Canadian -American Relations

COLONEL HILBORN

What is there to say when one rises to introduce a man whose notable career calls for a fulsome presentation yet, he is so well known that a recital of his accomplishments is superfluous?

You know Senator McCutcheon as a lawyer and actuary -learned in both professions.

You know him as an insurance executive with not one paragraph of tiny print in his soul.

You know him as a financier with a capacity for handling men with ease and business with alacrity. We assume that when they called him “tycoon” they knew the word means “great prince.”

You know him as a public servant-loyal and unselfish, who has never attempted to convey an impression of euphoria about the national economy.

You know him as a Senator in whom there is no hazardous incoherence.

You know him as a Cabinet Minister who at a time of indecision and doubt was unequivocal in his views.

You know him as a politician mindful of the fact that he serves his party best who serves his country best, and we hope, as was said about Asquith, that he has a profound unwillingness to abandon the struggles to which he has become accustomed.

You know him as a philanthropist with wide and influential interest in the fields of education, agriculture, medical research and care, world trade, international affairs, welfare and the arts.

When we think of him as a farmer who is also on the Senate of the Stratford Shakespearean Festival we echo Emerson who said “I like to have a man’s knowledge comprehend more than one class of topics, one row of shelves. I like a man who likes to see a fine barn as well as a good tragedy.”

So, you will agree he is so well known that there is nothing I need say other than to express our pleasure and our gratitude for his presence and to present Senator The Honourable M. Wallace McCutcheon.

MR. MCCUTCHEON:

Your President, when he honoured me by inviting me to speak to you today, left me free to select my own topic.

The attention that has been centred on the political affairs of our neighbours to the South, during the past few months suggested to me that the subject “Canadian-Ameri can Relations” would be an appropriate one at this time, notwithstanding that I realize the same topic has been discussed by others on several occasions in recent years.

In facing the fact of our cohabitation on this continent with the greatest power in the world, we Canadians are not much more enlightened than we ever were, if as much; but we are somewhat less self-righteous. After some decades during which we “viewed with alarm” the decaying civilization to the south and “pointed with pride” to the purity of our own nationhood, we have suddenly discovered that we had not, after all, achieved the millenium here in Canada. Tensions long repressed have suddenly exploded into the open; we cannot hide them any longer; we are concerned about the future of our Confederation. With troubles of our own at home, we have not had time this past year or so for the finger-wagging at our neighbour which had become almost a national pastime. We have perhaps even become a little more understanding in his problems.

Since we are all Canadians here together, we must concede in confidence that the Americans-whom we have caricatured so often as loud, boisterous and boastful-have shown considerable restraint in their reaction to our present discomfiture. After all we are in much the same position as the old maid next door, always preaching piety and righteousness, always complaining and criticizing her wayward neighbours-suddenly found drunk and shouting obscenities at her relatives. The neighbours don’t know whether to be shocked or to laugh out loud. We live by very understanding neighbours indeed. They have drawn the shades, and they are minding their own business … though the temptation to taunt us with some old Canadian editorials on American affairs must be very great indeed.

Those whose mission in life it seems to be to raise the dire warnings about American threats to our sovereignty do, usually, make a perfunctory nod to reality by noting in passing that there are certain advantages to living alongside the biggest industrial and military power in the world. They then proceed to enumerate the disadvantages and complications. I suggest that for a change we might be more specific about the advantages, and at the same time analyze the alleged dangers somewhat more thoroughly.

Canadians have been obsessed with threatened American domination, cultural, political, economic, for a long time. The American influence, we have often said, has been overpowering. Therefore we have not been able to realize distinct and independent Canadian attainments in these fields. This has been offered as an explanation; too often, it seems to me, it is little more than an excuse for our own shortcomings. As a matter of fact, the measures we have sometimes taken to counter this influence by encouraging Canadian self-expression and autonomy have had precisely the opposite result.

Recently a Canadian subsidiary, wholly owned by its American parent, offered 25% of its equity shares to the Canadian public. This action is in accordance with the stated desire of the Minister of Finance and resulted in the lower rate of withholding tax offered by the Minister being applicable to this company. $60 million invested by Canadians in this company certainly gave us no measure of control. We have the same degree of control that any 25% partner has over his 75 % partner. In other words merely the control the majority partner is prepared to permit. The money the company received is not going to be invested in Canada. It is not going to build new plants or create new employment. In fact it has left, or will leave Canada, in the form of a massive dividend to the American parent. I suggest that this $60 million might have been better invested in new and expanding Canadian developments.

Similarly, there is often a great deal of discussion about the need for an independent Canadian voice in world affairs. Now there is no reason why we cannot make our own Canadian contribution to the United Nations, to the Atlantic Alliance and so on. Indeed, we have been and are doing so. But there are two elementary points that I think we should keep in mind.

First, if our approach to world problems seems very often to coincide with that of the Americans, it is for the good and sufficient reason that our interests very often hap pen to coincide with that of our neighbour. Whether we are embarrassed by this fact is beside the point: It is a fact. The second point that should be borne in mind is that when we congratulate ourselves on the regard in which we are held in the world community, we ought to keep our self-esteem in perspective, if possible. If we have, as is often asserted, an influence in the world community out of proportion to our size as a nation, it is first of all because we do happen to live next door to the United States, and because we are a member of an older world organization, the Commonwealth.

I would be the last to deprecate the contributions that have been made by Canadian statesmen in our own right, to world affairs. But I am certain that we would not have been able to make nearly as great a contribution if we did not happen to share a continent with the United States. Canadians are also inclined to complain about the cultural dominance exercised by the United States over Canada. As Professor Ian Macdonald has put it, “We drink up American life while complaining about a chronic hangover.” It is true that the influence of American culture-American books and ideas, American radio and television-is very great. It is also true that Canadian ideas, Canadian attitudes and Canadian talent is represented to only a limited degree in this process. It is also true that Canadians have a great deal to do if we are to develop here our own distinct and independent means of sharing our own cultural offerings. (And I use the plural advisedly. We are a nation of many cultures-not one. God forbid that there should ever be one Canadian culture.)

But again, we often lose sight of some elementary consideration. First, there is this tendency to think of the American culture exported to Canada in terms of Playboy, the Police Gazette or the Beverley Hillbillies. This of course is a bit of supercilious arrogance on our part. It so happens that there is a very great deal that is informative, worthwhile, even elevating, in American magazines, television and radio. Moreover, the fact that there is a huge mass market in the United States also makes available to us, inexpensively, a wealth of artistic talent, great writings and other cultural amenities which our own economy could not support.

My second point is that we should abandon the notion that the effective way to encourage Canadian expression is to put up a barrier against the free flow of ideas from elsewhere. It has been accepted for a long time that in our country, government has a responsibility to foster and encourage the growth of Canadian cultural expression. We can accept this premise-without concluding that the way to do so is to undertake discriminatory policies against American television or periodicals. In saying this I am not suggesting that we should not impose some barriers against American publications masquerading as Canadian.

As I have suggested earlier the question of CanadianAmerican economic relations is rife with misconceptions; and the pursuit by Canada of “the Canadian interest” in these relations sometimes turns out to be illusory and selfdefeating. We sometimes manage to contrive unnecessary policies to meet imaginary dangers, and the result is to create new problems or aggravate existing problems.

Let us try briefly to place the situation in perspective. We nineteen million Canadians live alongside a neighbour ten times as large. Our trade in goods and services is greater than that of any two other nations in the world. The rate at which the U.S. economy expands will inevitably, over a period of time, have an effect on Canadian growth and development.

We share between us vast natural resources. The border between us is a highly artificial one-it is not an economic border; nor is it a geographic border in the sense that it is a natural geographic border. Because Canadians are determined to maintain a Canadian nationality on the one hand, and an American economic level on the other, our Canadian approaches are sometimes anomalous if not schizophrenic. I do not pretend for a moment that our problems are not difficult or that the solutions are uncomplicated. But it does seem to me that we should be governed by some very simple principles, assumptions and procedures.

First, if we expect each partner to take account, in the development of its policies, of the legitimate interests of the other, we must both of us definitely refrain from the type of unilateral action that complicates matters for its neighbour. The increase in the withholding tax by Canada followed by the imposition of the interest equalization tax in the United States are two classic examples of policies which should have been discussed, and formulae worked out, between the two countries. In the event the Canadian policy, in its only significant application to date, has as I said backfired. The American policy was somewhat modified to the extent that it bears upon Canada, in subsequent negotiations. But an arrangement that would further the legitimate policy objectives of both countries should have been worked out in the first instance.

I shall not comment on the situation that has developed with respect to the so-called Drury plan re the export of automotive parts except to say that it is another example of unilateral action which it appears may excite reprisals-and that the discussions now going on between Canada and the U.S. (details of which are not known) might better have been undertaken in depth in advance.

Canadians, it seems to me, must also be somewhat more realistic and perhaps less juvenile in our reaction to American policy on such matters as trade with Communist countries. It so happens that the realities of the American political situation have not yet permitted the Americans to indulge in trade with Cuba, Mainland China or Russia to the extent that Canada does. For reasons that do not apply to Canada, relations between the U.S. and Cuba and Mainland China constitute a highly sensitive political fact-and we should recognize that fact. Now we may think the American view is unrealistic, even foolish. But we, too, have our own political hot potatoes, red herrings and sacred cows -to pile one metaphor on another-and we should not be quite so eager to scoff at those of others. Moreover the Americans are highly vulnerable to world opinion, particularly in those difficult areas where they are carrying the burden for the western world, and we are not.

We do not have to agree with American policy on trade with, say Mainland China or Cuba in non-strategic goods. We do not even have to follow their policy, as is clear. But we should at least respect it. Because, for our own advantage, if we happen to part company with American policy in these respects, there is still no call upon us, it seems to me, to proclaim to the world that we are infinitely more “liberal,” more “progressive,” more “enlightened” than they. It just happens that our position is a bit more fortunate in this respect. Instead of preaching to the Americans about this question of trade with Communist countries, we should seek to obtain agreement with the Americans for a change in American law which will permit Canadian subsidiaries of American companies to export under the same conditions of Canadian-owned companies. In return for this agreement we should be willing to establish adequate safeguards to make sure that American companies do not use such an argument for the deliberate purpose of evading American law. We have undertaken to limit our trade with Communist countries to non-strategic goods and to prevent Canada being used as a medium through which U.S. produced goods might be shipped to such countries when U.S. law prohibits their direct export. We should continue this policy.

There are other bogeys and false assumptions about Canadian-American economic relations, and especially about American capital in Canada. One such assumption is that American parent companies tend as a matter of policy to restrict their Canadian subsidiaries in the export field, keeping the export market for the American firm. This assumption has been repeated so often that it is almost an article of faith in some quarters. There have been two recent studies which in effect disprove the assumption. One, by Dr. H. E. English, Director of Research for the Canadian Trade Committee was entitled Industrial Structure in Canada’s International Competitive Position. He investigated three large areas of manufacturing-the chemical industries, the machinery and equipment industries and the consumer durables industries–and found that foreign owned firms as a rule had been willing to export when tariff circumstances made this possible, and in fact encouraged such exports. Another study by Professor A. E. Safarian of the University of Saskatchewan found that the degree of foreign ownership has little relation to the size of exports by foreigncontrolled manufacturing enterprises, and that “problems which inhibit Canadian exports are generally common” to both foreign-owned and Canadian-owned firms.

Critics of foreign investment in Canada sometimes seem equally oblivious to the fact that such investment has been largely responsible for our economic expansion since the war and for the fact that we enjoy one of the highest standards of living in the world. Likewise do they seem oblivious to the returns to the country in taxes, and finally there is the assumption that the chief result of this investment is a continuing flow of profits to south of the border. In point of fact it has been demonstrated that American-owned firms have a better record in the reinvestment of profits than do Canadian-owned firms. In recent years, according to Professor Macdonald, capital expansion of foreign subsidiaries in Canada has been “fairly evenly divided” between new capital inflows and reinvestment of profits.

This is no audience before which to take a partisan view -although on the topic I have chosen it is difficult not to do so. All I will say is that the latest example of the govern ment’s inclination to chase shadows and phantoms in its quest for Canadian autonomy is evidenced by certain provisions of Bill C-123 recently introduced by the Minister of Finance. This is not the forum for me to discuss what can only be evidence to our friends outside Canada that our government is determined to continue to enforce restrictions on the free flow of capital-or, as one more bit of evidence that the government may not mean what it says when it claims to welcome foreign investment or that the climate for foreign investment in this country may be somewhat chillier than some of us would like. I shall discuss this matter in another forum-all I say at the moment is that the exercise will merely serve to irritate without achieving any beneficial result.

The third bogey about foreign and particularly U.S. investment in Canada is that we run the risk of losing our political independence. The implementation of the national oil policy is but one piece of evidence to the contrary. This policy has been accepted by the great international oil companies, and no doubt it runs counter to their own global interests at times. But it is imposed and accepted without legal sanction, but with the moral authority of the government of Canada behind it. It is, as I say, evidence that Canada will continue to be mistress in her own house. Anyone who suggests otherwise does not know the temper of the Canadian people.

One could deal with this whole matter at very great length. Time will not permit. It may be that in certain fields the rules of the game should be changed before new players come in. That was done in opening our far northern resources for exploration and hopefully for commercial exploitation. But we should not indulge in the dubious pastime of changing the rules for those now here and whose arrival when they did come, we welcomed.

At the end of a three day meeting the Canadian-American Assembly on the Canada-United States relationship, issued a report which represented the consensus of opinions expressed though it was understood that not every participant agreed with every statement.

I quote the final paragraph:

“Canada cannot survive without the United States and the United States has a fundamental national interest in the survival and development of a strong, vital, free and independent Canada.”

With that statement I agree, and on that note I close.

Thanks

Thanks of this meeting were expressed by Mr. Arthur Inwood, a Past President of the Empire Club.