Canada and the U.S.—Border or Bridge?

DR. STACKHOUSE:

Ladies and gentlemen: It would be easy to think that the world has many Henry Fords. One leading auto maker is called "the Henry Ford of West Germany." Another has been dubbed "the Henry Ford of China." Wherever cars are made, the name "Henry Ford" is part of the language.

The very weight of such a name might have crushed a lesser man, but not the second industrial leader to bear this name. At the age of twenty-eight, our distinguished visitor assumed command of the empire his grandfather had created and governed. He quickly showed he was cast from the same mould--and went on showing it through fifteen years as president, and twenty as chairman of the board. But it was no easy succession.

The throne he mounted in 1945 was shaking. The company was losing money at a reported ten million dollars a month. Fear was high, morale was low. Tensions were many, expectations few. But not for long. Gathering around him one of the finest management teams modern business has ever known, Henry Ford II renewed his company's strength as an American giant, and then built it up to multinational stature.

As one biographer's assessment puts it: "Henry Ford I created the company and made it big; Henry Ford II saved it and made it bigger."

As chairman of the Ford Motor company's Finance Committee, he remains associated with the business, and he is also continuing his leadership in public and social projects. He once summed up his philosophy of business in three words: "Products, profits, and people." And the record shows he has put as much emphasis on the third as on the first two.

We have time to recognize only a small number of the service positions he has held: chairman of the National Alliance of Businessmen, a group of business leaders in the United States seeking jobs for the hardcore unemployed and for disadvantaged; chairman of the National Center for Voluntary Action, an organization for stimulating private action to solve community problems; chairman of the trustees of Henry Ford Hospital; chairman of the Detroit-Fort Wayne Port Authority; member, board of governors, United Nations Association; trustee, the Ford Foundation.

One of the most impressive, even exciting, demonstrations of his social leadership, however, is also one of the most visible -the towers of the Renaissance Center rising up in the heart of Detroit and giving that city a new heart. This high-rise complex of offices, banks, stores, theatres was called "renaissance" to express its builders' hopes it would give the city a new birth and a new life. That it was built at all in the face of racial tension, economic recession and urban blight demanded the kind of leadership that only Henry Ford II could give Detroit.

It is a great privilege for the club to be addressed by a business leader with an active social conscience and, I am glad to say, a Yale education. Ladies and gentlemen, will you please welcome Mr. Henry Ford II.

MR. FORD:

Ladies and gentlemen: It has been almost a year now since I held day-today executive responsibilities at Ford Motor Company. Standing back from my former duties has, frankly, given me a new perspective on issues of concern to business, and I want to share some of that perspective with you here today.

" Successful business managers these days require a clear understanding of the impact of national and international politics on the future of private enterprise. I am certain nobody here needs to be reminded of this.

Today, the United States is sixteen days into its fortieth presidency. It is difficult at this early date to be precise about what this may mean for the future. But the transfer of leadership in Washington, it seems to me, offers an appropriate time for both Canada and the United States to take stock; to explore together some shared concerns and expectations; to define where we are and where we should be headed; and to set the course towards achieving some common goals.

As President Reagan enters his third week in office, it is evident that he has assumed leadership over a nation whose fundamental assumptions--its economic and political touchstones--have been altered dramatically in recent years.

Following the Second World War, the United States held undisputed military leadership as well as financial, industrial and technological supremacy. Today, in many respects, the Soviet Union matches and even surpasses the U.S. in military strength. Oil-producing countries have gained enormous power in world financial markets. And other countries, particularly Japan, are outmanoeuvring U. S. industry and technology at every turn.

Canada, with its complex network of economic ties to the United States, has not remained immune to

this shifting tide of historical events. One could even say that the United States is today as different from its own postwar years as Canada is from the period when the "Empire Club" meant Empire!

All of this, it seems to me, adds up to a convincing argument for a concerted effort by Canada and the United States to address the future together--with renewed co-operation, understanding and sensitivity.

We have a strong tradition of co-operation between our two nations. It has become commonplace to describe the U.S.-Canadian border as the longest unprotected international border in the world -no small achievement in this day and age. But I am sure that, from the Canadian perspective, Washington often appears self-satisfied with that peaceful border and somewhat complacent towards its northern neighbour, prepared to voice convenient platitudes about cooperation, while leaving the real work of co-operation to some more convenient time.

Faced with the dramatic changes we have seen occurring over the last three decades, neither the U.S. nor Canada can afford this kind of complacency.

We have been through some difficult periods together in recent months, and the rapport between our nations has not been perfect. The list of common concerns is familiar to all of us--fishing disputes on the east and west coasts, environmental concerns, and a range of issues covering energy, trade and other economic questions. On the specific conflicts which have clouded our relations, I have no special insights; it would not make much sense to inject my opinions into issues that our public officials have been grappling with for years.

Unfortunately, the resolution of these concerns has been complicated by a peculiar habit in Washington to take its friends for granted. At least in this respect, I think we can expect a noticeable change in the new Administration. We have already seen some important gestures.

As President-elect, Mr. Reagan took a symbolic step in meeting with the President of Mexico, on Mexican soil--signaling his desire to improve understanding and co-operation with our neighbours. I am certain he will meet with Prime Minister Trudeau at the earliest possible moment. I hope it will be here in Canada. However, such gestures have little meaning unless they are followed up by decisive efforts to solve more fundamental problems. It will not be easy, but together our two nations possess enormous resources. I am not just talking about agriculture and oil and other natural resources. The real strength -the real resources of North America--reside in the hands and hearts and minds and labour of its people, and in its common institutions and traditions that go back centuries.

We will need to marshal all these resources to deal effectively with basic, structural economic problems--including declines in productivity and capital formation; deficit spending and over-taxation; soaring inflation and interest rates; massive trade imbalance, and what academics call "the problem of maturing industries" or "slow economic rot."

The impact of all these factors can be seen in both our nations to a greater or lesser degree, in steel, in construction, but no more dramatically than in the auto industry, an industry that the former U.S. Secretary of Transportation has called "a vital mobilizing force in our defense capability."

Before leaving office, the Secretary issued a powerful warning against relinquishing the North American automotive market to the Japanese. "Our strategic position," he said, "could be gravely undermined were we to depend on others for our basic manufactured goods."

This warning is not irrelevant to Canadian public policy.

In the United States, the auto industry accounts for 8.5 per cent of the nation's gross national product. In 1980, the industry accounted for twenty-one per cent of the demand for U.S. steel, twenty-five per cent of the cast iron and machine tools, and twenty-two per cent of the aluminum, as well as significant amounts of rubber, glass, lead, textiles and electrical components. To allow this industrial capacity to move offshore would render the North American defence capability unacceptably vulnerable. Yet, a minority of vocal doomsayers are counselling just such a move--as a way to solve our current economic dilemmas!

Some economists are hoping for "a thorough-going financial crisis" as the only solution to inflation. Others are cashing in on current mass anxiety by peddling books to prepare people for the coming "depression," or "crash," or mass unemployment. You name the economic disaster, and there is a best-selling book to prepare you for it! This kind of madness is reflected in the mass hysteria that recently caused forty billion dollars in accumulated wealth to be wiped off the books when supposedly sober Wall Street professionals responded to a single cry of panic selling.

Such fears feed on themselves. The problem is that there is just enough evidence of economic vulnerability to give credibility to these peddlers of desperation.

On the surface, the current plight of the North American auto industry appears to provide such evidence. For example:

Twenty-five per cent of the American and eighteen per cent of the Canadian automotive work force is still on layoff;

Some 140 U. S. supplier plants have been shut down;

Some 2,100 dealers have closed their doors since January, 1979.

What has brought the industry to this point is neither simple nor easy to explain. It is clear, however, that rapidly imposed government regulations, including tough, costly emission and safety standards, combined with the crisis in world energy, were triggering factors. Chaotic national fuel allocation policies, which produced anxious, panicky lines at the gas pump, forced an overnight shift in consumer demand.

Unfortunately, the auto industry is not geared to dramatic swings in customer tastes. Car designing is obviously not like dress designing, though our critics sometimes think it is. From drawing board to assembly line requires between three and five years of dedicated effort to produce a new line of cars. There are no shortcuts.

The North American auto industry responded to the demand shift with a massive, eighty billion dollar redesign and retooling effort--amounting to an industrial revolution unprecedented in peacetime. The Canadian contribution to this retooling effort should be a source of immense pride. Two weeks from today in St. Thomas, Ford will introduce sporty versions of its "World Cars"--cars which have distinguished themselves in performance, in sales and public acceptance. They have been six years in development and testing, and the Canadian-built EXP and LN7 mark the second stage in a plan to introduce new and improved products roughly at the rate of one every six months. In addition, Ford will soon bring on stream a major new engine plant in Windsor--to produce a new generation of fuel-efficient V-6 engines, giving a long-awaited boost to automotive activities in that area.

The energies currently being dedicated to this revolution on both sides of our common border -the extraordinary design and engineering talent, the creative use of new technology and materials, the labour and management skills--make pure hogwash of those who claim that the auto industry in North America is suffering from an irreversible case of industrial rot. On an annual basis, the auto industry is investing amounts as large as the gross national products of Ireland or Egypt or Morocco to achieve this industrial transformation.

But, as I have indicated, of course such revolutions do not occur overnight. And meanwhile, the Japanese set their targets on what amounted to a windfall opportunity. And they began shipping to North American shores seemingly endless cargos of small, fuel-efficient vehicles--developed over many years in an airtight, protected market.

The impact has been stunning. Japanese imports now comprise some twenty-one per cent of the U.S. and Canadian markets, up from an average of fifteen per cent a year ago, and under fourteen per cent two years ago.

Ford Motor Company in the U.S. has appealed for voluntary restraint by the Japanese during this transition period. We also called on the Japanese to assume a stake in the North American market by producing some of their vehicles in the United States. While appearing willing to consider such proposals, Japanese auto makers continued to produce cars in dramatically increasing numbers. And in 1980, Japan surpassed the U. S. as the largest auto producer in the world.

Restrictions imposed on imports by other countries have diverted more and more Japanese cars and trucks into the open North American markets. The U. S. tariff on car imports is currently less than three per cent, while the European Economic Community enforces a tariff on car imports roughly five times that rate. And the EEC is now preparing for a showdown with the Japanese which is expected to result in further European restrictions on Japanese imports. Outside of Europe, automotive trade barriers are even more impenetrable.

We are not asking to close the door on Japanese imports. We are asking for "orderly marketing," reasonable restraint and sensitivity to those who hold one in twelve jobs in the United States, during the current period of industrial upheaval.

The symbol of an enlightened approach to such concerns is embodied in the U.S.-Canada Auto Trade Pact, signed sixteen years ago last month. It isn't perfect, and it is properly being reviewed for adjustment. But the mutual benefits growing out of the Pact represent one of the success stories of modern international co-operation. As you know, Japanese imports do not fall within the terms of this Pact, and such imports are able to flood both of our markets, freely exploiting the benefits of lower cost structures.

I still sometimes hear the old canard that "Detroit" has only itself to blame for its present problems. Even if this allegation were wholly true (which those in Washington have come to realize is not so), I cannot see any point now in dwelling on the past. The question is: What is required now?

This is a question that applies across the board, across all industry, throughout all of North America. And, again, this is the question that we need to address cooperatively, jointly, bringing to bear on our mutual problems the best Canadian and American minds that we have. Because we are in this together.

Among other things, we need to explore together a variety of incentive policies that directly and indirectly help business--including investment tax credits, inventory allowances and "fast write-offs" on new and used machinery.

We also need to pursue new approaches to job satisfaction, and the auto industry has made great strides in this area in recent years. Generally speaking, leaders of organized labour have seen the benefits of producing higher quality work per hour. Joint industrylabour programs on the production line are benefitting everyone. Recent improvements in quality and cost reduction are due, in part, to labour and management working more closely together. Other benefits have come from this co-operation, such things as greater employee input and greater employee satisfaction.

I believe that this improved working relationship will continue in the future. And more can be done. But first we must reject the notion that continued decline in North American financial and industrial strength is inevitable. We must reject the idea, fostered in some academic circles, that solutions to our economic problems can only follow what they are calling the "moral equivalent of defeat."

This is sheer nonsense.

What industry needs is a clear policy, an industrial policy, that endorses the notion that public decisions--laws, regulations, taxes, standards, and so forth--should take into account the revitalization of the North American industrial base as a fundamental goal.

During the past decade, we in the United States have seen a massive expansion of the government's role in business, often intruding unproductively into management decision-making processes. Given the government's stake in the economy, it's clearly time for greater co-operation between the private and public sectors. Why, for example, has it taken the better part of two years for Washington to determine whether it can negotiate with the Japanese government on voluntary restrictions of its automobile products--a matter of international economic importance? Why hasn't the government taken more aggressive action to encourage capital formation? Why hasn't it viewed regulation of industry with a more flexible set of deadlines and cost-to-benefit analyses, and why hasn't it been more consistent in handling balance-of-trade questions, particularly in providing incentives for export?

We are already seeing some hopeful signs that significant changes are in the offing. I believe that there is a real appreciation of the fundamental economic issues we face in North America among those coming in with the new Administration in Washington.

As a "key to restoring U.S. competitiveness in world markets," President Reagan has called upon both business and government "to lay aside old hostilities and replace the adversary roles they have come to assume with a new spirit of co-operation and shared responsibility." This is a promising start, and it assumes that a re-invigorated industrial base can be achieved. The idea of some kind of North American accord between Canada, the United States and Mexico, raised by President Reagan following his election, was, I'm sure, suggested in a spirit of mutual trust and cooperation, and was conceived to strengthen North America's ability to confront the historical trends I referred to at the outset. Whether or not this particular approach has merit, the idea of closer North American co-operation in meeting our mutual goals deserves close attention. From all appearances, the Reagan administration has placed this idea high on its list of priorities.

A new atmosphere pervades Washington these days. The change of Administration and the return of the remaining hostages from Iran have coincided to provide a framework for fresh beginnings and new hope. The settlement of the hostage issue also served to remind us all of the remarkable and humane role Canadian diplomats played in liberating United States citizens from that troubled cauldron of conflicting forces. The outpouring of gratitude for this singular act of courage served to highlight the underlying respect, good will and common purpose that is the foundation of relations between our peoples.

I have great confidence that, in the months and years ahead, we will be able to build on that foundation with fresh resolve; confront our common concerns with new unity of purpose; and marshal our joint resources for the betterment of both our nations.

Together we can confound the defeatists and doomsayers--and we can make our continent richer, stronger and more productive during the decade ahead than any of us dared hope.

The thanks of the club were expressed to Mr. Ford by Catherine Charlton, a Director of The Empire Club of Canada.