Canadian-American Industry 9780773591363

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CAN AD IAN -AM ER ICAN IN D U STRY / 1 10U

5 A5

02

95

A Study in International Investment

by Herbert Marshall, Frank Southard, Jr., Kenneth W. Taylor with an excursus on The Canadian Balance of Payments by Frank A. Knox and with a new Introduction by L. A. Skeoch

The Carle ton Library No. 93 Published by McClelland-and Stew art Lim ited in association with the Institute o f Canadian Studies, Carleton University

THE CARLETON LIBRARY A series o f C anadian reprints, original w orks and new co llectio n s o f so u rce m aterial relatin g to C anada, issued under the editorial supervision o f the In stitu te o f C a n a d ia n S tu d ies o f C a rle to n U niversity. O ttaw a. D irecto r o f the In stitu te

D avidson D unton G e n e r a l E d it o r

M ichael G narow ski E x ec u tiv e E d it o r

Jam es M arsh E d it o r ia l Bo a r d B . C arm an Bickerton ( H isto ry I D ennis Forcese (S o cio lo g yI David B. K night (G eography) J. G eorge Neuspiel I L a w I T hom as K. Rym es I E conom icsI Derek G . Sm ith (A n th ro p o lo g yI M ichael S. W hittington (P o litica lS cien ce)

© M c C le lla n d a n d S te w a r t L im ite d . 1976 A ll R ig h t s R e s e r v e d ISB N

7710-9793-X

The Canadian Publishers M cClelland and Stew art Lim ited, 25 H ollinger R oad. T o ronto. C anadian-Am erican Industry was copyrighted in 1936 and 1964, and first published in 1936 by the C arnegie E ndow m ent for International Pcacc. It was re-issued, 1970, by Russell and Russell, a D i­ vision o f A theneum Publishers, Inc. T his edition is published by arrangem ent with Russell and Rus­ sell, Publishers, New Y ork. P rinted and hound in Canada.

Introduction to the Carleton Library Edition This volume constituted a distinguished introduction to a notable series o f studies. The Relations o f Canada and the United States, prepared under the direction o f the division o f Economics and History o f the Carnegie Endowment for International Peace. The editor o f the series, James T. Shotwell, suggested in his preface that the authors, although pausing “ here and th ere. . . to point out the larger implications o f the facts with which they deal,” were primarily concerned with preparing a detailed survey o f the “ vast m ovem ent o f industrial capital across the C anadian-Am erican frontier.” W ithout underestimating the importance o f such a historical census, both for its intrinsic interest and for its contribution to an understanding o f the route which has carried us to our present p osition , this appraisal appears in retrospect to be unduly modest and circumscribed. Indeed, both as a contribution to scholarship and to policy form ation, it is the broad approach o f the study and the m ulti-faceted and tentative nature o f the analysis o f the determinants and results of the movement o f industry that serve as its distinguishing characteristics. In support o f this view, it may be worthwhile to review, in a few brief and impressionistic comments, som e o f the more prominent aspects o f the process under consideration. N ational attitudes to the international m ovem ent o f capital, labour skills and technology have undergone basic changes through the history o f modern industrial developm ent. Shifts in the direction, nature, and magnitude o f such movements continue to occur, often with little warning, thereby confounding the exponents o f single-faceted or sim p liste diagnoses o f their purpose or consequences. During the mercantilist period most nations, including Great Britain, adopted measures, both im aginative and varied, to withhold labour skills and technology from international markets. Long before 1850, however. Great Britain gave up trying to keep her improved machinery to herself. Soon she was pressing it upon foreign markets. Distant customers borrowed her capital, bought her machines, and acquired her special skills. In Great Britain, this involved, in part, a shift from the export o f goods for consumers to that o f goods for producers “ from Manchester to Birmingham," as it has been called and, in part, a shift from cruder and simpler factory products to high-grade consumption goods. The dynamic processes which were inherent in these broad changes tied dom estic adjustment to foreign adjustment in an intimate and, sometimes, painful fashion. Indeed, it is doubtful if

iv

CANADIAN AMERICAN INDUSTRY

there was, even in those earlier adjustments, much logic to treating domestic markets as if they were independent and discrete. More recently, with the so-called U .S. “ industrial invasion” o f British and continental markets (among other areas), the process, whether initiated by the multi-national corporation, by the joint-enterprise form o f corporate organization, or on some other basis, continues to involve interdependent adjustments which are difficult to forecast in nature or extent. Certainly, the current wave o f investment in the high labour-cost manufacturing sector o f United States industry by European and Japanese firms, and the expanding foreign operations o f firms from such small countries as Sweden and Canada— which, in fact, goes back in an important degree to the turn o f the century— require basic reconsideration o f currently popular explanations o f the aims and consequences o f foreign investment. Whether, as one writer has suggested, multinational corpora­ tions, with the aid o f computers and a corps o f P h.D .’s, “ are prac­ ticing the gospel o f comparative advantage with a vengeance,” whether the fortunes o f dynamic change are being exploited inter­ nationally by effective managements in a wide range o f economies, or whether, as seems likely, a combination o f these and other fac­ tors such as tax concessions, the desire to protect a market posi­ tion against new protectionist action, the attempt to gain continuing access to U.S. technological advance and business practices— ac­ counts for this unforeseen development, is not important for pre­ sent purposes. However, such major postwar shifts as these, along with the action of the Soviet Union in initiating the movement of foreign firms, among them Fiat, Ford and Boeing, into the produc­ tion o f sophisticated manufactured goods in that country, suggest that the international movement o f capital, entrepreneurial skills, and technology are part o f a complex process o f dynamic change in what is in economic terms rapidly becoming a single entity. It is realistic to suggest that inter-regional obstacles to such movements, say, within Canada, are probably fully as serious as are the obsta­ cles to international movements. The study o f the evolution o f a country from eager absorber of foreign capital, technology and management skills to aggressive ex­ porter o f raw materials, manufactured goods, and later o f those fac­ tors they earlier absorbed, and then to reluctant exporter o f capital and industrial know -how and to defensive participant in the dy­ namic reactions which the earlier processes set in train, requires a subtle and adaptive conceptual framework. It is, indeed, the breadth and complexity of the analytical ap­ proach adopted by Marshall, Southard and Taylor, that makes this study such a valuable basis for the analysis o f “ industrial migra­ tion,” to use their expression. They are concerned not only with

CARLET ON LIBRARY INT RO DUCTION

V

American investment in Canada, but with the movement in the other direction as well. The range o f determinants of the nature, direction and extent o f industrial migration is explored with a de­ gree o f balance and sophistication that is impressive. Nor do they neglect to investigate “the fields o f economic activity into which American enterprise has not ventured to any considerable extent.” Even the significance of individual personalities is fruitfully ex­ plored. The sense o f depth and realism which results from this m ulti-dim ensional and carefully qualified analysis is clearly the product o f discerning and wise scholarship. In conclusion, a few brief biographical notes on the authors will indicate something of the basis for the range and maturity of the study. Herbert Marshall (born 1887), after graduating from the Univer­ sity o f Toronto in 1915, served in World War I from 1916-18, then lectured in the Department o f Political Economy o f the University o f Toronto from 1919-21, before joining the Dominion Bureau of Statistics. His distinguished work in statistics culminated in his ap­ pointment as Dominion Statistician in 1945, and was recognized by his appointment as president o f The Canadian Political Science Association, the American Statistical Association and the InterAmerican Statistical Institute. Kenneth W. Taylor (born 1899), served in World War I (1917-18), then, after graduating from McMaster University and the University o f Chicago, was appointed a Fellow of the Brook­ ings Institute, 1924-25. He joined the faculty o f McMaster Univer­ sity and served there (1925-1939) until he moved to Ottawa to begin an arduous and distinguished career, from Secretary o f the Wartime Prices and Trade Board to Deputy Minister o f Finance (1953-1963). He contributed extensively to the professional journals and was the author, with H. Michell, o f Statistical Contributions to Canadian Economic H istory. He was president o f the Canadian Political Science Association (1944-45), and, after his period o f government service, returned to academic life at McMaster Univer­ sity. Frank A. Southard, Jr. (born 1907), received his Ph.D. from the University of California (1930), and has pursued a government car­ eer in foreign exchange and monetary policy analysis and adminis­ tration. culminating in his appointment (1962) as deputy managing director o f the International Monetary Fund. His other major pub­ lications are: Foreign Exchange Practice and Policy (1940), and Finances o f European Liberation (1946). L. A. Skeoch

EDITOR’S PREFACE T h i s book is a pioneering enterprise. It is the first attempt to make a detailed survey of that vast movement of industrial capital across the Canadian-American frontier which is one of the outstanding facts in the relations of these two countries. Both in magnitude and in its persistence, this movement is unique in the world today. Its sig­ nificance lies not merely in the fact that almost four billion dollars of American money is invested in Canada, or that a proportionately larger amount of the industrial capital of Cunada is invested outside its frontiers, but that the forces which have produced this movement have been able to maintain it, although at varying rate, through all the political vicissitudes of these years of strain and crisis. Only the most hardy growths in the field of economics could endure through­ out such a depression as that which has tested and is still testing the vitality of American and Canadian business. One secret of this strength may perhaps be found in the absence of government action, such as so often instigates or controls foreign investments of Euro­ pean countries. The scene disclosed here is that of democracies at work, democracies of individual interests not only free from political tutelage but even moving against political currents, sometimes ap­ parently with accelerated pace in proportion as the opposing trend of political nationalism grew stronger. It is obvious that there is much food for thought in the data which this book supplies. But the authors have been conscious of the re­ straining hand of the scientific technique which has held them to the initial task of those who break ground in any new field. While here and there they pause to point out the larger implications of the facts with which they deal, they have upon the whole confined themselves to the exploration and mapping of an uncharted area, to which by implication they invite the cooperative study of all serious students of the North American economy and the interest of that larger pub­ lic whose fortunes are so deeply involved in matters like this, of which they may have been only partly aware. This volume is the first to appear in a series which will deal with many and varied aspects of Canadian-American relations. For the last two years scholars and experts have been at work in both coun-

CANADIAN-AMERICAN INDUSTRY tries not only in economics but also in history, politics, international law, sociology, and education, in the fulfilment of a cooperative pro­ gram designed to cover all of the more important elements in the past and present relations of the two countries. These investigations were made possible by the interest and support of the Carnegie Corpora­ tion and the Carnegie Endowment for International Peace. The former covers within the scope of its trust the British Dominions as well as the United States; the latter has turned aside in this instance from the study of disturbed areas where peace is menaced to a part of the world in which it is most firmly established, to analyze pacific international relationships when working under the most favorable of circumstances. The task, however, would not have been undertaken had it not been for the almost incredible fact that these relationships had been so taken for granted in the past, or so neglected in the ordinary routine of constant intercourse, that there is no compre­ hensive study of the varied elements which have made and are still making an international neighborhood. The planning of the Series called for international cooperation in the fullest sense of the word. Editors and editorial committees were appointed in both countries to deal with each of the major subjects. These prepared their outlines after consultation both with their fellow-craftsmen across the line and with their colleagues in the dif­ ferent subjects at home. The editors charged with the planning and oversight of the present volume were Professor Jacob Yiner, of the University of Chicago, and Professor Harold A. Innis, of the U ni­ versity of Toronto, to whose mature counsel and helpful cooperation the authors have registered their grateful appreciation below. I t is fortunate that from the first this series of Canadian-American studies was able to draw to it such leaders in the social sciences of both countries. For without their aid it would have been impossible to build up a consistent picture of the whole without distorting the perspective by an overemphasis of any one technique or any one point of view. The project therefore had the difficult task of main­ taining scientific objectivity in the presentation of facts or conclu­ sions while serving at the same time the not unethical purpose of a better international understanding. In the pursuit of this aim it soon became evident that various kinds of studies would be called for. F irst of all, research would have to fill many gaps in our knowledge,

EDI-TOR’S PREFACE both past and present. Some of this is so highly specialized that it will be available only for students of the subject in question. Rut there will be some thirty volumes of published text, thus furnishing a body of material which will make possible for the first time consistent and developed courses on Canadian-American relations in our col­ leges and universities as well as supplying the interested reader with a new outlook in North American history. This is not the place to describe in full the enterprise of which tliis volume is a part, but this much is perhaps necessary in order to ex­ plain its setting in the plan as a whole. It would be wrong, however, to give the impression that the volumes are to be closely articulated under a rigid scheme of editorial arrangement. Each monograph stands by itself, scope as well as treatment being determined by the nature of the subject with which it deals. The same principle holds with reference to the order of publication. By a happy chance the first volume to appear is one that opens up a field of major interest; but subsequent volumes will be published as they are finished with­ out regard to the subject matter. This necessary adjustment to the exigencies of research work does not in any way lessen the funda­ mental unity of the series as a whole, although that fact may not be so apparent to the general reader as would have been the case with a closely knit, encyclopedic survey. For those who look beyond the facade of national organization to the varied and elusive elements which give it significance, this method of studying and of presenting the interplay of the political, economic, and social forces of the two nations with which these studies deal will be justified by the nature of the problem itself. J . T . S.

AUTHORS’ PREFACE is a commonplace of public utterances that the international bound­ ary betw een Canada and the U n it«l States is marked by an absence of fortifications and by a lack of formality almost unique. But even cordial friendship between the two countries has not prevented a di­ vergence in both culture and policies which has made the boundary much more than an invisible and imperceptible line. The unusual degree of similarity in the economy of the two countries has, how­ ever, meant that business men and capitalists in cither country have always been attracted by economic opportunities in the other, and found few obstacles to investing in and developing them. In conse­ quence there have emerged the many hundreds of enterprises which we have termed “Canadian-American” : the mines, factories, stores, banks, insurance companies, railroads, public utilities, which, located in the one country, are controlled by citizens in the other. Inescap­ ably important in Canadian-American economic relations, these com­ panies form the subject matter of this book: why they have been established, their history and importance, their mode of operation, their position in the economy of which they are part. Completely to isolate and examine the alien-owned industry in a country is virtually impossible. N ot only are there in all probability some companies in which the foreign interest is not admitted, but even among the more than a thousand known cases many refuse to respond to any queries. But patient search in newspaper and maga­ zine files and financial handbooks; the generous cooperation of many agencies, both public and private; and the friendly response of sev­ eral hundred companies have revealed much of the complicated structure of the subsidiary companies in either country which look for guidance to parent companies in the other. T o all the many hundred persons and organizations who answered our questionnaires, gave us interviews, compiled statistics for us, we make grateful acknowledgment. W e are particularly conscious of our indebtedness to Professor Jacob Viner, of the University of Chi­ cago, and Professor Harold A. Innis, of the University of Toronto, who read and criticized the entire manuscript; to Mr. Louis Domeratzky, Dr. Amos Taylor, and Dr. Paul Dickens, of the United It

X

CANADIAN-AMERICAN INDUSTRY

Slates Department of Commerce; to Mr. R. G. Lewis, H r. W . H. Losee, and Mr. G. S. Wrong, of the Dominion Bureau of Statistics; to Dr. Edward W hite, of the United States Bureau of Internal Revenue; to Mr. Harry Tipper and Mr. Francis T . Cole, of the American Manufacturers E xport Association; to Mr. Frank E. Gannett; to President Robert C. Stanley, of the International Nickel Company of Canada, L td .; to Mr. J . E . Macpherson, of the Bell Telephone Company of Canada; to Mr. R. S. Kellogg, of the News­ print Service Bureau; to Mr. John Langdon, of the Financial Post; to Mr. George P. Oslin, of the Western Union Telegraph Company; to Mr. J. A. Walker, of the Dominion Securities Corporation, L td .; to Mr. W . H . Hall and Mr. A. A. Nelson, of the Canadian Surety Company and the American Surety Company, respectively; to the officers and staffs of the M onetary Times and of the Financial P ost; and to Mr. W . L. G. Joerg, of the American Geographical Society, who supervised the designing of the railway maps. Professor Frank A. Knox, of Queen’s University, was a member of the planning com­ mittee and gave much assistance in the early stages of the work. He has permitted the inclusion herein of his study of the Canadian bal­ ance of international payments. A t every stage of our researches we were able to rely on the encouragement and enthusiasm of Dr. James T. Shotwell. It is fair to add that the authors have not always been able to accept the criticisms and points of view offered by these many persons, and that where experts have disagreed we have necessarily had to assume the responsibility of choosing between them.

December, 1935.

H . M. F . A. S. K. W . T .

CON TENTS IS T R IID I { T l(> \ T i l T ill C \K I I TON LlilK AKV E D ITIO N

iii

E d i t o r ' s P r e f a c e ...............................................

vi

.....................................................................................................

ix

C h a p t e r I . H is t o r ic a l B a c k g r o u n d ..........................................................

1

A

utho rs’

P

r e f a c e

A m erican In d u s trie s in C a n a d a .................................................................. C an ad ian In d u s trie s in th e U n ite d S t a t e s ................................................... 16 C h a p t e r I I . T h e E x t e n t o f A m e r ic a n I n d u s t r y i n C a n a d a

.

4

19

I n t r o d u c t i o n ............................................................................................................. 19 M a n u f a c t u r i n g ...................................................................................................... 29 V egetable P r o d u c t s ....................................................................................... 29 A nim al P r o d u c t s ...............................................................................................33 T e x t i l e s ............................................................................................................. 34 W ood an d P a p e r P r o d u c t s .........................................................................35 N e w s p r i n t ......................................................................................................36 P u lp M i l l s ......................................................................................................52 P a p e r G oods F a c t o r i e s .........................................................................53 Saw an d P la n in g M ills ; L u m b er, Wood P ro d u cts . . . . 54 Iro n an d I t s P r o d u c t s ................................................................................ 56 F u rn aces, R o llin g M ills, C astin g s, F o r g i n g s .................................... 56 M a c h i n e r y ......................................................................................................60 A utom otive P r o d u c t s ................................................................................ 63 M iscellaneous Iro n P r o d u c t s ................................................................. 69 N o n -ferro u s M etal P r o d u c t s .........................................................................71 N on-m etallic M in eral P r o d u c t s ..................................................................75 Chem ical P r o d u c t s ....................................................................................... 80 M iscellaneous P r o d u c t s ................................................................................ 86 M ining an d S m e l t i n g ....................................................................................... 87 G old and C o p p e r ...............................................................................................90 N i c k e l .....................................................................................................................95 S ilv er, L ead , an d Z i n c ................................................................................ 101 A lu m in u m ............................................................................................................. 102 P e t r o l e u m ............................................................................................................. 107 A s b e s t o s ............................................................................................................. 109 C o a l .....................................................................................................................Ill P u b lic U t i l i t i e s ...................................................................................................... 112 R a i l r o a d s ............................................................................................................. 1 1 3 T e l e g r a p h s ......................................................................................................123 T e l e p h o n e s ......................................................................................................127

xii

CANADIAN-AMERICAN INDUSTRY

R adio C om m unication an d B r o a d c a s t i n g ............................................ 131 A ir L i n e s ...............................................................................................................135 B us L i n e s ...............................................................................................................137 P o w e r, L ig h t, G a s, an d S im ilar U tility C om panies . . . . 139 M e r c h a n d i s i n g ....................................................................................................... 152 M iscellaneous C o m p a n i e s ................................................................................. 160 M otion P ic tu re I n d u s t r y ................................................................................. 160 I n s u r a n c e ...............................................................................................................163 F i n a n c e ...............................................................................................................164 H o t e l s ......................................................................................................................169 R e s t a u r a n t s ....................................................................................................... 171 O t h e r ......................................................................................................................171 S u m m ary ...............................................................................................................173 C h a p t e r I I I . T h e E x t e n t o f C a n a d ia n I n d u s t r y in t h e U n it e d S t a t e s ...............................................................................................................175 I n t r o d u c t i o n ...............................................................................................................175 W ood a n d P a p e r P r o d u c t s ................................................................................. 177 M in eral P ro d u c ts , C hiefly Iro n an d S t e e l ....................................................180 O th e r M a n u f a c t u r e s ........................................................................................ 183 M in in g a n d P e t r o l e u m ........................................................................................ 185 M iscellaneous C o m p a n i e s .................................................................................186 T ra n s p o rta tio n a n d O th e r U t i l i t i e s ...........................................................187 F in a n c ia l S e r v i c e s ................................................................................................196 C h a p t e r IV . M o t i v e s ........................................................................................ 198 B ra n ch F a c t o r i e s ................................................................................................199 T a riffs ...............................................................................................................199 C onsum er P r e f e r e n c e ................................................................................. 203 F a c to ry C o sts: R aw M ate rials, L a b o r, T r a n s p o rta tio n . . . 205 A u x ilia ry S u b s i d i a r i e s .................................................................................207 S e r v i c i n g ...............................................................................................................208 I n G e n e r a l ....................................................................................................... 209 M ines, F o rests, an d F i s h e r i e s ..........................................................................210 C o m m u n ic a tio n s ....................................................................................................... 212 L ig h t, P o w er, an d G a s ........................................................................................ 213 S e r v i c e s ......................................................................................................................215 S um m ary ...............................................................................................................216 C h a p t e r V. O p e r a t i o n s ........................................................................................ 218 O rg a n iz in g the B ra n ch P l a n t ..........................................................................219 S ele c tin g a L o c a t i o n .........................................................................................220 S ele c tin g a F o rm o f O r g a n i z a t i o n ........................................................... 223 A cq u irin g a P l a n t .........................................................................................224

CONTENTS

x ii i

F in a n c in g t h e C a n a d ia n V e n t u r e ............................................................... 2 2 5 L ia is o n : P o lic y D e t e r m i n a t i o n ....................................................................... 2 2 9 O p e r a t i n g th e S u b s i d i a r y .......................................................................................231 S a le s , A s s e m b ly , o r M a n u f a c t u r e ............................................................... 231 C o s t s ..............................................................................................................................23G W a g e s a n d L a b o r P o l i c y .......................................................................................2 3 9 M a r k e t s ...................................................................................................................... 241 A d v e r tis in g a n d S e l l i n g ....................................................................................... 2 4 2 C h a p t e r V I. R

e s u l t s

...............................................................................................2 4 4

P r o f its a n d L o s s e s .......................................................................................................2 4 4 A m e ric a n -o w n e d C o m p a n ie s in C a n a d a ....................................................... 2 4 4 C a n a d ia n -o w n e d C o m p a n ie s in th e U n ite d S t a t e s ................................2 4 8 P r o f its a n d L o s s e s , G e n e r a l ...............................................................................2 5 2 R e p a tr ia t io n a n d W i t h d r a w a l ...............................................................................2 5 2 C h a p te r V II. C o n seq u en ces

P

and

r o b l e m s ................................................26 3

C a n a d ia n - A m e r ic a n I n d u s t r y a n d C a n a d ia n - A m e r ic a n T r a d e . . 267 C a n a d ia n -A m e ric a n I n d u s t r y a n d C a n a d ia n - A m e r ic a n T a r if f s . . 274 C a n a d ia n - A m e r ic a n I n d u s t r y a n d th e C a n a d ia n - A m e r ic a n B a la n c e o f P a y m e n t s .............................................................................................................. 2 7 7 B r a n c h C o m p a n ie s in th e C a n a d ia n E c o n o m y ............................................... 2 7 9 B r a n c h C o m p a n ie s a s C o m p e t i t o r s ............................................................... 281 B r a n c h C o m p a n ie s in K e y I n d u s t r i e s ....................................................... 2 8 2 W h a t I s a C a n a d ia n C o m p a n y ? ....................................................................... 283 T h e I s s u e in L o c a l a n d N a ti o n a l A f f a i r s ............................................... 285 S u m m a r y ...................................................................................................................... 291 E x c u r s u s . C a n a d ia n C a p i t a l M B alance

ok

I

A p p e n d ix I . S e c u r it ie s P trolled

C o m p a n ie s

A

m e r ic a n - O w n e d

A p p e n d ix I I I . N A p p e n d ix

and

ay m ents,

u b l ic l y

O ffered

in

A p p e n d i x I I . C a n a d ia n R

ov em en ts

P

n t e r n a t io n a l

Ca

n a d a

the

C a n a d ia n

1 9 0 0 -1 9 3 4 A

by

.

.

.

296

m e r ic a n -C o n ­

............................................................... 325

e p a t r ia t io n

of

C o m p a n ie s F

orm erly

...............................................................................................3 2 6

e w s p r in t

C o m p a n ie s

IV . Q u e s t io n n a ir e s

Sent

in

Ca

O ut

n a d a in

P

................................3 3 0

r e p a r a t io n

of

C h a p t e r s I I - V ...................................................................................................... 331 I ndex

to

Co m

p a n i e s .......................................................................................................335

G e n e r a l I nd ex

351

TABLES I. A m erican c o n tro lle d an d affiliated m a n u fa c tu rin g estab lish m en ts in C an a d a , 1 8 7 0 -1 8 8 7 ..........................................................................

12

I I . A m erican c o n tro lle d an d affiliated m a n u fa c tu rin g estab lish m en ts in C an a d a , 1 8 7 0 -1 8 8 7 , classified by in d u strie s . . . .

13

I I I . A m erican c o n tro lle d an d affiliated m a n u fa c tu rin g estab lish m en ts in C an ad a, 1 8 7 0 -1 8 8 7 , acc o rd in g to g e o g ra p h ic al d istrib u tio n

14

IV . A m erican c o n tro lle d an d affiliated com panies in C a n a d a ; U n ite d S ta te s D e p a rtm e n t o f C om m erce a n d D om inion B u re au of S ta tis tic s su rv ey s c o m p a r e d ........................................................... 22 V. A m erican c o n tro lled an d affiliated com panies in C an ad a, 1932 3 Cl V I. A m erican c o n tro lled an d affiliated com panies in C an ad a c lassi­ fied acco rd in g to am ount o f c a p ita l em ployed, 1932

364

V I I . A m erican c o n tro lled and affiliated com panies in C an ad a classi­ fied acco rd in g to am ount o f c ap ital em ployed, show ing p e r­ cen tag e of to ta l com panies, c ap ital em ployed, an d gross value of p ro d u cts in each size g ro u p , 1932 ............................................

27

V I I I . N e w sp rin t pro d u ctio n in C an ad a by in d ep en d en t an d by A m eri­ can-ow ned c o m p a n i e s ..........................................................................52 IX . C om m unities served b y A m erican-ow ned pu b lic u tility com­ pan ies in C a n a d a ................................................................................. 14-2 X . C hain sto res in re la tio n to all sto re s in C an a d a , 1930

.

.

.

156

X I. A m erican-ow ned chain sto re s in C a n a d a ............................................ 157 X I I . C an ad ian su b sid iaries in re la tio n to p a re n t com panies . X I I I . C anadian-ow ned com panies in th e U n ite d S ta te s

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158

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176

X IV . R elatio n betw een f.o.b. prices quo ted by p a re n t com panies and C an ad ian s u b s i d i a r i e s ..........................................................................237 X V . P ro fits, losses, an d re m ittan ces to U n ited S ta te s of b ran ch and su b sid iary com panies in C an ad a, 1926 to 1933 . . . .

245

X V I. Incom e a n d losses o f C anadian-ow ned com panies in the U n ited S t a t e s ....................................................................................................... 249 X V I I . Sum m ary o f income and deficits o f C an ad ian -o w n ed com panies in th e U n ite d S t a t e s ..........................................................................251

CHARTS A m erican-ow ned com panies in C a n a d a ...........................................................20 In te rn a tio n a l P a p e r a n d P o w er C o m p a n y ....................................................41 B ack u s-B ro o k s C o m p a n y ........................................................................................ 45 A lgom a C onso lid ated C o rp o ra tio n , L td ...............................................................59 G e n e ra l M otors C o r p o r a t i o n ................................................................................. 66 A m erican R a d iato r a n d S ta n d a rd S a n ita ry C o rp o ra tio n

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70

C ra n e C o m p a n y ....................................................................................................... 70 U n ite d S ta te s S te e l C o r p o r a t i o n ..........................................................................71 S ta n d a rd O il C o m p an y o f N ew J e r s e y ........................................................... 79 S h a re h o ld e rs o f fo rm er D ru g , I n c o r p o r a t e d ....................................................81 U nion C arb id e a n d C arb o n C o r p o r a t i o n ........................................................... 82 In te rn a tio n a l N ick el C o m p an y o f C an a d a , L td ................................................99 M ovem ent of n ickel from mine to m a r k e t ....................................................100 A lum inium , L td ., an d A lum inum C o m p an y o f A m e r i c a ..............................106 N ew Y ork C e n tra l L i n e s ........................................................................................ 118 A ssociated T elep h o n e a n d T e le g ra p h C o m p a n y ............................................ 131 C ities S erv ice C o m p a n y .........................................................................................144 In te rn a tio n a l U tilitie s C o r p o r a t i o n ...................................................................145 U tilities P o w er an d L ig h t C o r p o r a t i o n ........................................................... 150 M etro p o lita n S to res, L td ............................................................................................ 159 M oore C o rp o ratio n , L td ., an d F . N . B u rt C om pany, L td .......................... 180 In te rn a tio n a l M eta l In d u s trie s , L td ...................................................................... 181 C a n a d ia n N a tio n a l R ailw ay C o m p a n y ........................................................... 189 C a n a d ia n Pacific R ailw ay C o m p a n y .................................................................. 192

MAPS C an ad ian railw ay s w ith ex tensions in th e U n ited S ta te s U n ite d S ta te s ra ilw a y s w ith ex ten sio n s in C an ad a

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367 3158

CANADIAN-AMERICAN

INDUSTRY

C H A PTER I

HISTORICAL BACKGROUND G e o g r a p h y and history have made it inevitable that the economic structures of Canada and the United States should become closely intertwined. The common North American setting and atmosphere which makes, or has made, so similar many of their political and eco­ nomic problems, the large interchange of population, and the to some extent complementary nature of their resources have con­ spired to produce a growth of interdependence which public policy and private antipathy have been powerless seriously to impede. In­ deed, the very attempts on Canada’s part to preserve an independ­ ent economy, through tariffs, through Imperial preference, through appeals to local patriotism, have not infrequently promoted the “American penetration” which they were designed to repel. The boundary between Canada and the United States is geo­ graphically a natural one. An economy based on the canoe and the flowing rivers dictated boundaries of which the present is a rough approximation.1 But in an age of railways and gasoline there are no serious physical obstacles to contacts. In both countries the centers of population and the principal industrial areas lie close to the mu­ tual boundary. Contacts between corresponding sections of the two countries are physically easier than between different parts of the same country'. T he language and idiom of commerce and industry are practically the same in both countries. Movies and magazines, travel and migration have by no means produced an identity of cul­ ture, but have given rise to a degree of common culture that is prob­ ably unique. The organization of industry is very similar in the two countries, possessing very largely the same virtues and the same vices— vigorous expansion, restless mobility, giant corporations, coast-to-coast organizations, colossal advertising, high pressure salesmanship, chain stores, concentration of financial control. In matters of trade each finds the other its best customer. Given such

I. S ee H . A . In n is , T h e F u r T ra d e in C anada (N e w H a v e n , 1 9 3 0 ), p a ssim .

2

CANADIAN-AMERICAN INDUSTRY

conditions, economic penetration of each country by the other is a most natural and normal result. This volume is concerned chiefly with economic relationships, and, more narrowly, with the nature and extent of industrial and finan­ cial expansion of the nationals of one country into the territory of the other. It is a description of what is often loosely called “the branch-plant movement.” There are two points that it is particu­ larly desirable to emphasize at the beginning. The first is that this has been a movement in both directions. The impact of the United States on the Canadian economy is, of course, of almost immeasur­ ably greater consequence to Canada than is the impact of Canada on the United States to the American. But relative to wealth and population Canadians have as large industrial investment in the United States as Americans have in Canada, and much the same forces have established Canadian branch plants in the United States as have drawn American companies into Canada.2 The second is that this is not a new phenomenon. The first attempt to negotiate recip­ rocal trading arrangements— and like many of its successors an un­ successful one— was initiated by New England merchants in 1647­ 51.5 Early in the eighteenth century New York merchants had their agents in Montreal, and an active though illegal trade flowed north and south.* Neither American investment in Canada, nor even the branch plant movement, is a product of the twentieth century, though there was a rapid and increasing acceleration of this move­ ment between 1900 and 1932. Capital, promotion, and management in the earlier days of each country found themselves with plenty of scope for action at home. But even as early as 1810 American enter­ prise was spilling over into Canada, and by the 1880’s Canadian branch plants began to appear in the United States. The following chapters are devoted primarily to a description and analysis of the current situation, but there is enough misunderstand­ 2. See p p . 175 II. 3. R . G . T h w a ite s,