirmed at the first plenary session that
no country in the world has a more vital interest in the success of our deliberations than Canada. We have been blessed by nature with an abundance of natural resources which the industry and skill of our people have created surpluses of which the whole world stands in need. It is only through the co-operation of other countries that we can assure our people of a better way of life by exchanging our surplus products for those surplus to other lands. In this way we can make our contribution to a better life for the peoples of those lands.56
In spite of this universal language, however, his reports to Ottawa were dominated by familiar concerns about trade within the North Atlantic Triangle. Indeed, within days of his speech to the final plenary meeting of the ITO, Wilgress was reporting on the acrimonious ‘tariff negotiations at Geneva between the United Kingdom and the United States’, which were complicated by the latter’s renewed assault on Imperial Preferences and the former’s acute anxiety about its exchange difficulties.57 One month later, Lester B. Pearson, the Under-Secretary of State for External Affairs, advised the Prime Minister that ‘negotiations between the United Kingdom and the United States Governments have reached a crisis’, with the Americans insisting that the British accept a proposal from the American representatives.58 In fact, King was sufficiently concerned about the British attitude that he expressed to Clement Attlee his
hope that the United Kingdom Government may find it possible to reach agreement in the present tariff negotiations with the United States since failure in this respect would not only imperil the future of the International Trade Organization itself but in addition might well have the gravest consequences for the entire programme of United States assistance in the reconstruction of Europe.59
Though Wilgress was generally sympathetic to the British plight, he believed that ‘the United Kingdom Delegation have played their cards badly’ with respect to the timing and extent of any concessions. ‘Fundamentally’, Wilgress added, ‘the Geneva discussions are part and parcel of that attempt to secure the whole-hearted co-operation of the United States in post-war economic reconstruction, and it can only be regarded as short-sighted that the United Kingdom has failed to see the situation in this light’.60 The Canadian delegation was anxious to play its part in bridging such serious differences as arose in Geneva in order to avert a breakdown and to permit the signature of the GATT, which eventually took place on 30 October 1947, with Canada as one of the original signatories.
The final report of the Canadian delegation after the conclusion of the UN Conference on Trade and Employment at Havana also stressed dealings with the British and American delegates and the impact of the accord on Canada’s familiar pattern of commerce. The attitude of the United Kingdom to the ITO ‘seemed to be dominated by the desire to have nothing in the Charter that would impede their programme of agricultural protection nor their freedom to discriminate for balance of payments reasons’. As for the United States, its agricultural policies, involving import quotas and export subsidies, complicated its stance at the prolonged meetings in Cuba. Moreover, the impact of the Latin American delegations was such that Wilgress complained that the conference was demonstrably ‘held not only in the wrong place but at the wrong time’. Thus, Wilgress opined that ‘only the Benelux countries and Canada stood for the full acceptance of the basic principles of multilateral trade’, though ‘Canada was not absolutely pure’ as it attempted to safeguard its own balance-of-payments position. Overall, Wilgress concluded that the ITO Charter should be ratified by the Canadian parliament as it was important ‘to have some meeting place where representatives of governments can gather to consider complaints and to endeavour to remove obstacles impeding the free flow of world trade’.61
As the principal historian of Canadian commercial policy notes, Canada’s delegation played a significant part in elaborating the ITO’s Charter and in developing the framework and methodology for the multitude of bilateral negotiations that cumulatively provided the schedules of tariffs for the GATT.62 An American delegate later recalled Wilgress as ‘a very great man’ and identified Canada as ‘our great supporter. They ran interference, they always took the “simon pure” free trade positions and then we would make concessions, but they ran interference, so to speak.’63 In spite of these efforts, however, the ITO did not withstand the scrutiny of the American Congress and thus was consigned to the dustbin of history (at least until later diplomatic dustbin-divers retrieved, revised and renamed it as the World Trade Organization).
Meanwhile, the GATT, the interim organisation, was transformed into a quasi-permanent institution whose provisions included rules and regulations that had been intended for the ITO. All told, at the third session of the preparatory committee, with invited others in Geneva, 23 countries negotiated 123 agreements covering about 45,000 items in their tariff schedules. Canada made concessions affecting about two-thirds of its imports, while it benefited from reductions in tariffs on about three-quarters of its exports.64 The Canadian aim of trade diversification through the multilateral accord was reflected in the fact that Canada signed 14 trade agreements, though obviously none were as important as its deals with the United Kingdom and the United States.65 Six months of complex and often acrimonious negotiations, with myriad frustrations and tensions, nonetheless culminated in the first major multilateral accord on international commerce, including an interim arrangement of remarkable durability and acceptance.
Rather than diversify Canada’s trade, the GATT negotiations confirmed its continental direction. ‘Canada carried on bilateral discussions with many of the participants in the Geneva negotiations,’ Wilgress later recalled, ‘but it was chiefly with the United States that substantial results were achieved.’66 Unquestionably that was the most significant and comprehensive bilateral deal struck by Canada. The success of that and other agreements reached by Canada’s negotiators ‘confirmed for Canadian trade officials that the multilateral framework was a potent vehicle for promoting Canadian trade objectives’.67 The benefits with other potential trading partners were limited by the ‘escape clauses’ in the GATT necessitated by the immediate post-war economic difficulties. At the same time, Canada’s zeal to dismantle barriers to global commerce was tempered by its own exchange problems. On the same day as it announced its adherence to the GATT, the Canadian government imposed import restrictions to conserve its dwindling reserves of gold and American dollars. Wilgress had long urged that such action, which had been anticipated for months, should avoid the taint of discriminatory treatment, as that would undermine the efforts in Geneva and the credibility of the Canadian delegation there.68 Though formally non-discriminatory, the measures were obviously directed at imports of American products. As one response to Canada’s exchange crisis, Canadian officials negotiated a tentative free trade agreement with the United States (though that was eventually scuttled by King for political, not economic, reasons).69
Thus, the pragmatic Canadian approach to commercial policy was obvious at the end of the first round of GATT negotiations. That stance was evident as well at subsequent sessions in Havana, Annecy and Torquay, the cumulative effect of which was to confirm, not correct, the continental drift in Canada’s external trade. As Bruce Muirhead has put it, ‘Canadian policy was multilateral by preference, bilateral by necessity, and manifestly continental by default’.70
Conclusion: Canada’s North Atlantic world
In their early years, these multilateral financial and commercial institutions tended to increase rather than diminish Canada’s dependence on trade with the United States for its prosperity. Neither organisation functioned initially in ways that promoted the diversification of Canada’s international trade. Moreover, Canada’s conduct in this period within and outside the international organisations that it had helped to found contradicted earlier lofty declarations of its commitment to multilateralism. Canada’s rhetoric may have been global, but its policies and actions demonstrated that, in external economic policy in the early post-war years, as before, its world was the North Atlantic.