The Ontario Opportunity in Europe

MR.MACNAUGHTON:

Ladies and gentlemen of The Empire Club of Canada: Our guest of honour today is W. Ross DeGeer, Agent General for Ontario in the United Kingdom.

While the idea of hosting our Agent General was seen by all the members of the Empire Club as a good one, it should be noted that the timing of his visit has caused consternation in some quarters. Before his present incarnation as a representative of government in a foreign capital Mr. DeGeer was known, and some might even say feared, as one of the most skillful political organizers and strategists Canada has ever produced. As the chief designer and then as the principal operator of the Big Blue Machine, Ross DeGeer's return in the midst of a winter General Election has caused some skeptics to wonder if his visit here today isn't merely a guise that has allowed him to enter the country and join the campaign unnoticed. If any of you share that suspicion I can assure you that the invitation to Mr. DeGeer was made in April of last year and accepted at the same time.

Ross DeGeer is an ideal choice for our first speaker of 1980. At the beginning of the year, and at the beginning of a new decade, when we are all still filled with new resolve, it will be an inspiration for us to have the opportunity to listen to a man whom our jargon describes as a "local boy who made good."

A native of Toronto, Mr. DeGeer has been successively and sometimes concurrently a successful investment dealer, President of the Toronto Junior Board of Trade, President of the Albany Club, Executive Director of the Ontario Progressive Conservative Party and Principal Secretary to Premier William Davis. Today, of course, he occupies the prestigious post of Agent General for Ontario in the United Kingdom.

It has been a discouraging verity for Canadians of all walks of life, other than professional hockey players, that if a man is to be held in the highest esteem in his community he must first win a reputation in a foreign country. By this standard Ross DeGeer is an outstanding success.

He took up his present position on August 1, 1978, and in the eighteen months since then he has established himself as an informed spokesman for the Government of Ontario in Britain and on the European continent as well. He has also won acclaim at home in Ontario among the businesses and the cultural groups he represents so effectively abroad. It is our privilege to have him here today to present his impressions of The Ontario Opportunity in Europe."

Ladies and gentlemen, please welcome to our podium W. Ross DeGeer, Agent General for Ontario in the United Kingdom.

MR.DEGEER:

Head table guests, Consul-General, Ministers, Members of the Legislature, friends (and especially my daughter), it is a great delight to be here. I wonder if anybody would mind if we just stopped right now, after that marvellous introduction. Thank you very much, Mr. President.

Let me begin by saying that it is delightful to hear "O Canada" sung with such great gusto again. As you can imagine, it is not sung very often in Britain. I'm not even certain that "God Save the Queen" is sung with such enthusiasm at Wembley.

Mr. President, I had anticipated that (judging from past experience of Toronto in January) I would be up to my ankles in slush, sleet and snow and that I would be able to tell you that last week my wife and I walked in St. James Park and saw the forsythia starting. Perhaps that strikes a little envy in you, or you could consider it an invitation to come and visit us in London. But what I got was just slightly nippy weather and bright sunshine--and that is one commodity that is very rare in London.

It is nice to come home and see so many friends at this historic Empire Club, of which I was briefly a Director. Scott Young and Margaret Hogan have ably captured its glorious past. The book dealt very well with the history of the club, its foundations and raison d'etre and it struck me when reading it that the reasons for establishing the club were, in some ways at least, not dissimilar for the establishment of Ontario House originally, even though in reverse. Some of you may not know that Ontario House has been established in the United Kingdom since 1869, although Upper Canada, as it then was, had an agent in London as early as 1792 and, with only a slight blip in the chart during the second world war, we have been there ever since.

In those days, immigration was the prime objective and, while that is still one of our areas of endeavour (in highly selected professions), our principle responsibility is now in the area of trade and industrial development and it is in this context that I wish to talk to you today--the Ontario opportunity in Europe.

At a time when all the pundits are predicting a limited or no-growth period and, at a time when we in Ontario are going to have to fight a little harder for that investment dollar, it seemed to me that it might be useful if I took this occasion to set out some tentative conclusions about the opportunity for Ontario businessmen in and with Europe. These are some ideas I have formed after eighteen months as your Agent General in London where I have a number of officers responsible for developing trade and investment projects for Ontario with Europeans.

Of course, I could equally well have titled this statement, "The European Opportunity in Ontario," because the one opportunity is the obverse of the other. Ontario is, and no doubt will be, an important market for Europe. Europeans will want to retain and advance their investment and their trade here, but to do so, on a realistic and long-term basis, they will have to ensure that there are reasonable opportunities for us to develop a healthy economic relationship with them. I would like, therefore, to note some of the factors at work which affect our relationship and try to draw some conclusions.

First, it is important for us to realize, to take properly into account, the fact that in the last decade and' for the near and middle-term future, Europeans will be remarkably preoccupied with the relationships between themselves. They will be very much less interested in how they relate to the rest of the world. Since the 1950s western European countries have dedicated their political energies to putting in place a set of new economic relationships--primarily trading relationships--to form the base of a new western European system.

It is worth recalling that Europeans debated whether their interests would be best served by a broad "free trade area" in which trade barriers between them would be removed or reduced, or at least regulated in common, while each would maintain its own regime vis-a-vis third countries. In the end, six countries elected to form a closer arrangement, a customs union with a common policy for agriculture. The rest of Europe then had to concentrate on how to relate to the new and powerful community of six. That led to the creation of an industrial free trade area which in turn--because that was invented only as an interim arrangement--led to the negotiation of a European community of nine in 1973.

Around this evolving entity--if it is that--there have developed a great variety of special arrangements. There are industrial free trade arrangements with Switzerland, Sweden, Austria and Norway. There are special "association" or other preferential arrangements with other European countries, with countries of the Mediterranean basin, and special fixed period aid and trade treaties with a substantial number of developing countries in the Pacific area, in Africa and in the Caribbean. What we now have is a powerful European-centred system--the Community of nine being in the centre and a great number of other countries with various special trade relationships with the nine ranged on the periphery. This means that for most European businessmen the main trading opportunities are within--not outside--their system. Only fifteen per cent of exports from countries of the nine go to countries that do not have some special relationship---such as Japan, eastern Europe, the United States and Canada.

Further, in the next five to ten years, the Europe of nine will become the Europe of twelve--as the Community adjusts itself to the participation in Community decisions of Greece, Portugal and Spain. The adaptation required by these three new countries, who will be joining in the Customs Union, in the agricultural system and playing their parts in the Community institutions, will be profound. It is probable that the Community will become rather more inflexible, rather more slow-moving in reaching decisions and less willing to take into account the legitimate concerns of others.

It has been said that the paradox of the Community is that inside it looks inefficient, bureaucratic and slow-moving--certainly many people in London seem to see the Brussels machine in that way--but that from the outside it seems rather rigid and unaccommodating. I have heard the word "tyrannical" used in this context. Adding these new member countries may well reinforce these tendencies. Certainly it will not make it easier for Canadians to develop productive working relationships in Europe.

How will businessmen of this developing Europe see Canada? No doubt, they will continue to consider us one of their more secure, more stable sources of raw materials. When the industrialized countries move out of the present period of slow growth and when we inevitably enter another period of investment in resource development and processing, Europeans will be looking with increased interest at material sources as nearby, as secure and as stable as Canada.

For this reason, Europeans are not likely to overlook Canada. I suppose we should accept this as part of the necessary foundation for a healthy trading relationship across the North Atlantic. However, it is not enough. We in Canada and particularly here in Ontario, the industrial heart of Canada, will want a more mature economic relationship. We will want to develop European markets for more advanced Canadian products and we will want Europeans to develop investment projects here involving more than real estate or resource development.

Europeans should realize that this part of Canada is particularly well placed for production aimed at the whole North American market. Ontario should be seen as more than a base for manufacturing for the Canadian market. It will be, in the eighties and nineties, a base for serving markets in the United States as well.

It is, of course, for businessmen to make this happen. Government can negotiate the framework of rules and can help make contacts, can use its good offices, but essentially trade and investment are for the businessman, not for governments, whether they be in Ottawa, in Toronto, in London or in Brussels.

I do not want to lecture businessmen, but I do have some suggestions about how we can develop a healthier trade and economic relationship with the new Europe.

First, I am struck by the fact that to develop trade from Canada into Europe takes more planning, more concern for the long term, than trade does here in North America. There are not likely to be quick results, quick sales and ready product acceptance. Exporters to Europe have to take the position that they are after a permanent stake in Europe and they have to concentrate on the long-haul.

A second point I want to emphasize is that trade with Europe is not just an enterprise for big firms. There is plenty of scope for small and medium-sized Canadian firms who are specialized, who have particular competence, to get into and stay in the European market. I am struck by the number of Ontario firms who have concentrated on the development of very particular products: for example, I. P. Sharp Associates, General Signal Appliances (IONA), G. H. Wood, Sheerness Steel (CO-Steel International), Tonka Toys, Bunn-o-matic in McDonalds. All of these and many more find there is a market in Europe.

It is these small and medium-sized enterprises who most need our government facilities to help them get started in Europe. They sometimes need our help in knowing whether they should make contact with the Community institutions in Brussels, or whether they need to work with the government agencies in one or more member states. They need advice as to who are the likely European firms they should deal with. We at Ontario House in London have been organizing ourselves to try to provide this kind of service, working, of course, in close co-operation with the federal government Trade Commissioner staff in London and elsewhere in Europe.

One of the worrying features of the trade and investment relationship with Europe is that a wide range of potential manufactured exports from Canada, and particularly from Ontario, are of products where the potential European buyers are in the government or government-controlled sector. We Canadians have developed considerable competence in a range of specialized products in the urban transportation, telecommunications, energy generation and transmission sectors. The markets for these products in Europe are government procurement markets. European producers are protected by tariffs and they have the advantage of being on the ground. Beyond that, they are protected by buy-national or buy-EEC policies. This gives European producers almost infinite protection in their domestic markets against Canadian competition. One result is that it forces Canadians either to invest in production inside the Community, rather than exporting Canadian goods, or to enter into licensing agreements with European firms.

From the point of view of the individual business' corporation, such arrangements may be profitable, and it is not for government to say that they are not appropriate choices. However, it is worrying if Europeans use their government procurement rules or their product specifications to force Canadian firms to participate in this sector of the market only by selling their technology rather than allowing them an opportunity to supply the market with Canadian-made goods. Clearly, we have to be able to export a portion of our technology as goods, rather than as licensing arrangements, if we are going to provide a secure base for a developing technology--and the jobs in Canada which our developing technology should create.

To be rather more blunt, it wouldn't really be a disservice to the British or the French, for example, if they had Canadian-made telephone systems that worked as well as our telephones do here. It is encouraging, therefore, to hear that the British telecommunications authorities are said to be seriously considering giving a contract to a Canadian firm for Canadian-made Telex equipment.

Certain competitors in the U.K. seem to regard this proposal as immoral and unfair. What I see as unfair, and even more important, as unrealistic, is to assume that European firms can continue indefinitely to compete in our Canadian markets where they can afford to be highly competitive, operating as they do from the shelter of a totally protected home market. This is not really a viable basis for a trading relationship. It would be better if it were altered by some opening of the European procurement market rather than a closing off of markets here in North America.

I emphasize this point because I am very much aware of how important a portion of Ontario manufacturing is in this procurement sector, and because it seems fairly clear that if we are ever to develop a healthy trade in manufactured products with Europe, it requires better access to government-controlled markets there.

Looked at from the Community perspective, Canada, and certainly Ontario, is a major market for a wide range of capital and consumer goods. I don't think Europeans should be satisfied by selling us only cognac, whisky, perfume and fashion goods. Canada is a growing and long-term market. I reject categorically the attitude that is too common in Britain--that the Canadian market is too hard to compete in, particularly because of our proximity to American producers. Certainly the Japanese have demonstrated that offshore exporters can compete in Canada. A part of their success, of course, was in traditional areas of European export to Canada, such as worsted fabrics, but much of it has been in areas where American firms had been strongly established in our market.

As I have already emphasized, European producers should consider whether, as their market develops here, they may wish to build production facilities here in Ontario, either as new Canadian firms or as joint ventures.

I am sure Europeans visiting Ontario will be struck by the encouraging contrast between conditions here and what they--have come to accept as normal in Europe. You are all very conscious of inflation, of rising Canadian costs and prices. But what strikes me is how low Canadian consumer prices are for food, for clothing, for furniture and consumer durables, how competitive our retail distribution system is, how efficient our urban transportation system is, and how our telephone system really works. Our post office service is at least no worse than the British and French services. Our labour force is in the main highly productive by European standards, not to mention British standards. These factors, and the ease and low cost with which factories can be acquired or built and plants installed in Canada, as well as our reasonable energy costs, are considerations which European firms wanting to expand in North America are bound to weigh very highly, and they are all in our favour.

In a speech delivered in Brussels in September, Premier Davis concluded by saying: "I hasten to add that I am sure the governments of Europe accept the legitimacy of our hopes in this regard. Nevertheless, I feel some obligation to emphasize just how serious these concerns are to the future of our economy. We are not suggesting that basic economic forces be distorted in our favour. We are not looking for a more managed trade relationship . . . in fact, quite to the contrary. Canadian entrepreneurs, of course, have a lot to learn: that's inescapable in the market place, everywhere, at any time. However, we are not infants to the world of international commerce. Our aim is not an equality of outcomes, but an equality of opportunities."

The thanks of the club were expressed to Mr. DeGeer by Peter Hermant, a Past President of The Empire Club of Canada.