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and defence policies are on the THE OSHAWA TIMES,-Wednesdey, December 11, 1963 7 led Cam-|SOmie $1,500;000,000---io--imple-jernment's--thinking: no _nuclear;week visit to Britain and Eur- ; called before a Commons com 3 to impie-jernment's--? s Ha cs la ail as--they haven't heen]. : t mittee to give evidence }ment |weapons and an integrated|ope. 5 he K Whether " e yer orecas They are' still being heard by Former officers have aiso|multi-purpose airborne force. After that will come a gov-|Since the Korean. war, Whei LONG BACKGROUND its people were a tribal group the defence committee but have|testified before the committee | The committee plans an in-jernment white paper on de-|the public will find the. new Viet Nam history goes backlin the rich Red River delta near already put forward weapons|Their suggestions have been. in|terim report to the Commons|'ence. jconcoction palatable remains to ' more. than 2,000 years to when|China, Cuts In Defence City Oct..7: " By DAVE McINTOSH OTTAWA (CP)--Defence Min- ister Paul Hellyer rose in the Commons Oct. 28 to help beat off two opposition non - confi- dence motions condemning Lib- eral defence policies. "If our job is to provide the maximum fighting effectiveness that we can with the resources available to us... . then some changes are absolutely ess»n- . , often the pro- curement of some particular military hardware has been tel genesis of policy rathér than the result." So much for an_ individual weapons program. What kind of defence policy has Mr. Hellyer in mind? In other' words, what are the an- swers to the questions he has posed to himself and to his -de- tial,"' he said |partment? "They are not ali going to be| politically palatable. You just cannot avoid it... . "You either want a large es- tablishment and a smali opera- tional force, or you want to put more of your resources into the forces and have a smaller over- head... . This is going to cause some hardship in some cuse3, and it cannot be avoided" The 40-year-old minister took over the defence portfolio in April after a Liberal election victory that resulted partly from the previous Conservative government's hesitation over the nuclear warheads issue. ACCEPTED WARHEADS On Aug, 16, the government signed a nuclear custody-and- control agreement with the United States providing nuclear warheads for the Voodoo jet in- terceptor, Bomarce anti-aircraft missile, CF-104 low - level jet bomber and Honest John artil- lery rocket The Liberals had declared he- fore the election they wou'd ac- cept nuclear weapons, Thus the nuclear issue was the jeast of Mr. Hellyer's worries. He posed such questions as these to himself --What should Western de- fence strategy be? How can Canada make the best contribution to this Strategy within a de'ence bud- get of $1,500,000,000 a vear? --How can Canada reduce overhead in the defence es- tablishment so-that she can put more. teeth into opera- tional forces? --How can she make sure that tasks she takes on today don't disappear tomorrow and that equipment she buys will last? --How can,the armed forces be made more flexible so they can perform a variety of jobs without time-consum- ing reorganization? NEW POLICY IN '64 Mr, Hellyer called in civilian and service experts and put them to work on these and other problems. He promised that by ~ early 1964 he would have a fresh defence policy to present to the government and then to Parlia- ment so that it could be de- bated when the 1964-65 defence appropriations were before the Commons. In the meantime, Mr. Hellyer had seen that if he were tied down by an expensive weapons project while making his review he would never be able to ex- ercise any choice in selection of new tasks and equipment. As he told the Commons de- fence committee in June, he must have financial room to manoeuvre if he was to keep Options open to him In April, 1962, the Conserva- live government had announced a $452,000,000 shipbuilding pro- gram to provide the navy with eight super frigates which would be-used for anti-submar- ine work, air defence of the fleet with shipborne. missiles and limited troop-carrying, On June 27 this year, Mr Hellyer hinted thathe would cancel this program, He did so in October. No ship contracts had been let and only $500,000 had been spent FRIGATE DEFENDED David Groos, Liberal MP for Victoria and a former naval captain, complained that Mr. Hellyer was making decisions on weapons before over-all de- fence policy was established. Former defence minister Douglas Harkness, who initiated the frigate program, said he was appalled. He said Mr. Hell- yer could make all the studies he wished but that no better alternative to the frigate would At least a rough out!ine of a 10-year plan now can be de- tected, | NON-NUCLEAR ROLE First of all, it appears that the Liberals want to get out of the nuclear field, They never liked it from the beginning This can't be done cu.ckly, possibly not until 1969 when the present NATO agreement ex- pires. Mr. Hellyer seems to have de- termined that limited nuclea:| 'war is impossible without grow-! ing into all-out nuclear war.| Therefore Canada shouldn't| have anything to do with poli-| cies and weapons that woul!d! involve this country in limited nuclear war. Canada long agu decided to stay out of the field of strategic nuclear weapors which would have meant in- volvement in big nuclear war A decision to keep ciear of limited nuclear war _ policies would mean abandonment of the low-leve! bombing role of the eight-squadron RCAF air division in Europe. For some still - unexplained reason, the CF-104 low-leve! jet bomber was built as an exclu- sively nuclear carrier TO CONVERT CF-1048 It is understood that Mr. Hell- yer himself has been unable to discover the reason for this, Two of the four RCAF bases in Europe are in France and as long ago as 1959 France de- cided she would not permit American nuclear warheads on her soil. In fact, American squadrons pulled out: of France in 1959 for this very reason. | Though nothing - official has) |been said, the government is| planning to convert half the air division to a conventional role This can be done in two ways: Convert all CF-104s to a dual nuclear - conventional role or make the CF-104s on the two French bases conventional only Some CF-104s with nuclear capability will have to be re- tained because Canada has promised to participate in the inter-allied nuclear force, which| will include British bomber! command and a few American Polaris missile-launching: 'sub- marines. CHANGING AIR ROLE At home, the Voodoos and Bomarcs are expected to be re. tained until 1966 at least. After that, it would appear that Can- ada's role in North American air defence command will be confined to surveillance, by ra- dar and long - range patrol} plane, Combined, all these factors mean eventual RCAF with- drawal from a combat role ex- ey for anti-submarine| wor This would free the RCAF for more transport duties, a role long envisaged by Prime Minis.' ter Pearson Current planning is for some ype of combined force. air.| borne or shipborne or both which could serve in NATO, as a home defence formation or in United Nations peacekeeping operations Such a force also presumes a greater degree of integration among th services--how much is still unclear, Lt.-Gen, Geoffrey Walsh, chief of the army. general staff, told the defence committee that in: tegration of service tasks must come be'ore integration of the Services themselves, | Integration is the aim of the |sovernment, PLAN MANPOWER CUT Already there are plans to re- jduce the personnel strength of be found. "th armed forces by about 10 The cancellation of the frig- ates, Mr. Harkness said, meant Canada wouldn't be able to maintain its NATO commitment of 54 combat ships Gen. Charles Foulkes, chair- man of the chiefs of staff com- mittee 'rom 1951 to 1960 and seeker of a Liberal nomination in the 1962 election, told the Commons defence committee that NATO commitments are a get "mystic number" which may mean no more than the number of troops and weapons a country has on hand However, on nuclear weapons policy, the Liberals maintain that the Conservatives commit- ted Canada to nuclear war. heads and that therefore they (the Liberals) had to go through with it. The Conservatives deny such commitment being made. 2 STUDYING COST Mr.. Hellyer said the frigates, because they had been designed for three roles, couldn't perform any one task well enough. In any event, the minister Said his department was doing 'a "cost . effectiveness" study translation: is it 'worth the per cent. Present Strength is about 122,000 A reduction in manpower goes to the heart of the defence prob- lem. As pay and costs for oper- ations and maintenance have risen, the amount of money left for new weapons and equip- ment has shrunk. Expenditures for hardware now are less than 20 per cent of the defence bud- 1 | Mr. Hellyer is determined to overcome this problem by al-| locating a certain percentage-- jat least 20--0° the defence bud-| get to weapons and equipment The forces will not be allowed to draw from this fund for other uses. They will have to make do in other ways The services have claimed that they long ago cut out all the "fat" and were operating on absolute minimums in money and manpower Mr. Hellyer refused to accept this at face value and ordered! manpower studies: OFFICERS GIVE VIEWS These have -shown, for in. Stance, that the RCAF has not Gandl¢? of anti submarine} weapons systems, which include conventional and nuclear. sub- marines, surface 'Ships, ship borne and land. - based planes and shipborne helicopters reduced its personnel strength though: it is operating -- eight fewer combat squadrons than three years ago and has auto- maied the air defence system For the first time in history | Mr. Hellyer said at' Quebec)the chiefs of staff have been proposals which would cost|the main, in line with the gov-lbefore Christmas after a two-| A lot of cooks are at workibe determined. "Canada's competitive strength improving" 'Present circumstances offer us an opportunity for vigorous efforts to cope with some of our underlying problems", said J.P. R. Wadsworth, President, addressing the 97th Annual Meeting of the Canadian Imperial Bank of Commerce. Highlights from the President's Address The record of the Canadian economy in the current year shows clearly that the over-all position is relatively favourable. New records of production have been achieved in many areas, and this production has been sold successfully at home and abroad. We have achieved an increase in the Gross National Product which, in current dollars, will probably be about six per cent in the year 1963. An important source of this strength has been the improve- ment in our merchandise trade balance. The surplus on mer- chandise trade in the second quarter of the year was estimated to be running at an annual rate of $500 million. It appears that the deficit in the current account of our balance of payments during the second quarter of 1963 was running at an annual rate of approximately $460 million. This estimated annual rate of deficit compares with total deficits on current account of some $850 million in 1962, $980 million in 1961, more than $1.2 billion in. 1960, and about $1.5 billion in 1959, However, the extent of the improvement should not be exaggerated for it is not at all certain, at this stage, that the deficit for the full year 1963 will be less than $500 million. In a period such as the present, with a high level of consumer expenditures and sub- stantial business investment, there is a strong tendency for imports to increase. There are also certain special factors to take into account in making an assessment of current economic conditions in Canada. For one thing, 1963 will be the first full calendar year that we have been on the fixed exchange rate of 92.5 cents (U,S.), which was set with the International Monetary Fund on May 2, 1962.. The advantages which have resulted from fixing and maintaining this new rate of exchange will continue only to the extent that they are not offset by price increases within Canada or compensating changes in the exchange rates of other countries. Economic Outlook There is, however; no room for complacency about our economic prospects. The crisis experienced with respect to our exchange reserves and the foreign exchange value of the Canadian dollar in 1962, together with the immediate reaction to the Interest Equalization Tax Act proposed by the United States this year, are reminders of the basic sensitivity of the Canadian economy to judgments made and decisions taken in other countries. We must do all we can to build up a sub- stantial and sustained surplus in our merchandise trade and reduce the deficit on non-merchandise items in our balance of payments which continues to be in the vicinity of one billion dollars a year. The size of this deficit reflects in large measure the substantial outflow of interest and dividend payments which constitute the cost of: servicing foreign investment in Canada. ' The most gratifying aspect of the business situation in Canada at the present time is the fact that each major region of the country has been participating in the expansion. I would like to touch on some of the highlights of developments in each of these areas. . Atlantic Provinces The rate of capital investment in the Atlantic Provinces has generally kept pace with that of the country as a whole, and the proportion of the new investment made by_ business Organizations is roughly the same-for the Atlantic Provinces as for Canada as a whole. Quebec In the Provincé of Quebec business activity has continued at a high level through this year. There have been further gains in many measurements of activity reflecting the general buoy- ancy in business conditions which has been characteristic of 1963. : The manufacturing industries which produce items for basic consumer needs, such as the food industries, have continued to supply general strength to the economy while the industries which provide services of various kinds such as utilities, merchandising organizations, and financial institutions have been somewhat stronger. Capital investment has again provided considerable stimulus for the Quebec economy. Total outlays for all types of invest- ment including housing are estimated at close to $2.3 billion in 1963, establishing a new record for the province. The in- crease over 1962 is estimated at $117 million, 514 per cent, and follows an increase of $160 million in 1962. There continue to be strong increases in outlays for utilities, manufacturing facilities, institutional services and varicus other forms of social capital. Ontario In the Province of Ontario, there has also continued to be a high level of activity this year. The general pattern has been similar to that of 1962, with the rate of increase in over-all activity showing a fairly strong upward trend. The manufacturing industry, with its many facets, has been the major source of stimulus. The value of manufacturers' shipments in the first nine months of 1963 totalled $10.6 billion, some seven per cent higher than during the correspond- ing period of the previous year. Manufacturing accounts for roughly two-thirds of total output in Ontario and substantial year-over-year increases have taken place in a number of its leading industries--steel, automobiles and parts, farm imple- ments and machinery, to name some of the most important increases. Capital investment in the Province of Ontario continues to be very substantial and in 1963 total outlays in private and public investment will approach $3.1 billion. This will be an BANK OF COMMERCE Over 1260 branches to serve you increase of about one per cent over 1962, a somewhat smaller increase than in the previous year. Prairie Provinces In the Prairie Provinces the outstanding feature of the business situation is the fact that the wheat crop has set high volume records in two successive years and the sale of these two bountifulcrops on reasonable terms is virtually assured, This year the Prairie wheat crop is estimated at 703 million bushels, last year the crop was 546 million bushels. The contract signed with the Soviet Union, which covers the sale of approximately 240 million bushels of wheat and flour to be delivered by July 31, 1964, is by far the largest single commitment in this crop year. In addition, important contracts have been made with Japan, mainland China, and some countries in Europe which have not recently purchased Canadian wheat. When these new sales are added to the requirements of our other customers, it is estimated that sales of wheat for export and domestic use in the crop year 1963/64 will reach a volume equivalent to this year's entire crop. : The petroleum industry continues to make very substantial contributions to the economies of Alberta and Saskatchewan, with Alberta now accounting for about two-thirds of Canadian output of crude oil and natural gas liquids, Production of crude oil and natural gas liquids increased five per cent this year, . reaching an average, output of 785,000 barrels a day. Sales of natural gas increased by roughly one-third over last year and are expected to average over three billion cubic feet a day, one-third for export. By-products from natural gas production, particularly sulphur, have also shown a substantial increase in sales. British Columbia In the Province of British Columbia a number of factors has combined to make this a very good year. An important source of stimulus has been the sharp rise in capital investment which is running royghly 20 per cent higher than last year. This increase will amount to about $190 million and bring total outlays for private and public investment to some $1.1 billion for the year. The largest outlays for capital investment are concentrated in the pulp and paper industry and electric power projects. Housing also is up strongly this year with starts running about 15 per cent above the volume in 1962. Another major stimulus for British Columbia this year has been a strong export demand for a number of the products of its major resource industries, the increase in sales taking place not only to traditional customers but to growing markets across the Pacific, particularly Japan. The important forest products industries, which account for roughly one-third of the net value of production in British Columbia, have had a very good year. Output of lead and zinc is comparable to last year and there have also been important developments in new copper and iron mines which have long-term sales contracts. with Japan. This regional review has pointed up the wide range of undertakings which make up the Canadian economic complex. At the same time it has provided a picture of the extent to which capital investment is giving support and further stimulus to each region of the country. It also emphasizes the extent to which economic conditions in one area of the country are directly affected by conditions in the other areas. This year, for example, the big wheat crop and the contracts for its im- mediate sale are bringing benefits to each major region of the country, the seaports and the industrial centres as well as the Prairie region. Prospects Generally Encouraging For Canada as a whole, prospects for the future are generally encouraging, but we are still confronted by certain basic prob- lems to which we must continue to devote careful attention. One encouraging development has been the notable increase in the volume of Canadian manufactured goods sold abroad. In 1963 the value of these exports may be as much as $900 million compared with slightly over $400 million in 1960. Markets for manufactured goods are highly competitive and much depends on the level of unit costs as well as on product development and salesmanship. In this connection all the cost factors are important, because they directly affect our com- petitive position both in export and domestic markets. In fostering the growth and development of Canadian industry and enterprise, both for domestic and export markets, the Canadian banks with their wide distribution of brariches across Canada and extensive correspondent bank relationships throughout the world have played and will continue to play an important part. This Bank in particular, provides a worldwide banking service with constantly expanding facilities to Canadians with interests outside of Canada, be they exporters, importers, investors, or travellers on business or pleasure. For residents of other countries we provide equally extensive services, including the facilities of our branches in every part of Canada. The full text of the President's and the Chief General Manager's addresses may be obtained by writing to the Secretary, Head Office, Toronto. CANADIAN IMPERIAL World trade is growing and becoming steadily more com- petitive. Federal and provincial government departments are providing valuable assistance to the efforts of business enter- prise to obtain an adequate share of this trade. However, research, production techniques and marketing skills are pro- gressing rapidly in many countries, There is also the possibility of major changes in the field of commercial and tariff policies involving, for example, the working out of the United States Trade Expansion Act, the policies followed by the European Economic Community, and the whole question of Common- wealth preferences. The present. circumstances offer us an opportunity for vigorous efforts to cope with some of our underlying problems and to endeayour to ensure that the competitive strength of the Canadian economy both at home and abroad is steadily improving. William M. Currie, Chief General Manager, reviewed the balance sheet, highlights of which are summarized. His remarks follow in digest form: The Bank's 97th annual statement marks the first occasion on which total assets have exceeded $5,000,000,000, an increase of $486,000,000 or 10.2 per cent over the previous year end. Items in transit included under cash resources showed a decrease of $76,000,000. These are non-revenue-producing assets and the reduction of this total has been made possible by improved clearing procedures and, latterly, by the use of electronic sorting machines and computers, a field which this Bank was the first to explore and develop. Quick assets of $2,655,000,000 were equal to 53.35 per cent of the Bank's total liabilities, as compared to 49.4 per cent as of October 31, 1962. With the relaxation of monetary restraint during the twelve months under review, the country's money supply increased steadily and as a result the Bank was able to meet the demand for loans and add to its liquidity by additions to its security portfolio, which had been substantially reduced during the previous financial year. As at October 31, the Bank's commer- cial and other loans of $2,114,000,000 represent an increase of $29,000,000 over the previous year end. During the year 39 branches were opened and 22 were closed, increasing the Bank's total branches to 1,283, of which 26 are located abroad, Total deposits increased 10,3 per cent to $4,782,000,000, of which $2,209,000,000 represent personal savings in Canada, an increase of 6.2 per cent. Deposits by the Federal and Provincial Governments and by Other Banks also increased. Undivided Profits of $20,385,059 were up $1,195,133, or 6.2 per cent, over 1962. Earnings per share at $2.93 compare with $2.75 a year earlier. Total dividends of $15,678,000 were paid at the rate of $2.25 per share. The Bank recently announced the acquisition of financial interests in two existing companies, Triarch Corporation Limited and United Dominions Corporation (Canada) Limited. The former specializes in equity and interim mortgage financing, while the latter engages in medium and long-term capital financing. In addition the Bank, through all its branches, will act as sole agent for Kinross Mortgage Corporation in the placement of first conventional mortgage loans. These new associations will further broaden the comprehensive services already available at our branches. In closing I should like to say that progress such as that reported could not have been accomplished without the co- operation of a body of personnel which has proven itself to be second to none in the Canadian banking scene. It is therefore with the greatest pleasure that I express the thanks of General Management for the hard work, deyotion and loyalty which employees of the Bank at every level continue to direct towards the prudent management of our affairs and the realization of our ideals of service to the community. ANNUAL STATEMENT HIGHLIGHTS YEAR ENDED OCTOBER 31, 1963 ASSETS Cash Resources (including items in transit).... $ 709,441,696 Government and Other Securities 1,546,032,806 Call Loans . 399,523,935 Total Quick Assets $2,654,998,437 Loans and Discounts... ae fiveeres 2,114,514,988 Mortgages and Hypothecs insured under the N.H.A., 1954 He eva 219,059,186 Customers' Liability under Acceptances, 5 Guarantees and Letters of Credit, as per contra 167,731,763 Bank Premises Ane 67,506,371 Other Assets. Ss ie 24,802,899 Total Assets 3 $5,248,6 LIABILITIES Deposits rae eee ane Acceptances, Guarantees and Letters of Credit Other Liabilities ie Shareholders' Equity Capital Paid Up Rest Account Undivided Profits 272,044,265 Total Liabilities...... ; $5,248,613,644 STATEMENT OF UNDIVIDED PROFITS Profit after *income taxes... $ 20,385,059 Dividends ___15,678,000 Amount carried forward 4,707,059 Transferred from inner reserves after provision for *income taxes exigible....::...+ 5,000,000 2,657,206 Balance of undivided profits October 31, 1962 f $12,364,265 10,000,000 $4,782,271,680 167,731,763 26,565,936 $ 69,680,000 200,000,000 2,364,265 Transferred to rest account... Balance of undivided profits October 31, 1963 Cemceunaesseenereny © 2,364,265 *Total provision for income taxes $21,954,000