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

88. Telegram From the Department of State to the Embassy in Canada¹

Washington, December 31, 1980, 1554Z

342366. Pass to Warren Clark.² Subject: Letter from Secretary Miller to Finance Minister MacEachen dated Dec 19.

1. Embassy requested to transmit following letter from Treasury Secretary Miller to Finance Minister MacEachen. Signed original is being sent via diplomatic pouch.

2. Dear Allan: Thanks for your recent letter discussing the new budget and energy policies of the Government of Canada.³ The economic problems confronting Canada are indeed difficult ones. All of the industrial nations face similar challenges of adjusting to rapid changes in the relative price of energy, of reducing dependence on imported oil, of increasing productivity, and of expanding employment. Our ability to restore the basis for buoyant economic growth while reducing the rate of inflation will be critically tested in the decade before us.

3. These problems are truly international in scope. They may at times seem intractable, but I believe they are amenable to solution through coherent and consistently applied actions both on the domestic and on the international level. It is important to continue to coordinate our efforts in macro-economic policy as well as trade, investment, and energy through consultations and agreements in the relevant multilateral forums: the economic summits, the IMF, the IEA, the GATT, and the OECD.

4. I am sure you are aware that the USG has expressed concern in its diplomatic note of December 5 that elements of Canada’s new National Energy Program raise issues with respect to our bilateral economic relations and our mutual efforts to find effective multilateral solutions to current economic difficulties.⁴

5. At the economic summits our countries have joined in stressing the critical need to reduce our consumption of imported oil; at the International Energy Agency we have agreed to oil import targets. A key element in a strategy aimed at reducing consumption and inducing increased domestic production is pricing oil at world market levels. To the extent there is below-the-market pricing, the collective effort to reduce our group dependence on imported oil will be slowed and structural adjustment toward more efficient patterns of energy use will tend to be delayed.

6. The implications of certain NEP provisions for our trade relations are also of concern. The requirements for use of Canadian goods and services appear inconsistent with obligations undertaken by Canada in the context of the General Agreement on Tariffs and Trade. The implementation of Canadian content requirements in the synfuels area will make it far more difficult for us to resist pressures to incorporate “Buy America” provisions in our own expanding synthetic fuels program.

7. In the investment field, the requirement that at least 50 percent of oil and gas production be Canadian owned by 1990 and the ownership requirements for production on the “Canada-lands” seem likely to reduce the flow of investment funds into the Canadian energy sector. These requirements do not appear to be in accord with the national treatment provisions of the OECD Declaration on International Investment and Multinational Enterprises⁵ and the related decision. These provisions seem to be at odds with the spirit of multilateral efforts to maintain the free flow of investment capital internationally.

8. The serious economic problems of the 1980s confront all the industrial nations with difficult choices. But measures that impair the free flow of trade and investment and slow structural adjustments in the energy area are not likely to offer stable, long-term solutions. Economic cooperation based on adherence to standards developed in the multilateral forums offers the greatest potential for lasting solutions to our economic problems and to the health and stability of the world economy.

Best wishes.

Sincerely, G. William Miller.

Muskie

1. Source: National Archives, RG 59, Central Foreign Policy File, D810002–0025. Unclassified; Immediate. Drafted by K. Golden in the Office of the Assistant Secretary of the Treasury for International Affairs; approved by George W. Ogg in EUR/CAN.
2. Warren Clark was the Financial Attaché at the Embassy in Canada.
3. Telegram 5930 from Ottawa, October 30, conveyed the text of MacEachen’s October 29 letter to Miller on the Canadian budget and the NEP. On the NEP, see footnote 6, Document 87.
4. Telegram 322412 to Ottawa, December 5, transmitted the text of a diplomatic note that outlined U.S. concerns about the NEP. (National Archives, RG 59, Central Foreign Policy File, D800581–0812)
5. Reference is to the OECD’s Declaration on International Investment and Multinational Enterprises, June 21, 1976. (“O.E.C.D. Approves Rules of Conduct for Multinationals,” New York Times, June 22, 1976, p. 62)