Reflections from Washington

Canada's relations with the United States have changed perceptibly, if gradually, over the last few years--and for the better. And it will be necessary for both countries to work hard over the years ahead to make sure that this remains the case. Although we have a long way to go before there could be said to be an informed United States public opinion about Canada, even this aspect of the relationship has undergone considerable improvement. This evolution reflects in part a recognition by Americans of the limitations on their power to go it alone in an increasingly interdependent world. Likewise it reflects their need and desire to cultivate, with greater perception, their allies and friends. So far as Canada is concerned, this more considered and considerate attitude is also evidence of an enhanced awareness of the United States' stake in Canada; not just in terms of exports and investment or sources of energy and raw materials, but also as a zone of security and stability for the continent.

While strident versions of Canadian nationalism, bordering on anti-Americanism, have not been particularly helpful in the relationship, those voices, together with calmer and more considered expressions of positive Canadian concern for our identity and place in the world, have also contributed to a more active United States interest in what Canada really is, and is becoming.

I sense that we are getting away--admittedly slowly from the unreality of earlier U.S. assumptions, assumptions which had it that Canada would automatically be on side, or that its interests would be adequately served by the American decision-taking process and that, if this proved in practice not to be entirely true, the problem could be patched up by some relatively minor adjustment or by exception.

Elements of this usually friendly misconstrual of our situation remain a part, but a diminishing part, of public perceptions in the United States. Certainly these assumptions of quasi-automatic interest and identity no longer hold true for the U.S. business community, which has raised many questions about our economic performance and policies. Nor is it shared by Congress, which has recently found itself reacting to a variety of constituency concerns arising from Canadian actions which have had direct impact in the United States. And this rather laissez-faire attitude is certainly not true of the current and previous United States Administrations. Both have been careful and circumspect in their dealings with Canada. This, of course, has not prevented them--as is normal between governments--from seeking to ensure that Canadian actions did not adversely affect American interests or if they did that such effect was minimized.

I think there has been a growing awareness on both sides of the border that much of what we have to do in our respective countries cannot be done in complete isolation, without potential reciprocal disadvantage. This is certainly true in such areas as the environment, trade and mutual defence.

We have reached a point, realistic and desirable in my view, where both governments see advantage in good management of the relationship. Both are now aware of the need for early problem identification, advance notification, consultation and negotiation--all designed to cope with the range of problems that arise. And it is recognized that such problems are inevitable when two economies and people are so closely inter-connected and when any significant action taken by one is likely to have a perceptible impact on the other.

A similar recognition has been taking place also in the broad field of multi-national relations. Here, however, the break with the past is less obvious given the history of international co-operation between the United States and Canada over the post-war period. With one or two notable exceptions, there has been similarity in the main international objectives of U.S. and Canadian foreign policy, for example NATO defence, trade liberalization, assistance to the developing countries. While this has for the most part continued to be the case it is less of a general rule. Thus we have seen notable differences of policy with respect to China and Cuba, we have noted Canada's outreach to Europe and Japan as part of the policy of diversification of our relations. And we have observed a more forward position in Canada than in the United States relative to the needs and aspirations of the developing countries (but President Carter is, I believe, moving to change that situation).

Even when our broad objectives are the same, there are often differences about means and timing. These differences, however, are usually resolved in moving towards international consensus and I believe that reconciliation of U.S. and Canadian points of view on tactical questions has on occasion been catalytic in finding such consensus.

Canada's international contribution, both in terms of material and human resources (NATO, aid, peacekeeping) and in terms of the creativity of its thinking about world problems has been a positive factor in the bilateral relationship with the United States. It has created a favourable background against which United States leaders have found themselves able to address positively the multitude of housekeeping issues that come up between us as North American neighbours. And I think it is now common ground that another and distinctive voice from North America above the Rio Grande is, from the point of view of proper balance, a desirable feature of international deliberations. This is the more so as other countries have come to appreciate that the Canadian point of view is no mere echo of Washington. Indeed, it is the number of significant occasions when our voice has been different which has lent credibility to our distinctive role and has enhanced the international acceptance of Canada as an important participant in the consideration and resolution of world problems. We are now, and properly so, a participant in the summit meetings of the world's major industrialized countries.

The relationship with the United States is now in reasonably good health. While there was plenty to discuss during the Prime Minister's visit with President Carter, there was no so-called "list of irritants" on the table. This is not to say, however, that difficult and contentious issues will not arise in the future--issues which will test whether we have the capacity and maturity to ensure the resolution of problems which are negotiable and to accept that from time to time matters will arise where the conflicting interests of the two countries may not prove fully reconcilable.

The next year or so will, I think, prove particularly interesting to students of Canadian/U.S. relations. In making this observation I am not referring to the existence of a new administration in the United States nor to the pressing federal/provincial problems we are facing here. I am, however, thinking of the number of important issues which will be before us. I won't take you through the full agenda, but a few examples may suggest that skilled navigation will be required as we move ahead.

On the environmental front, by this summer, the report of the International Joint Commission on the Garrison Diversion Project in North Dakota should be in the hands of both governments. This project engages important interests in North Dakota and downstream in Manitoba where the potential adverse environmental impact has given rise to great concern. It is to be hoped that on the basis of the factual findings and recommendations of the I.J.C., the two governments will be able to find an acceptable solution. The President, as you may know, has recommended against further funding of this project until a study of benefits and costs is completed by the new Administration, and a moratorium has been placed on construction of the Lone Tree reservoir.

On the west coast the routing of incoming tanker traffic is a matter of considerable sensitivity on both sides of the border. Alaskan North Slope oil is expected to be flowing south sometime later this year.

On the east coast the Canadian Government is not disposed to permit the transit of large volumes of hydrocarbons through the dangerous waters of Head Harbour Passage on the New Brunswick coast. This is the proposed access route for a refinery which commercial interests wish to construct at Eastport in Maine.

In the north, we are permitting drilling in the Beaufort Sea and the Americans share our concern about the potential adverse effect on the environment in the sea and, indeed, on their Alaska coast.

In trade, we shall be working in this period to complete the bargaining in the current Geneva round of Multilateral Trade and Tariff Negotiations. Given the sharp difference in the trading patterns of Canada on the one hand and the other industralized countries on the other, one can be reasonably sure that the negotiations will be vigorous before Canada can feel assured that "reciprocity" has been achieved. In particular we shall wish to see that the United States uses its full authority to reduce tariffs to zero. The importance of this objective for Canada is illustrated by the fact that some 70% of U.S. dutiable imports from Canada fall within the low duty zone of 5 % or less. We shall also seek to ensure that the general tariff cutting formula and related sector negotiations do indeed provide enhanced opportunities for the manufacture and upgrading of Canadian resources--opportunities which have been denied us under the traditional escalated tariff structures of most of the importing nations.

In the automotive sector, the two governments now have to consider the results of the parallel studies on the North American industry undertaken over the past two years, following Mr. Trudeau's visit with Mr. Ford. These reports, together with the realities of the international competitive situation, should help point the way ahead for this key industry. It is our perception, which seems to be shared by the U.S., that we have to enter a period of intensive discussions on the future of the North American industry. The agenda for these discussions will include not only bilateral issues, but multilateral aspects of trade in automobiles, particularly imports of vehicles and parts from off-shore sources and the place of automotive trade in the Geneva negotiations.

The extension by the two countries of their respective fisheries jurisdiction to 200 miles has made urgent the question of long-term fisheries arrangements between them as well as resolution of the issue of our disputed seaward boundaries, particularly in the Georges Bank area on the east coast, but also on the west coast and in the Arctic. It was only with considerable difficulty that the two sides were able to work out an interim fisheries arrangement to carry us through until the end of 1977. If the earlier discussions are any guide to what the future may hold--both important fisheries and potential hydrocarbon resources are at stake--our negotiators will have their work cut out for them to secure a satisfactory agreement by year end. As the Secretary of State for External Affairs has stated in the House of Commons, the two sides have agreed, in order to ensure that the boundary matter does not drag on interminably, that if by the end of 1977 no negotiated agreement has been reached, there would be third party reference. Both governments would prefer to reach a negotiated settlement.

On the bill of fare for this year are important questions for both countries concerning the development and transportation of natural gas from the Prudhoe Bay/Mackenzie Delta area to southern markets.

Closer to home, here in Ontario, is the question of tolls on the Seaway. And we shall be working to bring about changes in United States laws and regulations which inhibit the holdings of conventions in Canada.

Each of the examples I have just given involves large constituencies of interests in the two countries. They are strong, vocal and have considerable political clout. So the way ahead will not be easy.

But just as each coin has two sides it is clear that a demonstrated capacity to deal with these difficult issues will further reinforce the notion that Americans and Canadians know how to live together in ways that recognize and accommodate their differences.

Certainly there are many areas on the horizon where the period ahead holds promise of positive developments. I would think that defence re-equipment and procurement is one of these where, as in the case of long-range patrol aircraft, Canadian procurement decisions will be welcomed by the United States government in terms of a strengthened Canadian defence capability.

The 1972 Great Lakes Water Quality Agreement, a landmark in the history of our environmental relations, comes up for review this year. Prime Minister Trudeau and President Carter have agreed that the review should aim at improving the treaty rather than merely continuing it, as we must be able to deal with new and dangerous sources of pollution, as well as the old challenges. Success in this joint effort will surely be greatly welcomed on both sides of the lakes.

The Law of the Sea negotiations which are scheduled to resume later this year could, if successful, mark a significant break-through in the capacity of countries to deal jointly with world economic, sea transport, fisheries, seabed resources and environmental problems. On the other hand, failure could herald chaos in maritime jurisdiction for many years to come. In terms of Canada/U.S. relations, these negotiations hold the possibility of being significant pluses or minuses in terms of the possible reconciliation of some divergent interests, as well as in terms of international recognition of some that are the same--as for example in our parallel views about the fishery and management of the salmon resource.

The positive attitude of the United States towards Canada, of which I have spoken, is, of course, predicated on some rather basic notions. Americans feel that despite our being a different country we are fellow North Americans and that our basic disposition is friendly. Americans have considered also that Canada was and would remain a relatively stable and well managed country. And it has been believed that on the business side we were basically free enterprisers like them.

In the last few years some of these overly simplified notions have been tested by actions taken or policies introduced, arising from Canada's desire to have a surer hand on the development of its economy and to assure the maintenance and growth of our distinctive cultures.

Some of our actions have given rise to puzzlement in the United States and, in traditional business circles, to a measure of concern. Thus, Americans have had to adjust to our foreign investment review procedures as well as to the actions taken by Canada in support of our broadcasting and publishing industries.

In the resources sector, Americans have had to realize that Canada was not the unlimited storehouse it was thought to be; that Canadians would wish to control the rate at which non-renewable resources were depleted and that in the case of energy Canadians were not automatically ready to share dwindling supplies of oil and gas on a North American wide basis. Americans have also had to come to understand better the jurisdictional powers enjoyed by the provinces of our country, including the right to take resources under public ownership and control. The entry of the Government of Canada into the field of hydrocarbon exploration and development through Petro-Canada was also something of a surprise. That it should have been, notwithstanding the great number of other countries which have state-owned oil companies, is perhaps another indication of the oversimplified view which many Americans have of Canada.

In the field of the encouragement of the arts and of individual artists, our philosophies, experience and circumstances differ. An increasing number of Americans are becoming aware of the extent to which the federal and provincial governments provide support in Canada--and increasingly understand why in the interest of our cultural identity and development they do so.

The process of coming to accept some of these differences and innovations of the Canadian experience has yet to run its course. If we are accepted for what we truly are--and this is increasingly the case--then I believe much unnecessary friction can be avoided. For our part we must accept that the policies of the United States with its different global and domestic imperatives will not always coincide with or be supportive of those of Canada.

This is well illustrated in the trade field. While the broad thrust of U.S. economic policy is in the direction of trade liberalization, their laws and regulations are capable of highly restrictive application in response to domestic pressures for protection. The world is closely watching how, in the next few weeks, President Carter and his administration will respond to the recommendations for action against imports recommended by the United States International Trade Commission in the case of shoes, colour television sets and sugar.

A world in which many countries have not recovered from the 1974-75 recession and continue to face difficult balance of payments situations is also anxiously awaiting further evidence of the forward direction of the United States economy. Here I think the news is good. The administration expects that this winter's dislocation will have only modest and short run effects and that for the year as a whole real growth will be between 53/4 and 6%, measured quarter to quarter, with an underlying inflation rate of about the same magnitude. This is taken to imply for this year a substantial increase in the United States 1976 trade deficit, which was $9.2 billion. The stimulative measures being taken in the United States should be helpful to a number of countries which are looking for export-led growth to help them overcome current difficulties. With its large stake in the U.S. market, Canada is, of course, directly affected. I expect our resource industries will benefit significantly from stronger U.S. economic activity. The extent to which our manufacturers are able to do so will depend on our relative competitiveness, which is a matter of considerable concern. The lower value of the Canadian dollar should provide some help for our exports, but I think fundamental improvements have to be made in the area of our manufacturing costs and productivity if we are to regain our position in export markets and hold our own against manufactured imports. From this point of view as well as that of our problems of unemployment and lingering inflation, Mr. Macdonald's budget tonight is awaited with more than usual interest. While a number of our economic problems are indeed serious, I doubt the outlook is as dark as the recent gloomy and Cassandra-like article in Business Week would have readers believe.

What Mr. Macdonald has to say tonight will also be read with great care in New York, Washington and elsewhere in the United States. Since our bout of inflationary disease and the introduction of controls, there has been something of a wait and see attitude about Canadian economic performance and prospects. These uncertainties and the questioning in the business community of measures taken in the resources area for example potash legislation in Saskatchewan--have naturally been greatly compounded by U.S. bewilderment about what is happening in Quebec and what this may portend for Canada as a whole. Indeed the Quebec situation has probably provoked more serious thought and concern about the well-being of their neighbour to the north than at any time in United States history. This consideration is of a quite different kind than the superficial knee jerk reaction that, for example, swept the United States on the question of Taiwan participation in the Olympics, or the current outcry by special interest groups and well-intentioned citizens with respect to our seal hunt.

I think most Americans were taken aback by the results of the Quebec election and the stated intention of the Parti Quebecois to try to lead the people of Quebec out of Canada. Americans are not likely, I believe, to identify the aspirations of the P.Q. in this regard with their revolutionary struggle to throw off the British yoke, but rather to recall the deeply bruising experience and long unhealed wounds of their Civil War.

Against this background, and in part because they assume that Canada is a land much like their own, Americans find it difficult to grasp that a group of people, even of different culture and tongue, would wish to forego the potential of the broader horizon for what they would see as the disadvantages of a more limited, if culturally and linguistically more homogeneous, status.

There has also been a feeling in the United States, as in other countries, that Canada is fortunate among nations, has much of its destiny yet to be fulfilled and remains a land of great opportunity for those who were born here or through immigration have had a chance to share in the Canadian adventure. Measuring these prospects against the problems and limitations present in so many overseas countries, Americans and other foreigners are bound to find it difficult to understand why any group in our country would wish to put the future at risk, their own, and that of their fellow Canadians.

At another level of perception, and although this is unspoken, Americans are, I believe, concerned about a diminution of stability in Canada, and hence in North America, should the separatist forces in Quebec gather in strength and the separation of the province become a realistic possibility. The prospect of stability being imperilled in a friendly neighbouring country which stands both between the Lower 48 and Alaska and between their country and the Soviet Union is, I believe, not something Americans wish to contemplate.

These are, I believe, some of the considerations in the minds of our American friends. Their government has however been extremely careful in any comment they have made on the Quebec situation. President Carter, expressing his clear personal preference for the continuation of Canadian federation, stressed that this is an internal matter for Canadians to work out themselves. I think you can take it that overwhelmingly Americans wish us well in dealing with the challenge to Canadian unity, indeed in dealing with the whole range of current problems whether economic, constitutional or social which may stand in the way of the growth, stability and health of Canada and the Canadian society. At the governmental level it is clear, following the Prime Minister's visit, that our relations with the United States Administration are set in a highly promising and constructive direction.

I am optimistic that we Canadians will find the will and the sense of community to overcome our present difficulties. We have seen what can happen in terms of unemployment and inflation from excessive expectations and demands relative to available resources. We have experienced the constraints of the sorts of measures which have had to be taken when the economic situation must be taken firmly in hand. We perceive with increasing clarity that an export dependent society cannot afford the luxury of loss of competitiveness. We have seen that international financial markets do react to events in Canada in terms of willingness to invest and the cost of borrowed money. These messages have reached or are surely reaching home.

I believe also that what has happened in Quebec has caused most Canadians to rediscover in their different ways what Canada as a whole means to them. This enhanced awareness and appreciation of what it is to be Canadian will, I hope, make it possible for us to forge a new consensus in our country. I think of a consensus encompassing the legitimate aspirations of our French speaking compatriots--including many who now consider separatism as their preferred option--a consensus capable of encompassing also the aspirations for change in Canada's other regions and provinces which are compatible with the imperatives of the sound governance of our whole country.

A Canadian Ambassador necessarily must be concerned with all the problems affecting our relations with other countries, irrespective of where they may have had their origin within Canada. He inevitably comes in his thinking and in his presence to have a feeling for and passionate involvement in all that goes into the make up of our country and our society.

There is that about our seas, our shores, our skies, our space, our city sights, our countryside and forest scents, there is in the coming of our spring and the glory of our fall fulfillment, even in our winters long--there is in all this the essence of a land unique to us, an essence which pervades, transcends, which knows no local barriers. I trust that Canadian Ambassadors for countless years ahead will be able to sing the praises of this essence and will have, as I have had, the honour, to represent one Canada from sea to sea, our Canada in all its rich diversity.

The Governor General in his New Year's message said: "This great and marvelous country belongs to us all." Like him, I trust that the Canada we pass on to our children and our children's children will be undiminished in any way, indeed that out of our present travail will come an even richer heritage.

The appreciation of the audience was expressed by Mr. John D. Herrick, a Director of The Empire Club of Canada.