Friday, December 19, 2014

Our Lives: Economic In/Dependence from the United States (10)

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Through the 1960s and 1970s, Canadians began to assert their independence from America politically, economically, and culturally. The degree of foreign control through the 1950s was much too high for comfort. Among other things, nationalists argued that it had resulted in the 'deindustrialization' of Canada. But different arguments had varying degrees of purchase in different parts of the country. Nova Scotia and Saskatchewan had very little industry of which to speak. Alberta's economy was much more dependent on resources extraction. And in Quebec, the question of nationalism concerned the distinctiveness of Francophone culture and the preservation of the French language within Canada, not in distinction from the United States.

It was recognized by Prime Minister William Lyon Mackenzie King, in conversation with the American Secretary of State in 1935, that the role of Canada in the continental system was largely to supply raw materials for American manufacturers. For their part, the Americans saw a certain amount of attraction in maintaining industrial capacity in Canada. The Canadian government was perceived to be less interventionist, and Canadian unions less confrontational, than their American counterparts. A Canadian plant could potentially pick up slack in production during periods of unrest in the United States. By 1970, American interests controlled approximately 58% of manufacturing assets and 35% of all non-financial industries.

Supporters of greater Continental integration pointed out Canada's widely dispersed and comparatively small population, which made it impractical not to pursue close relations with its southern neighbour. These were usually free traders and free enterprisers, for whom state ownership and excessive regulation were problematic.They could point to the fact that American capital, expertise, and technology had also helped the Canadian economy diversify. Opponents of greater integration argued that Canada now possessed a sufficient capital base, far more money was leaving the country than was entering, and most foreign investment was actually the retained earning of American companies already in Canada. They saw the sale of Crown Corporations after WWII as the product of ideological opposition to state ownership, rather than an actual reflection on their actual performance.

The specifics of these economic debates were of little interest to the population at large. Persons who sided with the nationalists were likely to have the impression that Canada was much too subservient to the United States. They thought that this depressed the country's economic potential. Persons who sided with the Continentalists held that breaking ties with the United States would disrupt economic growth. The crux of the ideological issue was the degree to what political and economic power were believed to be intertwined.

The economic reality of the situation was that the United States granted Canada 'special regard' in its rules concerns foreign trade. Prime Minister Lester Pearson argued that what appeared as Canadian dependence was actually the result of Canada's status as a preferred trading partner. It was the only way Canadian industry and research could compete in an competitive American market. However, the 'special regard' cut both ways. In order to retain preferred treatment, the Canadian government had to stifle criticisms it might have of American actions in Vietnam.

In the late 1960s, Pearson struck a committee examining the pros and cons of foreign ownership of corporations in Canada. The committee's report suggested that an agency be established to promote the development of Canadian-controlled corporations and supervise the operation of multi-national corporations in Canada. Prime Minister Pierre Trudeau established the Canada Development Corporation in 1971. It was given a modest budget to establish Canadian firms to finance buying out American firms. American control of Canadian assets declined by 25% between 1970 and 1980.


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