What Canada needs from international trade policy

What Canada needs from international trade policy ROY MATTHEWS At the time of the Gordon Commission's exhaustive examination of our economy ten years ago, average Canadian living standards were estimated to be some 25 percent to 30 percent below those in the United States. Recent studies suggest that there has been no appreciable narrowing of this gap in the past decade. There is not much doubt that the CanadianAmerican living-standard differential represents one of the most serious problems of Canadian policy-makers. Because of the similarity between the United States and Canada in most respects, and the frequency with which Canadians come into contact with Americans (either directly or through the communications media), comparisons are readily made. There is a constant tendency , therefore, for people in this country to decide that they could do better in the States, and to make the (relatively easy) move south. In many cases, the evidence indicates, the Canadians who emigrate, often permanently, are the more enterprising, energetic and skilled members of society, so that the loss to Canada is far greater even than the numbers would suggest. But the problem of emigration itself is not the most important aspect of this question. More vital is the fact that Canadian governments, although they are not usually aware of it, are continuously limited in their freedom to make policy by the need to hold down «the cost of being Canadian." They realize, consciously or unconsciously, that the electorate will not be inclined to re-elect politicians whose policies lead to further deterioration in the relative economic position of the average Canadian as compared with his American opposite number. This difficulty causes governments, as a general rule, to avoid any action that is much out of line with what is being done in the United States, so that cost-benefit balances do not work out - or even appear to work out - differently in one country than in the other. It unquestionably inhibits any 12 restraint, however slight, on the access U.S. economic interests are provided to Canadian resources , Canadian investment opportunities, and so forth. And, more generally, it discourages political measures, in defence of Canada's legitimate national concerns, which might cause the United States to take retaliatory measures with adverse economic results. Whatever one may feel about the merits of interdependence between Canada and the United States, there can be few Canadians who do not wish that their country could develop a more distinctive political personality. They resent Ottawa's reluctance to take desirable policy initiatives because of fear of the economic consequences . Yet, so long as those same Canadians aspire to, but fail to achieve, American living standards, their politicians know that they would frustrate any significant move to more determinedly independent national policies. The outcome is a sort of castrated nationalism - an agony to Canada and a bore to everyone else. Nor is this the end of the story. Because French-Canada is somewhat less close, culturally speaking, to the United States than is the rest of the country, and because it has a tradition of paying a price for its individuality, there is always a much greater number of French- than of English-Canadians anxious to break out of the psychological impasse noted above. Thus is produced the phenomenon that we see today - the majority of English-Canadians reluctantly opting for the maximization of economic advantage , even if it leaves them politically impotent, while a large proportion of Quebeckers appear willing to forego economic benefits for political sovereignty. It is questionable whether Canada can survive so extreme a form of national schizophrenia . It must therefore be a major political objective of this country to raise Canadian living standards toward the American level. There are a great many reasons for the differential - ranging from climate to culture - but the most readily identifiable is the relative inefficiency of Canadian secondary industry. This inefficiency is not, by and large, a reflection of poor technical Revue d'etudes canadiennes performance, but rather of structural inadequacies : plants are too small, or product lines are too short, or output is too diversified. And these shortcomings are almost always related, directly or indirectly, to the import barriers...