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The Canadian Reviewof American Studies, VolumL'VIII. Number L Spring 1977 CanadianTradePolicy in the Age of AmericanDominanceand BritishDecline, 1943-1947 Robert Bothwell and John English I "Canadian trade with both the United Kingdom and the United Sates is of a complementary nature, and is a classic example of a basically sound division of labour," the Rowell-Sirois Commission wrote in 1940. It continued: "Canada's 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." 1 In the l930's, this economic equation had not worked very well for Canada. Buffeted by an unfavorable international economic climate, Canada in 1938 possessed a standard of living lower than that of Great Britain; it went without saying that the American standard of living was an unattainable height for most Canadians. 2 The small man in the poker game had been nearl~ cleaned out, a fact which few Canadian officials or economists dared forget in the years that followed. Canadian trade policy during the 1940's was conditioned by the dismal experience of the I930's. The spectre of depression was ever-present, and to exorcise it the small Canadian poker-player was driven back to the trading table, to gamble with his larger partners, the United States and Great Britain. During the war years, the Canadians occasionally suggested modifications in the rules of the game to afford some protection against bankruptcy. They discovered that the problem was greater than it had been, since now another player, Great Britain, was also in serious straits. As a direct consequence, Canada turned more and more often to the American side in the game, pursuing the goal of a ..sound division of labour" and a sound bank balance. 53 In this game. Canada had no choice· it wa~ the only game m town, and Canadian officiuls were constrained to anticpate, and counter. their American partner's changes jf mood. It was in this spirit that Canada entered the world oftrading negotiations in the l940's. The war produced a phenomenal rise in Canadian exports, particularly to the United Kingdom. Canada's problem of the l930's, the lack of export markets, vanished; so, too, cffdCanadian unemployment. Canadian officials knew, however, that the war was only a palliative for Canada's export problems, a palliative which, bj' weakening Britain's external economic position, would make the post-war cure more difficult. Unfortunately for the Canadians, the new exports would be an early casualty of the peace: they were almost entirely munitions, foodstuffs, a_nd raw materials to feed the British war effort. Moreover, these exports rested on a hastily-constructed foundation of loans, credits, and temporary wartime financial expedients. Thisfoundation rested, in turn, on the Hyde Park Agreement of 1941between Canada and the United States, by which American moh~V.was made freely available to keep Canada's war industries alive. After 1941.C:anada herself had to finance most of her exports to the United Kingdom} Tht fact was, in Lord Lothian's breezy phrase, "Boys, Britain's broke."-i That Britain was broke was often concealed behind the facade of heroism and endurance, but for Canadian and British officials, there could be no escape from wrestling with the very real economic disasters of the war and with the obscure economic prospects for the peace. In this atmosphere of ambiguity, Canadians sought security: all agreed that secure trading patterns weredesirable, but how these patterns would be obtained was unclear. Fearmga return to peacetime poverty, Canadian public opinion, if the polls are to betrusted. looked to economic union with the United States as the preferred solution. Even a majority of upper income Canadians, traditionally insulated by the tariff from personal concern about depressions, seem to have favored this course. Among middle and lower income Canadians, the percentages were much higher. 5 The politicians and officials, however, did not have the simplistic choices which Gallup presented. There was, it is true...


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