The Free Trade Conspiracy and Other Canadian Myths

Recently, one of the hottest topics on Canadian lips has been what Peter Gzowski calls The C-word: Competitiveness. Another topic or issue about which we hear a great deal is The G-word: Globalization.

Globalization is more than a buzzword. It is the new world of business. With few exceptions, every management consultant offers advice on thinking and strategizing globally.

Professor Noel Tichy of the University of Michigan, for example, advises business leaders: "The root cause of change in the '90s will be globalization. You'll have to have global standards for quality, for pricing, for service, for design. You will have to have global leadership."

Harvard Professor, Michael Porter, in his recent report and the accompanying discussion papers on the Canadian economy released by the Federal Government, sharpened the focus on the question of Canada's ability to compete in the world. He observed: "Canada is under tremendous strain because of sweeping changes in the global competitive environment. New competitive realities call for a new paradigm of competitiveness, one that is centrally focused on fostering more dynamism in the Canadian economy."

The issues raised by Tichy, Porter and others are complex. And the proposed solutions, difficult to sort out. In the words of my favourite Hebrew prophet, Woody Allen: "If only God would give me some clear sign! Like a large deposit at a Swiss bank!"

As useful as Tichy, Porter and other commentators are, their views must be qualified. At best, they provide an outsider's, rather than an insider's, look at Canada in a global context.

Our speaker today provides an inside look at Canada in a global setting. In a recent piece of correspondence with The Empire Club, Ann Shortell wrote: "Canada is as much at a time of crisis from an economic standpoint as from a constitutional one. That, of course, makes this a very exciting time to be a Canadian business journalist and commentator."

It also, I might add, makes it a very exciting time to have Ann Shortell address The Empire Club. She is a highly respected business journalist. She has been a writer at The Financial Post, an editor at the Financial Times of Canada, and business columnist for Toronto Life.

Ann has authored several important Canadian business books. A Matter of Trust, Power and Privilege in Canada's Trust Companies was launched in 1985 and became the inaugural National Business Book Award winner.

Her second text, Brass Ring: Power, Influence and the Brascan Empire, was published in 1988. It explores the Toronto Bronfman Edper Empire. It won the 1989 Best Non-Fiction Paperback Author's Award.

With a prize for every book behind her, Ann Shortell--not surprisingly--decided to write another text. The new release, entitled Money Has No Country, provides the basis for her remarks today.

Ann's writing offers important insights into the challenges that Canada faces. Her topic today is The Free Trade Conspiracy and other Canadian Myths; Ann threatened to rework the title if it was not deemed sufficiently provocative!

The Italian novelist, Umberto Eco, once remarked: "The world of media is full of easy answers, wash-and-wear philosophies, instant ecstasies, what-me-worry Epiphanies. Probably readers want a little more."

Ann Shortell provides a lot more. It is with great pleasure that I welcome to The Empire Club of Canada, Ann Shortell.

Ann Shortell:

Thank you very much John, and thanks to The Empire Club for inviting me to speak, and to all of you for attending today's luncheon meeting. I must alert you right at the start that I am not an economist, and this speech will not be full of statistics. I am a storyteller, and I am here to tell a few stories about how Canadian mythology is molding our economic future.

The title of my speech today is The Free Trade Conspiracy and Other Canadian Myths, but the topic is really what I like to call the state of the Canadian psyche. The prognosis is not cheerful. We Canadians have always had a bent toward self-analysis about why and how we can work as a nation. Unfortunately, for all our soul-searching we don't seem to have moved beyond the first stage of psychotherapy--the blaming stage--to any sort of real analysis of what will make Canada prosper in the future.

I've heard a lot of name calling and blame-passing in recent weeks, as I toured the country to promote my new book. It's called Money Has No County, Behind The Crisis in Canadian Business--there Denise, I got the plug in.

But I've begun to think that I should have called my book Beyond Blame. A New Age Guide to Discovering the Canadian Within. With, of course, the standard self-help guide, 12-step recovery program. And every step on the road to recovery would include the term "attitude adjustment." Because so much of what is wrong with Canada comes down to attitude; and that seems to be getting worse, not better.

The mood of the nation is ugly; people are distrustful, cynical. Fear is overwhelming Canadians' ability to reason, to admit that others' point of view may also be valid. This is common, of course, at a time of political and economic upheaval. We all recognize that when we see it elsewhere in the world. As nations in Eastern Europe and the Soviet Union turn to nationalism and prejudice born out of fear, and try to protect their communities from outsiders rather than cooperating to deal with very serious economic problems, we shake our heads in distress. But we are doing exactly the same thing here.

Now, I may be feeling so pessimistic today because I'm still reeling from being branded as a Patsie for the Tory-Big Business Conspiracy by irate radio talk show callers. One caller even suggested that I'm on Brian Mulroney's personal payroll--and all because I don't believe that free trade is the root of all evil. Because I believe that the economic problems in this country can't be blamed on a few percentage points dropped from a tariff barrier.

But it is the personal nature of the attack, the gut feeling among many Canadians that anyone who disagrees with them is not merely misguided, but somehow corrupt, that is so unsettling to me. This type of battleground rhetoric is making it impossible for Canadians to plan a future together.

And the biggest divide of all is between the business community and the rest of the country. Business leaders are seen by the average Canadian as uncaring about our country and willing to do anything to make a profit--including betray the country.

Let's start with the so-called free trade conspiracy. The story runs that Brian Mulroney and his Tories, with the knowledge and encouragement of big business in Canada, sold Canada down the river to the U.S. government and business interests in the U.S. for some hidden personal gain.

The second chapter of this tale is subtitled the high dollar sellout. In order to ensure that the free trade deal would enrich U.S. business at the expense of the Canadian people, so the story goes, the Tories deliberately kept the Canadian dollar much, much too high.

It may sound like nonsense to members of this audience--or maybe it doesn't, to some of you. The fact is nonetheless that there are many, many Canadians--bright Canadians, sincere Canadians, politically active Canadians--who do believe in this conspiracy theory. They believe it because it seems to them the most plausible explanation for the Federal Government's monetary policy since the last election.

It makes more sense to them that Mulroney would sell out Canada than that he and his advisers pursued a course that they believed would be the best in the long term although costly in the short run--or even that the government simply made a mistake.

This belief, of course, is rooted in good part in the way Canadians feel about Brian Mulroney. So I have tried to debunk this myth at times by operating on the level of personality. I say to those who bring forward this idea: OK, whatever you think of the Prime Minister, he couldn't have pulled this one off alone. He would have needed some members of his cabinet onside. He would have needed the co-operation of, say, Michael Wilson.

Now, Canadians have always thought of Michael Wilson as an honest man, it seemed to me. Certainly, they don't despise him for his personality traits. In fact, most of them haven't noticed his personality.

But as I really began to look into this conspiracy theory, I realized that the days when Wilson's honesty was assumed were long gone. And I'm not just talking about finger pointing by the political opposition. Journalists were querying both Wilson and U.S. trade czar Carla Hills about a secret deal on the dollar last June when they opened the North American free trade talks here in Toronto.

And the night after that press conference, I attended Wilson's annual constituency meeting, held in a church basement in Etobicoke Centre. As I slipped out a bit early, I ran into one of his constituents leaving another meeting down the hall for a cigarette break "What's your meeting?" I asked. "Narcotics Anonymous," she replied. "Michael Wilson's down the hall," I offered. "No kidding!" she said with a hollow laugh. "You mean nobody's assassinated him yet?"

And people are wondering why Wilson just bought a house in midtown Toronto rather than Etobicoke! After meeting that constituent, I can't blame him for hiding out across town.

His own party people know that Wilson is under suspicion, even among his own party members, because of the high dollar policies he supported as Finance Minster. At the Tory policy convention in August, one of his supporters privately urged the Minister to stand and declare that there was no backroom deal on the dollar.

Wilson staunchly refused. He thought that to stand and proclaim his innocence of any collusion with the U.S. would make it seem that he thought he needed to apologize for keeping the dollar high. And that he emphatically doesn't believe. Wilson is a high priest at the altar of monetary conservatism, proselytizing to the nation about the hard road to prosperity, in fact as much a zealot as John Crow. (As an aside, while Mazankowski doesn't have the depth of economic understanding that Wilson does, it may be good for the country that there's now a more politically tractable Finance Minister.)

In fact, I must accuse Michael Wilson of the same sin that I accuse the conspiracy theorists of: rigidity and an inability to see that there may be another side to the story. To Wilson and other Conservatives, there's no question of the government's commitment to research and development, training, investment in innovation by business. Unfortunately, the facts speak differently. After seven years in office, the Tories have a legacy of reduced Research and Development spending, and they failed to provide the promised training programs needed to help our labour force bridge the transition to free trade.

This difference between rhetoric and reality on the Tory's part is saddening. But it's no cause for alarm--nothing, in fact, other than the usual politician's ability to fool himself with his own PR.

But the inability of the government to explain the policies that it has instituted has resulted in a far more damaging situation. I don't have to detail for you the effect of plant closings, jobs lost, communities devastated. People, faced with this type of upheaval, need answers. And they haven't been receiving any satisfactory ones.

In fact, three is good reason for the widespread public distrust of both the government and business leaders. After all, it's now clear that neither the Federal Government nor Canadian executives who pushed for the FTA could have understood just how competitive Canadian companies were when they signed the deal.

Company heads merrily piled up debts during the 1980s, without spending enough of their record profits on upgrading of plant and equipment and technological innovation in order to compete with U.S. firms. Business created a good many of its own problems through plain old bad management.

Ottawa blithely took business leaders at their promise that they were able to compete. At the same time the dollar policy was exacting too high a price from the country at an extremely painful time of transition. The fact that the government has such a difficult time explaining that decision to ordinary Canadians shows that while the idea was good, it was too religiously pursued at exactly the wrong time. It just didn't make sense.

Ottawa also didn't admit publicly that its senior trade policy advisers were shocked at the extent of plant closures--that it had expected new jobs would shift south, but not that established plants would close. It didn't know how to say: "We made a mistake in our calculations, but we still believe that we had the right idea."

The collision course between federal monetary and trade policy, and Ottawa's inability to accept blame for mistakes, have both seriously damaged the credibility of the Tory free trade policy--although it is an essentially sound policy.

But Ottawa is not the only party to blame for our present economic situation. Nor is business. No, the Canadian labour movement and many voters are also at fault here. They simply don't want to admit the seriousness of the basic structural issues facing our country.

In fact, the overall Tory economic agenda has always been upfront and easily understandable. Deregulation, privatization and tax reform have never been big secrets--they were part of the party platform before the 1984 election. The 1988 election was fought on free trade. Actually, while they may not recognize it, when people speak of a conspiracy, they are really protesting against this very upfront set of beliefs about how to run the economy. The Tory agenda is seen as too American, and too favourable to business.

In fact, some nefarious design that they haven't quite figured out, but that will end up enriching only the rich, and driving the country as a whole to ruin. So they look for scapegoats: free trade, deregulation, foreign investment.

Competitiveness is now being labelled as the new Big Business-Tory Conspiracy. It's seen both as the Tory's way of justifying their mistakes with free trade and business's way to put the thumbscrews to labour. It's also seen as a backdoor attack on Canadian nationalism and the Canadian social net.

People simply refuse to admit that our resource base isn't enriching us as it once did, that our money has long since run out. Now we are afraid to compete with a Third World country like Mexico, afraid that we will be dragged down to its living standard.

This argument is a strange amalgam of false pride and extreme negativism. It wants to keep Canada exactly as it is, but also presupposes that we have nothing to offer employers but low wage workers. No innovative technology, no very productive processes, no skilled employees, no research-driven companies to carry our economy. It also carries within it the seeds of the problem. We don't have enough of any of those things.

And Canadians are very aware of our economic crisis. The economy is the No. 1 problem in recent polls. And we know what we don't want here--an eroded standard of living, a community with no protection for workers and no social net, another Mexico. But we haven't figured out a vision for a workable Canada from an economic perspective.

That's because we won't move beyond the fact that Canada doesn't make economic sense, to deal with how we can transform this economy and so save our country. In the lexicon of self-help literature, right now this is a dysfunctional country.

The first step to recovery is to admit that there are no simple answers. The next step is to begin to ask ourselves some very serious, very searching questions about the price we are willing to pay to be Canadian. That was the original intent of the government's prosperity paper. Unfortunately, the spin doctors took over from the policy makers in ISTC and Finance, and the result is a watered-down discussion paper designed to justify Tory policy positions rather than a no-holds-barred report. As a result, Wilson's prosperity campaign has been dismissed by the public before the debate could begin.

Some people are also calling Professor Michael Porter's $1.2 million study of our economy a waste of money. Certainly, we already knew most everything in it--either from past Canadian studies or by reading his 1990 book on world competitiveness.

But it's not the worst $1.2 million ever spent by government and business either. After all, bringing in an American economist focussed media and public attention on the problems at the root of our economic malaise.

The historian Barbara Tuchmann spoke of the wilful blindness of different political leaders throughout history in her book The March of Folly. Tuchmann argued that, at times, it seemed that leaders would plunge to their destruction, taking their nation with them, even while knowing that by approaching matters differently, they could save the situation.

My appeal today, to this audience, is not to be wilfully blind to the basic structural problems in this country's economy. Take off your blinders and admit that business has a responsibility for the state of our economy, and must be part of the change in thinking needed as part of a major shakeup in our approach to our economic nationhood.

Everyone in the business community must deal with the basic lack of investment in innovation in this country. Unless business makes that commitment to invest in innovation here in Canada, the fabric of our country will wear even thinner in the coming years. And our standard of living will decline.

If this doesn't happen, I don't honestly believe that our country can continue to exist, no matter what constitutional arrangements we may make. Behind all the anger and the fear that is spawning conspiracy lies a simple question from all Canadians to the business community. Are you in or are you out? Please make that commitment to Canada

Thank you.

The appreciation of the meeting was expressed by John Campion, Partner, Fasken Campbell & Godfrey, and a Director of The Empire Club of Canada.