Canada: Facing a Winter of Discontent

Trudeau looks to the U.S. as his economic problems deepen

The trip was U.S. Secretary of State George Shultz's first formal visit abroad, and also a chance for a college reunion. For six hours Shultz closeted himself in Ottawa's Lester B. Pearson Building with a fellow student from the Massachusetts Institute of Technology, Canadian External Affairs Minister Allan MacEachen. When they emerged from their meeting, the atmosphere was almost chummy. The two men agreed that they would henceforth consult four times a year, and they tried to make some progress in resolving the deadlocked cross-border dispute over "acid rain," industrial pollution that destroys life in lakes and forests across vast reaches of both Canada and the northern U.S.

The Secretary of State's meeting with MacEachen and a subsequent talk with Canadian Prime Minister Pierre Elliott Trudeau were signs of a small thaw in a U.S.-Canadian relationship that has grown increasingly frosty. Washington is concerned by what it sees as the nationalistic and discriminatory investment policies of Trudeau's Liberal government. Those worries have been expressed vocally in the U.S. Congress. Last week Congressman John Dingell, chairman of the House Subcommittee on Oversight and Investigations, attacked Canada for "unfair and confiscatory policies in the energy and investment areas." According to a report issued by the subcommittee, those policies are "having a strongly adverse impact on the Canadian subsidiaries of U.S. corporations." Indeed, so strong is the feeling in Congress that, according to Canadian Ambassador to the U.S. Allan Gotlieb, there are 53 pieces of legislation pending in Washington that would curtail U.S.-Canada trade in areas ranging from trucking to electronic technology to automobile manufacture.

Ottawa is now trying hard to correct its image. The reason: foreign, and particularly U.S., investment is central to Trudeau's new strategy for reversing Canada's worst economic decline since the Depression. As Trudeau put it in a televised national address, "A difficult winter lies ahead. We face a challenge unlike any our generation has faced. We must keep our markets open to others in order to secure access to their markets. We must meet the competition at home and abroad."

Canada's economic problems are substantial. Unemployment is at a record 12.2%. The inflation rate is also double digit: 10.6%. Between January and September, 8,074 Canadian businesses went bankrupt, the worst rate since the 1930s. The gross domestic product dropped 7.8% from June 1981 to July 1982. Foreign debt soared from $23.1 billion in 1970 to $73.3 billion last year. Of that, $54.6 billion is owed to the U.S.

The economic difficulties, worse than those of the U.S., are having their political consequences. A recent Gallup poll showed that the Prime Minister, now in his 14th year in office, and his Liberal Party would be soundly defeated by the opposition Progressive Conservatives if elections were held today. Three weeks ago, the Liberals suffered humiliating defeats in three parliamentary by-elections in Ontario, leaving Trudeau with a mere ten-seat majority (146 to 136) in the House of Commons.