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January 23, 1979 - Image 4

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The Michigan Daily, 1979-01-23

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Page 4-Tuesday, January 23, 1979-The Michigan Daily

GSbe £icbtgan BatIQR
420 Maynard St., Ann Arbor, MI 48109
Eightr-Nine Years of Editorial Freedom

A North American common market

By Kenneth D. Emmond


Vol. LXXXIX, No. 94

News Phone: 764-0552

Edited and managed by students at the University of Michigan


We apologize

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EWSPAPERS TRY never to err in
reporting. But the best effort -of
everyone in this business mistakes do
happen. Last week was such an oc-
casion for us. This was not merely a
spelling error; we misrepresented the
facts and may have harmed a
Last week the Daily .reported the
events surrounding LSA-SG President
Bob Stechuk's decision to lend the
Literary College student government's
name to a list of sponsors of a demon-
stration last December against former
Israeli Foreign Minister Yigal Allon.
Mr. Stechuk endorsed the protest in the
name of LSA-SG under the authorityof
vaguely defined position of Advocacy
The Daily reported on January 16
that at a LSA-SG meeting Mr. Stechuk
promised to apologize to Mr. Allon and
to Jack Walker, Dean of Public Policy
Institute, who arranged the Allon
speech. What in fact happened was
that Mr. Stechuk agreed to
disassociate LSA-SG from the violent
demonstration and also to apologize to
Mr. Allon and Mr. Walker for that
violence, not for the original endor-
sement of the protest.
Much to our ciagrin that was not the

only occasion we misreported the story
of Mr. Stechuk's actions. On January
18 the Daily reported that LSA-SG had
condemned Mr. Stechuk's endor-
sement of the protest. In fact LSA-SG
did no such thing. LSA-SG condemned
the "incident," clarified the original
intent of the endorsement and
disavowed council from the endor-
We have stated on this page that the
violent protest which interupted Mr.
Allon's speech was deplorable. It was
antithetical to the principle of free
speech. And Mr. Stechuk's decision to
lend the Literary 'College student
government's name to the list of spon-
sors without checking with the entire
council was irresponsible.
Nonetheless, we have misrepresen-
ted the facts surrounding the LSA-SG
reaction to the affair. For this we are
sincerely sorry. We regret that Mr.
Stechuk may have appeared in a bad
light as a result of our error. We hope
that whatever damage we have done to
Mr. Stechuk's reputation, or any in-
convenience which we have caused
him will be at least somewhat dam-
pened by these words. Measures have
been taken to see that this does not
happen again.



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Carter chooses guns

W 1 announced his energy policy two
years ago he said the country should
wage the "moral equivalent" of war
against energy shortages and energy
waste. In looking at the ad-
ministration's new austere budget it is
apparent that either the President has
a twisted sense of humor or the
priorities of the administration are
The Energy Department, a new
cabinet office created by Mr. Carter,
was originally supposed to receive $9.1
billion of the federal budget. Mr. Car-
ter and his advisors have cut that back
to $8.1 billion in an attempt to keep the
trade deficit under $30 billion. Of the
total Energy Department allotment
nearly 20 per cent, or some $1.6 billion,
is being spent on the research,
development of nuclear weapons.
The President's logic appears faulty.
He says he wants to control nuclear
proliferation and yet he increases the
defense budget by five per cent and
spends 20 per cent of the Energy
budget on nuclear weapons. He says
we must wage ware against our energy
problems but he cuts the proposed
budget for the department capable of
carrying out the wary by $10 billion

and spends $1.6 billion of it on weapons
of destruction. If controlling inflation
is his biggest project and balancing the
budget and decreasing the trade deficit
are two important steps towards the
major goal, why does not Mr. Carter
spend more money on energy research
and development to end the nation's
reliance on foreign powers for energy?
Mr. Carter is listening all too well to
' the generals in the Pentagon who per-
cieve the Soviet Union in traditional
cold war terms. The generals have
Carter convinced it is still our role to
play policeperson all over the glove.
Meanwhile the American consumer is
faced with ever increasing prices.
Energy, food, and other necessities are
becoming incredibly expensive.
Because of the post World War II
prosperity in the United State and
other western industrialized nations,
this country has been able to have both
guns and butter. That prosperity,
however, has diminished with the
decreased availability of non-
renewable energy resources. For the
first time in recent history the United
States is faced with a real
choice-guns or butter. Mr. Carter's
choice is obvious.

for Yankee jobs already have turned
America's southern border from a barrier in-
to a highway. Now, growing numbers of
Canadians, faced with serious economic dif-
ficulties of their own, also want to dismantle
America's northern boundary.-
Trade deficits, currency devaluations and
hard times in the marketplace tend to stir up
protectionist talk in the United States, but in
Canade it's just the opposite.
Chronic current account deficits in recent
years, the weakest Canadian dollar in
decades and reports of net capital outflows
from Canada are providing a forum for
proponents of a Canadian-American free
trade area.
In late September, days before the
Canadian dollar established a new 47-year
low on the New York currency exchange, a
delegation of Canadian senators journeyed to
Washington for discussions with a group of
U.S. senators on a possible North American
wheat cartel.
And while Canadian farmers are looking
south of the border for solutions to their
problems, Canadian manufacturers see a
nation of 214 million customers south of the
forty-ninth parallel that looms just as large -
and potentially lucrative - to them as China
and its one billion possible buyers seem to
U.S. exporters.
A question of politics
HERE NEVER has been much argu-
ment here that a common market with
the U.S. would be profitable for Canada. The
question has been what political price, in
terms of U.S. control of its own economy,
Canada would have to pay.
Canadian economist Ron Wonnacott has
been a proponent of free 'trade between the
two countries since the early 1960's - the last
time Canada encountered trade problems.
Wonnacott, who teaches at the University of
Western Ontario, and his brother Paul, now at
the University of Maryland, published a book
in 1967 which showed that free trade would
benefit both countries but would be par-
ticularly valuable to Canada.
They concluded that a Canadian - U.S. free
trade' zone could raise Canada's gross
national product by at least 10 per cent by vir-
tue of lower consumer prices and economies
of scale in production.
Looking at Canada's position today, Won-
nacott said in a recent interview, "I don't
think my position has changed very much."
There are some differences, however. For
one thing, in the 1960's the average Canadian
industrial worker earned about 20 per cent
less than his American counterpart, a factor
which would have helped lure U.S. employers
to Canada, and spurred Canadian sales in the
U.S. too.
But with the achievement of wage parity in
the Canadian automotive industry in the
1970's, a trend toward equal earnings with
American workers began. In some industries
- notably pulp and paper - Canadian
.,r.o c n n- - - LS}l i a so' P on Y mm' .FA t ln

Canadian workers, though earning the same
number of dollars as Americans in many in-
dustries, have seen the currency in which
they are paid shrink in value from just over
one U.S. dollar the only about 85 cents.
After a decade of economic nationalism,
Canadians find themselves just about where
they started - about 20 per cent behind their
American neighbors in real income.
Today more and more Canadians have
begun to realize that economic integration
with the United Sta'tes may be the only way to
achieve real economic equality with it - in
terms of living standards.
Wonnacott admits there would be a tough
period of adjustment for, Canadian
manufacturers under a free-trade
agreement, and he has no illusions that there
would be casualties.
"I think the big adjustment problem would
be the necessary turnaround by Canadian
Of course a free trade agreement with the
United States would entail much more risk for
Canada than for the U.S. In 1977, a typical
year, Canada imported $42 billion worth of
goods, and just under $30 billion of them came
from the U.S. Of the $44 billion in exports, $31
billion went to the U.S.
To put these figures in perspective, it would
be as if the United States exported $300 billion
a year to Canada and bought a similar
amount from its neighbor to the north.
Still, problems would be matched woth op-
portunity, because Canadian producers who
met production costs and price levels of
American competitors would gain tariff-free
access to the immense markets to the south.
Nevertheless, great political, social, and
emotional obstacles continue to stand in the
way of any Canadian-American customs
union agreement.
Social and emotional
stand to lose - or who fear the challenge
of being forced to increase efficiency or close
down - continue to exert strong political
pressure against free trade proposals. Op-
ponents of closer economic ties to the U.S.
also appeal to nationalism, since, at bottom,
many Canadians still fear economic in-
tegration as a possible step down the road to
political union, a prospect all Canadians
regard as anathema.
Though the proponents of free trade reject
the argument, many Canadians still fear that
under free trade Canada would be reduced to
the role of "hewers of wood and drawers of
water" for a resource-hungry America.
"Economic considerations aside, there
simply is no way that two nations of such
unequal population, temper and power, could
become economic partners without Canda
being swallowed up in the process," wrote
Peter C. Newman, editor of MacLeans'
magazine, in a recent editorial.
Saskatchewan Premier Allan Blakeney
exulted over his re-election as part of
Canada's only New Democratic Party gover-
nment, after a campaign dominated by the
isses nf ennomic nationalism and the

selling oil and natural gas to the Americans
is there a hint of real free trade walk amen
politicians. The businessmen who encourage
this trend are connected with the majorrin
tegrated oil companies or with pipeline firms.
Liberals have long talked free trade as a
Canadian policy goal, but under successivE
Liberal administrations, including the
present one under Prime Minister Pierre
Trudeau, there has been little overall tarif
reduction.. :,
Beneath the veneer of free trade rhetoric
and the hard evidence that there are benefit:
tobe derived from lowering trade .barriers lit
some of the highest tariff walls of the in
dustrialized nations.
The public justification for this reluctance
to lower trade barriers is as much cultural a;
economic. The issues of "Canadianism" ant
"cultural autonomy" have surfaced as majoi
national issues in recent years, but in fac
they are as old as the Canadian confederatior
M ada's first prime minister, Sir Johr A
Macdonald, established the "Nationa
Policy," which still basically guide:
Canadian economic tactics. The 'Nationa
Policy" in effect is a tariff barrier higi
enough to force Americans wishing to sel
manufactured goods in Canada to establisl
factories within the country.
However dubious the economics of the
policy, it was good politics - creating jobs it
the short run and allowing Canadians to give
rein to their Loyalist sentiments.
In addition to the higher cost of manufac
tured goods that trade barriers produce
there is another, perhaps steeper, price tha
Canadians pay for their comparative securit;
behind tariff walls. Protection has created
defensive climate in which Canadian industr;
shuns rather than welcomes the hurly-burl;
of international competition.
This tendency has caused some frustratio
to Canadian trade officials at the 31 con
sulates throughout the United States.
Bob Burchill, trade commissioner with th<
Canadian consulate in Chicago, says trad+
will increase as a result of the bargait
basement dollar, but not by as much as i
"I think that some Canadian firms are ver;
reluctant to take advantage of the exchang+
rate to the extent they could," said Burchil
recently. "Canadians could do much mor
business . . . if they woke up.",
Even those Canadians who believe in fre
trade is inevitable because of the limitation:
of the Canadian market think it will come les:
from political choice than force of economic
Wonnacott, for example, doubts whether
Canadians ever will accept free trade withou
some prodding, either from -the rest of the
trading world or as a result of a sever
economic crisis inside Canada.
"Canadians are pretty protectionist," h
says. "I think we'll get substantial trad
liberalization in the next 25 years . . . but it'
not clear that it will be a result of Canadia


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