I Told You So: Over 45 Years Of Being A Canadian Economic Nationalist When It Was Not Popular

If you haven’t seen it, the 2010 comedy “Hot Tub Time Machine” is far better than the title suggests. The concept is pretty basic, and I won’t go into the plot, but the critical consensus on Rotten Tomatoes is: “Its flagrantly silly script – and immensely likable cast – make up for most of its flaws.”

I opposed the Free Trade Agreement in 1988 by busting my ass to get John Turner elected, and I have been a fervent economic nationalist since the late 1970s. So, if there was a hot tub time machine, I would love to go back to 1990, walk up to Mulroney’s smug face, and tell him what a disaster his trade agreement will be for Canada in 2025 (after it evolved into NAFTA and USMCA/CUSMA).

Of course, I could also go back to 1988 and provide better advice to John Turner, so he ends up winning the election – or maybe even to 1984 to help Turner avoid the mistakes that lead to Mulroney’s victory in 1988.

But if I had a time machine, I would also face the decision of whether to kill baby Hitler, which would mean that history would be totally different, and since a hot tub needs modern North American electricity to run, I might end up stuck in an 1889 Austrian jail for killing a baby, and not even speaking German. So, my “I told you so” will have to be delivered to the people who were old enough to vote in the 1980s and are still around.

What started me towards economic nationalism was the realization that Canada’s economy was not like the US, and I might have to leave to have the life I wanted. I wanted to design cars, like the Mustangs, Camaros of the late 60s and early 70s, or the 1970 Challenger I learned to drive in. But I found out that there were no universities in Canada that taught automotive design, and so I would have to move to Detroit or California. Thus, I went and studied architecture, and took an elective in economics.

I grew up in Toronto, where we got three to six Canadian channels and three Buffalo stations, until we got cable around 1974. But there was little Canadian content on TV that I would watch other than news, sports, and Wayne & Shuster. Well, there was some Canadian animation on in the morning – Hercules, Rocket, Robin Hood and a few other things that just could not compete with the classic Warner cartoons (before they started censoring them as too violent or even racist). On radio, we had the Guess Who and a few other great Canadian artists, but British and American bands dominated.

Being Canadian was something like being an outsider to the US, looking through a window while not knowing what was going on behind me. I knew more about US history and politics than the Canadian equivalents. In my first years in school, we didn’t sing O Canada, but God Save the Queen, though one of my earliest memories is when we got the new maple leaf flag in 1965. My mother and many of her friends emigrated from the UK, but ties to the UK were weakening and leaving a void that was usually filled by the US – with the exception of the British Invasion and the Beatles,  and also James Bond!

While I wasn’t paying attention, Walter Gordon pushed the Pearson and Pierre Trudeau governments towards economic nationalism, though within the Liberal Party there was Mitchell Sharp and others who resisted. It was really only in the 1972-74 Trudeau minority government that Canadian economic nationalism was at its height, in large part because there were economic nationalists (and anti-Americans) in the NDP who forced Trudeau into taking some actions.

We got Petro-Canada, the Foreign Investment Review Agency (FIRA), and later the National Energy Policy (NEP) – which was hated in Alberta, but would have increased Canadian ownership and exploration as well as setting a “made in Canada” oil price. Ironically, if the NEP had stayed in place, Canadians would have had to pay prices far higher than OPEC when oil prices were low through the 1980s. Ontario would have had to pay more than across the border, as it had from the Diefenbaker years when he instituted the “Ottawa Valley Line” that allowed Quebec and Atlantic provinces to import cheaper foreign oil.

At this time, the Committee for an Independent Canada (CIC) group was formed by Walter Gordon and others, for citizens to push for economic nationalism. In his final years in Office, Trudeau was willing to consider free trade deals with the US in five areas, and the Maconald Commission report started under Trudeau, but released later, suggest a free trade deal with the US.

Mulroney ran with the free trade deal despite opposing it when he ran for the Progressive Conservative (PC) leadership – rival John Crosbie had previously championed the idea. However, Mulroney gave away many of his best bargaining chips, like dismantling or gutting FIRA instead of waiting and using it as a bargaining chip to get a better deal.

There is the acronym “BATNA” – which refers to deal making and means “Best Alternative to a Negotiated Agreement”. The problem for Mulroney, and Canada, was that Mulroney had no BATNA since he had given away his best chips and had no alternative plan that the Americans would find disagreeable. So, Canada gave away a lot and got little, instead of walking away.

We had major US multinationals like GM advising both sides – so the 1965 Auto Pact was changed to keep out the Japanese auto companies. Mulroney guaranteed access to our oil & gas – in an emergency, Canada could not hold it back for our own needs, but had to maintain proportional sales. There were other clauses, like Chapter 11, which raised the point at which foreign takeovers could be reviewed. We didn’t get an end to the harassment of our softwood lumber exports.

I had not studied history. I did not know about the US cancelling an earlier free trade deal in 1866, about the high tariffs under US President McKinley – Smoot-Hawley in the 1930s – and I only had a vague recollection of Nixon putting tariffs on Canada in 1971. But John Turner and others knew about these things, and how the US federal government and politics work.

The Council of Canadians was created in the early 1980s to fight against a free trade deal with the US, after the CIC had withered away by 1981 – but after 1990, the Council turned to other more limited issues, like the potential freshwater exports to the US.

We forget that in 1988, more people voted for the Liberals and NDP, the two major parties opposed to the deal, than for the PCs who supported it. That is what “first past the post” gets us. The Liberals should have pushed for a national referendum instead.     

Jean Chretien ran in 1993 vowing to get changes to the NAFTA deal Mulroney had negotiated with Reagan – Reagan wanted to create a trade zone guaranteeing access to Canadian resources and the use of cheap Mexican labour, with US capital and corporations in the middle benefitting from both. Chretien got little changed.

I knew enough Canadian history to know that our country was able to remain independent of the US since 1867 because of federal government policies like the building of the CPR and Sir John A. Macdonald’s National Policy. Macdonald actually wanted more trade with the US, but was forced to introduce the National Policy (with tariff rates on the US lower than their tariffs on us) as a defense. Additionally, tariffs were the main source of federal government revenue before World War One.

We later had Crown Corporations like the CBC, CN, and Air Canada, instead of letting US companies run our economy in sectors where our own private sector wasn’t up to the job.

Since around 2015 when Trump first ran, or even since the Tea Party sprung up in the US after the 2008 economic crisis, neoliberalism and globalization have been questioned from many angles. Trump wants to return the US to the McKinley era when they took over colonies from Spain and imposed high tariffs. I got an MBA in the 1990s, including some more economics and policy based courses, and always wanted to see Canada follow the paths of Japan and Korea instead of the neoliberal globalization approach that has been called “a race to the bottom”. (Note, I highly recommend reading Ours Was the Shining Future by David Leonhardt for an excellent critique of neoliberalism, from an American point of view.)

Perhaps the only thing that Trump gets right is that it is hard for a free enterprise Western nation to compete with authoritarian, non-market economies like China or Vietnam that are heavily oriented towards economic nationalism and have non-tarriff trade barriers that trade organizations like the WTO don’t make illegal.

While I might be able to gloat that I knew this day would come in our relationship with the US, the real problem of course is what do we do about it now.

The standard answers from the political right consist of things like building more pipelines and otherwise doubling down on exporting commodities and natural resources to other countries. Some suggest more trade deals, like with the Association of Southeast Asian Countries (ASEAN), which includes dictatorships like Myanmar and non-market economies like Vietnam. Others suggest tax cuts to corporations. Everybody seems to be calling for eliminating internal trade barriers – except for the provincial premiers.

Nobody is calling for even deeper cuts to immigration when our unemployment rate is at 6.6%, a number that will likely increase drastically if tariffs are imposed. We don’t even know what skills our economy will need, or if any labour shortages will be in unskilled sectors of our economy.

And almost nobody is calling for Canada to move away from branch-plants and build our own great companies like Japan and Korea did. Canada is not lacking in capital, unlike those countries in the 1950s and 1960s. This is perhaps the one area where Canada’s elites and media have yet to change, despite the current crisis.

Economists and business leaders often refer to Adam Smith and David Ricardo to support the ideas of free trade and globalization. But there is another intellectual tradition that believes that free trade is for mature economies, and other countries need to intervene in the economy and trade if they do not want to end up stuck only selling low value commodities (like the old phrase describing Canada’s citizens as “hewers of wood, drawers of water”).

Ironically, this other tradition goes back to the American Alexander Hamilton – the guy in the musical. Others built on those ideas, including German Friedrich List, who wrote a major treatise in 1848. A little known Scottish-Canadian named John Rae wrote a book on this concept in 1834. Japan and Korea, and now China, followed this alternative approach to move up into high value manufactured goods. Ha Joon Chang has written about this, but more recently Canadian economist Eric Helleiner wrote “The Neomercantilists” tracing the intellectual roots of neo-mercantilism in a variety of countries.

Canada needs to move beyond commodities and natural resources, towards selling high valued services and goods around the world. We know lots of German, Japanese, and American brand names and will likely still buy them even if there is a tariff – like a Lexus or a BMW. Other than a Canada Goose jacket, it is hard to think of similar Canadian brands sold internationally.

Technology now means manufacturing need not be located mainly in Southern Ontario or near Montreal. In 2022, Bombardier announced an aircraft manufacturing plant to be built east of Calgary.

It is time for Canada to direct our economic growth strategy away from naïve ideas like high immigration, and start looking at how we can compete and develop competitive advantages in areas unrelated to our natural endowments – just as the US, Germany, and Japan did.