Canada

The gloomy view from Capitol Hill

Michael Posner October 13 1980
Canada

The gloomy view from Capitol Hill

Michael Posner October 13 1980

The gloomy view from Capitol Hill

Canada

Contemporary Americans often feel that Canadians enter negotiations with a chip on their shoulders.... Canadians complain that the U.S. is more demanding of Canada than it is of Europe or Japan. That plaintive wail is not very

attractive____Canada must decide what

it wants—and soon.... Canada must get its act together.

Those acid-tipped remarks come from the ranks of those rare Americans—some in government, some in business—who know the nation to the north as more than the home of Guy Lafleur. Their skills and experience have been developed at bargaining tables around the world, and their understanding is tinged these days by a peculiar sadness. Beyond the easy rhetoric of regret that recent Canada-U.S. rela tions have not been better managed, lies knowledge of a distinctly bleaker sortthat Canada's economic health is more

fragile than Canadians are prepared to admit.

The specifics are almost painful. Consider the auto industry, brontosaurus dying in its own exhaust. Before this decade is out, many American analysts believe, the Ford operation will be marginal and Chrysler will belong to the history texts. Their satellite campuses in Windsor and Oakville will be quaint museums. GM—the only American manufacturer positioned to survive— will flee to Mexico, where labor is

cheaper and far less fractious.

Or consider steel. Under one president or another, the United States is soon going to become serious about reindustrialization—that polysyllabic euphemism for modernizing the nation’s ancient plant and equipment. To regain a competitive edge, elaborate protective barriers will have to be erected. How will this impact on Canadian steel?

This is ominous handwriting. What puzzles knowledgeable Americans is why Canada has failed to read it. “You can’t plan for the ’80s by studying the past,” says Harald Malmgren, a Washington-based consultant and former deputy of the U.S. special trade representative’s office. “There’s no thinking being done up there on industrial policy, on how to restructure the economy for the ’80s.”

Malmgren’s message is brutally simple: the rules of international trade are changing swiftly and competition is growing more intense. Unless Canada can plot and implement a realistic strategy, it runs a serious risk of being left behind. The word Malmgren—and others—used is “doomed.”

American officials are mystified, therefore, by what they perceive as a mood of Canadian “chippiness” or “truculence” in bilateral discussions. When Canada’s critical need is for new capital formation to exploit the vast potential of its mineral and energy resources, the drum roll out of Ottawa is beating defiantly about tougher guidelines for foreign investment, apparently designed to discourage the most ardent suitor.

“Canada’s obsession to be seen to have equalled or bested the Americans,” as one learned student of the game put it, does nothing to improve the diplomatic climate.

The urgent question, U.S. observers say, is not how many scallops Nova Scotia fishermen should be allowed to draw from American waters. Rather, it is how Canada can reduce its dependence on America’s economic health and broaden its export markets. Americans see successive Canadian governments wasting precious opportunities. The sorry record of the nation’s labor relations has apparently discouraged Japanese investment. And the diplomatic daring of Canada’s overture to China has never yielded significant trade dividends (“The Chinese were surprised you never played that chip,” says Malmgren). Symptomatically, even Canadian entrepreneurs are risking their dollars elsewhere.

It is early to prepare for the funeral. As the world’s economy emerges from the present trough, international investors—not only Americans, but Germans, Belgians, Dutch, the very diversity Canada needs—will be looking to exploit Canadian resources. The groundwork for such investments must be constructed soon, U.S. officials say, or Canada will have squandered another opportunity. And that, they sincerely believe, would be a national tragedy. Michael Posner