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Financial Post, Weekly edition, May 14, 1977

Stiffer competition for Canadian exporters

Robert Catherwood (London)

The message to Canadian businessmen from the economic summit meeting here this week is that the world will become even more competitive.

A declaration, issued at the end of what is officially dubbed the Downing St. Summit, said all seven participating nations were committed to "an open international trading system" - or the freest possible system of trade.

In his informal remarks at the close of the conference, U.S. President Jimmy Carter said there must be the "maximum amount of free trade." West Germany Chancellor Helmut Schmidt echoed this view.

The statement issued by the Magnificent Seven - Canada, Britain, France, Italy, Japan, the U.S. and West Germany - said protectionism would foster unemployment, increase inflation and undermine the general welfare. The seven leaders agreed they would seek to achieve a "tariff reduction plan of the broadest possible applications designed to achieve a substantial cut and harmonization, and in certain cases elimination, of tariffs."

Under the chairmanship of Britain's Prime Minister James Callaghan, the leaders acknowledged the "right of individual countries under existing international agreements to avoid significant market disruption."

Canada's External Affairs Minister Donald Jamieson said structural differences among the various countries would be recognized as the seven moved toward freer trade. He gave textiles, footwear and electronics as examples of Canadian industries that would need special consideration.

But the commitment of the seven leaders toward a more open trading world was strong. They all obviously agree on the importance of giving the less developed nations a more important role in world commerce. This means that Canadian exporters, who already face stiff competition from the efficient, and usually lower cost, economies of the industrialized world, must prepare to face a new thrust from the even lower cost economies of the less developed nations.

Prime Minister Pierre Trudeau, who was an active participant in the conference, said he was impressed with the historical perspective placed on the deliberations by such leaders as Prime Minister Takeo Fukuda of Japan, Prime Minister Giulio Andreotti of Italy and President Valéry Giscard d'Estaing of France.

These leaders stressed that the dismal failures of world leaders to resolve international economic problems in the 1930s had had disastrous consequences.

Fukuda, at 72 the oldest of the seven leaders, reminded everyone in his statement at the close of the conference that a similar economic conference held in London in 1933 had produced no worthwhile results. However, he had high hopes that the 1977 summit would help to reduce unemployment and cut inflation.

Trudeau no doubt derived small comfort from the fact that his six fellow leaders are also worried about unemployment (there are 15 million unemployed in the seven nations). In particular, all seven are concerned about youth unemployment, the clear implication behind this concern being the threat of some sort of violent reaction from young people who can't find jobs.

None of the leaders would admit that any pressure was exerted on Japan and West Germany, the two nations with balance of payments surpluses, to relax their domestic economic policies to give the other nations, especially Britain and Italy, a chance to boost their exports. The view seems to have been it is better to get the weak nations closer to the level of the strong than to bring the strong down to the level of the weak.

The summit leaders also expressed their determination to achieve solid results at the Conference on International Economic Co-operation, which begins its final session in Paris at the end of this month. Canada will be co-chairman.

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