U.S. continues to maintain strategic bases in various parts of the world — air bases, radar sites, submarines and surface vessels, together with a vast armory of sophisticated missiles.
“Granted, then, that the United States has the power and is prepared to use it, what support would Canada have in its struggle with that giant? Very little. Under President Nixon, many of the tensions between the United States and the Soviet Union, on the one hand, and the United States and China on the other, were substantially eased, with the result that the relationship of the United States to both these countries is on a stable level. Therefore, it would be impossible to expect that in this crisis Canada could depend on any diplomatic or other support from the Soviet Union, and certainly not from China.
“Probably the best we could expect would be the support of world opinion against the action taken by the President. Frankly, I do not expect world criticism to have any effect whatsoever on the President. Canada stands alone, without any hope of defending itself militarily.
“On the other hand, I do not think the President would be prepared to take Canada by force, thereby risking the confidence of all the major powers and indeed of the world. The spectacle of the United States seizing an ally, its major trading partner, is one which I cannot visualize. Furthermore, there is little doubt in my mind that the President can achieve most of his objectives by hard bargaining now that he has stressed that the United States needs the fossil fuels immediately and that he is not prepared to accept any further delays.
“Let us for the moment assume that the United States will act against Canada by way of sanctions should we fail to accede to the ultimatum. There is no doubt that this is in the President’s mind. As we all know, he imposed an embargo yesterday at noon against the flow of investment capital into Canada, though he later withdrew that sanction when we countered with the threat to cut off all exports of oil and gas.
“Sanctions have undoubtedly been the United States’ prime weapon against its trading partners who have gained an economic advantage. The States first employed such measures in earnest a decade ago when, as a result of a deficit in world trade, it began to take steps to protect its dollar and to support its work force. As foreign goods became competitive in quality as well as price, and as the outflow of American dollars around the world continued to exceed inflow of capital, it became apparent that the American dollar could not withstand world competition. It began to fall in value, a reflection of the fall in relative productivity of the United States’ industrial complex.
“Finally, in 1971, as a reaction to the thrust of foreign products into the American market, President Nixon imposed a 10 per cent surcharge on all imports of manufactured goods. It is significant that he very carefully excluded from this category the natural resources necessary to keep the U.S. industrial machine in operation. Canada was caught in that net, despite the fact that we were the major trading partner of the United States. After some revaluations of foreign currencies, President Nixon withdrew the impost. Nevertheless, shortly after, the United States government created the Domestic Incentive Sales Corporation program. DISC was designed to attract American manufacturing capital back to the United States, to induce American corporations which had manufacturing subsidiaries in foreign countries such as Canada to shut those subsidiaries down and return the jobs to the U.S. The device was, and still is, a very simple one, and while the DISC program cannot be classified technically as a sanction, it nevertheless demonstrates the type of America-first action which that country is prepared to take, regardless of its trading partners or neighbouring countries.
“In 1975, the United States enacted the Burke-Hartke Act, which provides even more protection by making it possible to put a ceiling on the import of any given commodity into the United States. As you well know, this has worked a serious hardship on Canadian industries, the majority of which are subsidiaries of United States firms, and has created an enormous impediment to the sale of Canadian-manufactured goods in the United States, Canada’s biggest market.
“Thus there is little doubt in my mind that the United States will not hesitate to impose economic sanctions to achieve the aims of the ultimatum.
“That concludes my brief, Prime Minister. Now if I may, I will deal with the questions in the order in which they have been delivered.”
Gendron stopped and turned to speak to his deputy, Max Peterson, sitting on his right. Peterson had been collecting and making notes on the question papers. He gathered them together and handed them all to the Minister.
Gendron put the stack of papers on the lectern and said, “Ladies and gentlemen, I have about nine minutes left of my time allocation. I’ll try to get through as many of these questions as I can.
“The first question is, ‘Is there any evidence of troop movement in Detroit or Buffalo, or in any of the northern American cities?’
“The answer is, ‘No, there is not, although as of yesterday morning at nine o’clock there was a sharp increase in the number of bomber and fighter flights over Canadian territory by the USAF. We regard these overflights as merely a form of intimidation rather than any preparation for military action.’
“The next question is, ‘If the flow of United States investment capital to Canada is cut off, what are the chances of getting an increased volume from Western Europe, and especially from the Middle East members of the Organization of Petroleum Exporting Countries?’
“That is an excellent question. As you know, the members of OPEC — which includes Saudi Arabia, Iran, Iraq, Kuwait, Venezuela, Libya, Algeria, and others — are tremendously wealthy as a result of their sale of oil to the United States. They export 80 per cent of the petroleum on the international market and control 70 per cent of the world’s oil reserves. They are therefore very powerful.
“It is regrettable, perhaps, that Canada does not belong to OPEC. We were invited to join two years ago, but when pressure was put on by the United States to decline, we did so. Nevertheless, I have instructed our ambassadors at Beirut and Teheran to set up emergency meetings today with the heads of government of all the OPEC countries in the Middle East. Our Ambassador in Italy is in Libya and will also go on to Algeria. The Ambassador will explain the nature of the emergency and seek immediate investment support in the event that sanctions are imposed.
“At this point we don’t know what the response of the government leaders of the OPEC countries will be. I believe there is an enormous base of sympathy on their part for Canada. They realize that our relationship with the United States has slowly become more difficult over the years. I can assure you if the OPEC countries do support Canada with investment funds, it will be on the condition that we join their organization. One of OPEC’s reasons for existence is that, since its members control so much of the world’s supply of oil, they can apply pressure on the United States, which now must buy over 60 per cent of its oil and energy supply from foreign sources.
“There is one further point. … Excuse me for just a moment.” The Minister for External Affairs hesitated, then left the lectern and walked around the end of the table to his right to where the Prime Minister sat. The two whispered together briefly, and then Gendron returned to the lectern.
“I thought I should check with the Prime Minister on what I am going to tell you next. As you know, the Prime Minister secured the lifting of the American investment embargo by threatening to cut off exports of oil and gas to the United States. He had hoped that the threat would be strong enough to cause the President to lift the ultimatum altogether, but it was not. What the Prime Minister has now agreed that I may reveal to you is that our ambassadors have been instructed to say that if Canada is forced to apply such a counter-sanction, we will join OPEC provided the OPEC countries agree to institute a similar embargo and cut off all supplies of oil to the United States.”
At that, the silence
