The Militant(logo) 
    Vol.62/No.7           February 23, 1998 
 
 
Canadian Capitalists Face Economic Crisis -- Union officials push `buy Canadian,' while gov't imposes austerity measures  

BY MICHEL DUMAS
MONTREAL - The Canadian dollar fell to US$0.688 January 22, its lowest point ever. After a week of almost daily record lows, the Bank of Canada increased its interest rates in hopes of offsetting the dollar's downward movement for a while.

"The fundamentals are still excellent," insisted Prime Minister Jean Chrétien, stressing that the Canadian dollar is currently doing well compared to most currencies. "The problem is with the American dollar," he insisted. But 83 percent of all Canadian trade is with the United States, and the relationship of the Canadian currency to the U.S. dollar is the one that really counts for Canadian capitalists.

Bosses, big-business politicians, and union officials all claim that making "our" companies more competitive against U.S. companies is key for all Canadians. That's what the 2,400 pulp and paper workers on strike against Fletcher Challenge in British Columbia and the 2,300 meatpackers on strike against Maple Leaf Foods keep hearing, for instance.

Both companies claim that workers will need to accept deep concessions if they are to keep their jobs. Fletcher Challenge claims that 1996 labor costs at coastal mills in British Columbia were Can$150 per ton, compared with Can$87 in the western United States. Maple Leaf asserts that wages and benefits in its biggest plant in Burlington, Ontario, total Can$25.08 per hour, while workers doing the same job in the United States only average Can$16.50.

But workers at Fletcher Challenge and Maple Leaf Foods made the decision to stand up and defend their wages and working conditions. Their actions are in contrast with the chauvinist "buy Canadian" campaigns waged by labor officials in Canada. In the last issue of the IAM Journal, Canadian vice president of the International Association of Machinists David Ritchie denounced children's clothing made in Haiti. "It's not that we want to take work away from that poor Haitian worker," he asserted. But when you buy something, it's better if "the product is Canadian made."

On January 19 Canadian Auto Workers officials launched a protectionist campaign against cars from Asia, in particular from South Korea "where the economic crisis has dried up the auto market and companies such as Hyundai Motor Co. are gearing up for huge exports," said CAW president Basil Hargrove.

Attacks on social wage
"Canada today is growing more rapidly than any Group of Seven country," said a front page article of the Wall Street Journal December 26. "Economists expect Canada to achieve a balanced budget in the current fiscal year, ending March 31 - well ahead of the U.S..

"To get to their current state, Canadians had to struggle through a recession followed by an austerity program far tougher than anything Americans have suffered in the postwar era," added the big-business daily. As an example of this austerity, it cites the 14 percent of federal employees whose jobs have been cut by the current government.

Ottawa has also cut transfer payments to provinces, spurring massive attacks by provincial governments on health and education services. One after the other, they have succeeded in closing down hospitals and drastically cutting education budgets, in some cases despite broad labor mobilizations.

Ottawa has cut unemployment benefits as well. Since the opening of the 1990s, the proportion of unemployed workers receiving jobless benefits in Ontario, for example, dropped from about 65 percent to 35 percent.

The relative success of Canadian capitalists has been made possible by an explosion of Canadian exports, which gave them more breathing space while they were busy attacking workers' jobs, wages, and living conditions. Since 1989, when the Canada- U.S. Free Trade Agreement started to reduce tariffs between the two countries, exports from Canada have grown 90 percent. This is the main factor behind the decline of the rate of unemployment, which according to official figures is currently at 9.1 percent, its lowest point since 1990.

Canadian capitalists have succeeded modestly in raising labor productivity during this period. But they have been unable to fill the gap with their U.S. rivals on this front. "In the key manufacturing sector," said a report of the Conference Board of Canada released in October, "the United States is 32 per cent more productive than Canada in terms of real output for every person-hour worked."

The export increase is above all the result of the decline of the Canadian dollar from about US$0.89 in 1991 to its current historical low. This decline has accelerated since the beginning of the currency crisis of several oppressed Asian countries.

Competing on the world market
Canada stands as one of the imperialist countries most vulnerable to the impact of the crisis of Asian currencies.

Competition between imperialists for sales of agricultural products in Asia is growing. For the first time since its creation more than 60 years ago, the Canadian Wheat Board has extended $35 million in credit to South Korea, in response to a $1 billion credit extended there by the U.S. Department of Agriculture and $36 million by the Australian Wheat Board.

But direct trade with Asian countries accounts for a small proportion of Canada's exports. The real impact of the Asia crisis comes above all by its impact on world prices of commodities. A third of Canada's Gross Domestic Product comes from exports, including some of those most affected by the Asia crisis.

In 1971 about two-thirds of Canadian exports were resource- based goods and one-third manufactured goods. In 1997 the ratio is closer to 50 - 50. But wood, energy, and farm products still accounts for most of Canadian capitalists' net earnings from trade. The single biggest contributor to Canada's trade surplus over the last two year was the forest products industry. The second was the energy-products industry, which sells natural gas and oil to the United States and coal to Japan. Prices for forest products, energy, and metals are now dropping.

Canada is the world's biggest supplier of pulp. Several Canadian paper companies are postponing planned investments, suddenly unable to raise money on the stock market because of investors' fears of lower demand in Asia for pulp and other forest products. Montreal-based Avenor Inc., for example, shut its pulp mill in British Columbia for about six weeks starting December 24 because of order cancellations from Asia.

Mining accounts for 16 percent of Canada's exports, a much higher portion than in most industrialized countries. Canada's biggest natural-resource company, Noranda, has seen its stock price falling well below levels of a decade ago, because prices of its two most important products, zinc and copper, have plummeted in recent months. Inco, the world's largest nickel producer, has closed four mines, laying off 500 workers. The price of nickel dropped 22 percent in 1997, a fall that was accelerated by the crisis in Asia.

There is growing talk among the Canadian rulers about the possibility of a deflationary collapse. "Such a rapid, overall decline in the prices of assets or goods and services is a catastrophe that North America hasn't seen since the Great Depression, over 60 years ago," noted an editorial in the January 21 Toronto Globe and Mail.

The increasing competitive pressures on capitalists here are reflected in a wave of important mergers over the last few weeks. On January 23 the Royal Bank of Canada and the Bank of Montreal - the biggest and oldest Canadian banks - announced a plan to merge in what would be the world's third-biggest bank consolidation ever. Nova Corp. and TransCanada Pipelines are currently holding talks to merge their energy empires in what would be the largest business deal ever between two Canadian companies. When implemented, these mergers are expected to increase job cuts.

This also means more trade wars. "Look for more skirmishes along the 49th parallel," read the subheading in Globe and Mail's January issue of Report on Business Magazine, recalling the conflicts between Canada and the United States in 1997 around salmon, wheat, milk and sugar. "Expect more of the same in 1998," it said.

Elssa Martínez, a member of Communication, Energy and Paperworkers Union, contributed to this article.  
 
 
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