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~w J ?BURSDAY, DEC. 16th, 1954 - . - FMjE NINU THE CA14ADIAN STATESMAN.BOWMANVITT. NTrARIO Increasing comnpetition prov'des many chalIlenges for the comin yer 1 Extracts of addregses delivered at the 88th Annual Meeting of The Canadian Bank of Commerce I "If it were possible to draw up a balance sheet of Canadian conditions it would show a substantial surplus on the favourable side," said James Stewart, C.B.E.., President,- addressing the 88th Annual Meeting of The Canadian Bank of Commerce. - In dealing with Uic general economic picture, Mr. Stewart observcd, in part, that "evidence is mounting to indicate slowing'down, for Uic time being, in the rate of cur over-ail economic growth. The commercial and industrial situation this past year is by no means de- pressed-in fact, if it were possible to draw up a balance sheet of Canadian conditions it would show a substan- tial surplus on the favourable side. However, careful examination of the record reveals a somewhat spotty patterni of activity with both gains and losses showing up i a number of areas and in a number of industries." "It is gencrally agreed," said the President, "that gov- ernment policies of the past few years designed to main- tain some measure of stability in a growing economy bave been- successful. We now arc entering a pcriod when business must, on its own initiative, test the s trengths and weaknesses in the market-place. During thc past fcw years there bas developed a feeling in some circles that business fluctuations can be smoothed out, even corrccted, by various monetary and fiscal * ieasures. On the other hand, a skepticismi continues to be fclt as to whether government intervention can * cope with ail unfavourable developments. In a large measure solutions will depend on the kind and degree of problemn to be solved. On us as citizens - corporate and individual - mucli will depend on the position we 4 .-take on domestic and international issues. For example, are wc prepared to pay the price for "full employment" -assuming the price can be estimated; do we favour * price-supports to maintain floors under prices that othcrwise would be brought into Unme with demand; do wc approve of special protection for special industries in Uic liglit of our position as a trading nation? These and other vexatious issues, concerning which the people as a whole arc vitally interested, cail for early and objective thinking in the liglit of the re-emer&ence of a buyers' market." In a reference to national production, Mr. Stewart said: "But what possibly bas not commanded the at- tention it deserves is that, witb an expanding popula- tion and a growing labour force, it is necessary - as- suming economiv stability - that productivity move forward in relation to this growth. If our standards of living are to improve, the rate of increase in product- ivity should bc somewhat greater than the rate of r poZulation growth. When, in fact, production remains r constant or dedlines then this is a warning that changes are called for in both business and government poli- vies." "The agricultural situation this year lias vhanged rela- tive to last year. The picture bas been affected in no âmail way by the capriciousness of the weather. An unofficial estimate of a 250 million bushel wheat crop for Uic prairies this year follows three consecutive years of crops over twice that size. Even Uic diminished yield j does flot tell Uic full story. The composition of Uic $' crop is even more revealing, as witness Uic estimate that a substantial percentage of this year's crop will be ratcd as fecd. Manifestly, Uic difficulties of marketing a mounting grain surplus in competitive foreign mark- ets is somcwhat alleviated as a result of this year's out- S turn. Howcver, any adverse effect on Uic income and purchasing power-of the prairie farmers soon becomes ,4'ï evident and in turn affects, to some degree, the over-al consumption pattern for the moths ahead. Production ow f most of our principal grain crops, with the exception of fiax, is down this year. Howcver,' Mr. Stewart con- cluded, 'Uic level of domestic food consumption re- mains high and should remain relatively stable." W2t is evident that we arc in a period of competition, in course of time may become more intensi- fied, yet it would appear that the influences of a sellers' r markct durimg Uic past decade continue to prevail amd 1 consequcntly have made adjustmemts to competitive conditions somewhat more Mifcult to achieve. We are, Lin fact, witnessing thc emergence of at least Uiree kinds L f competition: in foreign markets, where it involves some of our exports ; and in the domestic field, wherc, flrst of aIl, there are felt the effects of imports from for- eign countries, and second as between our own firms and industries. "We hear on many sides of relatively higli costs beimg detrimental to sales in the present competitive market. If this be the case then every effort to rcduce costs must be made. Where productivity or other con- ditions can be improved to reduce costs it is impera- tive that plans be made to achieve Uiis as soon as pos- sible. In many cases, an increase in output could reduce the per unit cost of the product and thereby improve its competitive position. In other cases, it may be that technological improvements are necessary to restore the industry to a better relative cost relationship to competitors. In yet other cases it may require manage- ment to re-examine and where necessary revise produc- tion and marketing policies in lime with Uic changes that now are takimg place in the market. "Since, as I have moted, competition arises in several forms, and since we cannot usefully separate our do- mestic from our foreign activities, except in certain specific instances, the question of protection looms in- creasimgly important. One of the questions in the field of foreign trade that cannot be igmored centres on the extent to which we consider tarifis as a device to sup- port the ecomomy. I have recorded on other occasions my belief that with regard to "protection" the long run rather than the short run position is to be preferred be- cause of the dynamic growth character of our economy. If we pursue the' objective of diversification of industry, both primary and manufacturing, there is bound to be conffict with imports, particularly in manufactured goods. Nor is there much to be said for the view that we can concentrate our attention on exports while ignor- ing Uic import problem. Nations who buy, or who might be prepared to buy from us, in the final analysis expect to pay in their goods. Trade bas to be viewed in the form of imput as well as outflow. Or to illustrate in a more, homely fashion, any industrial organization bas a pur- chasing as well as a sales departmnent. Except in special circumstances, protection invites retaliation and for us this form of activity would be inimical to our desire for improved standards of living." "Camadians generally have given, I believe, serious attention to thç position taken by the governmemt in 1945 to Uic effect that it would be the duty of the gov- ernment to maintain a dlimate within which business could develop and expand. It now appears that the defi- nition of climate invites examimation and clarification. There seems to be a beief that business-small or big- van, should and does operate in an atmosphere of per- fect competition. Because of existing conditions of mass production, indigenous geographic characteris- tics, and growimg elasticity of substitution and Uic like, wc are in process of change. For example, substitutes are now available for nearly cvery product which once offered an opportunity for monopoly: new synthetic fibres for cotton, wool, licm, jute and suck; other fuels for voal; and a whole range of new ferro-alloys or alter- nate base metals for the relatively few original grades of iron and steel. The Camadian consumer now bas a di- verse variety of choice for goods and services which gives to competition a uiversality that it neyer before possessed. We must therefore turn our attention to Uic realities of present-day production and distribution as they apply to the Canadian economy. This suggests that while restrictive trade practices should continue to come within Uic purview of government supervision, Uic yard- sticks that are used require careful re-examination. Con- sideration such as 'to Uic detriment of Uic public' and 'undue lessening of competition' are temuous and diffi- cult of reasonable interpretation. Bearimg in mimd our geographic position, the pattern of present population concentrations, and Uic increasing competition fromn abroad, it is possible that certain forms of integration for greater productive efficiemcy, lower costs, and un- proved competitive position, cani exist in Uic public interest. In the ight of advances in mechamization and mass production some forin of industrial planning must be acceptable; otherwise unremunerative prices may follow which would flot be in the public intcrest. Unpro-. fitable business operations resuit in lowered wages and reduced employment - neither of which are desirable ends of policy. "The question of monopollstic practice surely centres on the relative profits obtained on effective investment. If this yardstick were more frequently applied it would make for happier relations between industry and gov- ernment without interfering with the right of action. The present approach, of proving collusion, seems somewhat unrealistic and unneccssary in the light of other and more useful tests of 'detriment to the public.' Surely with the re-emergence of a buyers' market, the sellers' market philosophy will be replaced with a real- istic approach to competitive business as it is actually conducted." "We have witnessed these past few months a revival of the purchasing power doctrine - a very pervasive approach to remedying any signs of unemployment. The idea that collectively wc can buy our way out of any downward trend in economic activity sounds fine except for one factor - the resulting eflect on prices. It cannot be said too often that we function in a world economy, not an isolated economy, and hence price is a key to, flot incidentai to, our prosperity. Let us kecp clearly in our minds that, in the main, the product pays the. wages - the manufacturer acting as a middle man in the trans- action. What can be paid out in costs of production is determined by what the consumer will pay for the finished.product. Manifestly, it is uneconomic in the face of a falling demand to do anything. to increase prices in the hope of reviving that demand. Surcly this is the time for realisma in our market appraisals." Turning'now to the immediate prospects Mr. Stew- art concluded: "Over-ail I would suggest that the next twelve months will record a continuation of the spotty pattern that lias been evident this year. How well or how.poorlywe react to the growing competition both at home and from abroad will of course have an impor- tant bearing on the relative success of our operations next year. However, disposable income continues to bc higli and there is cvery expectation that consumer pur- chasing will remain at a reasonably higli level. Mean- while, technology combined with the continuing devel- opment of resources suggests a steadiness in the rate of expansion of primary goods and ancillary industries. Investment opportunities should continue to be favour- able and particularly in the construction industry it' would appear that capital investment should remain strong. "In the longer view, I look for continued growth and development throughout the country. Blessed as we are with an abundance and a variety of resources, one can only conclude that we can, with care and conservation, market many of our products with considerable advan- tage to ourselves. A growing population, which means a growing labour force, demands a continuai revision of our objectives. This, amongst other tbings, means new markets and requires new or advanced methods of distribution. The challenges indeed are great; that we have successfully met problems in the past with foresight augurs well for the road ahead." wkL NEIL J. MeKINNON, VICE-PRESIDENT and GENERAL MANAGER, after reviewing the balance sheet, highlights of which are suimmarized below, said i part s "The 88th Annual Statement records a year of major growth during which new records were cstablished ini many important aspects of the Bank's business. Depo- sits increased by more than $1 56,000,000 and total assets increased by appFoximately $160,000,000 bringing the total assets of the Bank to an ail-time hiei of $2,058,00,000. "The past year has been on the whole one of active business, although at a somewhat lower level than last year, and it bas been marked by a widening in thc area of competitive trading conditions which were bccoming evident more than a year ago. This bas not only been truc of production competing in thc export field, but also of business serving principally the domestic market which, to an increasing extent, bas competcd with im- ports encouraged .by the prevailing discounts on other currencies. The sharply competitive conditions have made exacting demands on management, and bave focuscd attention on cost control and increascd efficien- cy. Much attention bas also been given to control and balance of inventories and this, together with a level- ling-off in Uic expansion of retail consumer credit, bas brought about, in many fields, a lessening in require. ments for additional bank boans. "This year The Bank Act was re-enacted by Parlia- ment following the usual decennial revision. Several useful changes have been made, one of which enables sccurity to be provided over petroleum in the course of production, a field of finance in wbich thc Bank bas played a leading part. Another change was the authori- zation of banks to engage in mortgage lending under thc National Housing Act undcr which, subject to cer- tain conditions, mortgages are insured up to 98% of Uic principal amount. The Bank bas also been actively engaged in this field. "A ncw item appcars for the flrst time in our balance sheet in the form of mortgages insured under the National Housing Act. At 3l1st'October this amountcd to $5,800,000 and commitments prcsently outstanding will increase this amount measurably during Uic coming year. "The balance at credit of undividcd profits was in- creased to $3,647,000 of which $3,000,000 bas been transferred to rest account in addition to a transfer of $1 0,000,000 from tax paid reserves to which reference bias been made in the directors' report. The additional capital for which subscription rights have been offered to sharcholders will augment the total of capital and rest account to $ 101,250,000. The enlarged capital resources will be an important aid in enabling Uic Bank to enlarge its participation in constructive develop.. ments and in furthering Uic continued growth of the Bank. "Once again it is a privilege to acknowledgc here, and pay tribute to, the loyal and entbusiastic work of al members of personnel within Uic Bank. The past year lias been a very busy one and the whole-hearted co- operation of everyone is reflected in the progrcss sbow,î in the Balance Sheet. Witb growing business and ex- panding activity, officers and employees have maintain- cd a high level of service to the public which is tradi- tional with Uic Bank." ANNUAL STATEMENT HIGHLIGHTS - YEAR ENDED OCTOBER 31,1954 ASSETS Cash Resources (including items in transit) .....$ 318,359,590 Securities............................................... 793,918,331 Total Loans............................................ 874,881,279 Mortgages and Hypothecs însured under the N.H.A. 1954 ...................................... 5,815,496 Acceptances and Letters of Credit ................... 29,813,441 Other Assets ............................................ 35,928,833 Total Assets............................................ $2,058,71 6,970 LIABILITIES Deposits ............................................... $1,938,666,112 Acceptances and Letters cf Credit................. 29,813,441 Other Liabilities ......................................... 8,589,769 Capital, Rest Account and Undivided Profits .... 81,647,648 Total Liabilities........................................ $2,058,716,970 STATEMENT OF UNDIVIDED PROFITS Profits before Goyernment af Canada taxes ............ ........................................................... $14A896,379 Less: Provision for depreciation on Bank Premises.................................................. $1,685,029 Provision for Government of Canada taxes................................................... 6,807,000 8,492,029 Balance available for distribution.................................................................................. $ 6,404,350 Dividends ............................................... ............................................................. 3,600,000 Balance carried forward ........................... .................................................................. $ 2,804,350 Balance cf undivided profits October 31, 1953........................................................................ 843,298 Î-3-,647,648 Transferred ta Rest Account .......................................-................................~........... 3,000,000 Balance of undivided profits October 31, 1954 ................................................. ...... ..........$ 647,648 The fui! iext of the Prssidoets and the Ge-neraI Mono ger's addresses May b. obtained by writing ta the Secr.tary, Head Office, Toron to. THE CANADIAN. BAN K 0F COM MERCE More Thon 680 Branches A cross Canada .,j - f mwmmàh-%bý -1 T 1