Ottawa Agreements Summary

  • Last updated on November 10, 2022

The Canadian government approved the Ottawa Agreements in an attempt to relieve pressures caused by the Great Depression. The agreements secured more favorable tariffs from Great Britain and other British dominions.

Summary of Event

The worldwide Great Depression of the 1930’s had a devastating impact on Canada, in part because Canada did not have an independent economy at the time. Instead, the country was linked inextricably to the economies of the United States, England, and the rest of Europe. Canada’s domestic production was particularly dependent on trade with Europe. Unfortunately, many countries throughout the world, including the United States and Great Britain, raised tariffs and curbed imports during the 1930’s to protect their own economies. [kw]Ottawa Agreements (July 21-Aug. 21, 1932) Ottawa Agreements (1932) Tariffs;Canada Great Depression;Canada [g]Canada;July 21-Aug. 21, 1932: Ottawa Agreements[08090] [c]Trade and commerce;July 21-Aug. 21, 1932: Ottawa Agreements[08090] [c]Diplomacy and international relations;July 21-Aug. 21, 1932: Ottawa Agreements[08090] [c]Government and politics;July 21-Aug. 21, 1932: Ottawa Agreements[08090] Bennett, Richard Bedford MacDonald, Ramsay King, William Lyon Mackenzie [p]King, William Lyon Mackenzie;Ottawa Agreements Roosevelt, Franklin D.

Early on, the Canadian government had little success in easing the Depression. Prime Minister Richard Bedford Bennett, who took office in 1930, instituted new tariffs to retaliate against other countries that had raised their own tariffs and to protect Canada’s economy. He and other government leaders did not believe that much more needed to be done to help Canadians in the early days of the Depression; they expected it to be relatively short-lived. They made some attempts to enact social programs such as unemployment insurance but were stymied somewhat in their attempts by constitutional limitations on such programs.

Bennett soon recognized that England would have to help Canada survive the economic downturn. In 1930, he traveled to a conference in England to demand that the British Labour government permit the creation of a commonwealth that would provide protection for the dominions and would allow the dominions and England mutual preferences. At the conference, Bennett pleaded for a system of preferences, and he also made it clear that this system must be reconciled with the fullest protection for Canadian producers against competition from foreign nations as well as from Great Britain and the other dominions. Bennett announced that he stood solidly behind the doctrine of “Canada first,” and he conceded that the other dominions would also believe that they should come first. Nevertheless, he said, they should all work together to hammer out a collective agreement that would benefit each nation.

Bennett offered specific solutions to the problem. He suggested that after Canada had decided on the level of tariff protection it needed, it would add an extra 10 percent against non-British companies, with a certain flexibility in this margin in the case of specific products. The ruling British Labour party, long proponents of free trade, scoffed at Bennett, but he was not deterred. Bennett believed that the British had both political and economic reasons for reaching some type of agreement with the other members of the Empire. England faced both a declining trade position and a growing crisis in international affairs. At Bennett’s insistence, the conference participants agreed to meet in Ottawa in 1932 to continue their discussions. By 1932, England’s economic picture had changed for the worse, strengthening Canada’s demand for preferential treatment within the Commonwealth. Unfortunately, Canada’s economy also had worsened, primarily as a result of other countries’ protective actions.

From 1930 through 1932, Germany and Italy both levied tariffs against Canadian wheat. In 1930, the United States enacted its controversial Hawley-Smoot Tariff Act Hawley-Smoot Tariff Act (1930)[Hawley Smoot Tariff Act] against Canadian lumber, cattle, and agricultural products. Even England, considered to be the home of free trade, instituted an emergency tariff in 1931. Moreover, British prime minister Ramsay MacDonald’s government was in turmoil as a result of the impending collapse of the Bank of England and opposition from his own party for his inability to balance the nation’s budget. These factors made Canada’s economic status more tenuous and increased the need for concessions from England.

Bennett hoped that Great Britain and the dominions would agree to the establishment of an imperial free trade area protected against the rest of the world. He also wanted to exploit England’s trading interests, which reached far beyond the Empire. The British were not particularly interested in satisfying either of Bennett’s hopes, but as 1932 arrived, they were not in a position to deny him entirely. By 1932, the Conservatives were back in power in England, and one of their first acts was to institute protection. In February of 1932, the British government passed the Imports Duties Act, which imposed a 10 percent duty on many articles imported by England. The act exempted the dominions from the tax.

In 1932, the Commonwealth countries hammered out a series of twelve separate trade agreements, most of them five-year bilateral pacts, known as the Ottawa Agreements. In general, the agreements worked in Canada’s favor. Representatives from each of the dominions needed to secure preferred markets for themselves, but none of them wanted to curtail individual levels of trade. It did not take long before the problems became obvious, and these problems were especially serious for England. About two-thirds of the country’s exports went to countries outside Europe, and England also had the distinction of being the largest shipowner and international banker in the world. As a result, the British banking industry had huge amounts of long-term investments throughout the world. Understandably, England was not willing to jeopardize its banking and shipowning industries in order to create an uncertain unity among the dominions or raise the cost of living for its own citizens. England also had to deal with the Commonwealth countries’ growing independence; many of these nations wanted to develop favorable trade agreements to benefit themselves at England’s expense.

There was a certain amount of irony in Bennett’s appeal to the British for economic help: His plea contradicted the idea that nationalism was alive and well in Canada. The majority of Canada’s citizens believed in the concept of one country, even though the individual provinces were unsure as to the exact legal status of their federation. Moreover, there existed no formal agreement establishing Canada’s position in the Commonwealth. The nearest thing to one was the Balfour resolution of 1926, which stated that the members of the Commonwealth “are autonomous communities within the British Empire, equal in status, in no way subordinate one to another in any aspect of their domestic or external affairs, though united by a common allegiance to the Crown, and freely associated as members of the British Commonwealth of Nations.” This was affirmed by the 1931 Statute of Westminster, Statute of Westminster (1931) which declared that “no act of the British Parliament shall apply to any dominion unless the latter requests it.” Canada had taken its autonomy seriously.

The conference in July and August of 1932 was intended to be the British answer to the worldwide Depression. Nine countries participated, hoping to establish free trade within the Commonwealth while retaining or raising tariffs against nonmember countries. Protective tariffs played a big role in the economies of the dominions. The British delegation supported low tariffs on goods exchanged among the members of the Commonwealth, but Bennett, in accord with his party’s protectionist philosophy, fought for high tariffs. He asked for preference in the British market for Canadian lumber, wheat, bacon, cheese, and butter. In return, he offered partial preference to British textiles and steel products, and none at all for boots and shoes. Bennett wanted to base preferential treatment on a general raising of tariffs on foreign nations’ products. In the end, the British acceded to his demands. To the Canadians’ delight, tariffs remained high.

The British government tendered generous trade privileges to the Canadians, granting a privileged market for Canada’s principal exports without getting much in return for its own products, in order to maintain peace between the two countries. Canadian manufacturers continued to demand and receive protection, especially against the textiles that England wanted to export. The Canadians could not be blamed for their demands for protection, as they were concerned about Russian and Argentine competition in the British market for primary products.

Significance

The Ottawa Agreements had mixed results. The cotton producers of the two countries held a side conference that broke down completely with no agreement, Canada’s sheltered industries opposed any threats to their protected position, and England demanded reduced duties on textiles, iron, and steel products. That demand produced heated discussions, as did Canada’s insistence that Great Britain impose an embargo on Russian lumber and other competing products. Progress was slow on any agreements, and the conference almost came to a premature halt. That was partly a result of personality conflicts, as participants accused Bennett of being too domineering and overbearing. However, England could not afford to end the talks without some sort of agreement.

At last, the countries compromised on several issues. England agreed to forgo tariffs on a substantial number of Canadian goods, including manufactured products, food, and raw materials. It also imposed duties of 10 to 33 percent on competing foreign products. Of primary importance to Canada was England’s decision to grant preference to Canadian wheat. Great Britain also agreed to take effective steps against foreign dumping of products, particularly of Russian lumber.

Canada increased the margin of preference on 223 British products, either by lowering existing preferential rates or by raising the general tariff imposed on competitors. The chief beneficiaries were the textile, iron, steel, leather goods, coal, and chemicals industries. In addition, Canada agreed to restrict protection to industries that had a reasonable prospect of success. Finally, it allowed the British to be represented in a tariff board on the administration of tariffs or any proposed changes in rates. A series of bilateral agreements with the other dominions supplemented the arrangements with England and promised to give Canada wider access to Empire markets. Despite the fact that some historians saw the conference as a failure, Bennett’s government won some important concessions.

In each year from 1927 through 1932, payments by Canada to the United Kingdom exceeded receipts, although the reverse was true from 1933 to 1939. Canadian product exports to England increased steadily after 1932, although values were lower because of lower prices. The proportion of Canada’s exports shipped to England rose from 28 to 38 percent. For the Empire as a whole, the increase was from 36 to 48 percent. Conversely, Canadian imports from England did not rise above the 1932 level until 1935. Overall, the percentage of Canada’s trade with England was slightly higher during the 1930’s than it had been in the 1920’s. That made the Ottawa Agreements worthwhile in the eyes of some Canadians.

The Canadian parliament vehemently argued about whether Canada had benefited from the conference. William Lyon Mackenzie King, the prime minister before 1930, seized on the agreements as a political issue. He criticized the agreements because they raised Canadian duties, granted only a slight concession to England, and made it more difficult to reach a new trade agreement with the United States. This last issue was particularly important to King.

Regardless of macroeconomic trends, many Canadians believed that it was vital to exchange goods freely with the United States. In the absence of such an arrangement, Canada would be forced to meet its heavy financial obligations to the United States through an increasing drain on its gold supply, a prospect that was extremely unappealing to many Canadians. Manufacturers and farmers also had mixed feelings about the conference and about Bennett himself.

There was some serious international political fallout from the Ottawa Agreements. Many non-Empire countries were affronted by the concessions Commonwealth members granted to one another. Ironically, the United States, which had imposed high tariffs of its own to combat the Depression, was one of them, and Americans felt slighted by the agreements. In the final analysis, the Ottawa Agreements gave Canadians the perception that free trade among the Empire’s members was one step closer. On the other hand, however, the agreements heightened the dislocation of world trade and accentuated the trend toward anarchy. Overall, however, to Canadians, the Ottawa Agreements represented a step toward economic independence, which was perhaps the most welcome benefit of all. Ottawa Agreements (1932) Tariffs;Canada Great Depression;Canada

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Brown, Craig, ed. The Illustrated History of Canada. Toronto: Lester & Orpen Dennys, 1987. An easy-to-follow history of Canada replete with photos that give readers a visual image of the people and events that contributed to the country’s history.
  • citation-type="booksimple"

    xlink:type="simple">Creighton, Donald. A History of Canada. Boston: Houghton Mifflin, 1958. A lengthy history of Canada focusing on the most significant events in the country’s past.
  • citation-type="booksimple"

    xlink:type="simple">Ferguson, Linda W. Canada. New York: Charles Scribner’s Sons, 1979. An overview of Canadian history. Offers a broad view of the people and events that have contributed to the country’s history.
  • citation-type="booksimple"

    xlink:type="simple">Hall, Walter Phelps, Robert G. Albion, and Jennie B. Pope. A History of England and the Empire-Commonwealth. 4th ed. Waltman, Mass.: Blaisdell, 1965. A textbook that provides insights into major events in Canadian history, from the British viewpoint.
  • citation-type="booksimple"

    xlink:type="simple">McDiarmid, Orville John. Commercial Policy in the Canadian Economy. Cambridge, Mass.: Harvard University Press, 1946. A comprehensive history of the Canadian tariff.
  • citation-type="booksimple"

    xlink:type="simple">McInnis, Edgar. Canada: A Political and Social History. New York: Holt, Rinehart and Winston, 1959. A readable book that focuses on the sociological impact of historical events in Canada.
  • citation-type="booksimple"

    xlink:type="simple">McMenemy, John. The Language of Canadian Politics: A Guide to Important Terms and Concepts. 3d ed. Waterloo, Ont.: Wilfrid Laurier University Press, 2001. Collection of more than five hundred brief essays on a wide range of topics related to the Canadian system of government, Canadian political history, Canadian laws and legal history, and more.
  • citation-type="booksimple"

    xlink:type="simple">Miller, J. D. H. Britain and the Old Dominions. London: Chatto & Windus, 1966. Positive evaluation of the Ottawa Agreements.
  • citation-type="booksimple"

    xlink:type="simple">Riendeau, Roger. A Brief History of Canada. 2d rev. ed. New York: Facts On File, 2006. Concise history includes discussion of Canada’s difficulties during the Great Depression.
  • citation-type="booksimple"

    xlink:type="simple">Safarian, A. E. The Canadian Economy in the Great Depression. Toronto: Toronto University Press, 1959. The role of the Depression in making the agreements possible.
  • citation-type="booksimple"

    xlink:type="simple">Wittke, Carl. A History of Canada. 3d ed. New York: F. S. Crofts & Company, 1942. A concise history of Canada. Contains marginal notes that make it easy for the reader to identify major events in the narrative.
  • citation-type="booksimple"

    xlink:type="simple">Young, J. H. Canadian Commercial Policy. Ottawa: Royal Commission on Canadian Economic Prospects, 1957. Brief treatment of the agreements in the context of Canada’s commercial policy.

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