Canada's Balance of International Payments, 1940–5

Extract

The long delay in making peace and in economic reconstruction threatens to bring upon the world an acute scarcity of United States dollars. Countries overseas, particularly on the continent of Europe, have not made the progress in production and exports which would make possible the balancing of their transactions with dollar countries, except at levels so low as to be ruinous to world trade and a most serious threat to the prosperity of North America. In this situation Canada's role is a dual one. We share with the United States a productive power enhanced by war; other nations need our products in replacing war's destruction; to countries overseas Canadian dollars are as scarce as American dollars. Yet when the United States looks abroad at the ranks of the countries to whose need for American dollars it must seriously attend, Canada is to be found in the line-up.

The familiar features of Canada's economic structure, together with American commercial policy, have conspired to bring it about that our trade with the United States, while naturally greater than with any other country, is an unbalanced one; we buy there more than we are permitted to sell. We must sell others more than we buy from them and use the proceeds to settle our debts in the United States. We are dependent therefore upon the free convertibility and a high value of sterling in New York. When sterling has fallen there, so has the Canadian dollar; when the convertibility of sterling into American dollars has been restricted, rigid control of the use of American dollars has been forced upon us. Thus important policy decisions may well await us in the not too distant future. It is appropriate therefore that we should look again at our past for possible guidance.