Foreign Relations of the United States, 1977–1980, Volume XXVII, Western Europe

87. Telegram From the Embassy in Canada to the Department of State¹

Ottawa, December 24, 1980, 1550Z

7017. For Secretary from Ambassador. Subject: The U.S./Canadian Relationship. Ref: (A) Ottawa 6592² (B) Ottawa 6846³ (C) Ottawa 6802.⁴

1. Summary: I believe we are entering a particularly sensitive time in our relationship with Canada as that country struggles to achieve a basic realignment of its economic and political structure. This presents both risks and opportunities for us. There are a number of substantive and symbolic steps that we should take in order to improve our prospects for avoiding the risks and taking full advantage of the opportunities to advance our interests. These range from such organizational measures as reestablishing a position for a Senior Deputy Assistant Secretary with no country responsibilities other than Canada to such operational steps as scheduling a Presidential visit to Canada early in the new administration and moving promptly to resolve the Senate impasse on the East Coast fisheries and boundary treaties. Our relationship with Canada is our most extensive and one of our most important. We need to devote to it the resources and attention which it requires and deserves. End summary.

2. As I reach the end of my tour as Ambassador, it want to record my observations and make some recommendations regarding our handling of Canadian affairs. We have reached a juncture in our vital relationship with Canada which presents great risks and great opportunities for us. Events with profound implications for our interests are occurring. We must move strongly and purposively, and in a well-coordinated way, if we are to protect and advance our interests effectively, avoiding the risks and taking full advantage of the opportunities. Business as usual and an ad hoc approach to managing issues as they arise will no longer be sufficient.

3. Canada is striving to complete the final phase of its emergence as an important independent actor on the world stage. In the process of seeking to bring its Constitution home from the United Kingdom,⁵ it must face and resolve the most fundamental questions regarding its character and very existence as a nation. At the same time, it is pressing forward with a controversial energy program for the next decade which has generated heated opposition in the producing provinces and added significantly to the strains on the fabric of national unity.⁶ Further, despite the defeat of the “sovereignty association” referendum last May, separatism remains a significant force in Quebec with long historic roots that assure it will continue to play a role in Canada’s ongoing national unity struggle.

4. Drawing on the great human and natural resources at its command, Canada will probably pass through this time of trial successfully and emerge stronger and more dynamic than ever. In the meantime, it will undergo a period of increased national self-consciousness and sensitivity. Moreover, it will be a period in which our two governments will be pursuing very different operational philosophies: the U.S. will be emphasizing deregulation and free enterprise solutions, while Ottawa will be stressing programs and policies which involve extensive government intervention in the private sector, such as the new energy policy and possible expansion of the mandate of Foreign Investment Review Agency (FIRA).

5. This outlook will pose problems for our interests in Canada and puts a premium on our ability to deal with Canada with restraint, understanding, and flexibility, and above all, with a constant awareness of the importance of this relationship. The inevitable irritations and clashes of interests on particular issues must be kept within bounds and not generalized or allowed to sour the overall atmosphere in which we deal with each other.

6. The complexity, diversity, and sheer scope of our relations with Canada can hardly be overstated. Our trade with Canada is nearly twice that with our next largest foreign customer, Japan, and is equal to our trade with all of the countries of the European Community combined. Over a fifth of our foreign investment is located in Canada. There are some 68 million crossings of our common border by Americans and Canadians annually. Our joint agenda includes a staggering array of issues from potato imports in Maine to a proposed dam in Washington state and includes the major global concerns such as the response to the Soviet invasion of Afghanistan and cooperation in preventing the spread of nuclear weapons. It is clearly the most extensive relationship we have with any country and in many ways one of the most important.

7. There are a number of substantive and symbolic steps which I believe we should take to improve our ability to deal with this relationship in the difficult period that lies ahead:

— Organizational

(A) Change the name of the Bureau of European Affairs to the Bureau of European and North American Affairs (EUR to ENA). This would symbolize our recognition of the unique importance of Canada to us and remove the source of persistent congressional and other criticism that we treat Canada organizationally as an appendage of Europe. At the same time it would continue our recognition that Canada is and should be treated as a member of the community of Western industrial democracies.

(B) Reestablish a position for a Senior Deputy Assistant Secretary within the Bureau who has no country responsibilities other than Canada. There is a need for a policy-level official who can devote continuous attention to U.S./Canadian issues. Since so many of these issues are economic ones, e.g., trade, investment and energy, it would make sense for this Deputy also to be the one who covers multilateral economic issues for the Bureau. This would, in fact, strengthen his or her hand in accomplishing the required interagency and congressional coordination as these issues which have broad economic policy ramifications are dealt with in the Canadian context. A major element in this Deputy’s job description should be the maintenance of regular contact with Congressmen, Senators and Governors concerned with U.S./Canadian issues. In addition to the operational advantages, the existence of a Senior Deputy whose only country responsibility was Canada would be helpful symbolic recognition of the importance we attach to this relationship.

(C) Regularize the practice of giving a Seventh Floor principal a watching brief on Canada. Ambassador Ridgway’s role in this regard has been most helpful. It is essential that when the crunches come the Bureau can turn quickly to an informed, senior Department official who can lend the needed support and has, when required, the necessary access to the Secretary. This official could step in when required to assure that there is overall coherence and consistency to U.S. Government approaches to Canada.

(D) Reestablish a U.S. presence in Regina, Edmonton, and St. John. All of these cities serve regions that have increased in importance to us since we have closed our posts in them. Recognizing that in a time of budget stringency it will probably not be feasible to reopen full-scale consular operations in those locations, we should move promptly to establish a U.S. presence in those cities in some other, less costly, way:
In Regina, Saskatchewan, a branch Public Affairs Office would seem most suitable. A modest one-man operation there could have a highly significant impact on U.S. interests in this province in which U.S. purposes and goals both bilaterally and globally are least understood and most suspect, and in which we are presently totally without permanent representation.
In St. John, Newfoundland, another province in which there is no permanent U.S. representative, and which is about to become a major producer of off-shore oil, the establishment of a consular agency would appear to be the minimum necessary immediate step.
We should also consider establishing a consular agency in Edmonton, the capital of Alberta, in view of the burgeoning growth of the economic and political importance of this energy-rich western province, even though we already have a post in Calgary, the industrial and commercial center of that province.

— Operational

(A) Schedule an early visit by the President to Canada. There has been no visit by an American President to Canada since 1972, during which time there have been some six visits by the Canadian Prime Minister to the the United States. This has become a sore point in Canada, and an early visit would be an important element in setting the right tone for a constructive relationship between the new administration and the Trudeau government. To do the job, it has to be separate from the President’s participation in the Ottawa Summit in July.⁷ If a Presidential visit cannot be scheduled before then, a firm commitment should be made for such a visit in the fall, and in any case, a visit by the new Secretary of State very early in the new administration would also be most helpful.

(B) Break the impasse in the Senate over the East Coast fisheries and boundary treaties. This is viewed by Canada as its most important bilateral issue with any country. If after languishing for nearly two years in the Senate it is not quickly dealt with and resolved, it will color and impede all our efforts to make progress in other areas. As I have reported Reftel (A), I think there is a basis for a compromise on East Coast treaties if we move quickly and forcefully when the new Senate convenes.

(C) Move promptly to ratify the revision of the 1942 Tax Treaty which will be before the Senate for approval.⁸ Given Canadian sensitivities regarding the handling of the East Coast treaties, we simply cannot afford long delays in ratifying this treaty. It contains major benefits for both countries and, with the passage in the lame duck session of an exemption for Canada to the foreign convention tax exemption limitation, its most controversial element has been set aside. Tax treaties tend to move slowly in the Senate, but this one should be recognized to be of unusual importance and given priority attention.

(D) Establish a sound long-term basis for Canadian exports of electric power and gas to the United States. Canada can and is prepared to make an important long-term contribution to our energy needs. This potential can only be fully realized, however, if we treat her as a valued source of reliable energy imports and give her the necessary regulatory and other assurances that make it attractive to gear up to meet our needs. We simply must stop viewing Canada as a residual supplier and recognize the very special character of our energy relationship with Canada.

(E) Find a basis on which to draw Canada into a greater contribution to the common defense. The traditional hortatory pressure has not worked well in the past and is not likely to be any more successful in the future. As suggested Reftel (B), it is important to relate increased contributions by Canada to its priority interest in economic benefits, particularly increased participation in high technology R&D projects such as our shift to dependence on satellites for North American air defense coverage.

8. Canada’s preoccupation with efforts to achieve a basic readjustment of its domestic economic and political structure including a clarification of provincial and federal government powers, has serious implications for us. Although we have no role to play in this domestic strife, our economic weight and involvement in Canada makes us a factor in almost all issues. There is a temptation, not always resisted, to use us as a scapegoat when things do not go well. This will be particularly the case with regard to Canada’s increasing tendency, in the New Energy Policy and elsewhere, to take increasingly protectionist trade and investment measures, which will almost certainly prove counterproductive in the long run. We should seek to respond constructively and offer reciprocal positive alternatives of an expansionary nature.

9. Despite the difficulties we face, however, all is not gloom by any means. On many issues of importance, we have been making significant progress in recent months, for example:

(1) The F–18 fighter purchase is moving forward nicely;

(2) We expect no problems in negotiating a five-year⁹

(3) Following this summer’s Memorandum of Understanding establishing working groups, we have been establishing the basis for the opening of negotiations on a trans-border air pollution control agreement. (In this connection, Canada has just passed major legislation strengthening its pollution control role vis-a-vis the provinces and thus giving the federal government the authority to carry out a meaningful agreement in this area and to take ameliorative steps in the interim.)

(4) We are making good progress toward agreements on West Coast tuna and salmon issues which will remove major irritants in the relationship and avoid the prospect of more seizures of U.S. vessels in the Canadian fisheries zone.

(5) The prospects for the financing of the Alaskan gas pipeline have sharply improved as a result of Canada’s decision to go forward with the pre-building of the southern legs of the system. (An early reaffirmation by the new administration of our commitment to this project would be helpful to maintaining our momentum.)

10. Thus, we have a record of considerable success on which to build. The problems we face are difficult but manageable if we approach them in a constructive and positive way. This is a time of opportunity in our relations with Canada if we accept the challenge and devote the resources and attention to this relationship that it requires and deserves. It is important that we do not only in terms of our vast bilateral interests, but also in light of the contribution that Canada can make to our efforts in support of global goals and purposes, such as the advancement of peace and freedom, on which we are in broad and fundamental agreement.

Curtis

1. Source: National Archives, RG 59, Central Foreign Policy File, D800610–0446. Limited Official Use; Priority; Limdis. Sent for information to the White House.
2. Telegram 6592 from Ottawa, December 3, proposed ways to deal with the maritime boundaries and fisheries issues starting in January 1981. (National Archives, RG 59, Central Foreign Policy File, D800583–1116)
3. Telegram 6846 from Ottawa, December 13, examined Canadian defense spending, commenting, “For Canada to increase defense expenditures enthusiastically, there must be some evident, direct Canadian benefit other than a gain in defense capabilities because its priorities are not defense oriented.” (National Archives, RG 59, Central Foreign Policy File, D800593–0039)
4. Telegram 6802 from Ottawa, December 11, provided a list of bilateral and multilateral issues in relations between the United States and Canada. (National Archives, RG 59, Central Foreign Policy File, D800591–0048)
5. On October 2, Trudeau announced that his government would back legislation that would replace the 1867 British North America Act with a new Canadian Constitution, introduce a Bill of Rights designed to guarantee the rights of the minority French-speaking and English-speaking communities within each of Canada’s 10 provinces, and eliminate the need for unanimous agreement from each province for constitutional amendments. (Henry Giniger, “Ottawa Introduces Changes in Charter,” New York Times, October 3, 1980, pp. A1, A3)
6. On October 28, MacEachen introduced a National Energy Policy that would hold down energy prices for Canadian industry and consumers, reduce foreign ownership of the country’s oil and gas industry from about 75 percent to 50 percent, and cut the share of energy revenues that would be earned by the provinces of Alberta, British Columbia, and Saskatchewan. (Henry Giniger, “New Steps Intensify Divisions in Canada,” New York Times, October 28, 1980, p. A9; Henry Giniger, “Canada Announces New Energy Policy,” New York Times, October 29, 1980, p. A1, A7)
7. Reference is to the G–7 Summit meeting scheduled for July 1981.
8. See footnote 4, Document 86.
9. This sentence, which is incomplete in the source text, apparently refers to the renewal of the NORAD command agreement, which was scheduled to expire on May 12, 1981. (Telegram 6802 from Ottawa, December 11; National Archives, RG 59, Central Foreign Policy File, D800591–0048)