CANADA: ECONOMIC DEPENDENCE Al\D POLITICAL DISINTEGRATION

CANADA AT CROSS ROADS

Despite the glow of Montreal’s superbly successful Expo ’67. Canada’s preoccupation in its Centennial Year has been with its chances of survival.

The mass circulation “Star Weekly”, for instance, in its Canada Day issue of July 1 featured interviews with two distinguished Canadians under the heading “Can Canada Survive?”. One of these was with Mr. Walter Cordon, President of the Privy Council, and a member of the Federal Cabinet. Mr. Gordon was currently heading a “task force” – a Cabinet Committee of Enquiry which included Finance Minister Sharp and a team of research staff recruited from the universities. The subject of the enquiry was the effect of foreign investment on the Canadian economy. A White Paper outlining government policy was promised for the autumn of 1967.

Here is part of Walter Gordon’s reply to the question put by the “Star Weekly”:

”During the last 50 years we have freed ourselves of traces of colonial status insofar as Britain is concerned. But having achieved our independence from Britain, we seem to have slipped, almost without knowing it, into a semi-dependent position in relation to the semi-dependent position in relation to the United States.

”While the relationship is a benevolent one, if present trends are allowed to go unchecked – if we fail to arrive at a consensus of national goals and objectives – then, as I’ve intimated, Canada may not exist as a separate and independent nation for another 100 years.

The choice is clear. We can do the things that are be necessary to regain control of our economy, and thus, maintain our independence, or we can acquiesce in becoming a colonial dependency of the United States, with no future except the hope of eventual adsorption”

And again, from the same interview:

“Already, in my view, we have surrendered too much ownership and control of our natural resources and our key industries to foreign owners, notably those in the United States. And history has taught us that the economic control inevitably goes with public control. This is what colonialism is all about. Indeed, it is sadly ironic that in a world torn asunder by countries who are demanding and wining their independence, our free, independent and highly developed country should be haunted by the spectre of a colonial or semi- colonial future”

Walter Gordon represents a minority view within the federal cabinet. It would be fair to say that the majority opinion of the government is one of apprehension that the views expressed by Mr. Gordon may check the flow of American capital into the country, and slow down economic growth. Th preoccupation with the current rate of growth of Gross National Product per head is itself a measure of the degree to which criteria of corporate business have displaced more comprehensive and social formulations of national objectives.

The admission by Prime Minister Pearson the Canada is, in fact, a political satellite of the United States was symbolically featured in an interview in the Canada Day Issue of the country’s leading mass circulation monthly, Maclean’s Magazine. In discussing Canada’s position on the war in Vietnam, Mr. Pearson admitted that:

“We can’t ignore the fact that the first result of any open breach with the United States over Vietnam, which their government considers to be unfair and unfriendly on our part, would be a more critical examination by Washington of certain special aspects of our relationship from which we, as well as the), get great benefit.”

The reporter, Ir. Ross, then commented: “This isn’t really very different from satellite status, is it?” To which Mr. Peruson replied:

“It’s not a very comforting thought, but, in the economic sphere, when you have 60 percent or so of your trade with one country, you are in a position of considerable economic dependence.”

The links of dependence extend far beyond “normal” commercial trade. For instance, earlier this year, in a public reply to an appeal by 400 University of Toronto professors for dissociation from the war in Vietnam, the Prime Minister reviewed the benefits which Canadians gain from the integration of defence pro­ duction and concluded:

“For a broad range of reasons, it Is dear that the imposition of an embargo on the export of military equipment to the US and concomitant termination of the Defence Production Sharing Agreements would have fur-reaching consequences that no Canadian government would contemplate with equanimity.”

The Links of trade referred to by the Canadian Prime Minister. are in large part links arising from the operations of American based corporations in Canada They are manifestations of a new mercantilism of American corporate empires which cuts across boundaries of national economies and undermines the national sovereignty of the hinterland countries in which subsidiaries and branch plants are located.

A feature which the new mercantilism shares with the old lies in the way enterprises use their economic power, and their political influence, and indeed, the military strength of their metropolitan governments to protect their investments against disruptions in the market for their supplies and their sales.

Uncertainty in the free market can be reduced and even eliminated by converting market transactions into intra-company transfers through the device of vertical integration. Further, the large corporations can use their power to obtain from metropolitan and peripheral movements a network of preferential and bi­ lateral trading arrangements, and fiscal concessions, which in some ways resemble the exclusive privileges of the old mercantile systems.

The “special aspects of our relationship” referred to by Mr. Pearson consist of a set of preferential arrangements granted to Canadian businesses by the United States: these include exemption from import quotas on exports of crude petroleum. The partial free-trade agreement in automobiles and automobile parts, which waived the provisions of GAIT, the exemption of Canada from the Interest -Equalization Tax, and the exemption of Canada – until very recently – from U.S. directives to international corporations concerning desirable levels of overseas direct investment.

Here it is important to understand that these preferences and concessions made to hinterland countries are the outcome of the interplay of power between American domestic interests. Farm products, in which Canadian interests predominate, obtain few concessions and have largely been shut out of the American market. American farmers are able to exercise considerable political leverage and the American consumer has little power. Canadian lead-zinc exports are subject to highly restrictive quotas in the American market because American metal producers in the Mountain States exercise power in the U.S. Senate to protect their regional interests. The relative absence of American capital in lead-zinc mining in Canada is both a cause and an effect of this configuration of power.

In contrast, pressure from inefficient American iron ore producers for protection has been ineffective. Canada’s huge Labrador iron ore deposits have been developed by capital and enterprise mobilized by the American steel industry, which required a large, safe, and cheap supply of iron ore. These same American steel interests, together with New York State electricity consumers, finally induced the U.S. Congress to approve participation in the St. Lawrence Seaway, a god quarter century after the proposal was made by the Canadian government.

Canada’s protests against American oil import quotas had Jess to do with the granting of exemption to Canadian crudes than the energy needs of the influential Pacific States. The participation of the major American automobile companies as formal signatories to the agreement between the governments of Canada and the United States, setting out the conditions of free trade agreements in the automobile industry. is perhaps the most dramatic instance of the fact that trade negotiations between the two countries were in effect negotiations between representatives of the two governments on the one side, and representatives of three gigantic international corporations on the other.

The situation is well summarized by Professor Hugh C. J. Aitken, who has provided the most carefully documented and penetrating accounts of the relationship of Canada’s resource industries to the United States:

“Experience has underlined a principle that could have been stated a priori. If Canada wants the United States to do something, she must be able to prove it is in the interests of the United States to do it… the only exceptions are cases where it has been possible for Canada to associate her interests with the interests of particular groups in the United States, who, for their own purposes, are prepared to support policies which Canada. also supports.”

Professor Aitken also points out that the security considerations in United States trade policy encourages purely bilateral arrangements between Canada and the United States:

The conclusion is then drawn:

“If Canada seriously wishes to retard the process of continental integration, she could refuse to accept such discriminatory treatment when it is offered. It is indeed, by Canada’s reaction to such bilateral proposals that outside observers will be inclined to gauge what weight Canadians do in fact attach to their autonomy and what sacrifices of economic advantage they are prepared to make to achieve it.”

There is of course a price to be paid for these special relationships. Thus, Canada is prevented from exporting crude oil to Japan, Canadian subsidiaries are prohibited by U.S. legislations from filing orders from countries blacklisted the government of the United States. For these reasons Ford of Canada was not allowed to supply trucks to China, for flour milling companies were not permitted to fill orders from Cuba, a number of Canadian drug companies were debarred from selling medical supplies to the society of friends for use in South and North Vietnam, and the potash industry of Saskatchewan, which is entirely controlled by American subsidiaries, was not able to fill attractive orders from China. While it might appear that business lost by the extraterritorial application of the U.S. Trading with the Enemy Act is small compared with the advantages gained by free access to the American market, this is a view which neglects the possibility of radical shifts in the pattern of Canada’s trade. It is no accident that the multi-million trade deals with the Soviet Union the China came in the form of wheat sales, where Canada is in a position of total commercial independence.