Category Archives: Commercial Law

Treaties

Treaties in Canada

Information regarding treaties to which Canada is a party can be obtained in print at several Law Libraries, or online through the web site of theDepartment of Foreign Affairs and International Trade.

For information on how to find a treaty when you have a citation, click here. For information on how to find a treaty when you do not have a citation, click here (at the bottom).

Treaty with the United States Early History

Lord Elgin arrived at Washington in May 1854. His suite included Hincks and Laurence Oliphant, the writer, whose humorous and satiric account of what he saw during the negotiations makes most amusing reading. The diplomats reached the American capital at one of the most dramatic moments of American history. On the very day of their arrival the Kansas-Nebraska Bill passed Congress. It meant the momentary triumph of the South and the extension of slavery into the great hinterland beyond the Mississippi. The passage of the bill was celebrated by the salute of a hundred guns; and, fearing trouble, legislators sat in the House armed to the teeth.

Lord Elgin at once began operations which can hardly be distinguished from an ordinary lobby. From Marcy, the secretary of state, he ascertained that the kernel of opposition to reciprocity was the Democratic majority in the Senate, and he set about cultivating the Democratic senators. There was a round of pleasant dinners and other entertainments, at which Lord Elgin shone. A British peer is always an object of interest in a democracy. This one possessed most agreeable manners, a charm to which Southerners are peculiarly susceptible, and also an unusual gift of oratory which won him favour with a public accustomed to the eloquence of Daniel Webster and Wendell Phillips.

These things told with the Democratic majority. That the treaty ‘was floated through on champagne’ is an exaggeration; but there was undoubtedly much hospitality shown on both sides and much good fellowship. Ten days after his arrival at Washington Lord Elgin was able to tell Mr Marcy that the Democrats would not oppose the treaty, and on the fifth of June it was actually signed. Oliphant furnishes most amusing details of the actual ceremony of appending the signatures. It went into force only after it had been formally ratified by the legislatures of Great Britain and the United States. The most important provisions were as follows.

Natural products were to be admitted free of duty to both countries, the principal being grain, flour, lumber, bread-stuffs, animals, fresh, smoked and salted meats, lumber of all kinds, poultry, cotton, wool, hides, metallic ores, pitch, tar, ashes, flax, hemp, rice, and unmanufactured tobacco. In return the American fishermen obtained the coveted privilege of fishing within the territorial waters of the Maritime Provinces, without any restriction as to distance or headlands. Canadians were accorded the right to fish in the depleted American grounds, north of the 36th parallel N. latitude. Nova Scotians were not pleased at these concessions, especially as they were not allowed to share in the American coasting trade; but as trade grew up and prices rose, their discontent naturally vanished.

The benefits accruing to Canada from the treaty were immediate and plain to every eye. In the first year of its operation the value of commodities interchanged between the two countries rose from an annual average of fourteen million dollars to thirty-three millions, an increase of more than one hundred per cent. The volume of trade rose steadily at the rate of eight or nine millions per annum. When the war broke out between the North and the South, prices jumped, and, during the four years of the struggle, Canada had a greedy market for everything she could produce. The benefit to both countries was obvious. For the first time since the Revolution the currents of North American trade flowed unchecked in their natural channels. Canada had never known such a period of prosperity, and was never to know such another, until the great West was opened up by the railways and until immigrants began to flock in by hundreds of thousands, to draw from the rich loam of the prairies the bountiful harvests of man-sustaining wheat. Lord Elgin’s pact held good for twelve years. In the last year the volume of trade was more than eighty-four millions.

The agreement ended from a variety of causes, economic and political. Canada had raised the tariff on American manufactures in order to meet her increasing expenditure; and she tried to divert American commerce from its regular routes to a profitable transit through Canadian territory. But the chief cause was the bitterness of the United States at the attitude of Britain during the Civil War. The Trent affair, the ravages of the Alabama and other commerce destroyers, the open and avowed sympathy with the South expressed in British journals and elsewhere, convinced the American people that Britain would be glad to see the Republic broken up. That, with such provocation, the Americans should deprive a British colony of a commercial advantage was not unnatural. One statesman even proposed that the whole of Canada should be handed over to the United States in compensation for the Alabama claims. That the treaty was negotiated at all, and that the experiment in trade was so beneficial to both countries, has certain important lessons.

The episode proves that a colonial governor, while governing in strict accordance with the constitution, can do for his government what no one else can do. Lord Elgin’s success has never been repeated. Delegation after delegation of Canada’s ablest politicians have pilgrimed from Ottawa to Washington, seeking {155} better trade relations, with no result. The second lesson is the tendency of trade to mock at political boundaries and to wed geography. Even now, with high tariffs on both sides of the line, Canada spends fifty-one dollars in the United States for every thirty-three she spends in England.

From his triumph at Washington the governor-general returned to Canada to undergo another experience of democratic manners. The Hincks-Morin government was nearing its end. Parliament had no sooner assembled in the ancient capital, Quebec, than it was dissolved. In the political tug-of-war known as the debate on the Address the government was defeated. Instead of resigning, the leaders recommended the governor-general to dissolve the House, so that there might be a new election, and that the mind of the people might be ascertained on the two great issues, the Clergy Reserves and Seigneurial Tenure. The opposition contended that the ministry should either resign, or else bring in some piece of legislation as a trial of strength. Lord Elgin’s position was precisely the same as in the time of the Rebellion Losses Bill.

He acted on the advice of his ministers. When he came in state to prorogue the House, a most extraordinary scene occurred. He was kept waiting for an hour while the parties wrangled, and when Her Majesty’s faithful Commons did present themselves, the Speaker, John Sandfield Macdonald, read, first in English and then in French, a reply to the Address which was a calculated insult to Her Majesty’s representative. The point of the reply was that, as no legislation had been passed, there had been no session; and that this failure to follow custom was ‘owing to the command which your Excellency has laid upon us to meet you this day for the purpose of prorogation.’ Sandfield Macdonald was an ambitious and vindictive man. He was wrong, too, in his interpretation of the constitution. Hincks had denied him a cabinet position which he coveted, and this was his mode of retaliating upon him. None the less, the House was prorogued, and the elections were held.

According to the old, bad custom, they were spread over several weeks, instead of being held on a single day. The result was unfavourable to the government. Representation had been increased, and out of the total number of members returned the ministry had only thirty at its back. The Conservatives numbered twenty-two, the Clear Grits seven, Independents six, and Rouges nineteen. Papineau was defeated and retired to his seigneury. Hincks was returned for two constituencies. In the election of the Speaker he very adroitly thwarted the ambition of Sandfield Macdonald to fill that post; but, soon afterwards, the ministry was defeated on a trifling question and resigned. Hincks was afterwards knighted and made governor of Barbados and Guiana. He returned to Canada in 1869 to be a member of Sir John Macdonald’s Cabinet. He made a fortune for himself and he had no small part in making Canada. He died of smallpox in Montreal in 1885. His Reminiscences is an authority of prime importance for the history of his times. (1)

Resources

Notes

  1. Archibald MacMechan, “Popular Govrerment. A Chronicle of the Union of 1841” (1916), Toronto, Glasgow, Brook and Company

See Also

Definition of Treaties

The Canada social science dictionary [1] provides the following meaning of Treaties: An agreement or contract between two or more sovereign nations creating obligations and responsibilities for both parties. The British and French colonizers of what is now called Canada and the Canadian government itself have negotiated many treaties with the Native nations which occupied the land. These treaties are now protected by the Canadian constitution. See: NUMBERED TREATIES related information in this encyclopedia, in the legal dictionary or in the world encyclopedia of law.

Treaties: Resources

Notes and References

  1. Drislane, R., & Parkinson, G. (2016). (Concept of) Treaties. Online dictionary of the social sciences. Open University of Canada

Codfish

Codfish in Canada

History of the Codfish Question

Ever since the success of the Revolution the fishermen of New England had a grievance against the British government and against the colonies which did not revolt. They thought it most unjust that, as successful rebels, they could not enjoy the fishing privileges of the North Atlantic which they had enjoyed as loyal subjects. They wanted to eat their cake and have their penny too. Of course no power on earth could exclude them from the Banks, the great shoals in the open sea, where fish feed by millions; but territorial waters were another matter. By the law of nations the power of a country extends over the waters which bound it for three miles, the range of a cannon shot, as the old phrase runs. Now it is precisely in the territorial waters of the British American provinces that the vast schools of mackerel and herring strike.

To these waters American fishermen had not a shadow of a right; but Yankee ingenuity was equal to the difficulty and proposed the question, Where does the three-mile limit extend? The American jurists and diplomats insisted that it followed all the sinuosities of the shore. If admitted, this claim would give American fishermen the right of entrance to huge British bights and bays full of valuable fish. The Canadian contention was that the three-mile limit ran from headland to headland, thus excluding the Americans from fishing within the deeper indentations of the coast-line. By the treaty of 1818 the Americans were definitely excluded from the territorial waters, but still they poached on Canada’s preserves. It was maddening to Nova Scotians to see aliens insolently hauling their nets within sight of shore and taking the bread from their mouths.

The Americans applied the headland to headland rule to their own territorial waters; no ‘Bluenose’ fisherman could venture into the Chesapeake; but for the ‘Britishers’ to insist on the same rule was another matter. In 1852 the constant clash of interests almost led to war; for Britain backed up the just complaints of her colonies by detaching a force of six cruisers to protect our fisheries and stop the poachers, and the American government also sent ships to protect their fishermen. There was no further action, beyond a recommendation in the President’s message to Congress that the whole matter should be settled by treaty. (1)

Resources

Notes

  1. Archibald MacMechan, “Popular Govrerment. A Chronicle of the Union of 1841” (1916), Toronto, Glasgow, Brook and Company

See Also

Corn Laws

Corn Laws in Canada

In 1846 abolition of the Corn Laws in Great Britain directly affected Canada by (1) removing the preferential duties on wheat, timber, etc., and (2) producing the discontent with imperial relations which culminated in the famous Annexation Manifesto of 1849. Tariff preference on colonial produce had existed as early as 1828; but the subject came more prominently into view after 1841, when the government of Sir Robert Peel first revised the list of customs duties in 1842, and then rather abruptly in 1846 adopted free trade. The revision had reduced the preferences, but left them as a feature of tariff policy, Peel declaring: “It is desirable that we should act on the principle of treating Canada as if it were an integral part of the Empire.” This hint of an imperial tariff was followed in June, 1843, by the Canada Corn Act. The Act imposed a sliding’ scale of duties on wheat which, for the next three years, gave Canada a preference, varying, according to the market price, from 13s. to 15s. a quarter. The exports by the St. Lawrence route greatly increased during this period. Abolition of the Corn Laws, however, taking effect in 1849, but wiping out preferences at once (except that on West Indian sugar), checked exports. The resultant agitation in Canada was, therefore, both commercial and political. Dispassionate review of the conditions indicates that the Act had too brief an existence to develop a large trade, and that other factors contributed to the Canadian alarm. These were an increase in ocean freight rates, low prices in Great Britain, and the setting up of the bonding system by the United States Congress. The last-mentioned was a device to switch Upper Canada exports for shipment at New York. Popular opinion, however, attributed commercial depression wholly to free trade, ignoring the other causes, and the Galt tariff of the fifties, with its duties on British manufactures, drew support from this feeling. What expansion along imperial lines might have resulted, had the preferences continued, is matter for conjecture only. Free trade passed the House of Commons on May 11, 1846 , by 98 majority, and in the House of Lords, after a majority of 47 for the second reading, received third reading without a division. So definite a verdict buried hopes of preference for fifty years until the Fielding tariff of 1897, with its voluntary preference on British imports, re-opened the question. See D. L. Burn, Canada and the repeal of the Corn laws (Cambridge Historical journal, 1928).

Source : A. H. U. COLQUHOUN, “Corn Laws”, in W. Stewart WALLACE, ed., The Encyclopedia of Canada , Vol. II, Toronto , University Associates of Canada , 411p., pp. 131-132.

Resources

See Also

Free trade
Imperial Preference
National Policy
Reciprocity
Tariffs

Tariffs

Tariffs in Canada

History of Tariffs in Canada

Up to 1846 there were two tariffs applicable to imports into Canada, an imperial tariff on foreign goods only, and a colonial tariff fixed by the colonial legislature, levied on all imports, and limited to a maximum of 5 per cent. In the earlier years of the nineteenth century no duties were levied on the land frontiers of Canada, and even when such duties were legally imposed there was little attempt to enforce or collect them. Much of the supplies for the western pioneers in Ohio , Indiana, and Michigan came through Montreal, and considerable quantities of American produce were exported via the St. Lawrence, and accepted in Great Britain as Canadian in origin. During the 1820’s and 1830’s the definition of “Canadian” produce was more strictly drawn, but American raw materials processed in Canada were still admitted into England as Canadian goods. When in 1846 the repeal of the Corn Laws swept away the preferences on which so much of the St. Lawrence trade had come to be based, desolation stalked in Montreal .

1846-1866

The repeal of the Corn Laws almost necessarily involved the granting of full autonomy to Canada in tariff matters, and in 1847 a Canadian tariff, with a prevailing rate of 10 per cent., took the place of the old imperial and colonial tariffs. A second inevitable result of 1846 was the negotiation of a commercial treaty with the United States. Negotiations began in 1848, and following a difficult and complicated course were successfully .concluded in 1854. The Reciprocity Treaty of 1854 in effect traded navigation and fishing privileges for free entry of all natural products of the farm, forest, mine, and sea. The treaty remained in force for twelve years, but was abrogated in 1866 at the instance of the United States. The Canadian prosperity which coincided with the period of reciprocity was due in no small measure to the free access to the American market. Especially during the Civil War did Canadian producers profit by the high prices and insatiable demand of the United States . And, in its turn, the denunciation of the treaty was an important influence underlying Confederation.

In the meantime, a protectionist movement had begun to develop in Canada. In response to the growing agitation of the small manufacturers, the Cayley tariff of 1858 and the Galt tariff of 1859 raised the duties on manufactured goods from an average of about 10 per cent. to one rather over 20 per cent. While the government defended the increases as necessary revenue measures, it is clear that it was accepting in principle a policy of moderate protection. The Cayley and Galt tariffs aroused a storm of protest in England, but the despatches, speeches, and memoranda in this connection belong to constitutional rather than economic history. They also occasioned a good deal of resentment in the United States , where they were regarded as a breach of the spirit of the Reciprocity Treaty, and this resentment was added in 1865 to the other interests demanding the abrogation of the Treaty.

1866-1879

In 1867 the normal rate of the Canadian tariff was reduced from 20 per cent. to 15 per cent. This reduction was a compromise between the moderately protectionist policy of the Canadas and the more or less free-trade policy of the Maritimes, but it was also a reply to the abrogation of Reciprocity. With the United States market largely closed, it was necessary “to make Canada a cheap country to live in and to produce in”.

During the first ten years of Confederation, the tariff was not a divisive factor in politics. It was regarded primarily as an instrument of revenue, conferring, it is true, “incidental protection”. The economic depression that began in 1873 created budgetary difficulties, and in 1874 the general rate was increased to 17½ per cent. In 1876 a further increase to 20 per cent. was proposed, but was rejected by the government. As the depression deepened, Canada became a slaughter market for the surplus stocks of British and American manufacturers. Attempts at relief through a new reciprocity treaty failed. After some hesitation the Conservative party, then in opposition, adopted its ” National Policy “, a policy of high protection and concentration on the home market. In the general election of 1878 the Conservatives were victorious, and the new government at once put its policy into practice.

1879-1897

The budget of 1879 and its successors amply fulfilled the pre-election promises of the National Policy . Duties on manufactured goods were raised from 17½ per cent. to 30, 35, and in some cases 45 per cent., and the free list was considerably reduced. Cottons, woolens, furniture, and iron manufactures were especially favoured. In 1883 the production of pig-iron and steel was further encouraged by the introduction of a system of bounties.

The prosperity of 1879-1883, which came to Canada as it did to the rest of the world, gave a somewhat fictitious prestige to the National Policy. Undoubtedly the history of modern manufacturing in Canada dates from 1879, but after 1883 the era of the National Policy was largely one of difficulty and depression. Industry became stagnant, and emigration assumed alarming proportions. The Canadian political Scriptures, it was said, “began with Exodus and ended in Lamentations.”

By 1890 the seven lean years had begun to produce a reaction. The reviving political power of the Democrats in the United States offered some hope of freer trade relations with that country. The publicity given to the growth of monopolies and trusts in Canada was turned into an effective argument against high tariffs. The government met this shift in opinion by lowering a few duties here and there, especially on articles used chiefly in the farming industry. The election of 1896 was fought on a complexity of issues, but of these the tariff was one of the most important. The Liberals roundly attacked the whole National Policy, and, against a rather disorganized Conservative party, won handsomely.

1897-1911

In spite of the Liberal professions when in opposition, the first Liberal budget of 1897 made no radical changes in the tariff. Indian corn, binder twine, barbed wire, pig-iron, and sugar were added to the free list; there was some simplification of rates and classifications; and the duties on a few items were raised.

The most significant item in the Budget of 1897 was the introduction of the principle of the British preference. It took the form of a rebate of 1/8th of the general rate on imports from countries granting at least as favourable rates to Canada . It was intended and expected that this rebate would apply only to the United Kingdom and certain of its colonies, but it was found to be legally impossible so to confine it, because the British treaties with Belgium (1862) and the German Zollverein (1865) specifically bound the colonies. In practice, therefore, the lower rates had to be extended to all countries within the world-wide network of the British most-favoured-nation treaties. The United States was the only important country that failed to qualify. At the Colonial Conference of 1897, Great Britain was persuaded to denounce the Belgian and German treaties, and in 1898 Canada was free to grant special preferences to British and Empire goods. This she at once did, at the same time increasing the rebate to ¼, a rebate further increased to 1/3 in 1900. In 1904 the flat rate preference was abandoned in favour of a two-column tariff, the British preferential column being in most cases substantially lower than the general column.

The inauguration of Imperial Preference may be attributed to several factors. It was supported by Liberal free-traders as an ingenious flank attack on the policy of protection. In part it reflected Canadian resentment to the McKinley and Dingley tariffs of 1890 and 1897; and it was in part a product of imperial emotion associated with the Diamond Jubilee. Opinion in Canada divided only on the question of whether the concessions should be conditional or unconditional. In practice they were accorded unconditionally to Great Britain and conditionally to other parts of the Empire. By 1904 preferential treatment had been extended to India , South Africa, British West Indies, and New Zealand ; and by 1913 to practically the whole of the dependent Empire. In 1923 the Irish Free State was included, and in 1928 Newfoundland. Trade relations with Australia have never been governed by the preferential tariff, but since 1925 they have been the subject of a special trade agreement.

The development of imperial preference aroused some misgivings in foreign countries, but Germany was the only country to take retaliatory action by withdrawing from Canada its conventional tariff and imposing its maximum rates. Canada replied in 1903 with a surtax of 33 1/3 per cent. against German goods. Not until 1910 was a settlement reached, when Germany accorded her minimum rates to the principal Canadian exports, and Canada withdrew the special surtax.

In 1904 the anti-dumping clause was introduced into the Canadian tariff. This clause provides that when the export price to Canada is lower than the domestic price in the exporting country an extra duty equal to the difference in these prices is levied. This anti-dumping clause was a Canadian invention, and has been widely copied by other countries.

In 1907 there was a complete revision of the tariff, and the well-known “three-column tariff” was introduced; that is, for each item three rates of duty are provided, the British preferential rate, the intermediate rate, and the general rate. The intermediate rate is the bargaining rate, and the general rate applies to all countries with which Canada has no most-favoured-nation agreement. Broadly speaking, the 1907 revision left the preferential and general rates unchanged, but introduced the new intermediate rates, slightly lower than the general rates.

Between 1907 and 1911 Canada built up a network of most-favoured-nation agreements with a large number of foreign countries. It has already been noted that Canada received autonomy in tariff-making in 1846, but freedom to negotiate commercial treaties came much later. In 1877 Great Britain adopted the practice of inserting a clause in all new commercial treaties making the adherence of the self-governing colonies optional. But treaties affecting Canada were still negotiated through the Foreign Office, though the practice slowly developed of including a Canadian as an associate in the diplomatic pourparlers. In 1883 Sir Charles Tupper was appointed joint-plenipotenti­ary with the British ambassador in Paris for the purpose of negotiating a commercial agreement. Not until 1907 did Canadian plenipotentiaries conduct the whole of the negotiations, and even then the British ambassador put his signature to the final document. Only in 1923 did the Canadian government secure recognition of the right to sign exclusively on behalf of the Crown.

Commercial agreements were signed with France in 1907, and with Italy, Germany, Belgium, and Netherlands during the next few years. In addition, by adherence to British treaties, Canada entered into most-favoured-nation rela­tions with most of the other European countries, with several South American countries, and with Japan.

The pre-war history of the Canadian tariff naturally concludes with the struggle over reciprocity. In 1909 the Payne-Aldrich tariff had for the first time given the United States a two­column tariff, the punitively higher rates to be used against countries which discriminated against the United States. The United States raised no official objection to the preferential tariffs, but did demand, in return for its “minimum” tariff, the concession of not only the whole intermediate column, but also certain special rates conceded to France in the 1907 agreement. A very generous compromise was reached in March, 1910, by which Canada made a few very minor concessions, and in return received the whole minimum schedule.

The negotiations leading up to this settlement had, however, given rise to discussions of a much broader nature. Both governments were facing regional political revolts on the tariff question, and a sympathetic understanding of each other’s difficulties led them to accept the broad objective of reciprocally lower tariffs. A draft agreement, to be given effect by concurrent legislation, was completed in January, 1911. This agreement placed most natural products on a reciprocal free list, and pro­vided for substantial reductions on a long list of manufactured products. The agreement passed Congress, though not without difficulty, but in the Canadian parliament the Conservative opposition vigorously and successfully insisted on an appeal to the people. In the election that followed the Liberals received only 88 seats to the Conservatives’ 133. The Liberals carried the Maritimes and the West; Quebec divided largely on the nationalist and naval questions; Ontario went almost solidly to the Conservatives. In the popular vote the Conservative majority was about 40,000 in a poll of 1,300,000. Both parties, however, accepted the 1911 verdict as a definitive rejection of special tariff relations with the United States , and regarded the issue as closed.

1911-1930

This period was marked by frequent changes in tariff detail, but no significant change in policy or in trend. During World War I, a horizontal increase in all tariffs was made by imposing a special surtax on all imports, 5 per cent. on the British preference, and 7 ½ per cent. on the intermediate and general rates. In 1919 the tariff question was forced into political dis­cussion once more, but the division of opinion remained strongly regional, and both national parties, in the attempt to remain national, had to compromise. Though the government changed in 1921, and for the first time a large farmers’ party arrived at Ottawa , no real change in tariff policy can be observed. Duties on agricultural machinery and on automobiles were reduced in 1924 and 1926, but the rates on many iron and steel items were increased. The most numerous changes came in the Dunning budget of 1930. The number of items on the British free list was greatly increased, largely by the addition to it of items under which little was imported or in which Canadian production hardly existed. The 1930 budget completely re-wrote large sections of the tariff, but the work was really one of long overdue reclassification, and the net effect on the margin of protection was negligible. The Dunning budget did, however, introduce a new tariff device, the seasonal tariff in a wide range of fresh fruits and vegetables.

The years 1923-1928 saw renewed activity in the negotiation of trade agreements, the more important being with France, Italy, Australia, Netherlands, and the British West Indies. By exchange of notes or order-in-council, most-favoured-nation treatment was still further extended. After a short lapse this movement was renewed after 1933, and by 1937 Canada had commercial agreements either of a special nature or of the general most-favoured-nation type with all the important countries of the world except China.

An Advisory Board on Tariff and Taxation was created in 1926. For some time there had been discussion of “taking the tariff out of politics,” or of applying scientific methods, or at least “open diplomacy”, to tariff changes. The Board of 1926 was empowered to study and report on any question referred to it by the minister of finance.

During the four years of its life it received nearly 200 references. Its most important achievement was the complete revision and reclassification of the iron-and-steel schedules. The Board was dissolved after the general election of 1930, but a new Board was constituted in 1933. The new Board not only reports on any matter referred to it by the minister of finance; it also deals with matters arising out of Articles 10 to 15 of the United Kingdom-Canada Trade Agreement (1932) and it hears and decides appeals from the rulings of the Department of National Revenue with respect to appraisals, valuations, and the classification of imports.

1930-1937

Immediately after the general election of 1930 a special session of parliament was called to deal with unemployment, and as part of the relief programme a drastic upward revision of the tariff was undertaken. Duties were increased all along the line; and in many cases, especially in textiles, heavy specific duties were superimposed upon the increased ad valorem rates. Canada stepped directly into the ranks of the definitely high tariff countries. At the same time, the Customs Act was amended, giving the government broad powers to impose arbitrary valuations and drastic anti-dumping duties by ministerial decree, and to impose what were in effect almost prohibitive duties on imports from countries with depreciated currencies. The special powers thus conferred were freely used between 1930 and 1933. Partly as a result of the Ottawa Conference and partly as a result of the passing of the acute stage of the depression, these powers were more moderately exercised after 1934.

In 1931 the new powers were used to prohibit the importation of coal, lumber, asbestos, and certain other products from Russia. In retaliation the Soviet government practically ceased making purchases in Canada. Normal trade relations, however, were resumed in 1936.

A short tariff war with Japan occurred in 1935. Japan took the view that the Canadian “administrative protection” constituted in fact discrimination against Japanese trade. Negotiation failing to resolve the issue, Japan imposed a surtax of 50 per cent. on the more important exports from Canada, and Canada replied with a surtax of 33 1/3 per cent. on all Japanese goods. Five months later an amicable settlement was effected.

In 1932 the Imperial Economic Conference was held at Ottawa. For thirty years the principle of imperial preference had been spreading in the British Dominions, but so long as Great Britain remained a free-trade country it was impossible for it to reciprocate. During and immediately after the war Great Britain imposed protective customs duties on a few commodities – the McKenna and Key Industries duties – and in these she conceded a 33 1/3 per cent. rebate on imports from Empire countries. During the winter of 1931-2, however, Great Britain definitely abandoned her free-trade policy, and imposed, first, a general tariff of 10 per rent. (subject to some important exemptions), and later a more complicated tariff with rates as high as 25 and 35 per cent. In all cases imports from Empire countries were admitted free of duty pending the results of the Ottawa Conference. At this Conference a comprehensive series of bilateral agreements were negotiated. Canada signed agreements with the United Kingdom, South Africa, the Irish Free State, and Southern Rhodesia. Agreements were already in effect with Australia and New Zealand. India and Newfoundland remained the only parts of the Empire with which Canada had no special agreement.

The agreement with the Irish Free State accorded Canada most-favoured-nation treatment, and in return Canada gave the same rates of duty accorded to the United Kingdom. The agreements with South Africa and Southern Rhodesia exchanged preferences on specified lists of goods, chiefly Indian corn, fruits, nuts, and sugar, on the one hand, and wheat, apples, lumber, paper, hosiery, rubber goods, electrical appliances, and various kinds of machinery, on the other.

The Canada-United Kingdom Agreement was more comprehensive. Great Britain undertook to continue the preferences already existing under the Import Duties Act, and in addition created new preferences chiefly in wheat, dairy products, meat, fruits, and tobacco. Great Britain further undertook to secure for Canada extensive preferences in the non-self-governing Empire. In return Canada increased the margin of preference on 223 items, 133 by lowering the preferential rate, and 90 by raising the intermediate and general rates. The principal groups benefited were textiles, iron and steel, and chemicals. Canada also increased the margins of preference on various commodities largely produced in the dependent Umpire.

In addition to the tariff schedules, Canada agreed to a number of broad principles governing the administration of her tariff. Chief of these were undertakings to accord protection only to industries with reasonably sound prospects of success; to limit the height of the tariff by considering the differences in the costs of efficient production in the two countries; to provide machinery for impartial settlement of disputes over tariff administration; and to abolish as soon as possible the exchange dumping duties.

The Agreement ran for five years, and was replaced by a new Agreement in 1937. The new Agreement involved no significant changes, but accorded slightly lower rates of duty on a long list of commodities, the most important being in the textile group.

In November, 1935, Canada signed a trade agreement with the United States which for the first time in seventy years placed Canadian-American trade on a negotiated foundation. The agreement exchanged unconditional most-favoured-nation treatment (the United States excepting Cuba, and Canada excepting the British preferential rates). The United States further reduced by 20 to 50 per cent. the duties on 63 items including lumber, cattle, fish, cheese, cream, apples, and certain chemicals. The United States undertook to keep twenty-one items on the free list, including newsprint, shingles, wood-pulp, and agricultural implements. For five items the tariff concessions were applicable only to reasonably generous quotas, all imports above the quota being subject to the old rates of duty. Canada in return extended the entire intermediate tariff to the United States, a reduction of 2 ½ to 5 per cent. on the great majority of the items in the tariff. On fruits, vegetables, magazines, farm implements, and a wide range of industrial machinery, new rates were established considerably below the old intermediate rates. Canada also agreed to amend the Customs Act to eliminate much of the arbitrary control of customs valuations, and agreed specifically to reduce by at least 20 per cent. the special seasonal duties on fresh fruits and vegetables.

The net effect of the agreement was to put the general level of duties in both countries back to about the level prevailing in 1929, that is, before the introduction of the Hawley-Smoot and Bennett tariffs of 1930.

Summary

Beginning in 1867 with a low tariff, Canada became in 1879 a country of moderately high tariffs. Since 1879 the general level has been fairly constant, with perhaps a slight downward trend. The only important break in this policy was in 1930-35, when Canada was definitely in the high tariff class. Since about 1904, Canada has become steadily more conscious of the growing importance of trade with countries other than Great Britain and the United States, and this has been reflected in the growth and development of a network of commercial treaties. Since 1890 there has been no politically significant group in Canada committed to a free-trade policy. Low tariff sentiment is strong on the Prairies and in the Maritimes; high tariff sentiment dominates the industrialized central provinces; and the national policy has remained a somewhat uneasy compromise between the two.

Source : K. W. TAYLOR, “Tariffs”, in W. Stewart WALLACE, ed., The Encyclopedia of Canada , Vol. VI, Toronto, University Associates of Canada, 1948, 398p., pp. 102-108.

See Also

Corn Laws
Free trade
Imperial Preference
National Policy
Reciprocity

Further Reading

If you’re interested in diving deeper, our reading included:

  • E. Porritt, Sixty years of protection in Canada (London, 1908);
  • O. D. Skelton, “General economic history, 1867-1912”, in A. Shortt and A. G. Doughty (eds.), Canada and its provinces, vol. ix (Toronto, 1914);
  • W. A. Mackintosh, “Canadian tariff policy”, in Canadian papers, Banff Conference, I. P. R. (Toronto, 1933);
  • K. W. Taylor, “Tariff administration and non-tariff methods of trade control”, in Proceedings of the Conference on Canadian-American affairs, Canton, New York, 1935 (New York, 1936);
  • H. Feis, “A year of the Canadian Trade Agreement” (Foreign Affairs, 1937).

Reciprocity

Reciprocity in Canada

Reciprocity Agreement

Reciprocity, a term commonly used in Canada in reference to an agreement with the United States involving mutual reductions in customs duties. The agitation for reciprocity became of political importance in Canada in 1846 during the period of discontent that followed the repeal of the Corn Laws by Great Britain . The British government was accordingly induced to open negotiations at Washington for a reciprocal agree­ment including the five North American colonies. The dispute over the rights of Great Britain and of the United States in the North Atlantic fisheries com­plicated the negotiation for reciprocity, but increased the anxiety of both governments to reach a general settle­ment. At length in June, 1854, a for­tuitous combination of circumstances, including the decline in the opposition of the northern protectionists and of the southern pro-slavery party, enabled Lord Elgin, and W. L. Marcy, the American secretary of state, to negotiate the treaty.

Under the terms of the Elgin-Marcy treaty [more commonly known as the Reciprocity Treaty of 1854], the United States and the British North American colonies (Canada, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland) each removed the duties upon a considerable list of natural products. The most important were grain, flour and breadstuffs, animals, meats, fruit, fish, poultry, tallow, coal, timber, and lumber. American fishermen were admitted to the colonial fisheries on the Atlantic coast, while British subjects received a similar privilege in eastern American coastal fisheries north of the thirty-sixth parallel. British and American shipping had access, upon equal terms, to the St. Lawrence, the Canadian canals, and lake Michigan. The treaty undoubtedly imparted a considerable impetus to trade between the United States and the colonies, which more than doubled between 1854 and 1865. The prosperity of the period was, however, to a large extent, the result of other factors, including the rapid development of the area around the Great lakes and of the American middle west, the construction of railways, and the American Civil War. The trade developed under the treaty has been described as a “commerce of convenience” : the principal articles of importation into Canada – grain, flour, meat, livestock, coal, etc. – were largely the articles which the colonies chiefly exported to the United States.

As early as 1856, American protectionists, particularly the manufacturing and shipping interests of the state of New York, began an agitation against the treaty. Canadian tariff increases, in 1858-9, upon dutiable importations from the United States enabled opponents of reciprocity to claim that Canada had violated the spirit of the treaty. During the Civil War, the allegedly pro-southern sympathies of Great Britain and of the colonies increased northern opposition to the reciprocity agreement. Economic and political forces, therefore, combined to bring about the abrogation of the treaty by the United States in March, 1866.

Between 1866 and 1900 Canada made repeated but abortive efforts to secure another reciprocity treaty. In the period after Confederation the Macdonald government attempted to negotiate an agreement, and in 1869 Sir John Rose, then minister of finance, made an unsuccessful visit to Washington . Hope of securing a reciprocity agreement was temporarily destroyed by the Treaty of Washington of 1871, in which important fishery and navigation privileges were conceded to the United States, without the provision for reductions in duty, except upon fish. In 1874, George Brown and Sir Edward Thornton, the British minister at Washington, negotiated a draft treaty, with Hamilton Fish, the American secretary of state. The treaty, which was to operate for twenty-one years, provided for tariff reductions upon natural products, agricultural implements, and manufactures; but it was rejected by the United States Senate. During the eighties the Liberal party, through the influence of Erastus Wiman and Goldwin Smith, was committed to the policy of unrestricted reciprocity with the United States. In the election of 1891, Sir John Macdonald made telling use of the argument that the Liberal policy would lead to the annexation of Canada. Commissioners were despatched to Washington by the Conservatives in 1892-3, and by the Liberals in 1898-9, but were alike unsuccessful in securing a treaty.

During the following decade there was little discussion of reciprocity. In 1911 negotiations between President Taft and W. S. Fielding, the Canadian minister of finance, resulted in a reciprocal arrangement which was to be enacted by concurrent legislation in the two countries. The agreement provided for free trade in the natural products of the farm (grain, fruits, vegetables, and farm animals), low rates of duty upon natural products in secondary form (meats, canned goods, flour, etc.) and upon a variety of articles including agricultural implements and engines, building material, and partly finished lumber. Pulpwood was to be admitted free by the United States when the provinces withdrew the embargo upon the exportation of pulpwood from government-owned lands. The necessary legislation was passed by the United States Congress; but the Laurier government, which fought a Dominion election chiefly upon the issue of reciprocity, was defeated.

No further negotiations for reciprocity occurred between the two countries for over twenty years. After passage of the Reciprocal Trade Agreements Act in the United States , negotiations were opened between the Canadian and American governments in the latter part of 1934. The accession to power of the Liberals in Canada in the autumn of 1935 was followed by the King-Hull agreement at Washington on November 15. The treaty was to be in operation until December 31, 1938. According to its provisions, the United States reduced the duties upon some sixty commodities imported from Canada, including cattle, horses, whiskey, sawed boards, planks, deals, and sawed timber, cheddar cheese, maple sugar, and seed potatoes. Free entry to the American market was guaranteed to a number of products including newsprint paper, woodpulp, pulpwoods, and shingles of wood. Canada extended to the United States the benefit of the intermediate tariff in its entirety. Specific reductions below existing most-favoured-nation rates were made in respect of eighty-eight tariff items, including products in the groups of agriculture, textiles, iron and steel, machinery, agricultural, industrial and domestic, and electrical apparatus. Each country agreed to accord to the other unconditional most-favoured-nation treatment in respect of custom duties and related matters. Concessions by Canada to the other parts of the British Empire and by the United States to Cuba, the Philippine islands, the Virgin islands, American Samoa, etc., were not included within the scope of the treaty.

Source: D. C. MASTERS, “Reciprocity”, in W. Stewart WALLACE, ed., The Encyclopedia of Canada , Vol. V, Toronto, University Associates of Canada, 1948, 401p., pp. 228-230.

Resources

See Also

  • Corn Laws
  • Free trade
  • Imperial Preference
  • National Policy
  • Tariffs

Further Reading

If you’re interested in diving deeper, our reading included:

  • F. E. Haynes, The Reciprocity Treaty with Canada of 1854 (Baltimore, 1892, publications of the American Economic Association, vol. vii, no. 6);
  • Donald C. Masters, The Reciprocity Treaty of 1854 (London, 1937);
  • Charles C. Tansill, The Canadian Reciprocity Treaty of 1854 (Baltimore, 1922);
  • United States Tariff Commission, Reciprocity and commercial treaties (Washington, 1919);
  • John W. Dafoe, Clifford Sifton in relation to his times (Toronto, 1931);
  • Edward Porritt, Sixty years of protection in Canada, 1846-1907 (London, 1908);
  • Trade and tariff relationships between Canada and the United States (Report by joint Canada-United States Committee, maintained by Canadian Chamber of Commerce and Chamber of Commerce of the United States, 1934).

Imperial Preference

Imperial Preference in Canada

The theory underlying the old British empire, with its Navigation Laws, was that colonies existed for the benefit of the Mother Country. The Mother Country had a monopoly of colonial markets. Colonial products, on the other hand, sometimes received a preference in the markets of the Mother Country; and this policy reached its culmination in the famous Corn Laws of 1842. The policy, however, was reversed in 1846, when Great Britain adopted the principle of free trade in corn; and by 1860 free trade had come into full operation in Great Britain, and the last preferences on colonial goods had disappeared. In 1859, on the other hand, Canada adopted a protective tariff which operated even against the Mother Country; and by the National Policy of 1879 the principle of protection was carried still further in Canada. The development of intra-imperial trade by means of imperial preferences was a favourite theme with the imperial federationists of the period from 1884 to 1904; but the loyalty of the Mother Country to the ideal of free trade placed an insuperable obstacle in the way of this project. The only way in which Great Britain could give a preference to colonial goods was by abandoning free trade and setting up a tariff wall against foreign countries. In these circumstances, Sir Wilfrid Laurier made the first move in the direction of imperial preferences in 1897 when he brought into effect a budget remitting 25 per cent. of the Canadian import duties when goods were of British origin. This “imperial preference” was increased to 33 1/3 per cent. in 1900; and it was the intention of the Laurier government to increase it to 50 per cent. when it was defeated in 1911. A similar preferential tariff on British goods was adopted by New Zealand in 1903, by South Africa in 1904, and by Australia in 1907. In no case were these preferences dependent on concessions made by the Mother Country; but in 1903 the Right Hon. Joseph Chamberlain resigned from the British cabinet, and undertook a campaign in favour of “tariff reform” by which was meant the adoption by Great Britain of a protective tariff which would enable it to grant a trade preference to the Dominions. Though he gained widespread support, his programme, however, failed to win the support of a majority of the British electors; and ill-health ultimately compelled him to desist from his campaign.

It was not until the period of the World War that Great Britain was forced to abandon, in fact if not in principle, the theory of free trade. Once import duties were re-established in the Mother Country, it became possible to grant a preference to goods from the overseas Empire; and in the British budget of 1919, introduced most appropriately by Joseph Chamberlain’s son, the principle of an imperial preference was at last adopted. A preference of 33 1/3 per cent. was granted on cinematograph films, on clocks and watches, on motor-cars; and on musical instruments imported from the overseas Empire, and half this preference on tea, cocoa, coffee, and tobacco. These preferences were not of much value to Canada ; but it was important that the way was opened for the adoption of reciprocal imperial preferences. A system of recip rocal imperial preferences was finally arranged at the Imperial Economic Conference held at Ottawa in 1932. These included not only preferential tariffs between Canada and the Mother Country, but also between Canada and other parts of the Empire. These preferences were not so extensive as they might have been if they had been arranged a third of a century earlier, for in the meantime many industries had grown up in the Dominions which could only exist behind high tariff walls. But a beginning was made, with results advantageous both to Canada and the Mother Country; and the principle of reciprocal tariff preferences among the component parts. of, the British Empire is now, established in practice.

Source : W. Stewart WALLACE, “Imperial Preference”, in The Encyclopedia of Canada, Vol. III, Toronto, University Associates of Canada, 1948, 396p., pp. 254-255.

See Also

Corn Laws
Free trade
National Policy
Reciprocity
Tariffs

North West Company

North West Company in Canada

North West Company, an organization formed in the years following the British conquest of Canada, for the exploitation of the fur-bearing regions of the Canadian North West.

It was not, like the Hudson’s Bay Company, a chartered company, but was merely a pool or syndicate of fur-trading firms or individuals, formed to abate the evils of competition; and though it came later to be dominated by the Montreal firm of McTavish, Frobisher, and Company (later McTavish, McGillivrays, and Company), it never lost its character as a partnership. To this feature of its constitution it owed, indeed, in large measure both its success and its failure. Its wintering partners, with a personal stake in the fortunes of the company, proved much more aggressive than the poorly-paid employees of the Hudson’s Bay Company; and in the race for the furs which opened up the whole of the Canadian North West, from lake Superior to the Pacific ocean and from the sources of the Mississippi to the Arctic sea, the Nor’ Westers easily outdistanced the Hudson’s Bay men. On the other hand, when the rivalry. between the North West Company and the Hudson’s Bay Company came to a head over Lord Selkirk’s establishment of a colony on the Red river, cutting across the North West Company’s line of communications with the interior, the loose organization of the Nor’Westers proved to be a severe handicap, as compared with the unified control of the Hudson’s Bay Company.

History of the North West Company

Just when the North West Company was first formed, is difficult to determine. At an early date signs of concentration among the fur-traders in the far North West were apparent; and in 1775 Alexander Henry describes a pool or merger of interests on the Saskatchewan. There are references to “the North West Company” as early as 1776. But the first union of interest of which we have definite knowledge was the sixteen-share concern formed in 1779. The agreement on which this was based apparently broke down; but it was succeeded by a new agreement in 1783, and this is the date at which the North West Company has commonly been said to have begun. The 1783 company had to meet the competition of a rival organization of Montreal merchants, known as Gregory, McLeod, and Company, in the service of which Sir Alexander Mackenzie began his career; but in 1787 this company was absorbed by the North West Company, and a new agreement was made, under which the North West Company was reorganized on the basis of twenty shares, instead of sixteen. Opposition to the North West Company developed again after 1793, and in 1800 there was formed a “New North West Company”, to which the name of XY Company came to be applied. After a severe contest, the XY Company was in 1804 absorbed in the North West Company, and was given a quarter interest in the new concern, which was reorganized on the basis of one hundred shares. The agreement of 1804 was the constitution under which the company operated for the rest of its life.

The development of the North West Company’s trade during these years was spectacular. Its operations were confined at first to the lake Superior region, the valleys of the Red and Assiniboine rivers, and the Saskatchewan river. But in 1778 Peter Pond reached lake Athabaska; in 1789 Alexander Mackenzie followed the Mackenzie river to its mouth on the shores of the Arctic ocean, and in 1793 crossed the Rocky mountains, and reached salt water on the Pacific coast; and in 1811 David Thompson explored the Columbia river to its mouth. The opening up of these vast new territories, constituting a veritable “Umpire of the North”, over which the company held sway, converted the North West Company into one of the first examples of “big business” on the North American continent; and its wilderness headquarters, situated first at Grand Portage on lake Superior, and after 1805 at Fort William, became in the height of the season a town of several thousand inhabitants. Fortunes were made in the fur-trade; but these fortunes went to the individual partners, rather than to the North West Company, which consequently built up no reserve fund, and was indeed in the position of a creditor of many of its partners.

When, therefore, the Earl of Selkirk, who had acquired a controlling interest in the Hudson’s Bay Company, challenged the North West Company to a life-and-death struggle by establishing on the banks of the Red river in 1812 a colony which cut athwart of the North West Company’s line of communications, the North West Company found itself ill-equipped to meet the long struggle that followed. Not only was it at a disadvantage in meeting the intensive competition in the fur-trade (for the costs of shipping furs by Hudson bay were half of what they were for transporting furs by the long canoe route to Montreal), but it had no reserves to meet the costs of this ruinous competition or of the expensive and prolonged law-suits in which the North West Company became involved. It is not possible to describe here in detail the duel which took place between Lord Selkirk and the Nor’ Westers in the years following 1812 – a duel which first became acute with the massacre of Seven Oaks in 1815, and culminated in the capture of Fort William by Lord Selkirk in 1816 and the subsequent arrest of Lord Selkirk in 1817; but the results of the struggle were painfully apparent. The Hudson’s Bay Company invaded areas, such as the Athabaska country, which they had hitherto left to the Nor’Westers; and the Nor’ Westers devoted all their energies to the prosecution of the struggle with the Hudson’s Bay men, instead of to the prosecution of the fur-trade. On the face of things, the North West Company did not come out of the contest badly. They won, on the whole, a victory in the courts; and Lord Selkirk, his health shattered, retired to the south of France , to die an early and untimely death in 1820. But the victory was a Pyrrhic one. By 1820 the financial position of the North West Company had become so acute that no attempt was made to balance its books; and in 1821 it was driven to accept absorption in the Hudson’s Bay Company.

It has been usual to say that in 1821 the Hudson’s Bay Company and the North West Company were united or amalgamated; and it is true that the wintering partners of the North West Company were given an interest in the Hudson’s Bay Company, and the directors of the North West Company were ultimately given shares in the Hudson’s Bay Company. But the fact is that the North West Company in 1821 passed out of existence; the fur-trade was diverted from Montreal to Hudson bay; Fort William sank into the category of a third-rate post; and in 1839 Washington Irving was able to write the epitaph of the Nor’ Westers in these famous words: “The feudal state of Fort William is at an end; its council chamber is silent and desolate; its banquet hall no longer echoes to the auld-word ditty; the lords of the lakes and the forests are all passed away.”

Source : W. Stewart WALLACE, “North West Company”, in The Encyclopedia of Canada , Vol. V, Toronto, University Associates of Canada, 1948, 401p., pp. 17-19.

Further Reading

  • G. C. Davidson, The North West Company (Berkeley, California, 1918);
  • H. A. Innis, The North West Company ( Can. hist. rev ., 1927); and W. S. Wallace (ed.),
  • L. R. Masson (ed.), Les bourgeois de la Compagnie du Nord-Ouest (2 vols., Quebec, 1889-90);
  • C. M. Gates (ed.), Five fur-traders of the north-west (Minneapolis, Minn., 1933),
  • Marion O’Neil, The maritime activities of the North West Company, 1813 to 1821 (Washington Historical Quarterly, 1930).