Just Watch Me

by John English

  FIRA, the Canada Development Corporation (through which the government and Canadians could make strategic investments in Canadian businesses), and talk about an industrial strategy vanished from the front sections of the business pages when the Yom Kippur War of October 1973 in the Middle East caused the first great energy crisis of the postwar period. Although Ontario claims to have created the oil industry in Canada with the first well in the southwestern Ontario town of Petrolia, the industry really developed in Alberta in the mid-twentieth century, largely under the control of foreign owners. The huge Middle Eastern fields emerged at the same time, creating a historically low price for oil during the economic boom in the Western world during the fifties and the sixties. The Alberta Social Credit governments of the period believed, with some justice, that oil in Alberta was less attractive to the giant international oil companies than oil in Saudi Arabia, where the costs of extraction were exceedingly low. Accordingly, the province accepted low royalties and multinational leadership in developing the provincial oil fields. On the home front, however, the Alberta government moved immediately to establish, through legislation, its control of the resource at the wellhead. The federal government similarly moved to assert its control over international and interprovincial trade in energy products, particularly in the building of pipelines. The dominance of the multinational oil companies, American national interests, and Canadian federal-provincial rivalries all played a role in the conflicts that began to develop in the 1950s.*

  In 1956 there had been an angry debate in the House of Commons over the TransCanada Pipeline when John Diefenbaker’s Conservatives, who were traditionally anti-American, attacked the Liberals (and especially the American-born “minister of everything,” C.D. Howe)12 for permitting 51 percent American ownership of the new national pipeline for natural gas. Diefenbaker thereupon appointed the Royal Commission on Energy to settle the dispute. The commission’s solution was simple: it created the “Borden line” (named for its chairman, Henry Borden), which divided Canada at the Ottawa Valley, with those to the west using Alberta oil and those to the east benefiting from cheaper Middle Eastern crude. This compromise recognized the multinationals’ practice and also satisfied Alberta’s needs for a market at a time of ample energy supplies and a protected American market. In the early seventies, however, this carefully constructed scheme came apart.

  During the previous two decades, a fundamental transformation had occurred as all Western countries turned away from the coal and coke that had, for over a century, stoked their economic growth, in order to embrace the cleaner and much cheaper petroleum and natural gas.* Ontario had imported nearly all its coal from the United States, while western Canada had exported its ample supplies to the American West. That arrangement caused few problems—unlike the sale of petroleum. The Social Credit in Alberta had negotiated generously low royalty arrangements with the multinationals, who by the late 1960s controlled almost four-fifths of the energy sector. Then a growing number of Albertans and Canadian nationalists became increasingly troubled by this situation. The new Conservative leader in the province, Peter Lougheed, a smart Calgary lawyer and former football star, immediately set to work to fashion an effective critique of the old policies. As historian Gerald Friesen put it:

  [Lougheed’s] fundamental argument from 1965, when he took the Conservative leadership, to 1971, when his party took over the government, was that Alberta had squandered its petroleum revenue by failing to invest in local industries. His allies were the urban professionals—the businessmen, lawyers, and resource industry experts in Alberta’s new bourgeoisie—who agreed with him that the province must prepare for the day when the multinationals left—and the morning after, when the oil itself was gone.

  Lougheed’s arguments were similar to those Pierre Trudeau had made about Quebec in the fifties against the rural, religious, and populist Union nationale party, which had dominated that province’s politics for a generation. In the seventies, however, Lougheed’s stated ambition was “to strengthen the control by Albertans over [their] future and to reduce the dependency for [their] continued quality of life on governments, institutions, or corporations directed from outside the province.”13 This ambition struck Trudeau and his colleagues as a threat akin to the provincial nationalism of Quebec. Confrontation was inevitable.

  Lougheed was a formidable opponent. As historian Doug Owram observed, Trudeau and Lougheed “were used to success.” They had done exceptionally well academically, athletically, and socially. What was once said of Lougheed applied to both: “He was the golden boy.” Neither accepted losing easily and “neither … was the sort to yield for the sake of peace.”14 Lougheed’s boldness was immediately evident when he raised the royalty rates on the multinationals in 1972 and defied them when they charged that he had breached solemn contracts.

  In 1973 his attention turned toward Ottawa, which had already noticed him and his province’s more aggressive stance. Even before the Yom Kippur War in the Middle East, oil was becoming a critical resource, and the Organization of Petroleum Exporting Countries (OPEC) was gaining strength through the voracious demand for its products from the West. The Organisation for Economic Co-operation and Development (OECD) warned in May that the situation was uncertain and that oil demand was so strong that the wealthy members of the OECD would soon run a “substantial current deficit” with OPEC countries. Oil, it seemed, was becoming scarce. But no one was sure.

  In July 1973 Trudeau went to Calgary for a Western Economic Opportunities Conference, which he had proposed in January to try to understand why “so many gifted individual Westerners could feel so much discontent with their present and future prospects as Canadians.” These, his opening words to the conference, in which the four western provinces participated, were clearly directed at the “gifted” Alberta premier who sat near him. Lougheed would surely have agreed with many of Trudeau’s comments, notably his call for a “special role for the West in strengthening Canada” and his concern for the “unevenly spread and narrowly based” economic progress in the western provinces. But Trudeau’s call for a new national policy struck a discordant note for westerners, who saw earlier “national policies” as exploitative, colonialist, and beneficial primarily to the interests of central Canada.15

  Comments like these irritated Donald Macdonald, the federal minister of energy, mines, and resources. Self-confident, an economic nationalist, athletic, and a favourite of Trudeau, the towering Macdonald developed deep suspicions of Lougheed’s ambitions and what they meant for a national energy policy after the OPEC crisis in the final months of 1973. He was not alone. In Cabinet he strongly supported fellow Toronto minister Alastair Gillespie’s argument that neither Alberta nor the oil companies should be able to grab the windfall from the rapidly escalating oil price, which had risen from approximately $1.20 per barrel in 1970 to $2.20 in September 1973, when the federal government froze it, and then soared to a world price of over $9.00 by the first months of 1974.

  Although the Canadian government had begun to consider the implications of a possible energy crisis in the early seventies, the actual crisis found it surprisingly unprepared and even con-fused—a view the Americans expressed among themselves.16 The Alberta government, the National Energy Board, the oil companies, and independent observers could not agree on how long Canadian reserves would last, and the government soon began to consider phasing out exports to the United States, the creation of a state-owned oil company, and a two-price policy for oil: one for export and another for domestic consumers. In Lougheed’s eyes, Alberta would pay the price for the confusion and for central Canadian nationalism and selfishness.

  Initially, there was hope that the sudden “oil shock” would galvanize both governments to work together toward common ends. Such optimism died quickly. After the federal government established an export tax in September 1973, Alberta informed Macdonald in mid-November that it intended to create an Alberta Marketing Commission, which would “purchase and sell wi
th the province … approximately 85% of Alberta’s crude oil output.” This action would, a critical Macdonald reported to Cabinet, “enable Alberta to set the price within its borders, and allow it to refuse to sell beyond those borders, except at its price.” Trudeau, and others worried about Alberta’s use of its increased royalties, saw this assertion of provincial authority as a challenge to be met. For his part, Trudeau hoped that Alberta would use its windfall for conservation and for development of new reserves (especially of the oil sands), and most ministers hoped that the problem could be resolved in the discussions of November 22 between Alberta and the federal government.

  By November 27 there was less assurance. The NDP, which wanted a two-price policy, a lower price, and more government regulation, had a real impact on the talks. In the end, the Cabinet urged Macdonald not to “applaud the rise in royalty rates” on the part of Alberta as a Cabinet document had suggested he should. Reflecting the consensus, Macdonald assured his colleagues that he “would make clear to Alberta that [the federal government] does not concede the right of the Commission to establish domestic prices for oil and that the Federal Government would establish domestic prices at a rate which would guarantee further research and development of oil resources.”17

  Trudeau and others expressed their willingness to “share” the windfall profits with the producing provinces, principally Alberta, but their comments indicate that they worried about the effect of Alberta’s sudden wealth on Canada’s equalization program and also whether Alberta’s expenditures would benefit Canada as a whole. But negotiations about “sharing” went badly, and the NDP pointed to other producing countries that were creating national oil companies and creating special funds to share the windfalls with future generations. Indeed, in British Columbia, in stark contrast to Alberta, NDP premier Dave Barrett urged nationalization of Canadian energy resources, even though British Columbia was a producing province.

  Faced with a growing crisis, Trudeau moved quickly to recover the initiative and called a Cabinet meeting for December 12, where he set out a statement he proposed to make on energy. Jack Austin, the deputy minister for energy, mines, and resources, had met the day before with Alberta officials and told them that the federal government would continue its price freeze beyond January 31 and that the government intended “to close the supply gap by the end of the decade.” Alberta asked for a delay, but the federal government would not wait. Accordingly, Trudeau said that he would announce a new “national policy” to ensure Canadian self-sufficiency by 1980. This goal meant: the creation of a national market for Canadian oil; a pricing mechanism to ensure exploration and development; a pipeline for Montreal and eastern Canada; intensification of oil-sands research; the development of nuclear power and exploration of the Atlantic Shelf; and most dramatically, the creation of a national oil company. The last recommendation in effect accepted an NDP motion in the House to nationalize an existing energy company, though the Liberals instead created a new entity, the Crown corporation Petro-Canada.18

  Lougheed was furious when Canada’s “first ministers,” as the premiers and the prime minister were now known, gathered on January 22–23, 1973, to discuss oil policy. The international price was $9.60, the Canadian price only $3.80. Lougheed regarded the difference as theft; Trudeau and Macdonald, who worried about rising inflation, regarded it as just. After much bargaining, the assembled group agreed on a single national price and a continuation of the freeze until March 31. Trudeau publicly reiterated his view that in reaching this agreement, Canada had achieved much by acting “collectively and effectively to provide better social services, and to reduce poverty, to promote equality among its citizens, to see that disparities between regions are diminished.” Now, with energy costs buffeting Canadian society and the economy, Canadians would have to make sure that they did not “let so much of the gigantic new revenues accrue in a single place that equality of opportunity and reduction of disparity [would] become impossible in Canada.” That statement, in essence, remained Trudeau’s stand on the development of Canadian energy resources. He had an ally: William Davis, the Conservative premier of Ontario, Canada’s largest consuming province, enthusiastically supported the federalist side. For his part, Robert Bourassa, the Liberal premier of Quebec, whose province also benefited from the federal policies, painfully constructed an argument that backed the federal policy without actually supporting the federal government.

  Lougheed accepted the compromise but resented the hypocrisy in Davis’s and Bourassa’s arguments. Had not Albertans paid world prices for the iron ore, refrigerators, and automobiles they’d bought from central Canada? Why should there be two prices for oil but one for the gold, copper, iron, and other resources mined from the Canadian Shield? While dissociating himself from the Alberta bumper sticker—“Let the eastern bastards freeze”—Lougheed denounced the federal export tax as “contrary to both the spirit and the intent of confederation” and said that, in the future, Alberta was determined to sell its resources at fair value. For Lougheed the black stuff oozing from Alberta’s soil belonged to Albertans.19

  Trudeau’s arguments about the Canadian response to the energy crisis carried the day. Press reaction was warm, and the Gallup poll of February 6 revealed that the Liberals stood at 42 percent, the Conservatives at 31 percent, and the NDP at 21 percent, and Trudeau himself had quickly recovered the popularity his feckless 1972 campaign had devastated. As early as January 1973, a poll had indicated that Canadians believed Trudeau was once again the best qualified to “lead” Canada, and, during that difficult year, polls and press comment confirmed that doubts about his leadership had waned. His popularity, which had fallen almost continuously since early 1971, began to climb quickly back toward the levels of the glorious spring of 1968. As it rose, Trudeau paid close attention to those he had ignored before. With the assistance of Toronto MPs and ministers, he met with skeptical business audiences and editorial boards. Keith Davey introduced him to important figures who could influence public opinion, such as Pierre Berton. Trudeau’s distance from the world of middle-class English Canada can be gauged by a memorandum from Davey in November 1973 in which he tried to persuade Trudeau to appear on Front Page Challenge, the extremely popular CBC program. Trudeau had apparently never watched it and knew little about its panelists. “Three of the four regulars involved in the show,” a Trudeau aide explained, “can be considered on [the Liberal side], Betty Kennedy, Fred Davis, and Gordon Sinclair. The fourth, Pierre Berton, is an N.D.P.er.” Thanks to the prodding of Davey, Jim Coutts, and his powerful Toronto ministers, Trudeau came to know much better the city where Davey’s stride was bold and long.20

  Trudeau also began to learn the political charms of travel to certain international destinations. In October 1973, he and Margaret visited China on a trip that received international attention. Even though Richard Nixon had famously recognized the communist country in 1972, Canada’s earlier recognition had gained Canada credit with Chinese leaders, especially when the Americans delayed in exchanging ambassadors. It was a memorable and wonderful time for the Trudeaus. Margaret was seven months pregnant with her second child, but her health and spirits were good, and she even outran a journalist to the top of the Great Wall. While Margaret was visiting a kindergarten, Pierre was summoned to meet Chairman Mao, who gave him a rare and long audience in a dark room with curtains drawn in the Forbidden City. Mao, as was typical, dominated the conversation, and with the Yom Kippur War raging in the Middle East, he criticized Canada for supporting Israel too strongly. Nevertheless, Canada did sign a trade deal, which, unlike many trade deals with China, appears to have brought genuine benefits.

  The most striking moment was Margaret’s. On the last day, Premier Chou En Lai hosted a banquet at the Great Hall. Women and men were usually separated at such events, but Chou invited the blooming Canadian to sit beside him. Then, to the astonishment of Pierre, with the Canadian and Chinese officials sitting nearby, Chou spoke in clear and even colloquial English a
bout women’s liberation. He said that Margaret was liberated but Chinese women were not. When she tried to cover her protruding abdomen after Chou described how a Chinese woman had turned away from him because she was pregnant, he said: “Oh dear, no, no, you have come to terms with your self as a woman. You are proud. To watch you walking as proud as a queen with your big belly is the happiest sight to see because you are so proud of it. Chinese women are still feudal in their attitudes toward their own femininity, their own bodies, their own sexuality. They have just become versions of men.” Pierre later declared that Chou En Lai was the most impressive leader he had ever met.21

  These were the best of times. Together, the young expectant mother and the youthful, if not young, father bore grace in their steps as they walked hand in hand to the Great Wall; giggled to each other as the tour guide nattered on about birds and fauna while their boat navigated the astonishing corridor of spiked mountains of the Li River; and then, finally alone, strolled through the narrow passages of the old city of Guilin. Back in Canada, Justin, now speaking and walking, caused even Conservatives to smile when he, with a beaming Margaret and Pierre, appeared at events. Then, on Christmas Day 1973, Alexandre “Sacha” arrived and made the holiday season even more celebratory. Before long, the two little boys and their radiant young mother were delighting not only Canadians but an admiring world.