7 Contextualizing the Canadian Counterweights to Combat the American Economic Elephant: The Canada-First Policies of Pierre Elliott Trudeau

The word “context” can be best understood as the circumstances that form the setting for an event, statement, or idea, and in terms of which an event can be fully understood. As famously put by Canada’s fifteenth prime minister, Pierre Elliott Trudeau, to describe the relationship between Canada and the United States, “Living with you is in some ways like sleeping with an elephant: no matter how friendly and even-tempered the beast, one is affected by every twitch and grunt.”^[1] So, what exactly does the word “context” have to do with Trudeau’s apt analogy? First, it is important to understand the meaning behind his words. One relates to the proximity and size differences between the two countries, in which Canada would feel overwhelmed by its larger, elephantine neighbour. To go beyond population size, however, and delve into the cultural, political, and most importantly, economic implications, conveys a more telling significance: it illustrates the increasing interdependence and, at times, American dominance, particularly over the Canadian economy, that defined the “special relationship” between Canada and the United States following the end of the Second World War. This relationship developed further throughout the postwar era, and in many respects, fractured during Trudeau’s rise to power and his time in office. For this prime minister, the context was marked by three specific events in the Canada-US relationship: (1) the rise of Canadian nationalism in response to growing US dominance; (2) the so-called Nixon Shock of 1971 and implementation of the Third Option; and (3) the energy crisis of 1973, created by the Organization of Petroleum Exporting Countries (OPEC) and Canada’s subsequent National Energy Program (NEP). By looking at the significance of Trudeau’s “elephant speech” within the context of these events, this essay identifies the importance that context played not only in shaping Trudeau’s Canada-First mandate in dealing with the increasing American threat to Canada’s economic autonomy, but also in reinforcing Trudeau’s take on the special relationship: no matter how much the country tries to distance itself from the American “elephant,” Canada will inevitably be affected by its “every twitch and grunt.”

Canadian Nationalism and Trudeau’s Foreign Policy

In his book, The 49th Paradox: Canada in North America, Richard Gwyn asserts, “From the year 1957 on, Canadian-American relations were redefined by a force for which there was no historical antecedent. This was the force, at first tentative and apologetic, then increasingly vocal, then rancorous, then celebratory, of Canadian nationalism.”^[2] This statement perfectly illustrates the feeling that was burgeoning among many Canadians in the postwar period concerning the country’s increasing integration with the United States. On the one hand, many people recognized the benefits of American cultural and technological innovations and that the tensions produced by the Cold War necessitated closer relations to ensure “stability and prosperity.” On the other hand, there were those who were “increasingly alarmed” by polarizing American actions, including the “irrationalism” of certain anti-Communist rhetoric, the increase in militarism (particularly in Vietnam), and the “pressure on Canada to adopt nuclear weapons.”^[3] Canadians were especially aggrieved by what they viewed as the “infiltration” of Canadian society and the “implantation” of American values and interests in favour of their own. This growing concern was conveyed in opinion polls that showed a drift away from the pro-American sentiments of the 1950s or early 1960s.^[4] Many of these nationalists felt that something desperately needed to be done to help curb this perceived American “takeover,” particularly regarding one of its most invasive forms – economic ownership.

By the late 1960s, it was evident that American influence had penetrated the Canadian economy,^[5] notably, in the form of increasing investment as well as the rise of multinational corporations driven by postwar advancements in transportation, communications, and trade liberalization.^[6] In many ways, this “insurgence” placed Canada’s economy in an advantageous position with its American benefactor, including various exemptions.^[7] It also brought unexpected consequences: American direct investment allowed corporations to wield control over vital areas of the Canadian economy.^[8] In response to this “deliberate” breach and “exploitation” of Canadian interests, nationalists attempted to reclaim economic sovereignty, through an academic nationalist movement that came to be known as “Canadianization.”^[9] Chief among its promoters was economist Walter L. Gordon, at times a member of Prime Minister Lester Pearson’s Cabinet, whose efforts included commissioning the Task Force on Foreign Ownership and the Structure of Canadian Investment, which produced the Watkins Report, in 1967; and in 1970, together with Peter Newman and Abraham Rotstein, Gordon founded the Committee for an Independent Canada (CIC), which advocated “buying back Canada by removing American ownership from key areas of the economy and installing Canadian-owned companies or Crown corporations.”^[10] Under Gordon’s direction, the nationalist movement grew at an exponential rate. The CIC held conferences, published books, and gathered hundreds of thousands of signatures endorsing a petition that called on Pierre Trudeau, who in 1968 had succeeded Pearson as prime minister, to act before the country lost its capacity to control its own affairs.^[11] It is, therefore, no coincidence that Trudeau’s foreign policy, particularly concerning the United States, was greatly impacted by this new wave of Canadian nationalism and the CIC.

According to historians Jack L. Granatstein and Robert S. Bothwell, the concern for national unity was the cornerstone of all Trudeau’s ideas on policy, both foreign and domestic.^[12] And despite signs of reservation, the key to Trudeau’s approach to foreign policy was his view of nationalism.^[13] He argued that “nationalism will eventually have to be rejected as a principle of sound government … In such a world, the state – if it is not to be outdistanced by its rivals – will need political instruments which are sharper, stronger, and more finely controlled than anything based on mere emotionalism.”^[14] Nevertheless, amid the surge of Canadian nationalism, and realizing that it would benefit him in attaining his political ambitions, Trudeau’s “functional politics” – a term he had previously defined as a rejection of ideological approaches – changed to fit with the values of the times.^[15] This was exemplified by Trudeau’s “completely new and fresh approach” to foreign policy.^[16] “Reassessment has become necessary,” Trudeau asserted in a major foreign policy statement on 29 May 1969, “not because of the inadequacies of the past but because of the changing nature of Canada and of the world around us.” Furthermore, he proclaimed “that Canada will continue, secure as an independent political entity; that Canada and all Canadians will enjoy enlarging prosperity in the widest possible sense; and all Canadians will see in the life they have and the contribution they make to humanity something worthwhile preserving in identity and purpose.”^[17] In short, Canada’s foreign policy now needed to reflect Canadian national interests in the form of Canada-First policies.^[18] Out of this re-evaluation came six pamphlets, released in June 1970. This multicoloured package, what Peyton V. Lyon dubbed the “Trudeau Doctrine,” included a general overview, Foreign Policy for Canadians, plus five volumes dedicated to Europe, Latin America, the Pacific, International Development, and the United Nations; rather curiously however, was the omission of the United States, which required greater consideration because of its special relationship with Canada.^[19] In the meantime, many nationalists championed a foreign policy more independent of the United States and competitive or restrictive measures to stem the flow of American investment and culture into Canada.^[20] These considerations turned to realizations when, in 1971, the United States implemented President Nixon’s “New Economic Policy,” which greatly exposed Canada’s economic vulnerability and forced Trudeau to re-calibrate Canadian–American relations. Ultimately, he initiated a program, steeped in and supported by nationalistic rhetoric, to pursue economic measures against the United States.

The Nixon Shock and the Third Option

In Ottawa, on 14 April 1972, Prime Minister Pierre Trudeau welcomed incumbent US President Richard M. Nixon on his state visit to Ottawa with the following words:

Our relationship with the United States is too complex to be described, too involved to be understood fully, too deeply entrenched to be disregarded. We are no more capable of living in isolation from you than we are desirous of doing so … The basic friendship of Canada in the past several decades has been taken for granted by the United States, as we have accepted yours. I assure you that the friendship will continue for it is a permanent feature of our relationship with you. It will adjust to circumstance and be made more articulate in the process, but it is not regarded by us as negotiable.^[21]

This address perfectly reinforced the special relationship between both the countries. In a more polished version of Trudeau’s “sleeping with an elephant” speech, this particular address reassured his American counterpart that their friendship would continue as their long-established closeness in cultural, economic, and political matters made it inevitable, while it also drew attention to the rather complicated interdependence between the two nations, which more often than not, placed the United States in the patron position with Canada relegated to client status. This was especially the case regarding the Bretton Woods Agreement, created near the end of the Second World War as the international financial guarantor for Western countries in need. The Agreement collapsed, however, in the early 1970s, leading to dramatic rifts in the international economic system.^[22] Most notable in this regard was the “Nixon Shock” of 1971, which had a monumental impact on Canada–US relations.

Since 1944, when the Bretton Woods Agreement established the US dollar as the reserve currency for the capitalist world, and consecrated the global domination of the United States, the “mighty American industrial engine” had dragged Canada behind it like a “treasure-laden caboose.”^[23] That being said, with the United States having a balance of payments deficit since 1958, its costly embroilment in the Vietnam War, and the economic resurgence of Western Europe and Japan exacerbating its financial problems, the US government had to pursue more restrictive measures to stem the outflow of capital. Canada had covered its current balance of payments deficit to the United States by importing US capital. American restrictions on the outflow of capital throughout the 1960s, however, threatened to upset Canada’s balance of payments. Under the policy of “exemptionalism,” the United States had usually made Canada exempt from measures that protected the US balance of payments. That was the situation until 1971, when the American problem reached crisis proportions, and the US government could no longer afford to exempt its largest trading partner.^[24] In what Pierre Trudeau referred to in his memoirs as “arbitrary,” President Nixon imposed a 10 percent surcharge in 1971 on all goods entering the United States.^[25] In addition, the President called for the convertibility of the US dollar into gold or other reserve assets in creating of the Domestic International Sales Corporation (DISC) to provide export subsidies to US firms by deferring taxes on export sales indefinitely. With more than 20 percent of Canada’s gross national product (GNP) in 1970 dependent on exports and with 65 percent of that total being exported to the United States, Nixon’s actions threatened Canada’s prosperity. The Nixon Shock transferred the largely academic debate about foreign investment and Canada’s independence into an acute economic crisis. Despite mounting pressure from the international community, including Canada, successfully rescinding most of the surcharges, the shock and its aftereffects were still too much for Prime Minister Trudeau. Recognizing the full extent of Canada’s vulnerability, particularly that of its economy, to the United States, and heeding the increasing nationalistic cries for action, he decided that steps needed to be taken to safeguard Canada’s national interests. “My political action, or my theory – insomuch as I can be said to have one – can be expressed very simply,” he wrote in Federalism and the French Canadians, that is, “create counterweights.”^[26] In October 1972, the Trudeau government announced a far-reaching policy to enhance Canada’s economic autonomy. External Affairs Minister Mitchell W. Sharp told Canadians that they had three options: first, maintenance of the status quo; second, closer integration with the American economy; and a third option, namely, “to develop and strengthen the Canadian economy and other aspects of its national life and in the process to reduce the present Canadian vulnerability.”^[27] The Third Option was chosen, and its measures towards the United States were primarily aimed at reducing one of the greatest threats to Canadian economic sovereignty: the ever-expanding monopolization of American-dominated investment and corporate ownership.

Efforts had already been undertaken to regulate and supervise these “economic incursions,” by nationalists like Gordon, although without much success. This had even become a focus of Trudeau’s reassessed national policy. In March 1970, Trudeau had tasked one of his ministers, Herb E. Gray, with producing a paper on foreign investment. Finished in May 1971, the paper was debated privately, before being leaked later that year. Coming in at over 500 pages, the Gray Report recommended introducing a foreign investment screening agency. ^[28] After being reduced to a minority government in 1972, under pressure from a bolstered nationalist movement, and with the New Democratic Party (NDP) holding the balance of power, Trudeau opted for Gray’s proposal, and in 1973  the Foreign Investment Review Agency (FIRA) was created.^[29] In accordance with the Third Option, FIRA represented an effort to establish more effective control over the economic environment and to obtain greater benefit for Canada by ensuring that the foreign acquisitions and establishment of businesses in Canada were beneficial to the country. FIRA’s policy was to strike a balance between Canada’s continuing need for direct foreign investment and its desire for greater control over its economic environment. Foreign investment was still welcomed in Canada, but Trudeau wanted to ensure that any such investment would bring significant benefits to the country’s economy.^[30] FIRA was particularly instrumental with regard to one of the most crucial industries to both Canada and the United States, the energy sector. Almost immediately, however, the strengthening of Canadian ownership by “Canadianizing” the country’s industries would be challenged by more than just American hegemony. Trudeau and Canadian nationalism were faced with the globally cataclysmic OPEC energy crisis of 1973.

The OPEC Energy Crisis and the National Energy Program

In an interview with CTV reporters on 28 December 1975, Prime Minister Trudeau stated:

Well, it’s amusing … The need in the changing times … to develop new values and even change our institutions … I think the first shock came in ’73 with the OPEC crisis, and suddenly the industrialized world realized that it could be held to ransom for its supply of petroleum … And people are realizing it’s a different world and that you can’t live in a different world with the same institutions and the same values that you had before.^[31]

This statement is in alignment with Trudeau’s Canada-First counterweights and, by extension, his Third Option policy: to lessen dependence on the United States by Canadianizing the country’s economy, and especially in response to the OPEC energy crisis of 1973, its energy industry. Energy had been of vital importance to Canadian–American trade relations. Following the 1947 oil discoveries at Leduc, Alberta, as well as other discoveries in Western Canada, the United States became increasingly interested in Canadian oil and gas resources for its own national security. As a result, there was a significant influx of US capital to develop the country’s emerging energy sector, including the takeover of many oil and gas firms by American-controlled multinationals corporations.^[32] Throughout the 1950s and into the early 1970s, Canada’s priority had been to secure guaranteed access to the US market for the increased oil production surplus to domestic requirements. In due course, Canadian exports, like all other oil imported into the United States, invited American trade restrictions, for which Canada was forced to respond with protectionist policies to safeguard its own national interests.^[33]

Although the Cold War had hastened the development of the Canadian oil and gas industry, it was also responsible for raising American fears about US reliance on foreign oil supplies. During the 1950s, American domestic producers, concerned that cheap oil imported from the Middle East was flooding the US market, depressing prices, and reducing domestic exploration and development, argued that oil imports jeopardized US national security. As a result, in 1959, the US government enacted the Mandatory Oil Import Program (MOIP) to impose import restrictions on oil into the United States. As a reliable supplier of oil to the Americans, Canada protested the action and eventually succeeded in securing an exemption to this program. The exemption under the MOIP immediately became a fundamental component of Canadian oil export policy.^[34] Later in 1959, Canada established the National Energy Board (NEB) as an energy policy regulator.^[35] A National Oil Policy (NOP) followed in 1961 to foster the development of a domestic petroleum industry through expanding production and maintenance of national oil prices. An important provision of the NOP precluded Alberta oil pipelines from extending east of the Ottawa River. Thus, Ontario would have its foreign supplies replaced by slightly more expensive Canadian oil from Alberta, while the eastern part of Canada, particularly the important refining area of Montreal, continued to import foreign oil, mainly from Standard Oil production in Venezuela. Oil exports to the United States were in turn increased to compensate Western Canadian producers for the loss of the Montreal market. Between 1963 and 1968, officials in Ottawa and Washington negotiated regularly on agreed levels of Canadian exports.^[36]

When the Trudeau government assumed office in 1968, the NOP was evaluated based on the major changes that had taken place in the market since the policy’s implementation. Canadian exports were regularly exceeding the quotas established under the US overland exemption for Canadian oil and gas. In response, in 1970, President Nixon imposed import controls and an import tax on Canadian oil, just as Canadian domestic oil production had begun to decline that same year. The period between 1970 and 1973 also saw significant changes in the global energy market. Member OPEC states moved decisively to end the oil-company practice of generating profits by depressing wellhead prices and to combat the declining balance of payments they were experiencing because of the devaluation of the US dollar. In addition, many of these countries began nationalizing their oil and gas production. These shifts had a tremendous impact on the Canadian petroleum industry. As the United States became increasingly dependent on imported oil and gas, the Canadian industry was greatly exporting oil to its southern neighbour, and in doing so, it was liquidating its easily accessible reserves at an alarming rate but doing little to replenish them with new discoveries. In hopes of improving the situation before it became even worse, Trudeau acted to restrict oil exports, and as part of a national voluntary wage and price restraint program instituted in the face of mounting inflation, he requested industry to freeze oil and gas prices until 1974.^[37] These initiatives, designed to protect Canada’s national energy interests, in many ways paved the way for his more elaborate protectionist policies aimed at Canadianizing the country’s energy sector against the rising world prices brought about by the OPEC crisis.

Following American support of Israel in the Yom Kippur War of October 1973, OPEC embargoed oil to the United States, instantly quadrupling the global price of petroleum and subsequently providing a substantial external shock to Canada’s energy system.^[38] Under mounting pressure from the nationalistic-supporting NDP, arguing that Canada should have a more active federal oil and gas policy,^[39] Trudeau moved to control prices and increase revenue through taxation and eventually announced the end of the 1961 National Oil Policy. The price controls meant oil produced and sold in Canada would be priced significantly lower than the world price. The oil export tax, called the Oil Import Compensation Program, initially levied a flat rate of 40 cents per barrel, which evolved into the equivalent of the difference between the controlled price of Canadian oil and the world price. Both Alberta, Canada’s largest oil-producing province, and the United States were abhorred by these changes.^[40] Unmoved, however, Trudeau announced in Parliament in December 1973 an energy policy for the country to promote Canada’s self-sufficiency in oil by the end of the decade. This policy had two aims: first, to insulate consumers from world oil prices by subsidizing energy users and controlling the wellhead price of oil and natural gas, and second, to attempt to increase security of supply by reducing exports and redirecting them to the domestic market as well as by exploring the potential for developing Canada’s Arctic natural gas supplies and synthetic oil sands. The new energy policy abolished the Ottawa Valley Line (whereby western Ontario was off-limits for foreign crude oil) of the NOP and promised an extension of the transcontinental oil pipeline into Quebec as far as to Montreal. This energy policy speech in the House of Commons also gave official support to the two-price system of subsidized Canadian oil prices and promised the formation of a publicly owned oil company, eventually developing into the Crown corporation, Petro-Canada in 1975. These latest initiatives designed to “Canadianize” the country’s oil and gas industry were followed in December 1974 by another major step towards developing economic independence from the United States. Responding to concerns raised by Canadians about the availability of oil and gas resources to satisfy domestic demand and backed up by reports and hearings all indicating that Canada was running short of oil, Trudeau announced the decision to phase out oil exports to the United States.^[41] Subsequently, throughout the rest of the decade, Canada’s oil exports to the United States were almost entirely phased out, while natural gas exports remained approximately constant. The virtual elimination of oil trade and the imposition of an oil export tax meant that Canadian oil prices were immune from those in the United States.^[42] With the price of oil once again doubling, in response to the 1979 Iranian Revolution, energy security re-emerged as a political issue, and once again put strains on the Canada–US relationship.^[43] Furthermore, despite federal efforts through FIRA and Petro-Canada, by 1980, nearly three-quarters of the Canadian oil and gas industry was foreign-owned, with Americans counting for nearly 80 percent of all foreign ownership. The Canadian energy industry, which already relied extensively on its US sales, became a net capital exporter, selling more abroad than Canadians consumed at home.^[44] During the interim period from 1970 to 1980, in which Trudeau served as Opposition leader against the Conservative government of Charles Joseph (Joe) Clark, issues of Canadian ownership over the country’s petroleum industry persisted. Campaigning in Halifax in January 1980, Trudeau pledged to re-establish Canadian control over the country’s natural resources.^[45] After Clark’s short-lived government, Trudeau returned to power in 1980, determined to fulfil his promise to strengthen Canadian ownership over Canada’s energy sector, by unleashing his most ambitious, controversial nationalistic policy of all: the National Energy Program.^[46]

The Throne Speech delivered on 14 April 1980 represented a new beginning for Canada under the re-elected Trudeau government, particularly with regard to Canada’s economic sovereignty over its energy industry. In that speech, Trudeau placed great emphasis on the need to secure Canadian ownership and responsibility of the country’s own oil and natural gas resources.^[47] The official National Energy Program (NEP) that was introduced to Canadians in October 1980 by Trudeau and his Minister of Energy, Mines and Resources Marc Lalonde, came directly from this nationalistic platform. The NEP had three goals: to provide Canadians with energy security, the opportunity to participate in energy development, and fairness in the manner in which the benefit of the nation’s rich resources are shared.^[48] More concretely, the federal government envisioned that by 1990 Canada would be energy self-sufficient, 50 percent of the industry would be under Canadian ownership, and Ottawa would control a greater share of oil revenues.^[49] The state oil company, Petro-Canada, was to become the instrument for increased Canadianization through a “back-in” provision, which gave it automatic ownership of a 25 percent “Crown interest” in every new oil development on Canada’s lands. Petro-Canada would also be assigned capital to buy up more foreign-owned petroleum companies. Furthermore, a range of new taxes would divert the expected flood of petrodollars into the federal treasury by the billions. The Petroleum and Gas Revenue Tax (PGRT) would tap oil and gas as it gushed out of the ground; a tax on gasoline as it came from the refinery would pay for Petro-Canada’s foreign acquisitions. Petroleum Incentive Payments, called PIP grants, privileged domestically owned and controlled companies willing to pursue oil and gas exploration on Crown lands, over US-controlled multinationals.^[50] Although championed by Canadian nationalists, the NEP and its Canadianizing policies were considered to be deliberately aggressive, and at times, confrontational by its detractors, most notably, the United States under the neo-conservative government of President Ronald W. Reagan.

On 4 November 1980, one week after the implementation of the NEP, Reagan secured an overwhelming victory in the American presidential election. In his inaugural address, he referenced his “intention to curb the size and influence of the federal establishment and to demand recognition of the distinction between the powers granted to the federal government and those reserved to the states or to the people.”^[51] Canada’s NEP, with its interventionism, its nationalist promise to regain Canadian ownership over the country’s energy sector, and its favouring of Canadian firms over multinationals, through the efforts of FIRA and Petro-Canada, became a direct challenge to the new US administration.^[52] The initial response from Washington was one of utter disbelief and acrimony.^[53] During one of their earliest meetings at the White House, in late July of 1981, Trudeau was lambasted by Reagan and his Vice-President George H.W. Bush regarding the NEP and what they considered to be its anti-American implications. From their viewpoint, “in openly discriminating against foreign companies, the NEP was lowering the value of the petroleum assets of US firms in Alberta and making them targets for takeovers by Canadian companies.” Furthermore, US oil companies were objecting to what they called the “gross unfairness” of the “back-in” provision in the NEP, the 25 percent “Crown interest” that the Canadian government intended to allot Petro-Canada in every project on Canadian lands once it had shifted from the exploration to the development stage. American detractors also attacked FIRA, by alleging it to be “unfairly protecting predatory Canadian corporations” from counterattack while they bought out US operations in Canada at “fire-sale prices.”^[54] Trudeau rather famously responded to Reagan’s criticisms by remarking, “Look, I won an election on this platform. I don’t tell you how to set the figures for your military budget, you can’t tell me that I can’t have my own energy policy in Canada.”^[55] The US State Department launched complaints through the Organization for Economic Cooperation and Development (OECD), the International Energy Agency (IEA), and the General Agreement on Tariffs and Trade (GATT), alleging that Ottawa had failed to live up to its international commitments to provide national treatment to foreign investors in the energy industry. US officials attacked Canadian policy in the popular media.^[56] In addition, White House officials contemplated various methods of direct retaliation: at one point, Washington even considered limiting Canadian participation at a forthcoming G7 summit.^[57] Despite these outrageous attacks on Trudeau’s nationalistic policies, Reagan did eventually elicit concessions. In response, Trudeau pulled back his commitment to Canadianization by amending legislation that provided for fairer competition across the energy industry, cancelling a plan to privilege Canadian-owned companies in gas exports, and committing to limit Canadianization efforts to the energy industry. Finally, American companies that had been forced to sell equity to the Canadian federal government were compensated with no admission of wrongdoing.^[58] Still, the Trudeau government refused to concede Ottawa’s right to interfere in the market to promote and defend the national interest of Canada. The popularity of this stance – at the time, 84 percent of Canadians agreed with efforts to increase national ownership in the energy sector – ultimately convinced Washington that further objections would be futile.^[59] Far from buckling under the pressure of the American “elephant,” however, the writing was already on the wall for Trudeau’s doomed NEP as well as his ill-fated attempts to establish economic independence within the Canada–US relationship.

The NEP eventually collapsed under its own weight because of being too bureaucratic and politically divisive.^[60] As two ministers later conceded, its success hinged on a continued and sustained increase in the price of oil.^[61] When a sharp recession led to a steep decline in oil prices, the Trudeau Liberals found themselves vilified by the West, disliked in Washington, and – ironically, thanks in part to the success of the Canadianization initiatives – guardians of a fast-growing federal deficit. The NEP swiftly became one of the Trudeau government’s greatest political and policy failures.^[62] In September 1984, the Progressive Conservatives returned to power under the leadership of Brian Mulroney, who had pledged to “refurbish” Canada–US relations, including restoring the bilateral economic relationship to a place of importance in Canadian trade policy. As the new Canadian prime minister, Mulroney stated that “good relations …with the U.S. will be the cornerstone of Canada’s foreign policy” under his leadership. On assuming office, Mulroney declared, “Canada was open for business.” The government’s new direction was reaffirmed when Mulroney replaced the FIRA with Investment Canada, a department that sought to encourage foreign investment in Canada, and he dismantled the NEP.^[63] In essence, the new Canadian government cancelled Trudeau’s counterweights towards the United States, returning it to the status quo of the earlier postwar period.

Conclusion

“Context is everything,” and this is especially true when describing the special relationship between Canada and the United States under Prime Minister Pierre Elliott Trudeau. From his famous “elephant speech,” one can see that Trudeau was identifying a rather complicated cooperation between the two nations, one that often saw the Americans in the position of power, and Canada impacted by its every action. When viewed through the context of the economic circumstances during Trudeau’s rise to power and throughout his time in office, it can certainly be argued that they greatly helped contribute to his nationalistic Canada-First measures to establish autonomy over the Canadian economy. Growing US influence, increasing investment, and the rise of American-controlled multinationals led to a surge of Canadian nationalism, which subsequently benefited as well as influenced Trudeau when reassessing his policies towards the United States. With the Nixon Shock exposing Canada’s vulnerability to its neighbour and mounting pressure from Canada’s nationalist movement for retaliation, Trudeau imposed the Third Option to strengthen Canadian economic ownership to lessen the country’s dependence on the United States. The OPEC energy crisis of 1973 saw an oil embargo launched against the United States, which inevitably affected Canada’s largely American-dominated energy sector. Prime Minister Pierre Elliott Trudeau set about Canadianizing the oil and gas industry through the 1980 National Energy Program, resulting in more problems than successes. The NEP was largely dismantled by Trudeau’s successor, with components realigned to fit Prime Minister Brian Mulroney’s pledge of bilateral economic relations with the United States. In all three cases, the circumstances lend credence to Trudeau’s interpretation of the Canada–US relationship: “no matter how friendly, or even-tempered” the United States, Canada “is affected by every twitch and grunt.”