Canada in an Uncertain World Economic Environment

Karl Burak was a solicitor in North Vancouver, B.C.

Unfortunately, this publication does not contain a readily apparent explanation of what it is. The reader unfamiliar with the publisher and its publications might assume he is reading a magazine of essays in international economics, in this issue featuring Canada in the world economic environment. He might equally assume he is reading a solitary publication of one paper in a magazine format. The words “Essays in International Economics” on the front cover and a footnote at page 5 (which is printed at page 33 and explains that the reader is looking at a paper originally presented in Ottawa in March of 1980) do not adequately explain the publication. When he sees the last pages, which list publications of the Institute for Research on Public Policy, a research organization based in Montreal, the reader may conclude he is reading an “Occasional Paper” published by the Institute.

In any event, this paper is about changes in world trade in the 1970s and the possible effects of these changes on the economy of Canada in the 1980s. Some of the significant changes identified include growth in per capita incomes in developing countries, increased volatility in exchange rates, increased private sector holdings of foreign exchange, and rapid growth of international trade in manufactured products relative to growth in manufacturing in the industrialized countries. Given these changes, it is difficult to be optimistic about the economy of Canada in the 1980s. The author points out that Canada is at a comparative disadvantage in the growing area of world trade in manufactured products. The bulk of Canadian exports is to the U.S. market, which has not grown as fast as markets in other countries. Canada has lagged behind other countries in the adoption of new technologies.

Although it is difficult to be optimistic, the situation is not irretrievable. Canada can achieve levels of wealth relatively comparable to those previously achieved through essentially a primary products economy. The answer lies in the adoption of economic policies which promote more efficient domestic manufacturing: “a relatively open posture in relation to the acquisition and adoption of new technology developed elsewhere,” and “an open outward-looking attitude” as opposed to “protectionist, inward-looking nationalistic policies.”

To some readers the answer will not be realistic. They will ask whether the economy of Canada has been hurt or helped by quotas and domestic content requirements placed upon imported products. Can new high technology industries realistically compete in an open market, with the advanced high technologies of other countries? Is there a viable alternative to extensive protection and subsidies? To those who advocate free trade in an open world market, this paper delivers a valid, inspired message, as relevant today as in March of 1980. To those concerned with returns in the short run and the immediate effects of an open policy, the message must be tempered with some recognition of what an established economy and its participants can reasonably accept.