A few bitter realities

The downward pressure on the Canadian dollar was predictable, if not inevitable, once U.S. President Ronald Reagan sent his proposed budget to Congress.

That budget, with its projections of monumental deficits through 1990, gave the clearest possible signals to speculators and investors around the world. Even if Congress tinkered with the budget, they knew that the American dollar and interest rates would both stay high.

In these circumstances, the Canadian dollar was going to fall. No matter what the Opposition says in Parliament – and neither party has a realistic alternative policy – the Government had to sanction a managed decline in the value of the Canadian currency with a small increase in interest rates.

Yet the current surge of the U.S. dollar alone does not explain our falling dollar. After all, the dollar began falling a number of years ago now, its fall a reflection of certain bitter realities.

Foremost among these were Canada’s poor productivity record, its own burgeoning public debt and a stubborn refusal to restructure our industry.

Put simply, successive governments have been misapplying public funds to prop up losing or declining industries. The result of these political decisions has been a systematic and huge application of scarce resources to unproductive activities. Inevitably, these mis-investments took their toll on Canada’s economic standing. But no party will say these things for fear of losing votes.

Look about Canada and see a landscape littered with industries protected by government regardless of their international competitive positions. The car industry is assisted by restraints on Japanese imports. So are the textile and footwear industries.

Megaprojects mock the bold promises of their inventors and drain away taxpayers’ money – Northeast coal in British Columbia, Expo ’86 in Vancouver, Mirabel airport, Via Rail, the Olympic Stadium, the post office sorting complex in Montreal. The list runs on.

Uncompetitive industries – business being at once government’s sharpest critic and most insistent supplicant – demand their tithe of taxpayers.

There are too many fishermen or fish processing plants on the east and west coasts. Canadair and de Havilland continue to be sinkholes for public money. We are stockpiling heavy water in Nova Scotia for Candu reactors which nobody wants to buy. We’re reinstating passenger rail routes which will resume losing vast sums of money. We put more money into a losing oil-based petrochemicals plant in Montreal. We pour money into money- losing steel mills in Nova Scotia.

Unemployment insurance has become a social welfare program. In Newfoundland, make-work projects are designed to give people just enough working weeks to qualify for unemployment insurance.

The examples of misallocating public funds could run on and on. In every case, the reasons behind the allocations are political and social. Either no alternative employment exists or governments, having lost huge sums already, don’t mind dropping a little more cash to buy political peace.

This kind of economic behavior has been the Canadian way for decades. In the 1970s, when the terms of international trade turned against us and our productivity weaknesses became more glaring, governments intensified the subsidies and protection.

In this way, governments (usually Liberal) tried to cushion social distress. The approach also brought political gains. But it delayed structural adjustments in our economy, a sustained attack on weak productivity and a more intelligent national debate on the role and capabilities of government.

Canada’s code on South Africa could take cue from U.S. model

The Canadian Government might resolve the difficulties it has with its voluntary code of conduct for Canadian companies in South Africa if it were to revamp it along the lines of the Sullivan Code in the United States.

The Sullivan Code has the dual advantage of being at arm’s length from government while at the same time being compulsory for companies that have agreed to become its signatories.

The major flaw with Ottawa’s code is that it has no mechanism for enforcement, either by law or by moral suasion. Moreover, it is inclined to be stronger on noble rhetoric – however well-meaning – than on the presentation of specific, informed recommendations to Canadian employers operating in the apartheid state.

The Canadian code, first published by the Department of External Affairs in April, 1978, has received attention recently because of reports in The Globe and Mail that the giant Canadian multinational Bata Shoe Co. is in violation of it.

Bata is by far the largest direct Canadian employer in South Africa, with 3,500 workers. The Globe articles focused on its two footwear manufacturing factories in the black bantustan of KwaZulu, about 200 kilometres from Durban.

Questions have been raised in Parliament. External Affairs Minister Joe Clark has promised to personally review the code’s provisions and mechanisms.

The code’s intent was that Canadian employers in South Africa, on their shop floors and in their communities, should strive to dismantle the structures of apartheid that keep black workers and their families on the bottom of the economic and social heap.

To this end, it said Canadian employers should report annually to Ottawa on what progress they were making in meeting the code’s goals.

Unfortunately, External Affairs never spelled out how this was to be done, although its then-minister, Don Jamieson, now Canadian High Commissioner to London, assured Canadians his department intended to follow “developments” closely.

As the problems with mechanism became more apparent (and as no Canadian company ever made the kind of annual report the Government expected), Ottawa fell silent.

The U.S. Sullivan Code has the same intent as Ottawa’s code. But rather than being the responsibility of Washington, it is solely in the hands of the man who gave it its name – black Baptist pastor Leon Sullivan – the companies which are its signatories and the consulting firm of Arthur D. Little, which monitors corporate behavior according to the code’s principles.

Its enforcement provision could not be more simple: publicity.

The names are made public of U.S. companies operating in South Africa which are not signatories or which are dropped from the signatory group.

Companies are dropped if they do not report annually.

The Little firm grades the reports – and makes its grades public – not only on the basis of what companies have done to comply with the code’s provisions but on how much improvement they have made in the course of a year (thus a company could be given a good grade for initial compliance, but the grade would be lowered if it failed to improve on its own record).

The problem with trying to enforce a government code is that it places Ottawa in the position of more or less applying Canadian law extraterritorially to South Africa. The principle is anathema to Ottawa, which consistently has opposed the extraterritorial application of U.S. law to U.S. companies operating in Canada.

Ottawa would avoid this difficulty if it turned its code over to the approximately 30 Canadian companies operating in South Africa and perhaps invited an organization such as the Toronto-based Task Force on the Churches and Corporate Reponsibility to monitor it.

The code’s language, in addition, is in need of review – given Bata’s reaction to some of its provisions.

For example, the code says employers should pay their workers at least 50 per cent above the “poverty line”. Bata says its two KwaZulu plants already operate at a loss and the profitability of its entire South African operations would be wiped out if it complied with Ottawa.

The code is silent on such a situation, making neither allowances for it nor moral judgment nor provision for examining a company’s financial health. Would Ottawa prefer Bata not to be in South Africa – presumably putting 3,500 employees out of work – rather than violate its stipulation on pay? The code says Canadian companies should provide adequate assistance to their employees and their families for such things as housing and education.

Bata says its employees live in their own houses. It believes that Ottawa had in mind merely migrant workers in hostels. It is difficult, from reading the code, to be clear on what Ottawa did mean.

However, it is instructive to examine the poverty datum line – called the Household Sufficiency Level (HSL) – which Bata and many other employers use to determine wages.

Like many things in South Africa, the HSL is applied with racial distinction: for example, the HSL’s minimum monthly housing allowance for blacks in the Durban area is about $12; for coloreds, $31. There is no HSL for whites.

Ottawa’s code talks about ending economic disparity. What “poverty line”, therefore, is it talking about – the poverty line for blacks which Bata uses and which would appear to keep blacks in an economic class of their own? Or some kind of universal poverty line which officially does not exist? Bata asks why it should contribute to education when education is provided free by the state.

State per capita expenditure on education in South Africa is about one- seventh for blacks what it is for whites (this week’s South African budget is reported to have substantially increased black education spending, but a large gap remains).

If Ottawa specifically had intended that Canadian employers should give financial assistance to bridge the gap between white and black expenditure on education, it would have been helpful to employers if its code said so.

Bata is also somewhat of an exception. Most Canadian companies involved with South Africa are either minority partners in South African concerns or are Canadian banks lending money into South Africa. The Canadian code makes no recommendations on their behavior.

Finally, under proposed Sullivan Code revisions – being worked out between the companies and Rev. Sullivan – U.S. corporate signatories will be obliged to publicly condemn apartheid and lobby the South African Government for change.

The Canadian code has never made that specific requirement.

A spirited approach

News from Britain of new styles for, almost of, men, goes unabated. In the realm of popular music, there is Morrissey, the bushy-browed lead singer of The Smiths, whose hair, cut flat and quiffed, and shirts, rumored to be ladies’ oversized, have already been emulated by English youth, and Pete Burns, of Dead or Alive, who sports long crimped locks, the slightest amount of makeup, and sometimes a patch. In the field of mere fashion, the English Menswear Designer Collections have emerged as one of the hot attractions on the international trade show circuit.

Seven of the group’s nineteen members were in New York last month, invited by the Designers’ Collective, to present their fall lines. While even within this sample representation there was great diversity of design, the English exhibitors seemed to share an honest, adventurous spirit that made them the talk of the four-day event.

Chairman of the organization, Roger Dack, with 20 years of rag trade experience under his belt, was the most senior of the designers, but by no means stodgy. Quite capable of the kind of quick talk and aggressive manner necessary to make government agencies realize the importance of the E.M.D.C.’s efforts to establish an international profile, Dack, nonetheless, spoke of a sense of humor as the highest need. Though there was nothing really ground-breaking about his Franklin collection of tailored, textured sportswear, there was, in his mixing of plaids and paisleys, an echo of the nervy, avant-garde nature of current English fashion.

It may be taken as a sign of just how advanced that Martin Cassar, who designs a division of Custom Shoes, was able to say, “I could have shown last year’s collection.” Compared to the kind of continental, low- vamp slip-ons being offered by other footwear exhibitors at the Collective, Cassar’s thick-soled boots and bootees, while of a traditional English sturdiness, appeared particularly ew.

Floral motifs, such as have been so intelligently handled by British women’s wear designers for spring, showed up in shirts by Clive Jennings and Jerry Richards for Empire Apparel as well as in the jacquard weaves employed by Charlie Allen. Su Nicholson, for the Sioux label, adhered primarily to solid shades in a collection of appliqued wool and cotton fleece. What was special about her line was the way she juxtaposed sporty and formal elements, suggesting a multi-faceted male who might at one time wear track pants, at another, a dandified bow tie, and at some other, both.

A native of Hong Kong who studied at the Chelsea College of Art and whose mother now lives in Toronto, Antony Kwok expressed the general excitement of designing men’s wear as the opportunity to break many rules and his particular interest as specializing in unusual, frequently luxurious fabric. Besides coats of soft black alpaca, jackets of soft blue llama, Kwok’s fall collection included some extraordinarily snazzy evening duds, among them, wing-tip shirts of silk jersey, metallic knit turtle- neck pullovers, and shawl-collared jackets of silk gauze in silver or turquoise.

Equally brilliant was a collection called Arkitect designed by the Moroccan-born Simon Abihissira. Hard to forget were jackets, in pinks, greens, blacks and blues, of wool in which were combined Welsh tapestry techniques and Islamic patterns and trousers of lustrous raw silk. Impossible to forget was the pink organza shirt featuring sleeve plackets snaking from cuff to elbow. The Arkitect fall line, as well as printed shirts from Empire Apparel, is to be distributed in Canada by Power Clothes Works, a Toronto agency that deserves credit for doing so.

Canada, Taiwan strive to establish a balance in import-export trade

Canada’s trade with Taiwan is likely to grow again this year, but despite efforts on both sides of the Pacific the balance in Taiwan’s favor continues to expand.

The growing gap is of considerable concern in Taiwan, says Lorne Seitz, senior vice-president of the Canadian Chamber of Commerce.

Canadian exports to Taiwan – primarily paper products, copper, coal and grain – rose 15.8 per cent in 1984 to $400-million from the level of the previous year. But in the same period, imports from Taiwan – mainly footwear, textiles and consumer electronics – jumped 32.2 per cent to $1.22-billion.

This year, exports probably will approach $500-million, but imports are likely to climb even more, to between $1.4-billion and $1.5-billion.

A Canadian trade delegation, including Mr. Seitz, met Taiwanese officials earlier this month and urged them to make efforts to narrow the trade differential.

The gap in the trade balance is proportionately the same size as that between Taiwan and the United States, Taiwan’s largest export market, and the situation ”s causing no end of concern in Taiwan,” Mr. Seitz said.

The Canadians suggested Taiwan could increase its imports of Canadian coal and go to Canada to buy some metal products and all of its grain, rather than most of its grain, as is the case now.

They also suggested Taiwan could make some purchases in Canada rather than in Australia, with which Taiwan has almost balanced trade of about $700-million each way annually.

The Taiwanese are looking to diversify and to decrease their reliance on imports from Japan, which currently has a $3-billion trade surplus with Taiwan.

In hopes of boosting sales of Canadian goods, the chamber of commerce is preparing to establish a trade office in Taiwan, perhaps later this year.

Financing is the stumbling block. With no diplomatic relations between the two countries, the Canadian Government is prevented from providing the $500,000 to $600,000 needed to set up such an office and a support system in Canada. “The situation is kind of ludicrous,” said Ted Chih-Fan I, president of Investec (Taiwan) Ltd., a Taiwanese management consulting firm. “Purchases from Canada are very much agreeable to Taiwan, and the lack of political relations makes that more difficult.” Victor Chen, director of Far East Trade Service Inc. in Vancouver, says Canadians must maintain personal contacts if they hope to do business in Taiwan. Frequent follow-up visits are essential, he said.

U.S. and West German telecommunications companies, for example, keep a close watch on projects being developed through official agents in Taiwan.

A Canadian office could also help Taiwanese business people who want to come to Canada. A frequent complaint is the lack of a Canadian visa office in Taiwan. That forces potential travellers to apply for visas in Hong Kong, where the nearest Canadian post is located. Similarly, Canadians must apply for visas through Taiwanese offices in the United States.

Canada should also consider giving multiple visas, good for four or five years, as the U.S. Government does, Mr. Chen said. These make it easy for business people to make frequent trips.

Taiwan relies heavily on foreign trade. Exports comprise about half of the country’s gross national product.

Strong export demand has been the engine of Taiwan’s economic recovery following two years of slow growth in 1981-82, says a report published by the international banking department of the Royal Bank of Canada. ”he impressive export-led recovery is now being consolidated by an increase in momentum in consumption and private investment.” And with the economic recovery boosting tax receipts, the Government increased its spending plans by 11 per cent in 1984-85.

The Government is also committed to industrial restructuring, from labor-intensive to technology- intensive processes, and it is encouraging diversification of exports, which are mostly consumer- related goods.

Opportunities exist for Canadians to increase sales, particularly as Taiwan needs technology and equipment for planned nuclear and telecommunications developments.

As well, the Government of Taiwan recently decided to reduce import tariffs over the next three to five years.

Canada and Taiwan do not afford each other most favored nation status in trade, but ”hese things can be negotiated,” Mr. Chen said.

Mr. Chen’s company, which has offices in Toronto and Montreal as well as Vancouver, offers information and consultation services free to encourage trade between the two countries. The office is financed through levies paid by the Taiwanese Government, unions and businesses.

Italian shoes pump up trade surplus

Canadian shoe quotas may have cost Italian manufacturers $70-million worth of business in the past few years, Italy’s ambassador to Canada says.

Francesco Fulci cited the quotas as one of the major sticking points in Italian-Canadian trade relations, along with provincial wine-pricing policies and defence-related trade.

Footwear is Italy’s main export item to Canada – with more than six million pairs worth $120- million shipped in 1984. Italy and other exporters of higher-quality shoes have long said they do not compete for the same market as Canadian manufacturers. The quotas do not apply to the highest- priced fashion boots and shoes, a market dominated by Italy.

But although the exempt items account for a major share of the dollar volume, they make up a relatively small part of Italian production, which has led to the friction over the quotas. “The measure was supposed to be temporary,” Mr. Fulci said in a recent interview. “When it is in force for so long, it is not a temporary measure any more.” The federal Government first imposed shoe quotas in 1977 and has extended them several times. Restrictions on leather footwear were lifted in late 1981 but reapplied in July, 1982. The quotas are scheduled to expire at the end of November. “I feel that to enhance our bilateral trade we should . . . render both our markets even more immune to the disease of protectionism,” Mr. Fulci said.

Canada had a deficit in its trade with Italy last year of $538-million, more than double the 1983 level, and a far cry from the record 1980 surplus of $378-million.

But Mr. Fulci played down the numbers. “What counts is not who is in the black or the red in a particular year, but to increase the volume of trade.” After falling to a low of $549-million in 1983 from $988-million in 1980, Canadian sales last year were $578-million, a 5 per cent increase from a year earlier. “We are climbing out of 1983’s trough, but it will be some time before we get back to how we were doing in 1980,” said John Pearce, commercial counsellor at the Canadian embassy in Rome.

Mr. Pearce cited the decline in pulp and lumber exports as major reasons for the drop, which saw Canada’s share of total Italian imports fall to 0.75 per cent in 1983 from 1.3 per cent in 1980. The value of pulp exports last year was $177-million, up from $116-million in 1983 but still down from $230-million in 1980. Lumber exports fell to $14-million from $15-million in 1983 and $59-million in 1980.

Two factors are at the root of this downturn – cost and the economic situation in Italy. Between 1980 and 1983, the dollar appreciated from an average exchange rate of 725 lire to 1,222 lire, while a 16 per cent devaluation of the Swedish krona made the products of Canada’s biggest European competitor more attractive. And the Scandinavians have duty-free access to European Community countries.

Italy’s economy was late in picking up, and its recovery is not expected to approach U.S. levels. “With only a weak recovery we cannot expect Canadian exports of raw and fabricated materials to jump back to former levels,” Mr. Pearce said.

Mr. Fulci said both sides should work to diversify trade in non- traditional areas such as high technology.

He said Italy is buying flight simulators, electronic equipment and engines from Canada, but Canada is not reciprocating.

Federal officials agreed that Italian defence contractors have not won significant Canadian business in competitive bidding. But they said the ambassador has no basis for his complaints. “They are welcome to bid. It’s a matter of being competitive,” one official said.

Meanwhile, Canadian officials expect the European Community to bring the wine-pricing issue to the General Agreement on Tariffs and Trade.

In August, 1983, Ontario adopted a floor price system that cut severely into sales of Italian wines that had been priced below the minimum level set by the province.

As a result, Italian producers lost about one- third of the volume of their Ontario market in one year, Mr. Fulci said.

Canadian consumers bought $24-million worth of Italian table wine in 1984, compared with $22- million in 1983 and $20-million in 1980. Italian cheese exports were $7-million in 1984, compared with $9-million in 1983 and $7-million in 1980. Still, Canada enjoys a surplus in its food trade despite declining cereal sales, which have been hit by European Community protectionism.

Durum wheat, used for spaghetti and vermicelli, is Canada’s second- largest lira earner. Sales in the 1983-84 crop year (which ended July 31) were worth about $100-million, up from $96- million a year earlier, but below the $134-million reached in 1980. Italy’s good harvest in 1984 could have an adverse effect on exports this year.

Canadian exports of fish products are worth about $15-million annually. The Mediterranean is overfished, prices tend to be high and the quality uneven, leading to significant reliance on imports.

Smoked salmon has found an Italian market; and prospects are bright for clams because of problems finding uncontaminated shellfish in local waters, which are high in bacteria.

Both sides are exploring industrial joint ventures as a means of increasing trade flows. Small and medium-sized Canadian companies could benefit, for example, from Italian expertise in such areas as machine tools and industrial design, officials said.

Joint ventures in third countries are another option. Mr. Fulci mentioned Italian participation in the Argentine and Romanian nuclear projects, and noted that similar opportunities exist in Egypt, Turkey and Indonesia.

Company faces bankruptcy over definition of shoe part

A conflict with Revenue Canada over the definition of an imported shoe component may result in the closing of a Toronto shoe manufacturing company and leave 80 people without jobs.

Youngstar Manufacturing Ltd., which produces about 30 per cent of all athletic footwear manufactured in Canada, is facing bankruptcy because it must pay a 25 per cent tariff on a man-made nylon upper – a component for jogging shoes imported from Korea and Taiwan – company president Duck Choi says.

The tariff was increased from 10 per cent last October because the imported materials were not properly classified, Revenue Canada classification officer Osborne Todd said.

Mr. Choi said the jogging shoe uppers he imports were reclassified by Revenue Canada Customs and Excise as a textile and not a plastic, as they were before October, 1984.

Imported textiles are taxed up to 15 per cent more than plastics, which qualify for guaranteed preferential tariff status.

The uppers consist of a nylon material, laminated to a cloth backing with a plastic foam in the middle, and are added to the sole to complete the shoe.

A report from Revenue Canada investigators has recommended that the shoe component remain classified as a textile. But Mr. Choi said unless the status changes he will go bankrupt in three months. “It’s not just because of the money we’re losing. If this doesn’t change soon, we will not be able to manufacture anymore,” Mr. Choi said.

Mr. Choi said he has already laid off 35 of his 80 employees, and has lost $120,000 from the extra 49 cents he has paid on each upper since the reclassification.

Joanne James, director of industrial goods at Revenue Canada, said she has received a report from tariff and customs officials who analyzed one of Mr. Choi’s uppers and identified it as a textile.

Mrs. James said she is not sure if Mr. Choi’s financial situation can be taken into account, but she will submit a recommendation to the director-general, who will make the final decision some time in the next week.

Mr. Todd said that, after a laboratory analysis and inspection, it was decided the upper “had the appearance of a textile.” Mr. Choi said he is in a no-win situation because the single upper component is not produced in Canada, and he is forced to purchase imported materials.

Phillip Levine, secretary-treasurer of Capital Findings Ltd. which sells wholesale materials for uppers, said there are no companies in Canada that only produce completed uppers. Most shoe manufacturers produce their own components and have no need to import them or buy them from other companies, he said.

Youngstar produces 2,000 Sparx and Sonic running shoes a day for retailers such as K Mart, Sears and Bata.

Community set to block shoe imports

The European Community plans to block footwear imports from Canada and increase duties on imports of some industrial products in retaliation for Ottawa’s restrictions on footwear imports from the community, an EC spokesman says.

She said the commission has notified the General Agreement on Tariffs and Trade about the retaliation measures, which will take effect in 30 days unless the EC and Canada find a solution to the problem. Negotiations are continuing, the spokesman said.

The EC decided to take retaliatory measures because it cannot agree with Canada on the level of compensation it should receive as a result of Canada’s import curbs on footwear. A Canadian official in Brussels said the gap between what the EC wants as compensation and what Canada is prepared to give is still “quite wide.” Under the measures, EC duties will be increased for imports of the chemicals methanol, pentaerythritol, styrene and polyethylene; furskins; kraft paper; automobile radios; wire rod; vinyl acetate; sewing needles; crude granite; and some iron or steel coils and sheets.

The EC has also prepared retaliatory measures against Canada to compensate for the limits it imposed on EC beef and veal exports this year. GATT will be notified about the measures if talks on the issue do not lead to agreement, EC sources said.

Ottawa gave the EC an import quota for beef and veal of 2,700 tonnes in 1985, a steep drop from nearly 23,000 tonnes last year. The EC has said the import curbs are against GATT rules.

An External Affairs spokesman said a team of Canadian negotiators went to Brussels Tuesday to try to negotiate a settlement of the dispute over the import controls.

The spokesman said the Government is “hopeful” that the negotiators can reach an agreement with the community.

Mulroney sidesteps free-trade pitch, but Caribbean leaders praise his style

Prime Minister Brian Mulroney sidestepped a Caribbean pitch for free trade with Canada yesterday by reminding the various island nations of the preferred status they already enjoyed and promising to stick by previous aid commitments.

But even though Mr. Mulroney refused to commit himself to any new arrangements, his approach was applauded by several leaders present at the Caribbean Commonwealth conference.

Jamaican Prime Minister Edward Seaga, the host of the conference, delivered the appeal for free trade yesterday. Modelled on the U.S.

Caribbean Basin Initiative, Mr. Seaga had even given a name to the proposed arrangement – Caribcan.

He asked that Canada adopt a one-way free trade arrangement with Caribbean Commonwealth countries that would allow all products unlimited entry to Canada.

Mr. Mulroney responded that 93 per cent of Caribbean exports already enter Canada duty-free and most of the remaining exports enjoy favorable treatment. However, Mr. Seaga is seeking the removal of trade barriers on textiles, footwear and cigars. He also wants reductions on non-tariff restrictions on Caribbean rum.

Mr. Seaga said the Caribbean countries were not seeking an increase in official government-to- government aid from Canada. Rather, he wants changes that will allow the private sector to create jobs and produce exports.

The limited Caribbean capacity to produce textiles or footwear would only produce a small ripple in the Canadian market but would have a significant impact on jobs in the Caribbean.

Increasing incomes in the Caribbean woild in turn increase the Caribbean countries’ abilities to buyimports from Canada and the United States, Mr. Seaga concluded.

The Jamaican leader also spoke about special incentives to attract more Canadian investment to the Caribbean.

The official Canadian response is that Ottawa will consider the request but will have to consult the provinces as well, since areas of provincial jurisdiction would be involved in such an arrangment.

Mr. Mulroney’s statements yesterday represented one of his first foreign policy speeches since being elected last September. He shied away from new commitments, focusing instead on reassuring the other heads of governments that the Conservative Government will stick by accords reached its Liberal predecessors.

He also underlined his determination to ”efurbish” Canada’s relationship with the United States; leaving open the suggestion that he was prepared to carry the results of this week’s meeting to the discussions he will have next month in Quebec City with President Ronald Reagan.

The Mulroney approach impressed Bermuda Prime Minister John Swan who said he gained the impression the Canadian Prime Minister was prepared to advance Canada’s role as ”mbudsman” for the Third World.

He said Mr. Mulroney had ”ome here as a listener but had helped set the tone by developing a consensus.”

Caribbean states ask U.S. to lift duty on more goods

Jamaica Caribbean countries are calling for a fundamental change in the Caribbean Basin Initiative, a trade scheme implemented by the Reagan Administration 14 months ago.

Several countries have argued that garments and footwear should be placed on the list of regional exports that can take advantage of duty- free entry to the United States offered by the CBI for the next 11 years.

Fears of damage to U.S. industry by a flood of cheap Caribbean products have kept garments off the duty-free list, along with leather goods and canned tuna.

Jamaican Trade Minister Hugh Shearer has told U.S. Government officials that there is no basis for fears of low-priced Caribbean garments and shoes harming domestic production. “The additional volume of imports into the U.S. market would not damage the American economy in any way,” Mr. Shearer said.

Richard Cheltenham, the Agriculture Minister for Barbados, claimed the U.S. Administration was reneging on a promise to allow more generous entry for Caribbean garments. Mr. Cheltenham said it was now time for the United States to deliver on its commitment.

The garment sector employs more than 20,000 people in the Commonwealth Caribbean, Mr. Cheltenham said.

The pleas are likely to be fruitless. Kent George, the U.S. Governent official in charge of implementing the CBI, indicated there would be continuing opposition to the requests for garments and shoes to be included. Caribbean governments apparently hope continuing pressure for changes will be as successful as earlier efforts. The U.S. State Department recently accepted Caribbean arguments that importers should not be required to prove the veracity of import declarations on CBI products.

Caribbean exporters argued that this would lead to divulging information that could harm their competitiveness.

Retail sales show pickup but profit margins shrink

Although department and “five and dime” variety stores continued to underachieve, Canadians spent reasonably well in 1984 – mostly for cars.

After discounting inflation, retail sales during the past two years have been the best in several years.

At 8.5 to 9 per cent estimated gains – in dollar terms to $116.5- billion – profit margins are skinnier than before the recession because of more competitive pricing.

But Toronto researcher Len Kubas estimated that real growth among retailers, including auto- related and grocery sales, is significant at 5.3 per cent, following a 4.6 per cent hop in 1983.

Not bad for a 1 per cent yearly population growth, said the president of Kubas Research Consultants, considering the stiffer competition from the financial services and travel industries for disposable dollars.

During 1982, there was a 5 per cent real drop in sales following a 0.5 per cent gain the year earlier. Before the recession, higher dollar gains were illusory because the retail price index was running at 9 to 10 per cent, compared with 4.1 per cent in 1984.

Department-store-type merchandise (DSTM) is expected to end the year 6.9 per cent higher, for a real rise of about 2.8 per cent. This $49- billion category accounts for 42 per cent of the total retail trade.

But department stores, which are expected to show a sales rise of 5.1 per cent to $11.5-billion, are expected to make a real gain of only 1 per cent. Worse off are the variety stores, such as Woolworth, Kresge and Stedman’s, which are expected to have a total rise of 1.3 per cent to $5.4-billion – losing in real terms.

Specialty retailers in the DSTM category, including pharmacies, are expected to have captured further market share from the department and variety stores. Canadians are estimated to have spent about 8 per cent more, $17.4-billion, in specialty shops that sell sporting goods, jewelry, flowers, records and tobacco.

They are estimated to have spent 7.3 per cent more ($30.4-billion) in stores that sell groceries, 15.5 per cent more ($37.1-million) in car dealerships and auto-related outlets, 3.8 per cent more ($16.9-billion) in general merchandise stores, 12 per cent more ($7.7-billion) in clothing and footwearshops, and 6.5 per cent more ($7-billion) in household furniture and appliance outlets.

Mr. Kubas predicted Canadians would spend 9 per cent more in 1985 for a total $127-billion, with new car sales rising 11.7 per cent.

Frugality, practicality and skepticism have become the watchwords among many consumers, say retailers and consultants. Confidence in the economy has yet to be restored. The recession, in real terms, is not over in the West and remains a bleak memory for other Canadians. “The Canadian consumer exercised thrift in spending” in the third quarter, said Toronto- based investment dealer Moss Lawson and Co. Ltd. in early December.

It expected the “fourth quarter in 1984 to record an annualized growth rate of about 3 per cent in real terms. For the entire year, 1984, Canada’s real growth rate will be 4.5 per cent over 1983.” A more aggressive financial services industry is capitalizing on the widespread insecurity and the growing inclination to save – particularly during retail’s vital fourth quarter.

The institutions are snagging much of the public’s disposable income into such tax savers as registered retirement savings plans and registered home ownership plans.

Winter trips south are considered an inalienable right by many middle- income Canadians and currency devaluations in several sunny countries add to their attractiveness.

Adding to the public’s inclination to save rather than spend may be the debate on the universality of social benefits in the House of Commons, tied in with Ottawa’s aim of raising more revenue through taxes. Middle- income earners, who have been saving for their retirement, still depend to some degree on the pensions that have been promised by past governments.

As well, the fact that 1.4 million remain unemployed undermines the confidence even of those with jobs. Insecure people do not spend freely. Hardly reassuring are economists saying that inflation is being tempered by an economy just stumbling ahead, and that if prosperity explodes on the scene, it could re-ignite double-digit inflation.

Also confusing to the layman is Ottawa’s contradictory message that it is cutting its own deficit while urging consumers to spend freely.

Although innovative marketing has brought more people into the shops, many retailers still fail to use their most important sales tool, surveys show. Most retailers do not have their sales staff question prospective customers who walk out of their stores empty-handed.

It is estimated that 68 per cent of potential sales dollars walk out simply because customers are not asked what they are looking for. More than 50 per cent of sales people do not ask any questions of customers, said Mandev Ltd., a Toronto-based retail consulting and training firm.

Commissioned sales people are viewed as knowledgeable, but often the consumer is put off by their hard sell.

In 1983, appliance maker Whirlpool Corp. of Benton Harbor, Mich., which controls Inglis Ltd. of Mississauga, Ont., found that 68 per cent of consumers consider sales people an important information source. However, when asked what source they trust the most, only 4 per cent said they believed they could rely on salespeople.