Asleep at the Switch by Smardon Bruce;

Author:Smardon, Bruce;
Language: eng
Format: epub
Publisher: McGill-Queen's University Press
Published: 2014-01-01T00:00:00+00:00

The reference in the budget speech to “export subsidies” in the United States was in response to the development of the Domestic International Sales Company program under the Nixon administration in 1971. The program was designed to increase the extent to which American transnational corporations exported from their production facilities in the United States, rather than from branch plants located in other countries. Although, given the export limitations of Canadian branch-plants, the program was formulated more in response to the growth of transnational production and export activity in other parts of the world, particularly Europe, it still represented an attempt by the American state to shift production activity back to the US economy. In the perception of federal officials, the US measures, which were intended to stem the rising balance-of-payments deficits caused by the deteriorating position of American exports in the face of the growing role of Europe and Japan in world trade, contributed further to the stresses that were already being felt with the falling level of exports in the manufacturing sector.54

TECHNOLOGICAL DEPENDENCY: THE GRAY INITIATIVE

The difficulties experienced in the manufacturing sector occurred at the same time that more action was taken at the Cabinet level in regard to the twin issues of dependent technological development and domestic control of the Canadian economy. As discussed earlier in the chapter, Herb Gray was given responsibility for developing a policy framework to address the issue of “Domestic Control of the National Economic Environment.” At a Cabinet meeting on 28 July 1971, Gray presented his report, which placed major emphasis on the dependent character of Canadian economic development. It stated:

The degree of foreign ownership and control of economic activity is higher in Canada than in any other country. Foreign control is highest in resource-based and manufacturing activity, accounting respectively for about two-thirds and three-fifths of investment… Approximately four-fifths of foreign controlled capital employed in manufacturing and resources is controlled from the US. This high and growing degree of foreign, and particularly US, control of Canadian business activity contributes to a Canadian industrial structure which largely reflects the growth priorities of foreign corporations. Many of these corporations invest in Canada to extend the market for their manufactures. Subsequently, Canada tends to become locked into a dependent pattern of accepting innovation and technological development originating from abroad. Other corporations invest in Canada to extract resources for home consumption. In either case, to the extent that these corporations are influenced by their home environment, their investment decisions may reflect the laws and industrial priorities of foreign governments and economies. This in turn contributes to the integration of the Canadian economy into the world economy in a dependent way which makes it increasingly difficult for Canada to realize its growth and employment objectives… The high and growing degree of foreign, especially US, control contributes also to the establishment of “truncated” firms, e.g. firms in which many important activities are performed abroad by the parent company, with the result that the development of Canadian capacities or activities in these areas is stultified.

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