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Delivering Community Power CUPW 2022-2023

Building self-reliance: the alternative to free trade

“Increasing Canada’s economic self-reliance is the key to self-determination politically, socially and culturally”

Canadian PoliticsEconomic CrisisLabourCanada-USA

Between 1988 and 1994, Canada lost 334,000 manufacturing jobs, equivalent to 17 percent of total manufacturing employment in the year before CUFTA came into effect. Photo by Boris Spremo/Toronto Star.

The current encounter with Trump’s tariff attack on Canada demonstrates how urgent is the question of our vulnerability arising from our super-dependence on the US economy. There is now near universal agreement that Canada must build a more divergent export market. Three-quarters of our exports are sold to the USA. This became one of the key issues arising in the free trade debate of the late-1980s. CD was among the contributors to that debate, fearing that the Canada-US trade agreement would inevitably drive this country towards an ever greater integration with the US and raising the question whether Canada had a future at all with any degree of meaningful independence. What were the options available to Canada? One option put forward was a more self-reliant economy, less dependent on exports. Was this feasible? In this article, first published in the September 1987 issue of Dimension (Volume 21, Number 5), GATT-Fly, a project of Canadian churches for global economic justice, offered a detailed vision of what a more self-reliant economy would look like.

—Cy Gonick, February 5, 2025


The Canadian economy is heavily dependent on trade and particularly on trade with one country: the USA. But what can we do about it?

The Mulroney government seeks to protect and deepen this dependency by negotiating a bilateral free trade agreement with our much larger neighbour to the south. It is doubtful that this initiative will be successful even in its own terms of preserving Canadian export markets given the massive US trade deficit ($170 billion world wide of which $12 billion was with Canada in 1986) and the rapid slide of the US into international indebtedness.

Popular organizations including labour, farm, church, cultural, women and anti-poverty organizations have all pointed out the potentially disastrous consequences for most Canadians of a bilateral free trade agreement with the US.

While among popular organizations there is a clear consensus on the need to oppose free trade, there is no such agreement on alternatives. The status quo is not a realistic alternative. The present level of dependency on the US market leaves the Canadian economy extremely vulnerable to protectionist moves in the US. Even without free trade pressure will mount for Canadian taxation and social policies to conform with the regressive trends in the US.

We believe the alternative to a trade oriented economic strategy is self-reliance. Increasing Canada’s economic self-reliance is the key to self-determination politically, socially and culturally.

The three basic characteristics of self-reliance, stated in Canadian terms are that:

  1. Canadians produce the essential goods and services we need, in the quantity and quality needed.
  2. Families and individuals who now receive average or below average incomes, and who make up the vast majority of Canadians, have enough income to purchase the goods and services which they collectively produce.
  3. Canada’s foreign trade continue, but only as a planned extension of production and trade at home.

In order to achieve self-reliance several complementary, integrated components must be pursued. At the centre is an industrial strategy, which should be accompanied by appropriate monetary policy, regional development, fiscal policy, social policy, technological innovation, property ownership and control over investment, and international relations.

Reducing Canada’s dependence on external trade involves re-orienting Canadian industrial capacity to production of goods and services to meet basic needs in Canada. This means using domestic resources and labour to produce things that we now import and reducing the amount of our exports.

Moving away from export dependence has to be done gradually. A lot of fixed capital is now tied up in export oriented resource industries which would be difficult to convert to other domestic market oriented production.

The high degree of Canada’s foreign indebtedness also requires that we maintain a positive trade balance until this foreign debt is retired. A commitment to a self-reliant economic strategy would need to restrict any new investment in export oriented industries and re-direct investment capital to those industries which would serve primarily the domestic market: We need to move as quickly as possible to replace imports with domestic production. Given Canada’s heavy dependence on resource exports and high level of manufactured imports, such a policy would favour expansion of the very sectors where the employment generating potential per investment dollar is the greatest. We estimate that reducing imports to 10 percent of the Canadian market while continuing exports at present levels and increasing goods production by 20 percent over 10 years for Canada’s basic industries would result in almost 640,000 new full-time jobs.

Full employment: a key to self-reliance

Full employment is particularly urgent for any country beginning in earnest the struggle for economic independence. The scale of material transformation already outlined above for goods producing industries calls for a much greater collective human effort in Canada than we are now making. Moreover, full employment at above-poverty-level wages and salaries is the best means of ensuring that most Canadians have sufficient income to purchase the goods and services they collectively produce. It is also necessary if everyone is to participate in reaching and maintaining a community consensus about economic policy.

When we consider as well the improvement in human services needed by all of us, in health-care, education, child-care, and care for the elderly, for example, it becomes even clearer why leaving people idle who wish to work is unacceptable. Specifically, we estimate that an additional 1.5 to two million full-time workers would be needed in the human service sector during the early years of building self-reliance. Summing this with the jobs that would be created by expanding goods production, an additional two to 2.6 million full-time workers would be needed in the early years of a national commitment to self-reliance.

To ensure that an adequate income is received from employment, minimum wages must be increased. Not only should no one be employed and poor at the same time, no one who is fully employed should have an income less than those who remain on social assistance. Doing socially useful work should never entail a material disadvantage.

For Canadians unable to work or who choose not to work (as defined by society), a government-funded income program is necessary. This income, available as a right to every Canadian resident, would be above the poverty level but below the legal minimum wage or salary. Payments could best be provided through a system of universal tax credits which would remove the stigma of welfare programs. Income would be recovered from those who do not need such assistance through a genuinely progressive tax system.

Redistributing income through full employment, higher minimum wages, and above-poverty-level social assistance is just. It also is necssary in order to equate, within Canada, people’s buying power with domestic production and human needs.

“That’s a helluva way to greet a neighbour when he’s trying his best to surrender!”

Investment

GATT-Fly estimates that new machinery, equipment, and construction valued at just under $220 billion will have to be added to the Canadian economy in order to achieve the essentials of self-reliance, based on conditions in 1981. This amount would be spread over a number of years, depending upon the rate of self-reliant development planned at various community levels.

Where would this investment come from? Each year Canadians collectively produce a store of value which is surplus to what we consume. This surplus is held, in the main, by a variety of financial institutions and corporate enterprises within and outside Canada. The surplus held outside the country, in foreign-based banks or corporations, we assume can at best be set against a portion of our external debt, or at worst will be lost.

Of the surplus held domestically, much the biggest portion is in the hands of Canada’s chartered banks. Of the approximately $500 billion in assets held by leading Canadian financial institutions in 1981, the chartered banks held almost $350 billion, or roughly 70 percent of the total (this had fallen to just over 60 percent by 1985). Clearly the banks’ decisions about where to direct these assets are critical in determining whether or not enough self-reliant investment occurs.

In general, the assets of these banks, as well as those of other financial institutions, will have to be redirected towards self-reliant development. If this is done the bulk of the $220 billion can be found. We estimate that at least $150 billion could be found for investment in self-reliance if we forego expensive mega-projects and choose instead the soft energy options described in our 1981 study Power to Choose.

A significant part of the surplus is received as profits by major corporations based in Canada, both Canadian and foreign-owned. A conservatively estimated $20 billion from these profits could be devoted to self-reliant investment over the next decade.

One other important factor to consider is the productive capacity which is now unused. Our present economic system keeps a substantial portion of its workable machinery, equipment and plant idle because the markets for the goods which might be produced are not considered sufficiently profitable. Such idle capital meant that in 1981 only 82 percent of the goods which might have been produced were actually manufactured. Almost $40 billion in productive capital could have been added to the Canadian economy in that year if the rate of fixed capital use had been raised to 90. Much of this could be directed to self-reliant development.

Ownership and control

Foreign ownership of substantial Canadian productive resources is incompatible with self-reliance. At the moment Canada is riddled with such ownership. One of the first steps on the road to self-reliance must be to end foreign economic rule. GATT-Fly estimates that buying 51 percent of the common shares of all foreign-controlled companies listed among the top 100 industrial companies in Canada—26 altogether—would have required $18 billion in 1985.

Practically speaking, a purchase on this scale can only be done by government, perhaps some combination of federal and provincial initiatives. Whether these companies should remain in government hands, or be transferred to other Canadian owners, could be decided later.

Gaining control of Canada’s chartered banks is a key to self-reliance. It is not widely appreciated that gaining a majority control over the common stock of these banks is relatively inexpensive. In 1985, $2.8 billion was the value of 51 percent of the common stock of all Canadian chartered banks, taken together. This is lower than the cost of controlling Imperial Oil, even though the latter has total assets of only $9 billion.

In building a self-reliant Canada, as we have already implied, state ownership is only one alternative and perhaps the least important. Any form of control which is democratic and which accepts the goals of self-reliance, is valid. This includes family owned and worked enterprises, marketing and consumer cooperatives, worker cooperatives, and even private enterprises provided that the employees have organized themselves, are granted trade union rights and have a substantial input into management decisions.

Controlling and directing self-reliant development is not a matter of individual enterprises only. Economic planning for the entire community is necessary as well, for the nation and for other communities down to the township and village level. If such planning is to be effective it must be democratic. In material terms, perhaps the most important long-term role of government in the struggle for self-reliance is to organize economic planning and to coordinate plan implementations. Of course, plans must also be flexible and subject to modification in light of experience.

Technological innovation

Appropriating technological change for self-reliant development is another key component of any successful struggle for economic independence. Most Canadians are aware that Canada is now dependent for the majority of its new technology upon research and product development outside its borders. This technology is largely controlled and guided by transnational corporations based in Japan, the US, and Western Europe.

The result is technology which suits transnational corporations. It is characterized by huge production units, declining employment of human labour, and de-skilling of workers.

Other technologies are required, and if they are to meet our needs then they must be basically home-grown. Later, when the number of countries on the road to self-reliance increases, a global pool of appropriate technology will become practical. Self-reliance emphasizes sharing technology internationally, not closely guarding “intellectual property rights” for private corporate profit as the US government wants to do under the guise of a code of conduct enshrined within the General Agreement on Tariffs and Trade.

The following are among the challenges which await an appropriate, independent Canadian technology:

a) Better utilization of existing capital—this may mean producing different products for domestic markets, and requires among other things innovation on the shop floor.

b) Improving the quality of manufacturing processes under safer and healthier working conditions with the goal of producing more durable and easier to maintain appliances, vehicles, houses, clothes, etc. While this may increase the number of workers needed for a given level of output (the employment/output ratio), increasing substantially the useful lifetime of products can deliver an availability of goods equal to or greater than that delivered simply by raising volume of output.

c) Reducing the scale of efficient production units—smaller hydro dams, mines, or manufacturing plants, to name but a few—with no rise in per unit costs of production, is possible but uninteresting to corporate managers and owners. Yet such reductions in scale are vital to the development of self-reliance in smaller communities, including smaller nations (experience with microtechnology is changing traditional notions about economies of scale at a very rapid pace. For example, it is reported that a computerized manufacturing system for precision machine parts, a key industry for self-reliance, can now produce 25,000 different parts, most of these single items, at unit costs similar to those on long production runs).

In moving towards the kind of just and economically independent Canada which self-reliance entails, the volume of trade in goods and services with other countries will decline substantially. If we seek to repay the external debt, exports will have to be maintained at present levels until the repayment is complete. Replacing most imports by domestic production is in any case a near term priority.

Mexican President Carlos Salinas, US President George H.W. Bush and Canadian Prime Minister Brian Mulroney participate in the initialing ceremony of the North American Free Trade Agreement (NAFTA) in San Antonio, Texas, October 7, 1992. Photo by David Valdez.

External relations

The pattern of external trade will also change in two other dimensions. First, Canada is already heavily dependent upon exports of raw materials when compared to other industrialized countries. In building self-reliance, raw materials will become an even more important component of external trade, especially for imports. In essence, processing and manufacturing will be for domestic and will be designed to meet the needs of those markets. The main imports which we will seek are raw materials not found in Canada, such as tropical foods or rare minerals. The main products which we will have for export are raw materials that we do not anticipate a need for domestically, including minerals, forestry products, and food grains (not forgetting that industries which produce these products will nevertheless have a much stronger domestic orientation than at present).

Second, trade will be increasing with other countries struggling for self-reliance. This is partly because their economic and political structures will be more compatible with Canada’s, and partly because together we shall have to find ways of trading apart from transnational corporations.

International aid acquires a new focus in the context of self-reliance. The principal recipients would be underdeveloped countries committed to selfreliant development. The second target of Canadian aid would be groups struggling for self-reliance in countries which continue to be guided by the pursuit of global profits and power. For the primary recipients aid would be largely in the form of:

1) Machinery, equipment, and plant together with the training needed to operate, maintain, and reproduce these products.

2) Travel (in both directions) for education and for exchange of science, technology, art and culture.

The politics of self-reliance

How quickly should we expect to succeed, in Canada, in the provinces, and in local communities? Obviously the answer will vary, but there is little doubt that until Canada as a nation makes a basic commitment to self-reliance, and takes a minimum number of practical steps in that direction, efforts at other levels will be severely hampered. Any timetable thus depends in part on turning Canada around. At the same time, turning Canada around is a process, not just an event, made up initially of series of particular measures taken at every level.

A number of initiatives are already underway that will lead us in the direction of self-reliance. Some examples of these include:

  • worker-owned enterprises;
  • municipally controlled community development corporations
  • experiments in energy conservation and the development of renewable energy alternatives;
  • growing popular support for the nationalization of one or more major banks;
  • the movement to defend Unemployment Insurance and social services from cutbacks and to replace low welfare payments with an above-poverty-level universal tax credit;
  • the movement to establish more supply management agricultural marketing boards, e.g. for potatoes;
  • protection for specific commodities from import competition;
  • the struggle for Canadian full employment;
  • the struggle for automobile Canadian-content legislation.

All of these and other short-term goals are part of building, now, a self- reliant Canada.

GATT-Fly was a project of Canadian churches mandated to do research education and action in solidarity with people’s organizations in Canada and the Third World.

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