Ambassador's Answer

As one of his last official acts in Canada, retiring U.S. Ambassador R. Douglas Stuart tackled the thorniest current problem of Canada-U.S. relations: the vague but growing notion that U.S. investment capital is seizing control of the Canadian economy. In a blunt speech last week to the Canadian Club of Vancouver, he spelled out the contribution of foreign investors to Canada's economic expansion and paid his polite disrespects to those who seemed bent on stirring up trouble between good neighbors.

"The alleged domination by U.S. capital of Canadian industry and national resources . . . is being discussed emotionally," Stuart said. "Those who raise it do not appear to be seeking a solution but rather the creation of an issue [to arouse] a maximum of suspicion and rasp the pride and self-respect of any Canadian."

Inflammatory Talk. Without naming names, Ambassador Stuart quoted recent remarks by Tory Leader George Drew, one of the chief promoters of the current campaign against U.S. investments in Canada. "We are not going to be treated as though we were the 50th state* of the United States," Drew had cried. "We are not going to be hewers of wood, drawers of water and diggers of holes for any other country."

Said Stuart: "The descriptions . . . often resemble old-fashioned Communist caricatures rather than sober presentations of fact." The ambassador then proceeded to cite some sobering facts about Canada-U.S. economic relations: P: Rather than increasing to dangerous flood proportions, as some special pleaders claim, the flow of U.S. capital into Canada is actually receding. It was $346 million in 1953, $318 million in 1954, dropped farther in 1955. P: Canada's great industrial boom in recent years was neither wholly financed nor owned by U.S. investors. About 85% of the overall expansion was financed by Canadians themselves. Incoming U.S. capital went heavily into oil and mining ventures, where Canadians were unwilling to take the risks. P: Capital movements between Canada and the U.S. travel both ways. Canadians' per capita investments in the U.S. at the end of 1954 stood at $117 v. a $58 per capita U.S. investment in Canada. P: Canadians need U.S. investment more than U.S. investors need Canadian opportunities. Most of the underdeveloped nations of the free world are pleading for new capital. U.S. capital has gone heavily to stable Canada in the past, but could be cut off quickly if "fear, suspicion or unsettled political conditions . . . tended to discourage [it]." Said Stuart: "A withdrawal of sizable amounts of such capital already invested here or a dwindling of the potential supply would be immediately reflected in the rate of growth of the Canadian economy and eventually on the standard of living of every Canadian."

Latent Fears. Stuart's forthright speech aroused a storm of comment in the Canadian press and Parliament. In underpopulated Canada there has always been a latent--perhaps legitimate--fear of cultural or economic domination by its bigger neighbor to the south. The Labor Progressive (Communist) and the CCF (socialist) Parties have traded on this feeling for years, plugging the "U.S. imperialism" line. Lately, however, the major parties have shown signs of taking up the cry. Quebec's provincial Liberal Party, out of office for 17 years, is currently campaigning on that theme. And Tory Leader George Drew, whose party has not won a federal election since 1930, is determinedly beating the anti-U.S. drum as a vote-getting campaign issue for next year's federal election.

Canada's ruling Liberal government probably has no real fears of U.S. economic domination--and is well aware of the damage that would be done to the country's economy if large amounts of U.S. capital were abruptly withdrawn. But the Liberals, too, are aware of the political appeal of Drew's nationalist pitch. Last year they appointed a Royal Commission to investigate, among other subjects, the role of U.S. capital in Canada. In this year's budget they devised a frankly punitive tax on Canadian editions of U.S. magazines (TIME, April 2).

After Ambassador Stuart's speech last week, Ottawa dutifully passed the informal word to Washington that some Canadians felt the ambassador had trespassed on domestic affairs. But the government pointedly avoided any formal contradiction of Stuart's case, and even defended his remarks in a House of Commons debate. "Mr. Stuart endeavored to meet certain charges and criticisms by explaining his government's attitudes and objectives," said External Affairs Chief Lester Pearson. "That was a perfectly proper thing for him to do."

* Tory Drew generously gave the U.S. a dividend of one extra state.

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