415. It will be seen from the foregoing account of the capitalisation of the Company that the Newfoundland Government has a twofold interest in the success of the Company's undertaking. Not only is it concerned that the Mill should utilise its great advantages by working to full capacity, thus giving the maximum amount of employment, on remunerative terms, to the people of Newfoundland; but it has a direct interest in that it has itself guaranteed, both as to interest and principal, a series of second mortgage bonds to the value of £2,000,000 and bearing interest at 5½ per cent. The present depression of the newsprint industry, and the effect which this has had on the operations of the Corner Brook Mill, have, therefore, caused it serious anxiety.

  416. Here it may be said that the Mill, though burdened with heavy overhead charges, is recognised to be in a favourable competitive position. It is one of the most modern Mills in the world, is well designed and solidly built and is equipped with the latest machinery. Its supplies both of timber and power are obtainable without difficulty. Apart, therefore, from overhead charges, its cost of production should be very low. Unlike Grand Falls, which was built nearly 20 years earlier, it is situated on the estuary of a river, which is open to navigation for the greater part of the year. The paper is thus loaded on to ships direct from the Mill, and the Company is saved the cost of transport to the sea which, in the case of inland mills, is an important item in cost. By operating its own steamers, the Company is enabled to land its paper in New York and other ports in the United States at a minimum cost. In these circumstances there were not wanting those who contended that, even allowing for heavy overhead charges and for the present low price of paper, the Mill should be capable of paying its way on a whole-time basis in competition with any other mill in the world.

  417. In practice, however, the Company has been compelled during the last two years to curtail its operations, with far-reaching effects on the surrounding population. Three successive cuts in wages, totalling about 30 per cent. were brought into force, but even on this basis it was not found possible for the Mill to work full time. The length of the working week varies but the average closing of the Mill for any part of the week involved a serious curtailment in the actual earnings of the employees. On the basis of a 4-day week, a reduction of 40 per cent. in hourly rates meant a reduction in actual earnings of over 50 per cent. This drastic treatment gave rise to much hardship and discontent and there was at one time a general feeling that the Company was not dealing fairly with its staff. This feeling has, however, been mitigated by the recent decision of the Company to restore 10 per cent. of the cuts made.

  418. The Company's holdings extend to 7,200 square miles, and the maximum capacity of the Mill is 600 tons of paper a day. At the present time its output is approximately 500 tons a day when working. The number of men employed in the Mill is about 700. It is particularly unfortunate that a feeling of discontent should have existed since it is recognised by the management that the staff of the Mill is highly efficient and has uniformly given of its best; while the Mill itself is excellently laid out, suitable for easy working, well lighted and ventilated. Labour has been very stable; the average length of time served in the Mill by each employee is 5½ years; the men are accustomed to their duties and work steadily and well. These considerations must again make for a low cost of production.

  419. Of the employees in the Mill, including heads of departments, 94 per cent. are Newfoundlanders. Their general health is good and the Company provides them, but not their families, with free medical attention. Like Grand Falls, Corner Brook has been very well laid out and has all the amenities of a modern town. There is a well-equipped hospital, which is maintained by the Company: each employee is required to contribute 50 cents a month towards the cost. There are public schools. The Company owns a hotel, catering for the staff and the public, which is attractively situated, pleasingly designed and efficiently managed.

  420. If the lot of the employees in the Mill is at present a hard one, that of the woodsman is well-nigh desperate. The reduction of the output of the Mill has naturally been reflected in a reduction of the amount of timber required. Cutting has, therefore, been curtailed, and in one district, where no less than 50,000 cords were cut in 1931, no cutting took place in 1932. Numbers of men have, therefore, been unable to obtain employment while, in the case of those who have been unfortunate enough to do so, reductions in the rates offered have been such as to deprive them of all hope of earning a livelihood for themselves and their families. The average price paid per cord last season was $1.00-$1.30, as compared with $1.20-$1.50 in 1931 and $2.50 in normal times. The average cut per man was 1.3 cords a day. Each man, out of his earnings, was required to pay 66 cents a day for board and was subject to other incidental expenses. The margin thus left to him at the end of many weeks' hard work was insignificant: indeed, he was fortunate if he was able, as the Newfoundlander say, to "break even." As a result of these unfortunate experiences, the contiguous town of Deer Lake, which has grown up as a lumber centre, has been reduced to a state bordering on pauperism. Many families have been compelled to seek public relief and the remainder are in serious straits.*

  421. The Mill at Corner Brook does not operate as an independent entity but is affiliated to three Canadian Mills, those at Three Rivers and Gatineau, Quebec, owned by the Canadian International Paper Company, and the Mill at Dalhousie owned by the New Brunswick International Paper Company. The orders received are distributed among the four Mills and it was alleged before us that, as the Mill at Corner Brook is the most modern of the four and therefore a low-cost producer, use is in fact being made of its superior productive capacity to assist the other three Mills through the depression; in other words, that the profits made on the orders executed at Corner Brook, instead of being used to strengthen the position of the Newfoundland Company, are in practice used as a subsidy to enable the three Canadian Mills to keep open. The suggestion made was that, while the Mill at Corner Brook was the Mill at which orders could be most ecomically [economically] executed and, therefore, the most valuable asset in the partnership, yet it was naturally the object of the parent Company to tide over the depression with all its assets unimpaired, and the fact that Stock issued by the Newfoundland Company had been guaranteed by the United Kingdom and Newfoundland Governments respectively made it of less importance that its position should be strengthened than that the remaining assets of the partnership, viz., the three Canadian Mills, should be preserved.

  422. On the other hand the evidence given by the representatives of the Newfoundland Company, by those of the Canadian International Company and by those of the parent Company was to the effect that these various undertakings are going through a period of great difficulty and that it was their aim to secure a fair distribution of orders between the affiliated mills.

  423. The fact that the Newfoundland Government has guaranteed £2,000,000 worth of Stock makes it of special importance that all possible measures should be taken to facilitate the restoration of normal conditions at Corner Brook. The evidence submitted to us showed that there was no immediate danger of the Government being called upon to implement its guarantee; but prospects for the future must depend largely on world conditions, of which no forecast can be given.

  * We understand that, as a result of recent negotiations between the Company and the workers in the woods, increased rates have been offered to the contractors and sub-contractors for the cutting season now commencing.