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This article provides information about the economic nationalism in Canada:
The movement of economic nationalism in Canada was aimed at achieving greater control by Canadians of their own economy.
The movement, which was a result of the foreign control of the Canadian economy, had two main separate areas of concern.
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Protectionism in trade:
It was, in fact, a consequence of the National Policy of 1879, which was to encourage the creation of an industrial base in Canada by protecting small industries against the competition of larger and more established firms. Similarly, protectionism in trade was to establish a system of tariffs to favour domestic production of goods and to discourage imports.
The second area of concern related with the ownership of Canadian business by foreigners. It was a post-World War II phenomenon.
After World War II, there was a rapid increase of foreign ownership in the Canadian economy, which was linked to the rise of multinational corporations. A number of multinationals started their branch plants or subsidiaries inside Canada. As the ownership of these foreign corporations increased, there was an increased concern shown especially by the economic nationalists who, as a result, demanded legislation to monitor the activities and check the growth of foreign ownership in the Canadian economy.
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But there was another group, which was in favour of “free and unhampered” trade with all nations. This view was naturally based on the doctrine of economics known as the law of comparative advantage. The argument is that “economic growth will be maximised when government restraint is minimised and all countries specialise in the goods they produce best and trade freely with each other”. Keeping this doctrine in mind, a condition also laid down for foreign companies that “foreign-owned firms would succeed in establishing themselves in Canada only to the extent that they could produce their goods more cheaply than local firms, thus benefiting Canadian consumers and the Canadian economy”.
This argument was based only competitive economic environment with the prevalence of free markets but it was questioned by the economic nationalists, who saw the presence of the multinationals and the American firms as not healthy for the small industries of Canada. The concerns of economic nationalists were articulated in a series of four government-sponsored reports drawn up over the past several decades. These are elaborated as follows:
The Gordon Commission:
The first report on Canada’s Economic Prospects was established as a result of increased foreign ownership in the Canadian economy. It was named Gordon Commission after its Chairman, Walter L. Gordon. The growth of foreign direct investment was pointed out and it was also felt that “legitimate Canadian interests” were being compromised in the process.
The report recommended that Canadians be permitted at least part ownership in foreign-owned subsidiaries operating in Canada. Unfortunately, the report did not receive much attention and the general argument was that “Canada and Canadian workers in particular would benefit by the removal of all restrictions to trade and foreign direct investment, for nothing would raise the level of economic activity and boost incomes more rapidly”.
In the 1960s, a new wave of economic nationalism emerged which ultimately led to three more government-sponsored reports in the late 1960s and early 1970s, which described various problems created by foreign-owned subsidiaries operating in Canada. There were a number of problems. For instance, Canadian branch plants not only lacked the facilities to conduct research and development but also lacked full-fledged marketing and purchasing departments because these functions would often be managed by the parent firm in the US or Europe. The other major problem was related to management.
Since the companies were directed from abroad, Canadian managers and management were not able to develop to their full potential. We can infer from the above that dependence on various US capabilities was slowly being built into the structure of Canadian industry, leaving it less able to adapt to change and international competition. Moreover, the lack of Canadian directors on the boards of foreign-owned subsidiaries led to less number of orders for Canadian companies. A number of policies were recommended in response to these various problems.
The Watkins Task Force:
In its report published in 1968, it recommended the “creation of a special agency to co-ordinate government policies and programmes dealing with multinational corporations”. To monitor the behaviour of these firms by providing more information on their activities was one of the tasks of the agency.
The Wahn Report:
This report was published in 1970 and made a suggestion that Canadians should attempt to secure 51% ownership in foreign firms and laws should be made so as to countervail American extraterritorial jurisdiction. These laws would effectively make it illegal for corporations operating in Canada to refuse legitimate export orders from any country, regardless of the nature of that country’s diplomatic relations with the US.
It also proposed that any future takeovers of Canadian business by foreign- owned firms should require the consent of a control bureau such as the one outlined by the Walkins Report, and that certain “key sectors” of the economy should be identified where no further takeovers would be allowed.
The Gray Report:
The Gray Report, published in 1972, also known as Foreign Direct Investment in Canada, recommended the establishment of a “screening agency” and also specified the particular areas to be permitted or forbidden for foreign direct investment.
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These reports, in a way, formed the basis for nationalist sentiment in Canada in the 1970s. In 1974, the Foreign Investment Review Agency (FIRA), based on the recommendations of the Watkins, Wahn and Gray Reports, began to review all proposals for foreign takeovers of existing business or the creation of new foreign-owned businesses in Canada, for the purpose of ensuring maximum benefits to Canadians from these enterprises. FIRA was structured very closely upon the recommendations of the Gray Report, and Herb Gray became its first Chairman.
Due to the influence of the economic nationalism movement, in 1980 the National Energy Programme (NEP) was established by the Liberal government to monitor the security of Canada’s energy supply and to provide Canadians with the opportunity to increase their ownership of the energy industry. In a nutshell, we can say that economic nationalism in Canada can best be understood in the context of Canadian dependence on the U.S. In addition to economic regulation, social and cultural regulation has also been used to promote national unity and cultural identification.