Cover Story

And now for their next trick

Ian Urquhart November 27 1978
Cover Story

And now for their next trick

Ian Urquhart November 27 1978

And now for their next trick

If the business of America is business (Calvin Coolidge), it has come to be the business of Canada in these perplex-

ing times to goad and guide—and some would say bribe—Canadian businessmen to come to the rescue of the nation’s economy.

No one last week expected Jean Chrétien’s budget to provide all or even most of the answers to our economic problems. An increasing number of critics

inside and outside Ottawa say that it is the country’s manufacturing industries, once considered the bulwark of the economy, that are really in trouble; that with rare exceptions they are neither efficient nor innovative enough to compete in the modern world. So next week Prime Minister Pierre Trudeau and the 10 provincial premiers will meet in Ottawa in one more effort to forge a comprehensive industrial strategy for Can-

ada, rather than the sort of stopgap efforts that have failed in the past.

Liberal MP Martin O’Connell says, “Something bigger and more serious is happening to manufacturing than can be cured by the finance department’s fine-tuning of fiscal, monetary and expenditure policies, which only stabilize traditional ups and downs.” The manufacturing industries, their critics reason, are overly fragmented and dominated by foreign owners. Thus, budget measures such as tax incentives for research and development are little help because the companies are either too small to take advantage of them or are foreign-owned, in which case much of the research is done by the parent firm elsewhere. Only fundamental structural change will save the manufacturing sector, the argument runs.

The federal government has belatedly arrived at the same point of view and, gradually, is doing something about it. In the past five years, it has established the Foreign Investment Review Agency to screen non-Canadian investors; encouraged the merger of the appliance arms of GSW and Canadian General Electric to form one big firm, the Canadian Appliance Manufacturing Company; and wrested two aerospace firms, Canadair and de Havilland, from their foreign owners, under whom they were stagnating. But these and other ad hoc policies do not add up to an all-encompassing industrial strategy. The federal government tried to develop a more comprehensive approach at a conference last February with the provinces but failed. Next week, they will try again.

The February conference was unsuccessful because the federal government never made clear what it wanted accomplished and the provinces insisted on stressing parochial and short-term objectives. Thus, instead of discussing foreign ownership and rationalization of industry, Trudeau and the premiers dwelt on budgetary measures and make-work projects. It will be remembered most as the conference that put Gull Island, Labrador, the proposed site of a massive new hydro project, on the map, so frequently was it mentioned.

In passing, however, Trudeau and the premiers did agree to a series of studies by teams of business and labor spokesmen on manufacturing and its problems. The studies—23 in all—will provide a basis for discussion at next week’s conference, although it is doubtful if any of the participants have actually read through the entire package or considered each of the 860-odd recommendations.

Also on the conference agenda will be recommendations from meetings held earlier this month by federal and provincial ministers of industry, science,

zand tourism (considered an adjunct of manufacturing by industrial strategists). But the output of those meetings was disappointing as the ministers did a better job defining the problems than providing the answers. The industry ministers, for example, issued a 10-page communiqué after their day-long meeting, but it contained few concrete solutions and even federal minister Jack Horner admitted it was “full of verbiage.” The science ministers agreed “every effort” should be made to promote research and development by Canadian firms, but got little further than the bromide of tax incentives in their list of recommendations. An important and controversial report on the subject by the Science Council of Canada, recommending increased government intervention and tighter control of foreign ownership as means of promoting R and D, was not even on the agenda at the science ministers’ meeting. But the tourism ministers took the prize for inaction by devoting almost all of their meeting and subsequent communiqué to a denunciation of Transport Minister Otto Lang, everybody’s favorite whipping boy, for not appearing before them. (He claimed a previous engagement at the annual meeting of the Man-

itoba Pool Elevators in Winnipeg.)

It has been left up to Trudeau and the premiers to sort through this barrage of non-answers—and, in the case of the business-labor studies, self-serving advice—and to attempt to draft a comprehensive strategy. Perhaps the presence of the television cameras will force them to do something, if only to avoid being criticized for doing nothing. But in Ottawa there are fears that the cameras will have the opposite effect by preventing the premiers, especially those facing elections in the near future, from making compromises and by encouraging them to bash the federal government for alleged wrongs in the past. Thus, it is feared, the conference will spend more time discussing federal cuts in equalization grants and un-

employment insurance than industrial strategy.

It may be asking too much of Trudeau and the premiers to come up with a cohesive plan to save the manufacturing sector. The country is so diverse, with central Canada pitted against the Atlantic provinces and the West, manufacturers against primary industries, business against labor, and business and labor together against the consumer, that ad hoc, stopgap measures might be the only solution. But the timing of these measures is out of Canada’s control. For, while Trudeau and the premiers are meeting next week, another, more important meeting will be taking place 4,000 miles away in Geneva, where the industrialized nations are rewriting the General Agreement on Tariffs and Trade (GATT), the rule book for international commerce. After more than five years of debate, a new GATT, bringing with it a lowering of tariffs and liberalization of trade, is in sight. Like it or not, Canada will then have to rationalize some manufacturing industries and get out of some others entirely in the face of new international competition. At best, Trudeau and the premiers will succeed in making the transition as swift and painless as possible.

Ian Urquhart