Home › Features › Essays › Canada, the United States and the World Economy

Canada, the United States and the World Economy

Marie-Josee Drouin and Harald B. Malmgren
Winter 1981/2
Summary -- 

Relations between Canada and the United States have become more strained than at any time in recent memory. There have been many earlier periods of tension, but the policy orientations of the two capitals in late 1981 appear to be far more divergent than in the past. The two governments seem to be on a collision course, in a context that political leaders cannot fully control.

Marie-Josée Drouin is Executive Director of the Hudson Institute of Canada, a columnist for La Presse in Montreal, and author of Canada Has A Future and the forthcoming Quebec 1985. Harald B. Malmgren is President of Malmgren, Inc., an economic and consulting firm in Washington and London, and Adjunct Professor of Economics at Georgetown University. He was U.S. Deputy Special Trade Representative from 1972 to 1975, and has written widely on trade policy.

Login or Register to leave a comment.

Relations between Canada and the United States have become more strained than at any time in recent memory. There have been many earlier periods of tension, but the policy orientations of the two capitals in late 1981 appear to be far more divergent than in the past. The two governments seem to be on a collision course, in a context that political leaders cannot fully control.

Under the Reagan Administration, Washington is currently intent upon further liberalization of the economy, domestically and internationally, and upon reducing the distorting role of government intervention in key sectors. Ottawa seems to be seeking means to insulate itself, not only from the U.S. economy but from other undesirable external economic forces, while moving to enhance rather than reduce the government role in shaping the Canadian economy. As we shall see, Canada has its own varied list of complaints and grievances against the United States. But it is the list of American complaints that has now become both long and much more focused on basic policy differences.

The most contentious issues are the new Canadian National Energy Program (NEP), the expanding role of the Foreign Investment Review Agency (FIRA), the recent establishment of new official bodies to insure adequate benefits to Canadians of major energy and other natural resource projects, and various other efforts to discriminate against outsiders and favor Canadians. Some of these policies and official activities so boldly challenge U.S. government policies and private industry interests that some members of Congress and representatives of private firms have pressed for strong counteraction. The Department of Commerce has taken a broad survey of American business to identify grievances, and the U.S. Trade Representative has said that the initiation of a comprehensive investigation of Canadian policies is being considered, under a section of the law that authorizes retaliation if it is found that another government's policies unfairly affect U.S. commerce.

This is a premium article

You must be a Foreign Affairs subscriber to continue reading. If you are already a print subscriber, click here to activate your online access.

Buy PDF

Buy a premium PDF reprint of this article.

Related

Essay, Winter 1981
Mexico-U.S. Relations: Big Initiatives Can Cause Big Problems
Susan Kaufman Purcell

The United States recently "discovered" Mexico. Potential oil reserves of 200 billion barrels helped focus our attention and sparked interest in forging some kind of special relationship with our southern neighbor. Concrete proposals range from a North American Accord or Common Market to less dramatic package deals that would swap petroleum for increased Mexican access to U.S. markets.

Read
Essay, Summer 1984
The American Trade Deficit in Perspective
Arthur F. Burns

In recent years, the strong American recovery in overall production and employment has been accompanied by further deterioration in the merchandise trade of the United States with other countries. The reasons for focusing on American merchandise trade are not merely parochial; it is important for Europeans and others to understand that this poor trade performance of the United States reflects a disequilibrium in the world economy as well as in the American domestic economy. Political strains in many countries have been the inevitable result. The promises made at last year's Williamsburg Summit with regard to international trade and finance have not been fulfilled. If anything, international tensions arising from economic issues have increased during the past year.

Read
Essay, Special 1980
The Conduct of American Foreign Policy: Reflections on a Heavy Year
George W. Ball

This year was in all respects a very heavy time," wrote the authors of the Anglo-Saxon Chronicle in 1097, and we can appropriately use the same phrase to describe 1980. To be sure our country was not engaged in war; the Danes did not raid our coast; America was still rich by world standards; and the harvest was adequate. But a doleful chorus of lamentation was heard not only in our land but throughout the non-communist nations. It had a persistent recurring theme. At a time when the Soviet Union was systematically extending its military reach, the United States was falling into apathy and incompetence. No longer did we Americans seem willing and able to assure the security of our friends and allies. No longer did we display the mastery of events that had given confidence in our economic, political and military leadership.

Read
Cover image

In the Magazine

November/December 2009 / 6, 88
Essay
In the Quicksands of Somalia
Bronwyn Bruton

Washington's repeated attempts to bring peace to Somalia with state-building initiatives have failed, even backfired. It should renounce political intervention and encourage local development without trying to improve governance
Read