Policy makers have recently devoted a great deal of attention to the interest rate ceiling on bank loans, one of the two main impediments to the free flow of funds within the Canadian capital markets. The other major impediment, the interest rate ceiling on government-insured mortgages, has largely been ignored despite the pronounced impact it has upon the allocation of funds, and the recommendation of the Royal Commission on Banking and Finance that it be abolished. Recent instability in the residential construction sector has, however, once again focused attention upon this ceiling and raised the question of its desirability. The purpose of this paper is to correct a major misconception concerning the impact of this ceiling and to point out some of the other major implications of an interest rate maximum on governmentinsured mortgages.

On March 9, 1964, the Hon. J. W. Pickersgill moved in the House of Commons the second reading of the Electoral Boundaries Readjustment Bill, a step of major constitutional importance which not only made provision for the first redistribution of Canadian federal constituencies since 1952, but provided that, for the first time, this task of redistribution would be taken out of the hands of parliamentary committees and entrusted to independent representation commissions. All this was long overdue and there was broad, if not unanimous, agreement that the creation of impartial representation commissions was a desirable reform. As Mr. Pickersgill said in the House next day:

The first and by far the most important of these [principles] was that we should not follow the pattern that had been followed in the first ninety years since Confederation, of having the readjustment of representation in this place done in this place by its members directly, but that it should be done by some body which would be as impartial as we in our collective ingenuity could provide and who would be as competent as we could find means to provide through legislation and subsequent appointment.

In an earlier article, it was noted that a change in automotive policy might possibly meet the approval of both protectionists and free traders: the change might lead both to an increase in the volume of domestic production of the item in question, and to a decrease in the total excess costs of production. (In the event of both these results being achieved, the percentage decrease in per unit excess cost would of necessity be greater than the decrease in total excess costs.) This paper evaluates the probable effects of the US-Canadian automotive agreement of 1965 on the basis of these two criteria. In addition, the distribution of efficiency gains from this agreement will be discussed. Equity is an obvious consideration here, and there is also some question whether the division of gains may jeopardize the competitive position of the Canadian industry after 1968.