The ‘invisible trade deficit’

Statistics Canada announced a trade sur-
plus of $8.8 billion in 1988, marking a
steady downward decline in the balance of
trade since 1984 when the country enjoyed a
surplus of close to $20 billion.

Some may say call an $8.8 billion surplus
healthy, particularly when it is compared to
the trade deficit of our largest trading
partner, the U.S. which was $137.3 billion in
the red last year.

But there’s another side of the surplus
story — called the “invisible”’ deficit. Acc-
ording to a 1988 economic survey of Can-
ada by the Organization for Economic

Canadians and can be directly blamed on
increased corporate control over the econ-
omy, the integration of our economy with
the U.S., and federal government policy.
During 1988 the value of the Canadian
dollar rose from a low of around 70 cents
(U.S.) to a high of close to 85 cents. In part,
that reflected the support given to the free
trade agreement by the international finan-
cial community and pressure from the U.S.
government for an increased Canadian dol-
lar. The higher the value of the dollar, the
more competitive Canadian goods are in
international markets, particularly the U.S.

Dave Wallis

Co-operation and Development (OECD),
the net outflow of capital for patent fees,
management services, the repatriation of
profit and other transfers through transna-
tional corporations came to $14 billion
(U.S.)in 1984. By 1987 this had grown to
$17.2-billion.

If you subtract that figure from the trade
surplus, Canada really had an overall bal-
ance of payments surplus of only $2.1 bil-
lion in 1984. By 1987, the surplus had been
replaced by a net deficit of $8 billion U.S., or
$9.2 billion in Canadian dollars.

That deficit is a cause of concern for

NEWS ANALYSIS

Over the past five years, Canada’s relative .

share of the manufactured goods exported to
the U.S. did not keep pace with the rapid
pace of imports, which expanded at an
annual average rate of 15.7 per cent. In fact,
the Canadian comparable share of exports
in manufactured goods to all countries
dropped by close to 30 per cent relative to
countries like Japan, the Federal Republic
of Germany and the U.S.

It is doubtful that Canada’s trade surplus
will increase during the immediate period
ahead, despite promises circulating around
the Free Trade Agreement.

The Conference Board of Canada pre-

TORONTO — Free trade has just
kicked another 100 area workers onto
the street, according to United Steel-
workers District 6 director Leo Gerard.

Gerard was reacting March, 16 to the
announcement by U.S-owned Midas
that it would be shutting down its
muffler manufacturing operations in
Toronto where 100 workers are em-
ployed.

“Since the deal took effect on Jan. 1,”
said Gerard, “Steelworkers in Ontario
alone have heard announcements of
seven separate plant closures, all of them
linked directly or indirectly to free trade.

“As far as I can see, all the free trade
deal has done for Canada so far is give
the green light to U.S. multinationals to
give Canadian working people the boot
and close their doors in this country”’, he
said.

Midas says it will no longer be manu-
facturing mufflers in Canada, reducing
its Canadian operations to tailpipe
manufacturing, retail frarchises and
warehouse distribution facilities. It claims
its larger, technologically advanced plant
in Hartford, Conn. can produce mufflers
more efficiently and cheaply.

The decision comes less than three
months after the first step Jan. | of a
five-year phase out of the 9.2 per cent
Canadian tariff on after-market auto
parts, authorized by the free trade deal.

“The premier of Ontario and prime
minister of Canada promised substantial
improvements in adjustment programs.

south; people need help; and our
governments are just sitting on their
hands,” Gerard charged.

Layoff of 100 at Midas
connected to trade deal

Free trade is here; jobs are heading-

LEO GERARD ...

seven plant clo-
sures since trade deal signed.

6 Pacific Tribune, April 3, 1989

Printers
fight cut
as FTA

prompts

dicted slower economic growth for 1989. In
December last year, the Canadian Manu-
facturers Association, a free trade propo-
nent, anticipated in its annual report that
there would be fewer exports to the,U.S., in
part because of free trade.

The flood of mergers and takeovers will =|
serve to strengthen the position of the larg- |
est transnationals and act to limit the
expansion of Canadian industry into new
fields. With these mergers will come a trend
to move research to the transnational’s
home country.

The National Advisory Board on Science
and Technology, in its 1988 report, noted
that U.S. applicants filed for over six times =
as many patents in Canada as Canadian a ?
inventors. Canadians, with less than 2,000 i TORONTO Locked ‘out prin-
patent applications, also trail those from | ters ir supporters siete
Japan and the FRG. = Sears shoppe on se 1

We can already see many aspects of the i
effect of corporate restructuring, closer eco-
nomic integration with the U.S. economy,
and the effect of the transnationalization of
the world economy.

The torrent of plant closures continues.
Inglis has announced the closure of its prof-
itable Toronto washing machine plant in
1991, and is transferring production to a
plant owned by Whirlpool Corp in Clyde,
Ohio. Inglis is 71.5 per cent owned by
Whirlpool. Not only will 650 workers in
Toronto lose their jobs, along with another
110 in Cambridge, Ontario, but it makes
certain that no research and development
into creating a new generation of washing
machines will be undertaken by Inglis in
Canada.

The Canadian government continues to
rely largely on the “market,” which in every-
day language means the transnationals, for
research and development (R&D). This is
reflected in that Canada spends only 1.3 per
cent of gross domestic product on
R&D — about half the amount of other
developed capitalist countries.

This makes it difficult to compete in the
increasingly important fields of new mate-
rials, information technology and biotech-
nology, or even to keep up with new
developments in older technologies.

As new advances in technology become
increasingly costly to develop for commer-
cial use, the largest transnationals are often
the only corporations which can afford the
high price. Unless there is a sharp shift in
government policy, in the future Canada
will either be forced to import finished
goods or pay a high price for patents and/or
licenses to produce goods using imported
technology. Under such conditions Cana-
da’s “invisible” deficit will skyrocket.

The U.S. government has recently begun,
through the implementation of the conclu-
sions of a 1988 White Paper on Inter-
Company Pricing, to pressure U.S.-based
transnationals to charge their subsidiaries
more for using parent trademarks, trade
names and R&D. This will lower the profit-
ability of Canadian subsidiaries and reduce
the taxes they pay.

The above trend signals that Canada will
be left out of the increasingly competitive
world of exploration, discovery and devel-
opment of new ideas and technology.

It will bring an even greater loss of trade
in manufactured goods as our industry
becomes less efficient, compared to other
countries, and with it the loss of many of
our most able scientists and academics to
other lands where funding for research and
development is recognized as essential to
economic growth and to maintaining indus-
trial competitiveness.

An alternative would require a massive
increase in government funding for research
and development, including pure science.
This needs to be linked to an expanded role
for Canada’s universities (independent of
corporate diktat) in encouraging and train-
ing more scientists, engineers and researchers
in the new technologies of the future.

the “final” offer by 98, 98 percent.
The company letter also noted that :

mer, expired, and “‘S
ger a to commi TOs

| that rs U ls ees
LOL, PEGE, nd that in 1988

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ide a profit of 310 millior