bout de papier, Vol. 5, No. 2 (1987) — Summer 1987 // Été 1987, pp. 32–33
At one of PAFSO’s breakfast seminars in March, the Under-Secretary spoke on the potential vulnerability of Canada’s economic and social interests in a changing world.
Mr. Taylor began by saying that it was a truism that Canada’s interests were related to its geography, history, and demography. But he wanted to suggest that these interests had combined to create a unique mix, placing Canada not in the middle, but at the extreme end of almost any international spectrum.
Canadians tended to think of themselves as moderate, middle of the road, agents of compromise and so on.
In fact Canada was untypical in almost all respects:
• democratic in a world where democracies were a minority;
• wealthy, where extreme poverty was usually the rule;
• a small population in a geographically large country;
• ethnically varied, the result of massive immigration over the past century;
• secure, both in terms of our geographic isolation and our historical innocence of war, invasion, occupation, and liberation (despite the traumatic but fading memory of participation in two world wars);
• economically narrow-based, with a considerable dependence on resource industries and a concomitant reliance on trade to obtain manufactured goods. Mr. Taylor said that these characteristics had served us well in the development of a dynamic economy and socially just society, whose economic and social policies were enlightened by any standards. His question was whether these policies and national attributes were well-suited to a world which had grown tougher in many respects. Changes in the international economy and the spread of international violence had begun to show new ways in which we may be vulnerable as a nation. The fall of oil and agricultural prices, or the Air India tragedy, were examples.
Three events in the 1970’s revealed in time the extent to which assumptions fostered by experience in the 1950’s and 1960’s about stable and steady growth in the Canadian economy were mistaken. The first was the abandonment in the early 1970’s of the fixed exchange rate regime for a floating exchange rate system. This resulted in problems not fully anticipated at the time.
For a country whose trade represented about 30% of its GDP, any fluctuation in Canada’s currency had a proportionally higher impact on its balance of payments and on domestic prices.
The second event was the international “oil shock”. “ The rapid increase in oil and gas prices had mixed consequences for Canada. While it fueled inflation, contributed to the 1981-82 recession, and dramatically increased third-world debt, the oil shock also opened up prospects for the development of previously depressed regions in Canada. Off-shore and arctic drilling, made possible by the new oil prices, created economic opportunities in the North and on the East Coast. In 1969 the American tanker “Manhattan” undertook its arctic voyage in demonstration of a more than symbolic opening-up of the North. Eighteen years later, with the collapse of oil prices, every company but one active in the Beaufort had closed down its off-shore drilling operations.
The third event which brought home the real extent of the vulnerability of Canada’s economic well-being had been maturing over two decades. This was the erosion of commodity prices, including the prices of agricultural products.
Mr. Taylor noted that Canada was once assured of prosperity because of its privileged position as a world supplier of much sought-after raw materials. Today there is a global over-supply of many raw materials, and agricultural products, because of reduced demand in the industrialized countries, new production in developing countries, and the advent of new technologies. Our traditional comparative advantage in natural resources no longer ensured our prosperity.
This change in the international context was not being off-set by a shift of emphasis towards the production of manufactured products. For most of the last 15 years, Canada had a negative trade balance in manufactured products.
The recent European Management Forum’s World Competitiveness Report ranked Canada as sixth overall in the OECD. Although the report reflected the views of European businessmen, these views were crucial to future investment in Canada. The sixth ranking seemed to suggest that things were not all that bad. In fact the only reason Canada did not rate lower was because of its traditional strength in natural resources. When it came to technological development and intrastructure, the main factors now attracting international investment, Canada compared very poorly with other OECD countries. For example, in employee productivity trends, Canada ranked 19th, reflecting, in the Forum’s view, the relative lack of emphasis Canada placed on research and development. In the technological quality of products, Canada ranked 13th. In the redeployment of resources from declining to high growth sectors, Canada ranked 11th (behind such countries as Italy, Finland, and New Zealand).
Canadian firms were ranked 10th or lower on innovation in technique, services, and management. Nor did our firms do well in adopting foreign technology (17th), which was crucial in maintaining international competitiveness. All of this showed, said Mr. Taylor, that Canada’s technological development and knowledge-base were perceived as lagging far behind its major OECD competitors. Since these elements were now key to attracting foreign investment, the future growth of Canadian manufactures was increasingly compromised. We remained as dependent as ever on our resource base for maintaining, so far, our high standard of living.
Turning to Canada’s vulnerability in the social dimension, Mr. Taylor began by noting that Canada is a democracy and a market economy built on immigration and easy access to citizenship, and a long tradition of offering refuge. Many Canadians, from the American Loyalists to the Vietnamese boat-people, had benefitted. The result was a multicultural society which placed a value on preserving ethnic origins, and on the unrestricted movement of people. Our respect for law, perhaps a reaction against lawless repression in other countries, relied on a minimum of coercion and a low-level of policing.
These were enormous elements of strength in any society, which no sensible person would under-value. Nonetheless, they brought special problems when dealing with the outside world. Mr. Taylor noted a few examples:
• Canada traditionally welcomed genuine refugees. Yet the recent and growing abuse of this welcome by non-refugees had caused both a sharp reconsideration of our policies, and overwhelmed our refugee determination system;
• Canadian multiculturalism encouraged a pride in maintaining connections with our homelands. But we were shocked at the importation of other peoples’ quarrels;
• Canada was a strong supporter of human rights and development assistance. But these were conflicting considerations when applied, for instance, to questions of aid to Nicaragua, or international development loans to Chile;
• Canada’s strong stand against apartheid in South Africa led us to implement economic and other sanctions against that country, in line with Commonwealth positions. The fact was that this decision, based on human rights considerations, was very difficult for us to implement. The bias of our institutions, for the best of reasons, ran in the opposite direction, toward greater freedom of exchange rather than less. Our traditions were ill-adapted to the imposition of sanctions, and yet we felt compelled to follow this route for want of a better alternative. All of these examples in different ways raised questions of vulnerability, and presented difficulties in adjusting Canada’s social attitudes and institutions in a changing international context. The same argument, Mr. Taylor suggested, could be made about the institutions governing Canada’s security interests.
Mr. Taylor said that he had tried to show at the beginning how Canada’s make-up was the result of a degree of historical and geographic accident, and how Canada’s unique interests flowed from this. His point was that these interests placed Canada at the extreme end of almost any spectrum of countries, among the most secure, the wealthiest and so on. It was often these laudable qualities that placed us at the greatest distance from the normal experiences of other nations.
But our historical traditions also offered us the means to work with nations very different from ourselves. The break-up of the British and French empires suddenly created the basis of a whole new set of bilateral relations in Africa and Asia. To some extent, the pattern of our assistance to former colonies was set with our assistance to India early on, and this pattern has been repeated as each new colony achieved independence. These relations were strengthened within the new multilateral organizations of the Commonwealth and Francophonie.
Mr. Taylor concluded by saying that such new connections offered ways to mitigate our seeming vulnerability as a nation, by helping to construct a more stable world order.
As Mr. Clark said when tabling the Government’s response to the Hockin Report, “we must find room for realism, perspective, and humility…Internationalism calls for a great deal of understanding and perseverance”
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Originally published in bout de papier, Vol. 5, No. 2 (1987) — Summer 1987 // Été 1987, pp. 32–33. Read the rest of this issue →
