BUSINESS

Champagne diplomacy

Ontario courts French businessmen in Paris

JOHN DALY April 17 1989
BUSINESS

Champagne diplomacy

Ontario courts French businessmen in Paris

JOHN DALY April 17 1989

Champagne diplomacy

BUSINESS

Ontario courts French businessmen in Paris

It was a gala black-tie—or in the case of Ontario Premier David Peterson, red-bowtie—affair. Peterson and his wife, Shelley—dressed in a custom-made, black-velvet, off-the-shoulder gown—hosted 250 guests last week in a studio in Paris’s new opera house, which Toronto architect Carlos Ott designed. The glittering reception concluded an official four-day visit to France by Peterson and a delegation of 40 high-level Canadian business executives that was designed to forge new links between Ontario and French firms in anticipation of the creation of a single European market in 1992. After the guests listened to Ontario artists, such as guitarist Liona Boyd, watched Christopher House dance and participated in the Paris opera’s first foot-stomping, spoon-clacking sing-along with Franco-Ontarian singer Donald Poliquin, they descended to an elegant dinner at a restaurant downstairs. Said Peterson: “We put them [the businessmen] together in a room, pour the champagne, turn the lights and music down low and get out. And we just hope something happens.”

Peterson said that his role during last week’s tour was to “be like a marriage broker,” bringing European and Canadian businessmen together. And he planned to continue that role in Toronto this week when the Ontario and federal governments stage a conference to discuss the merging European market. The scheduled elimination in 1992 of all trade barriers between the 12 countries that make up the European Community (EC)—including France, Britain and West Germany—will create the world’s largest free trade area, with more than 320 million people. Canadian trade officials say that unification offers Canadian companies a unique chance to diversify their export markets and lessen Canada’s almost total dependence on trade with the United States—a market of 230 million that Canada has joined through the Free Trade Agreement (FTA). But, at the same time, many Canadian businessmen and trade officials have expressed concern that the Europeans could use new regulations and product standards to bar foreign-made products, creating a so-called, and much-feared, Fortress Europe.

Even though Western Europe has traditionally been Canada’s second-largest trading partner, only about $11 billion of Canada’s $137 billion in exports in 1988 were shipped to the EC countries, as compared with the $102 billion shipped to the United States. Most of Canada’s exports are raw materials and natural resources, including lumber, pulp, wheat, fish and newsprint. Those trade patterns have not changed significantly over the past decade and likely will not change in the near future. In Ontario’s case, Gerald Doucet, the province’s agent general in Paris, said that even if it were to quadruple its exports to France, Italy, Spain, Belgium, Luxembourg and the Netherlands this year, 90 per cent of its foreign shipments would still flow to the United States.

Both federal and Ontario trade officials say that heavy dependence on the U.S. market is potentially dangerous. Declared Armand Blum, director general of the EC bureau in the department of external affairs: “All you need is a recession in your major trading partner and you’ve had it. All your eggs are in one basket.” In Paris last week, Peterson said that it is vital that Ontario diversify away from its trading dependence on the United States and increase the meagre 4.5-per-cent share of its exports that currently goes to Europe.

But expansion might be even more difficult to achieve after 1992 than under the oftenconflicting trade laws that now prevail within the EC. Under the current blueprint, the EC countries are scheduled to establish universal health and safety standards and government procurement policies by 1992. But critics are divided over its impact. Potentially, the rationalization of standards could make things much easier for Canadian companies. In a particular case, by gaining approval to market a drug in one EC country, a Canadian pharmaceutical company would be allowed to market it in all 12. But some officials say the EC could also adopt new regulations that would be more restrictive. The Europeans may impose high local-content requirements, meaning that a product must be made by European labor and with European parts.

Many Canadian government officials have expressed pessimism about the future of Canadian-EC trade. Speaking to businessmen in London in February, International Trade Minister John Crosbie said that “even the threat of new trade barriers could have a chilling effect on international trade” between Canada and the Europeans. And there are indications that new walls are already being erected. Donald Macdonald, Canada’s high commissioner in London, told a meeting of the Mid-Atlantic Club in London that recent proposals to place new restrictions on the operations of Canadian life insurance companies in the United Kingdom could hamper their business in Europe.

But Jacques Lecomte, the EC’s ambassador to Canada, said that claims that new barriers will be erected are “absolutely wrong. It’s totally the opposite of what we want to do.” The Belgian-born economist said that kind of action would defeat the goal of the plan, which is to liberalize trade, including that with nonEuropean countries.

Still, Lecomte conceded that it is still unclear what sort of product standards will be set and how they will be applied to non-European products. And he added that Canadian companies will find themselves competing against European firms that are already expanding and forming alliances in anticipation of 1992. Said Lecomte: “There will be tougher competition for everybody.”

Several of the international firms represented on the Peterson tour already have a strong presence in Europe. Mississauga, Ont.-based Northern Telecom Ltd. has been manufacturing or selling office telecommunications equipment in Europe for almost two decades. It currently operates a manufacturing plant in Ireland and a research laboratory in England, and last week Peterson and the Canadian executives toured Northern Telecom’s newest plant—in Verdun, just east of Paris.

But for smaller firms, which still have no operations in Europe, the meetings with French businessmen were more critical. Cooksville, Ont.-based defence contractor Indal Technologies Inc. has been trying unsuccessfully to penetrate markets in France and Britain, where it wants to sell military equipment for aircraft and boats. It recently shifted strategies away from the transfer of technology to manufacturing in Europe. Indal vicepresident Roger Travis said that the Peterson tour would help open new markets.

To that end, Ontario Consumer and Commercial Relations Minister Monte Kwinter accompanied Indal executives to a meeting with executives of Thomson-CSF, a major French electronics conglomerate. Said Travis: “The minister-level support gives us much greater credibility. That is very useful for moving to the next stage.” Added David Lowe, a special assistant to the vice-president of Torontobased Spar Aerospace Ltd., which is also seeking European joint-venture partners: “We had an opportunity to talk to ministers and senior officials and business people who were not necessarily impossible to talk to on our own, but it would have been much more difficult.”

Other participants said that they went mainly to support Peterson’s 1992 initiative. Frank Stronach, chairman of the giant Markham, Ont.-based auto parts manufacturer Magna International Inc., which already operates two plants in Germany and one in Austria, said that if smaller Canadian firms are to break into the European market, they will need help. For his part, Marshall (Mickey) Cohen, president of The Molson Cos. Ltd., which indirectly owns a chemical plant in France, said that he was also along mainly as a gesture of support for Peterson. But both Stronach and Cohen said the trip provided valuable contacts that could lead to increased trade in the future. And Cohen said that the visit served to change perceptions in France about Canada. Said Cohen: “They went to Canada and stopped at Montreal. Now I see a lot of people thinking harder about Ontario.”

While businessmen solidified their contacts with French officials and executives, Peterson attempted to demonstrate his facility in French during speeches and in meetings with President François Mitterrand and Prime Minister Michel Rocard. He delivered his entire address to the France-Canada Chamber of Commerce in French. And he said privately that in his meetings with Rocard, the conversation had been about 75 per cent in French. Peterson said that he learned some of his French as a university student when he took a summer course in French at the University of Caen in Normandy. He added that he might have learned more French if he had not “fallen in love with calvados”—the famous brandy.

As well, while Peterson was helping Ontariobased firms in their attempt to break into the European market, he also addressed French executives, encouraging them to invest in the province. And he told them that they could benefit from the FTA, although he had strongly opposed it in the past. Declared Peterson: “There is access to the whole North American market, and there are considerable social advantages. Ontario is more than Niagara Falls.” And although Ontario officials noted that France sold twice as many goods to Ontario as it did to Quebec in 1988, Peterson said that his high-profile tour was not an attempt to compete with Quebec. Still, whether music, lights and champagne will open the door to Europe even wider for Ontario remains to be seen.

JOHN DALY with BRIGID JANSSEN in Paris

JOHN DALY

BRIGID JANSSEN