CANADA

Welcome mat policies
throw sovereignty away

Prime Minister Mulroney dusted off his old
campaign speech and trotted it out for 2,000 of
the who’s who in American business. In his
Dec. 10 address to the Economic Club of New
York, Mulroney told an enthusiastic crowd that
‘Canada was again open for business.”

The business and financial tycoons had-
reason to cheer, Mulroney put a For Sale sign on
Parliament Hill and started the bidding at zero.

Without ever mentioning his predecessor, the
prime minister made several veiled attacks on
the former Liberal government’s Canadianiza-

tion. policies. He announced that the federal -

Investment Review Agency, which screened:
foreign takeovers of Canadian business was to
be’ scrapped and replaced by ‘Investment
Canada’’. The Conservative program will facili-
tate and promote foreign, particularly U-S. in-
vestors.

In his speech Mulroney pledged his govern-
ment will boost its defence role, promote freer
trade with the U.S., lower the deficit, eliminate“
the National Energy Program and move to-
wards world oil prices for oil.

He also announced that U.S. president Rea-
gan will be visiting Canada in March as a sign
that relations between the two countries had
c :
Mulroney’s U.S. trip was his second since

taking office in September. In fact so many key
Canadian officials have been making the pil-
grimage to Washington — External Affairs
_ Minister Joe Clark, Finance Minister Michael
Wilson and Defence Minister Robert Coates —
that some observers have suggested amalgamat-
ing the two national capitals in Windsor-Detroit
to save on travel costs.
While the prime minister’s statements were
universally welcome by business on both sides
of the border, critics have pointed out that eco-
nomic integration with the U.S. has hindered
rather than assisted Canada’s financial fortunes.

Canada already has more foreign ownership
per capita than any other industrialized nation
in the world, particularly in the resource and
manufacturing sectors. Rather than creating
employment, foreign investors have exacer-
bated the jobless rate by shutting down their
subsidiaries in search of low wage areas in the
developing world.

According to B.C. economist Emile Bjarna-
son ‘foreign investment serves primarily to sé-
cure a market. Because of the ability of inter-
national capital to move around, it can then
transfer its operations anywhere and still retain
that market,’’ because it has forced out compe-*
tition. ‘

Coupled with greater foreign investment, the
Conservatives have promised to examine set-
ting up free economic trade zones. Canada and
Australia are the only two developed capitalist
countries who don’t have them to date.

The U.S. has 100 such zones, where
minimum wage, safety standards and other
labor protective legislation do not apply. These
zones serve to establish industries which are
essentially uneconomical and would not be able
to survive without the abandonment of current

- labor standards. a

Free trade zones would also have an adverse

effect on the number of jobs available in Canada -

because they remove many of the incentives for _

foreign companies to establish subsidiaries.
Bowing to protective tariff legislation in the

_ past, foreign investors have built branch plants
in Canada as part of the price for access to the
Canadian market. Removing protective barriers
would allow these companies to merely ship in
parts and supplies from their operations outside
of Canada.

Bjarnason, who is director for the Trade
Union Research Bureau in Vancouver, says the

“most important implication of Mulroney's.
investment invitation will be to destroy the cur-
rently favorable foreign trade balance between
the U.S. and Canada. —

**1983 was the first year in the entire post-war
period in which our foreign trade balance was
sufficient to cover our interest and dividend
payments to the U.S.,’’ Bjarnason stated.

News
Analysis

Kerry McCuaig

The end result of American investment in the
past has been to create liabilities of interest and
dividends and other transfer of payments be-
tween Canadian subsidiaries and U.S. head of-
fices. This is one of the reasons why Canada had
to keep its interest rates higher than the-U.S. to
prevent a further outflow of capital. But its
favorable trade balance has taken Canada out of
the spiralling interest rates situation.

In fact comparing our economic state with
that of the-U.S., Canada fares much better with
a $20-billion foreign trade surplus. The U.S. has
a $140-billion foreign trade deficit and must find
vast amounts of foreign capital to pay for their
imports. ;

“‘We’re in the opposite position and now Mul-
roney is about to chuck all this away,”’ charged
Bjarnason. —

The scuttling of FIRA is an indication of how
far the Mulroney government is prepared to go

* to emulate Reagan’s economic policies in Cana-

da. FIRA was but a minor brake on foreign
investment, and rightly deserved its oft-de-
scription of a paper tiger. Of the 23 takeovers it
reviewed in 1983, it approved 22.

However in the new ‘“‘Investment Canada’”’
bill, introduced in the Commons Dec. 7, by Re-
gional Industrial Expansion Minister Sinclair
Stevens, foreign bids must now show they will
have a ‘‘net’’ benefit for Canada, rather than the
‘substantial benefits’’ called for in the legis-
lation which established FIRA in 1976.

Moves to scrap the National Energy Program .

is another example of Conservative intention to
move away from any protection of Canadian
economic sovereignty. Ironically it was opposi-
tion leader John Turner, whose Liberal party

~ established the NEP, who provided the Conser-
_ vatives with an excuse to get rid of it.

Turner called for a committee probe in

Petro-Canada’s 1981 takeover of Petrofina .

Canada, a European-based oil conglomerate,
claiming it had avoided paying $200-million in
taxes because of the deal.
~ The $1.6-billion purchase of Petrofina was a
major part of the NEP’s goal to regain greater
control over oil resources.

The Conservatives have attempted to placate
labor opposition to its moves by the promise of
increased investment bringing more jobs. The

‘U.S. economic ‘‘miracle’’ is frequently evoked

as an example to parrot.
It is true that in the first six months of the year

(which coincided. with the U.S. presidential ©

election campaign) the U.S. economy expanded
very rapidly. But according to Bjarnason this

wasn’t because of Reagan’s monetarist policies ©

but because ‘‘he was following the old fashioned
Keynesian policy of deficit spending.”

“It’s hard not to generate an increase in
production if you’re prepared to resort to $200-
billion deficit spending a year, as Reagan has
done.”

Interestingly where Canada’s $26-billion de-
ficit was turned into an untamed monster in the
Canadian federal campaign, Democratic presi-
dential candidate Walter Mondale was unable to
get any mileage out of the U.S. mounting debt.

This was due to the different nature of U.S.

‘and Canadian federal spending. Where Cana-

da’s debt was garnered mainly by preserving
social programs during an economic downturn,

the U.S. debt was raised through massive give- ”

aways to corporations, particularly the arms

manufacturers. U.S. big business.was hardly —

prepared to bite the hand which fed-them.
But the economic balloon is about to burst,
and with that will come a new round of sky-
rocketing interest rates which will choke any
elusive recovery on either side of the border.
With Canada’s new-found closer ties to the

U.S., it will be even more difficult in future to

drag ourselves out of the mire.

The latest chapter in the hor-
ror/comedy saga of the CF-18
fighter plane appeared this week
in Auditor General Kenneth
Dye’s annual report to Parlia-
ment.

The report reveals that the
American ‘‘disease’’ of military
-waste, fraud and scandal is also
running amok in Canadian de-
fence procurement.

The CF-18 was one of the most
expensive aircraft in the world in
1978, when it was costed at $18-
million per copy. According to
the Auditor General, the price ofa
single CF-18 has now sky-
rocketed to around $62 million
(almost equal to the entire
financial cutback recently im-
posed on the CBC).

Among the overruns: a simple
wire aerial for the aircraft, priced
in 1978 at $9, is now over $2,000;
an electronic resistor, budgeted at
$1.19 is now $299.19, an increase
of over 25,000 per cent.

One waggish commentator has
noted that ‘‘the costs for this
supersonic plane climb faster than
it does!”’

OTTAWA CALENDAR

_A chronological indicator of what the federal govern
ment is saying, doing and enacting. 4

No census in 1986 _

Word reaching Ottawa of a
report by Clayton Research
Associates in Toronto that the
federal government plans to

hurt small businesses like
building firms, who will be de-
nied recent facts on popula-
tion, dwelling types, mort-
gages and other housing data.
The decision to hoist the cen-

_ sus was announced in the Nov.
8 mini-budget.

_ Ears may have been burning
in External Affairs in Ottawa,

Nov. 19, for in far-off Toronto

the prime minister’s senior pol-

icy adviser Charles McMillan

_ said — on the issue of sectoral

- free trade — ‘‘I’m not im-

and priorities.’’ He said: ‘Our
_ friends in Japan are extremely
- dismayed at the implications of
sectoral free trade on them.”

in fact Ihave not understood —
what sectoral free trade would
mean to our other trading part-
ners.’’ He suggested it meant
“larger barriers’ against them.

Back in July then prime
minister John Turner made 17
appointment of Liberals to

F-18 costs take of

‘stralia, cancelled their ord $

eliminate the 1986 census will

pressed with External’s thrusts _

And: ‘“‘I have great difficulty — -

The CF-18 was ordered in
late 70’s when it was claimed
Canada’s military airpo
needed to be ‘‘modernized”’
number of aircraft competed
the original tender, including
cheap and effective Europea
“Jaguar’’ and ‘‘Mirage”’ type. ¢
were eliminated in favor o
U.S.-built McDonnell-Doug
F’18, which was still in the
search and development stage

As problems with the F-I
grew, and costs mounted, sev:
customers, such as Spain and

Even the U.S. Navy, the b
buyer, threatened several time
kill the project. Canada, howe
stayed with it.

Ironically, even though
price has escalated to a m
boggling $8.5-billion for the tou
138 aircraft, Canada’s af
forces are less well-equipped
ever. The CF-18 is reputedly
reliable and more accident-
than any of the planes it wil
replacing.

what are considered patronag
. The Tories stormed. *
want to see the basis on whic
these appointments wef
made;’’ said Brian Mulrone
now prime minister. “I w:
that document made public
(the constitutional legal o
ion on the appointments). B
now, in power, the Tories.
fuse the release of the doc’
ment. Maybe they just wante
the formula for patronz
appointments. :

Michael Cochrane, chaif-
man of the board of Canadi
Investors Management Co
of Toronto, and chairman
Sydney Steel Corp, of Sydne
N.S. is on the job looking f
private sector buyers for A
Canada, it has been acknow:
edged by the office of Tram
port Minister Donald Maza
kowski. For purposes of leve
age, Cochrane is working
the Air Canada Employ
Ownership Committee,
group claiming to’ represe
5,000 airline employees. wi
an interest in buying share:
Tory policy appears to be
remove vital services as far
possible from the influence
the Canadian people.

16 e PACIFIC TRIBUNE, DECEMBER 19, 1984

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