CANADA: Vassal or Beneficiary?

So heavy is total U.S. investment in Canada ($4.2 billion in the past five years) that it now equals almost half the gross national product. Canadians rejoice in the boom that the money brings—but they are increasingly uneasy about the implications. CAN WE SURVIVE u.s. INVESTMENT? asked a recent headline in Toronto’s Financial Post, Canada’s most influential business newspaper.

Last week U.S. Assistant Secretary of Commerce for International Affairs Henry Kearns, a former California automobile dealer, gave a blunt answer to the question. Such fears, he told the Toronto Board of Trade, came as a “shock and a surprise” to Americans, who have been “perhaps somewhat naively proud” of the part U.S. capital has played in the economic development of friendly nations —and particularly in Canada’s postwar boom. Since 1953, he said, for every dollar withdrawn from Canada as an investment profit, U.S. firms have reinvested more than $2 in Canada’s long-term growth. They have paid $450 million yearly in Canadian income taxes, built up some of Canada’s most profitable exports, e.g., nearly $1 billion in pulp and paper sales annually to the U.S. Said Kearns: “We have never regarded capital invested in Canadian enterprises as anything but Canadian in its participation in the national life.”

If Kearns thought his argument would tranquilize Canadian concern, some sharp editorial retorts soon gave him reason to think otherwise. “That is the wrong tone to use, even with economic vassals,” snapped the Toronto Star. “Canadians are perfectly aware that U.S. capital comes in here because this is a profitable country in which to invest, not for altruistic reasons. U.S. capital dominates many key Canadian industries. What this means is that the making of economic decisions affecting Canada lies far too often in non-Canadian hands.” Said the Financial Post: “Canadians wonder whether they can call their country their own when outsiders own so much of it.”

A calmer reaction came from the Ottawa Journal: “If Mr. Kearns had taken the trouble to consult a few informed, responsible people, in Toronto, he would have avoided being ‘shocked,’ would have discovered that the Canadians who are crying havoc about U.S. investment are the sort of people who are always crying havoc about something and are not representative of Canadian opinion. Mr. Kearns then might have spared us his own excited talk.”