The Politics of Industrial Restructuring: Canadian Textiles 9781487576684

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THE ST ATE AND ECONOMIC LIFE EDITORS:

Mel Watkins, University of Toronto; Leo Panitch, York University

7 RIANNE MAHON

The Politics of Industrial Restructuring: Canadian Textiles In the late 1960s the Waffle raised the spectre of the •deindustrialization' of the Canadian economy - a prospect which was linked to the power of foreigncontrolled subsidiaries. Professor Mahon argues here that the threat of deindustrialization actually first appeared in a sector then dominated by Canadian capital - textiles . Moreover, Mahon suggests that the Canadian state cannot act in the narrow interests of the dominant capitals. Rather, in order to secure their political interests, it will have to take measures to restore Canada's industrial base . Its choice from among the main alternative industrial strategies - continental rationalization , technological sovereignty, and full employment - will be determined by the outcome of a series of political conflicts . This important book analyses the first industrial policy to emerge from these recent debates on industrial strategy. It goes beyond earlier studies in its treatment of 'new protectionism' by arguing that import regulation is but one component of a broader policy promoting tecfinological modernization and continental rationalization . It also makes a contribution to the ongoing debate in political economy about the role and nature of the Canadian state, emphasizing its organization of an unequal but positive-sum relationship within and between classes. Such an organization cannot allow deindustrialization to occur and so must find a new basis for compromise . An industrial strategy is that basis . Students of politics and public policy formation will find of interest the descriptions on how problems become issues that the state cannot ignore, on the structuring of unequal representation in making policy, and others. The theoretical perspectives can illuminate far more than the recent history of national policy in regard to textiles . RI ANNE MAH o N is an Associate Professor in the School of Public Policy at Carleton University.

RIANNE MAHON

The Politics of Industrial Restructuring: Canadian Textiles

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press 1984 Toronto Buffalo London Printed in Canada Reprinted in 2018 ISBN 0-8020-2538-2

(cloth)

ISBN 978-0-8020-6546-9 (paper)

Canadian Cataloguing in Publication Data

Mahon, Rianne, 1948The politics of industrial restructuring Includes index. Bibliography: p. IBSN 0 - 8020- 2538-2

(bound). -

ISBN 978-0-8020-6546-9 (paper)

1. Industry and state - Canada. 2. Textile industry Canada. 3. Clothing trade - Canada. 4. Canada Economic policy. I. Title.

I would like to dedicate this book to my parents, Peter Andrew Mahon and Mary Margaret (Peggy) Mahon, and to the Honourable W.F.A. Turgeon, who headed the 1938 Royal Commission on Textiles.

Contents

PREFACE

ix

ABBREVIATIONS Xi

Introduction 3 I

The textile case: a political economy approach 6 2

Sectoral politics and the policy process 26

3

Canadian textiles during the boom years 44

4

Textiles as a political issue 63 5 Formation of the textile and clothing policy 77 6 Import regulation under the new policy 95

7 Industrial restructuring under the I 971 Accord 11 I 8 Textiles and the politics of industrial restructuring: into the 1980s 129

viii Contents APPENDIX NOTES

151

159

BIBLIOGRAPHY I 83 INDEX

197

Preface

My interest in the textile policy was awakened by Professor Gerry Helleiner at a time when, as a researcher for Oxfam-Canada, I was particularly concerned with the problems of Third-World countries. As I worked on my doctoral dissertation, the focus changed as a result of the excitement generated by the publication of Capitalism and the National Question in Canada and the discovery of new Marxist work on the state. Professors Meyer Brownstone, Jose Nun, and Gerry Helleiner were very patient with me as I struggled to use these new ideas to analyse the textile case. The research for the dissertation proved enjoyable, in part because of the co-operation received from the Canadian Textile Institute and several key government officials. The transition from thesis to book was facilitated in various ways by my colleagues at Carleton University. The School of Public Administration enabled me to rearrange my teaching schedule and Monica Wright used her appreciable skills to put the manuscript into the word processor. The Dean of Social Science, Dennis Forcese, provided financial assistance enabling me to hire Lise Bissonnette to help with the index. Finally Carleton gave me the honour of being the first to receive the John Porter Publication Award. The book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada, and from the Publications Fund of the University of Toronto Press. Such financial support is an indispensable aid to scholarly publication. I also benefited from the comments of the reviewers. I would like especially to thank the friend and colleague whose belief in the value of the book has sustained me over the years: Leo Panitch . My family, close friends, and especially Rob Ryan have also provided invaluable moral support. Finally, R.I.K . Davidson, social science editor at the University of Toronto Press, helped me keep things in perspective with his cheerful and witty missives.

R.M.

Abbreviations

AAB

AES ACTWU ACWU

AFL AMC

BCNI CAMI CATMA

CCF CCL

CCU CIL CIRB CLC CLRC CTI

CIO CSD CSN OREE ORIE DISC ECC EDP

EEC FCTT

Adjustment Assistance Benefit program Alternative Economic Strategy Amalgamated Clothing and Textile Workers Union Amalgamated Clothing Workers Union American Federation of Labour Apparel Manufacturers Council Business Council on National Issues Canadian Apparel Manufacturers Institute Canadian Apparel and Textile Manufacturers Association Cooperative Commonwealth Federation Canadian Congress of Labour Confederation of Canadian Unions Canadian Industries Limited Canadian Industrial Renewal Board Canadian Labour Congress Canada Labour Relations Council Canadian Textile Institute Committee for Industrial Organization Centrale des syndicats democratiques Confederation des syndicats nationaux Department of Regional Economic Expansion Department of Regional and Industrial Expansion Domestic International Sales Corporation Economic Council of Canada Enterprise Development Program European Economic Community Federation canadienne des travailleurs du textile

xii Abbreviations FIRA FNTIV FTIAP GAAP GATT ICI ICTIP ILGWU ILOTC IMF

ITC LCIC LTA MFA MFI MFN MSED MSSD NOP OECD OIP

OSIP OSTR PCO PIC PTI

sec TCB

TLC TWUA UNCTAD UTWA VER

Foreign Investment Review Agency Federation nationale des travailleurs de l'industrie du vetement Footwear and Tanning Industry Adjustment Program General Adjustment Assistance Program General Agreement on Tariffs and Trade Imperial Chemical Industries Interdepartmental Committee on Trade and Industrial Policy International Ladies Garment Workers Union International Labour Organization - Textile Committee International Monetary Fund Industry Trade and Commerce Interdepartmental Committee on Low Cost Import Policy Long-Tenn Arrangement on Cotton Textiles Multi-Fibre Arrangement Manitoba Fashion Institute Most Favoured Nation Ministry of State for Economic Development Ministry of State for Social Development New Democratic Party Organization for Economic Co-operation and Development Office of Industrial Policy Office of Special Import Policy Office of Special Trade Relations Privy Council Office Prices and Incomes Commission Primary Textile Institute Science Council of Canada Textile and Clothing Board Trades and Labour Congress Textile Workers Union of America United Nations Commission on Trade and Development United Textile Workers of America Voluntary Export Restraint

THE POLITICS OF INDUSTRIAL RESTRUCTURING: CANADIAN TEXTILES

Introduction

Stagflation, unemployment, and balance-of-payments difficulties have plagued most advanced capitalist economies for over a decade. In some countries these problems have been seen as symptoms of a more fundamental economic malaise: the threat of 'deindustrialization,' that is, the progressive erosion of the domestic manufacturing base as a result of the inability of domestic forces to respond effectively to challenges emanating from the international environment. In Canada the structural weakness of domestic industry has often been associated with the problems posed by the predominance of subsidiaries of foreign, usually u.s.-based, transnational corporations in key sectors. The threat is not confined to sectors in which branch plants dominate, however; even sectors in which Canadian capital has remained in control seem in jeopardy. The threat of deindustrialization underlines the importance of the debate on an appropriate industrial strategy for Canada, which began to take shape in the early 1970s. At stake are the quantity, quality, and location of future jobs, the size (and distribution) of the national income, and even the very survival of th!! Canadian state in the face of continental and regional pressures. Yet to describe the struggle over the terms under which industrial restructuring is to take place as a 'debate' is somewhat misleading. Although the conflict has resulted in the articulation of two relatively coherent alternatives - 'continental rationalization' and 'technological sovereignty' - its conduct bears little resemblance to the procedures of a debating society, parliamentary or otherwise. 1 The conflict has been and is being waged on many fronts, sectoral and regional, and involves a variety of forces. This book focuses on one of these conflicts: that which has shaped the trajectory of the Canadian textile and clothing industries in the post-war period. 2 The textile case is of particular interest, because it provides an opportunity to examine the Canadian state's role in the restructuring process. The federal government's 1971 textile and clothing policy was identified by the then minister of industry, trade,

4 Canadian textiles and commerce, Jean Luc Pepin, as the first in a series of sectoral policies that, together, would comprise Canada's industrial strategy. 3 Moreover, when the federal government announced the creation of a new textile policy instrument a decade later - the formation of the Canadian Industrial Renewal Board (CIRB) - it made it clear that the new board was to be seen as an experiment. If successful, the CIRB would be used to facilitate the restructuring of other sectors. Seen in this light, an analysis of the background to and implementation of the textile and clothing policy can yield insight into the Canadian state's broader strategy for 'revitalizing' the national economy. Yet, given the way in which deindustrialization has been linked to the problems associated with foreign control of the Canadian economy, textiles could be viewed as something of a special case. Although this sector was one of the first to experience the threat of deindustrialization, it has not been one in which branch plants have predominated. In I 970 foreign capital controlled only I 3 per cent of the establishments in the textile industry, 9 per cent in knitting, and 3 per cent in clothing. 4 The industries' difficulties can be traced instead to the growth of competition from the new low-wage industrial sites that have opened up in the Third World. This development, of course, affects other relatively high-wage capitalist economies . Some have argued, in fact, that the availability of these new production sites will ultimately result in the relative deindustrialization of all advanced capitalist economies as capital in other sectors follows the path blazed by that in more labour-intensive industries like textiles. 5 Nevertheless, the impact of low-wage competition and the options available for dealing with the problems it poses are conditioned by the structure of power within each advanced capitalist country. Thus the plight of the Canadian textile and clothing industries also needs to be seen in relation to the network of power relations that permitted the establishment of a pattern of dependent industrialization. So, too, must the Canadian state's textile policy be analysed in terms of the broad political relationships that condition the state's choice from among the alternatives generated in the industrial strategy debate. My analysis of the textile case builds on the Marxist political economy approach to Canadian development. 6 Political economists have illustrated how the development of Canada's industrial base has been shaped by the relations that have obtained within and between classes in Canada and by the external ties that these relations have entailed. Marxist political economists, however, have tended to ignore two crucial questions . First, under what conditions will the state be moved to intervene in the restructuring of a particular sector? Second, what enables the state to intervene in a way that is consistent with the interests of the dominant forces in Canadian society? The first two chapters provide the framework that will guide the subsequent

5 Introduction analysis. Chapter I shows how a modified version of political economy helps to place the textile case in the wider national context. Chapter 2 will deal with the two specific problems that political economists have thus far failed to address. The remainder of the book is devoted to a detailed examination of the politics that have shaped the post-war history of the Canadian textile and clothing industries. Chapters 3 and 4 examine the economic and political conditions that preceded the state's attempt to formulate a new policy for the textile and clothing industries. Chapter 5 analyses the policy process, showing how the 1971 policy was shaped, not simply by sector-specific politics but by the broader configuration of power in Canadian society. Chapters 6 and 7 present an assessment of the I 971 textile policy. It will be argued that the I 97 I policy appears consistent with the 'continental rationalization' approach to industrial restructuring . The final chapter looks at the 1981 decision in order to determine whether the heightened conflict over the terms under which restructuring was to occur altered the structure of power to such an extent that a new version of the textile policy had to be formulated.

1

The textile case: a political economy approach

This study of the politics of restructuring in the Canadian textile and clothing industries addresses three basic questions. First, why is Canadian industry vulnerable to trade-induced deindustrialization, even in sectors like textiles, in which branch plants have not been the dominant form of corporate organization? Second, since past policies of the Canadian state have contributed to the problem, why would it intervene to prevent deindustrialization? Finally, what would condition the Canadian state's choice from among the possible policy options? Political economy, as we shall see, does provide insight into how these questions might be answered. Unlike the liberal nationalists, who tend to focus on the behavioural characteristics of branch plants, Marxist political economists tend to emphasize the broader class and international relationships, which have resulted in 'dependent industrialization' - dependent on the import of foreign technology often, but not exclusively, in the form of foreign direct investment, and dependent on the domestic market. Their emphasis on the policy implications of a particular pattern of class power, moreover, allows us to see why Canada's textile sector was one of the first affected by low-wage import competition and to grasp the nature of the constraints that led the state to select one particular policy option. Nevertheless, political economists too often have been concerned to develop the economic consequences of a set of power relationships while overlooking the political implications. This bias leads to the assumption that the Canadian state will not act to prevent deindustrialization. Political economy, however, can be developed to include the political dimension of class power by introducing the notion of hegemony- or hegemonic class domination . This chapter provides an introduction to the political economy approach, as modified by the concept of hegemony. The first section reviews the main arguments within political economy and shows how the concept of hegemony augments political economy's understanding of class power. The second section

7 The textile case discusses the 'dependent industrialization' thesis, with particular emphasis on the tensions generated by the Canadian state's post-war development strategy. It will be argued that these tensions have given rise not only to the threat of deindustrialization but also to the politicization of the whole issue of industrial restructuring. The final section shows how the modified political economy approach helps situate the textile case within the wider context of post-war Canadian development. CLASS, STATE, AND HEGEMONY

The work done by Marxist political economists provides insight into the reasons for the present vulnerability of Canadian manufacturing to trade-induced deindustrialization. Political economy traces the roots of Canada's current economic problems to the pattern of dependent industrialization fostered by the Canadian state in the National Policy era. 1 Central to its analysis of dependent industrialization is the concept of class. It is argued that the balance of power within and between classes has resulted in a particular bias in the state's economic policies. Such policies in tum, have served to place Canada in a position of relative dependence vis-a-vis more powerful capitalist economies, especially that of the United States, and to transnational capitals based in these economies. Yet political economy's contribution is, at times, obscured by the heated internal debate that has developed over the relative importance of international versus domestic forces and of inter- versus intra-class struggle. 2 More importantly, none of the protagonists has advanced a concept of power that adequately captures the political aspect of a given set of inter- and intra-class relations. Such a concept of power, however, is needed if we are to understand why the Canadian state is likely to attempt to produce an industrial strategy in order to arrest the very process of deindustrialization for which its past policies effectively laid the base. The concept of hegemonic class domination fills this gap. 3 The main lines of the debate within political economy have emerged in response to R. T. Naylor's seminal work, 'The rise and fall of the third commercial empire of the St Lawrence.' In this paper, Naylor staked out the following position: 'While the internal dialectics of class and capital accumulation may determine the nature of metropolitan expansion, the social structure and the structure of capital in the hinterland cannot be regarded as independent of the metropole. On the contrary, internal changes in the metropole are the immediate cause of socio-economic reorganization in the hinterland' (Naylor, 1972, 2). In other words, although the traditional Marxist emphasis on class struggle serves to illuminate the development process in metropolitan countries, it does not apply to hinterlands like Canada, where the 'immediate cause' of change derives from the

8 Canadian textiles metropolis. Naylor, of course, did not ignore domestic class relations. For Naylor, however, the relevant internal struggle occurred between two antagonistic fractions of capital: merchant capital, whose horizons were limited to short-term, secure investments; and industrial capital, prepared to invest in long-term, high-risk ventures . According to this 'fractions thesis ,' it is the former's victory over the latter, achieved with the support provided by the British imperial connection, that explains the subsequent trajectory of the Canadian economy and the role of the state therein . Stanley Ryerson and the new labour historians have led the attack on Naylor' s assertion that the struggle between classes plays a subordinate role in determining the rhythm of development in Canada. 4 The core of their argument is that by the 1870s industrial capitalism had taken root in Canada and had given birth to an industrial proletariat. From this moment no analysis of Canadian history could afford to ignore the impact of labour' s struggle to advance its interests. Moreover, as H. Clare Pentland' s ( 198 I) masterful account of the formation of a capitalist labour market has shown, neither the cultural nor the economic dimensions of Canadian society can be understood unless one digs deeper into the history of the subordinate classes . Nor can one ignore the economic and political effects of independent commodity producers, as studies by Vernon Fowke (1957), Leo Johnson (1972, 1981), and John McCallum (1980) have demonstrated. Naylor's fractions thesis has been attacked by Larry MacDonald, who argued that 'once the largest industries merged into trusts early in the twentieth century , production, distribution and finance were united and distinctions between manufacturers, merchants and financiers became academic' (MacDonald, 1975, 275). Glen Williams (1979) has criticized Naylor for emphasizing the antagonism between the two fractions of capital, when, according to Williams, the indigenous industrial capitalists' decision to follow the less aggressive strategy of import substituting industrialization can be understood as a perfectly logical choice, given Canada's particular status within the British Empire. Finally, although those who focus on the post-war period, like James Laxer (1974), Wallace Clement (1975 , 1977), and Mel Watkins (1977), largely accept Naylor's historical account, they disagree as to the structure of the contemporary dominant class. 5 Naylor's critics have served to establish several important points. First, the impact of international developments upon the Canadian economy has been (and is) conditioned by the balance of forces that have obtained within Canadian society. Second, no account of Canadian history can be complete if it ignores the impact of the subordinate classes. Finally, Naylor's treatment of the antagonistic relations between the two fractions of capital tends to ignore the actual links that developed between them and the benefits both drew from the National Policy. Nevertheless, many of Naylor's critics are subject to the criticism Leo Panitch

9 The textile case levelled at the labour historians: their account of Canadian history fails to explain why industrial capitalism assumed a dependent character in Canada. Naylor' s fractions thesis has the merit of addressing this question, but Naylor defines the interests of the contending fractions in terms that are too narrow. Moreover, his concept of power is too one-sided . The concept of hegemonic class domination, however, allows us to build upon the insights ofNaylorand his critics .6 It allows us to see the trajectory of Canadian development - and the state's role in this growth as the result of an unequal but largely positive-sum (i.e., mutually beneficial) relationship within and between classes. And, as we shall see, it draws attention to the adverse (for the hegemonic fraction) political consequences associated with the threat of deindustrialization. Nicos Poulantzas (1973, 1975) is the contemporary Marxist theorist who has laid the foundations for this approach. His work suggests a solution to the problem raised by MacDonald by pointing out that the emergence of monopoly capital does not abolish the tensions that arise among fractions of capital. In fact, the imperialist relations to which monopoly capitalism gives birth create new tensions, for example, between 'comprador' and 'nationalist' elements of the domestic bourgeoisie. In addition, Poulantzas helps clarify the theoretical status of the statement that the merchant-financiers remained dominant even after the emergence of industrial capital: It is certainly true that from the time that the capitalist mode of production established its dominance over other modes and forms of production in a capitalist formation, it is the cycle of productive/ industrial capital , which produces surplus value and within which capitalist relations of production are constructed, that determines the overall features of the reproduction of capital in such a formation .. . . But this does not prevent the preponderant place in economic domination from being occupied .. . by one or other fraction of the bourgeoisie ... On this dominance will depend the concrete path, demeanour and the rhythm that the development of capitalism in this formation will follow. (Poulantzas, 1975, 93)

That is, in a given period the direction of national development will reflect the relations of power among classes and fractions in a particular society - relations in which one fraction will normally hold the leading position. It is the latter's material interests that provide the central thrust of the national development process . Poulantzas's most important contribution, however, is the concept of hegemonic class domination . This concept indicates that the fraction of capital that places its stamp on the direction of the national economy is also likely to be the dominant political force . Yet this fraction's political pre-eminence rests on its capacity to secure the consent of other fractions of the dominant class and of the subordinate classes. Its position thus should not be understood as that of an 'elite'

10

Canadian textiles

facing a quiescent, vanquished 'mass'. The relative autonomy of the political under capitalism means that other forces can, and do, assert their presence by struggling to advance their interests. Accordingly, in order to maintain its hegemony, the leading fraction will have to make certain sacrifices, which allow other forces to realize certain of their interests. The hegemonic fraction, however, is largely incapable of formulating and implementing such a strategy of compromises on its own. Rather, it is through the state that the series of compromises on which hegemony is founded normally is organized. It is the state that attempts to make the realization of the interests of other fractions and of the subordinate classes contingent upon the realization of the interests of the hegemonic fraction. The involvement of the state, however, does not mean that the sacrifices imposed on the leading fraction are confined to symbolic measures designed to obscure their real purpose. Such concessions must be more than symbolic if consent is to be secured. As Adam Przeworski has pointed out: 'No ideology, marxism not excepted, can perform its function of coordinating individual wills unless it is validated by daily life, by what Althusser (1971) calls the "lived experience". If an ideology is to orient people in their daily lives, it must express their interests and aspirations. A few individuals can be mistaken, but delusions cannot be perpetuated on a mass scale. Ideological hegemony can be maintained only if it rests on a material basis' (Przeworski, 1979, 5). Thus the rhythm and structure of national economic development is also likely to reflect the concessions won by the subordinate classes. Moreover, the non-hegemonic fractions of the dominant class will require conditions that permit them to accumulate capital. These forces will consent to the leadership exercised by the hegemonic fraction to the extent that certain of their material interests can be realized. This co-operation does not mean that the leading fraction can afford to make unlimited economic concessions in order to secure the conditions for its political pre-eminence. The relationship between politics and economic power is complex but none the less fundamental. As Antonio Gramsci noted: Undoubtedly, the fact of hegemony presupposes that account be taken of the interests and the tendencies of the groups over which hegemony is to be exercised, and that a certain compromise equilibrium should be formed- in other words, that the leading group should make sacrifices of an economic-corporate kind. But there is no doubt that such sacrifices and such a compromise cannot touch the essential; for though hegemony is ethical-political, it must also be economic, must necessarily be based on the decisive function exercised by the leading group in the decisive nucleus of economic activity. (Gramsci, 1971, 161)

At a very basic level, in any capitalist economy the maintenance of an adequate

11

The textile case

rate of profit defines the fundamental interests of the entire capitalist class, that is, those economic interests that cannot be sacrificed. Profits constitute the condition for future investment under capitalism and hence for the economic growth that permits other classes to benefit. Yet the core material interests of the hegemonic fraction within a particular capitalist economy are likely to be more complex; they also are likely to involve a particular pattern of growth in which certain sectors are assigned the leading place. The incorporation of this concept of class power into political economy provides one method of resolving the internal debate. As we shall see, it sustains Naylor's insight into the reason that Canadian manufacturing is vulnerable to deindustrialization, while allowing for the impact of other domestic forces on Canadian development. In other words, such integration upholds the primary thesis that the leading position assumed by the merchant-financiers resulted in a pattern of dependent industrialization. At the same time, it suggests that this pattern of development is likely to have been so structured that other forces may obtain material benefits. If the dominant fraction is seen as hegemonic, however, Naylor's delineation requires modification. As we have seen, Naylor's fractions are based strictly on sectoral lines: trade and finance versus industry. Moreover, he defines their interests in very abstract economic terms - low versus high risk, short versus long term - and suggests that the victory of trade and finance over industry resulted in a pattern of dependent development. What is missing is a sense of the concrete politico-economic interests of the leading fraction. Yet such a definition is needed if we want to draw attention to the way in which the different fractions of capital come to be united around a 'line' that reflects the priority assigned to the broader interests of the hegemonic fraction within a strategy of compromises. Poulantzas has at times used the terms 'national,' 'comprador,' and 'internal' to identify the relations between domestic and international economies favoured by different fractions of capital. 7 Clement ( 1977) has used a version of this approach to emphasize the difference between those who manage foreign-controlled branch plants (comprador) and those large capitals, primarily in finance and trade, with a Canadian economic power base ('indigenous'). This approach allows Clement to develop a more subtle analysis of Canadian development than that presented by Laxer (1974). It might be more useful, however, to choose a terminology that highlights the association between the leading fraction and the particular development strategy through which it has sought to realize simultaneously its economic and political interests. Watkins's (1977) notion of a 'staples fraction' in this respect seems more insightful . The resource or 'staples' sector has been the leading sector of the economy for most of Canadian history. Even before Confederation public policies were

12 Canadian textiles primarily oriented to promoting the development and export of staples. Moreover, the growth thus generated has not only created jobs and incomes for trappers, loggers, farmers, and miners . The National Policy tariff of 1879 permitted certain industrial capitals to capture the domestic market for goods created by expansion in the staples and related sectors , such as the railways. The composition of the staples fraction , of course, has changed. In the nineteenth century it was Naylor's merchant-financiers who were best placed to profit from staples-led growth . Since the Second World War, this fraction has clearly included monopoly capitals, both indigenous and foreign, in the resource sector. The alliance between indigenous financial capital and large resource capitals, moreover, is not without some tension-at least in the current context, as Pratt's (1982) analysis of the National Energy Program (NEP) suggests . Nevertheless, the notion of a hegemonic staples fraction does serve to identify the line (tenuously) uniting not only the primary beneficiaries but also other fractions of the bourgeoisie and the subordinate classes: staples-led growth, achieved under conditions that also allow these other fractions to benefit. The concept of hegemony , implies more than a simple modification of Naylor' s analysis of Canadian development in order to incorporate the points established by his critics. It also sheds light on why the Canadian state is likely to attempt to reverse the process of deindustrialization by promoting industrial restructuring . That is, the concept of hegemony reveals a corollary to the main thesis that the direction of national economic development will reflect the state's attempt to organize an unequal but positive-sum relationship among the fractions of capital and between them and the subordinate classes. Hegemony refers to a situation in which one fraction occupies the leading position; but it does so on two conditions. First, it must be able to make sacrifices, which allow other forces to realize certain of their material interests. This is the price it must pay to secure their consent. Second, such sacrifices cannot be allowed to threaten the leading fraction ' s core material interests. Both of these conditions must be met on a continuous basis if the Leading fraction is to maintain its hegemonic position. The task of maintaining such an unequal but positive-sum relationship within and between classes is not an easy one; for the policies through which hegemony is constructed can eliminate neither the tensions between the fractions of capital nor the basic antagonisms between classes. In addition, the development process fostered by the state is uneven in its effects and thus generates new tensions. During boom periods these tensions may be dealt with relatively easily through policies that remain within the prevailing structure of compromises. Yet periods of economic crisis , which threaten the material basis on which the strategy of compromises has rested, create the need for a qualitatively different policy for achieving compatibility, as between the core interests of the hegemonic fraction and the interests of other forces . 8

13 The textile case This concept of class domination is clearly relevant to the problem addressed by this study: the threat of deindustrialization. Although, as we shall see, the threat has arisen because of the Canadian state's concern to provide conditions conducive to the continued expansion of staples exports, the state cannot afford to permit the dismantling of Canada's industrial base. Some form of industrial strategy is required if industrial capitalists and the workers they employ are to continue to consent to the domination of the staples fraction . Deindustrialization is thus not simply an economic threat produced by the state's post-war development strategy; it also constitutes a threat to the political interests of the staples fraction . The concept of hegemony requires further elaboration, of course, if it is to be used in the analysis of the textile case. Although the concept as outlined thus far indicates why , in general terms, the state is likely to intervene in the restructuring process, we have not yet specified the political conditions required to push the state to renegotiate the terms of the relationship between the staples fraction and capital (and labour) in the textile sector. Nor have we specified the mechanism through which the state can formulate a policy capable of establishing a new basis for consent. These questions will be addressed in chapter 2. DEPENDENT INDUSTRIALIZATION

To some extent, the threat of deindustrialization can be understood as a result of external developments. On the one hand, the vulnerability of sectors in which branch plants predominate was revealed as the United States began to respond to the growing challenge to its international hegemony posed by western Europe and Japan . On the other hand, industries like textiles and footwear have come under pressure because of the relative success of certain Third World states' export-led industrialization strategies. 9 Underlying both developments is the expansion of transnational capital. Nevertheless, the economic and political impact of international developments is conditioned by the relation of forces that obtain within each country . The roots of Canada's present industrial weaknesses were traced by Naylor to the victory of the merchant-financiers over industrial capital in the late nineteenth century. That the Canadian state accorded a central place to the broad material interests of the fraction - that is, staples-led growth - seems an insightful argument. Yet this fraction's dominant economic position within Canada, reinforced by ties to British capital , does not account for all the effects of the National Policy. For instance , the policy did encourage industrialization, albeit of a dependent character. We thus need refer to the concessions won by other forces as the price of their acceptance of the staples fraction's leadership. The National Policy promoted a pattern of growth that allowed workers, independent commodity producers (e.g., farmers), and industrial capitalists to

14 Canadian textiles draw certain material benefits. Workers gained jobs and relatively high wages; to farmers and fishermen benefited from policies designed to secure a larger export market for their commodities; industrial capitalists benefited from the expansion of a (relatively) protected home market. Yet, as Naylor suggests, that fraction of capital whose interests were most bound up with the general strategy of staples-led growth, the 'merchant-financiers,' was the policy's primary beneficiary. The main objective of the National Policy was to facilitate the production and export of raw materials to the leading industrial economies, especially the British. Confederation facilitated public borrowing from foreign sources to complete the canal system and to subsidize the creation of the railway that would transport staples to the ports of eastern Canada and Quebec . Immigrants provided the labour to produce the staples and to build the canals and railways. The tariff itself contributed substantial revenues to the federal government, which could then use the funds to provide an environment conducive to the development and export of staples products. The emphasis on staples exports, in turn, reflected the paramount position of the merchant-financiers, a fraction whose horizons had been formed in the era of the trade in cod, fur, and timber, when profits could most readily be made by organizing and financing these staples exports. When the earlier staples declined in importance, the attention of the merchant-financiers turned to other staples, notably wheat , and to the new means for transporting them-the railways. The staples preoccupation of this fraction did not preclude investment in secondary industry, nor did the primacy accorded staples exports rule out industrial expansion. In fact, many of the National Policy's components - the I 879 tariff, the railways, immigration, patent laws- helped create the conditions for this growth. Yet industrialization remained a secondary objective: The intent of policy makers, both inside and outside the state apparatus, was to build an industrial structure which could provide nothing more than a supplement to the staples economy - a quick and profitable return on minimal capital invested and a base for urban employment. A secure domestic market would be captured for local producers by means of a tariff-induced replacement of imports . Significantly, capturing the home market was not to be accompanied by becoming internationally competitive in specialized lines (with a few exceptions); rather, an extreme dependency on foreign technology was to preclude from the beginning any serious attempt to move into foreign markets. (Williams, 1979, 367-8)

In other words, while elements of the policy would benefit industrial capitalists (and by implication their factory workers), by accepting its terms - a relatively secure and growing domestic market, easy access to foreign technology domestic industrial capitalists acknowledged their dependence on the success of

15 The textile case policies designed to foster staples exports, since the growth of their home market was firmly linked to the economic stimulus provided by the latter. The post-war policies of the Canadian state can be understood as an elaboration on the basic theme of staples-led growth, modified, however, to include the Keynesian compromise between capital and labour, which has been operative in most advanced capitalist countries since the Second World War. 11 That is, workers' struggles during the I 930s and the war years resulted in the Canadian state's commitment to high employment, the adoption of certain social security measures, and the establishment of a firmer legal basis for collective bargaining. Yet, as David Wolfe (1980) has argued, in Canada basic Keynesian postulates were merged with W.A. Mackintosh's staples theory of growth. 12 The emphasis on staples was to be reflected in generous fiscal incentives offered to oil, mining, and gas producers as well as to related investments such as the Trans Canada Pipeline and the St Lawrence Seaway. This emphasis meant that the realization of workers' interests, defined in terms of high employment, rising wages, and social security benefits, would be contingent upon the success of commercial and fiscal policies designed to promote the rapid development and export of resources. That the interests of the staples fraction, which had come to include capital based in the newer resource industries as well as the descendants of Naylor's merchant-financiers, remained the central concern of the Canadian state after the war did not mean that capital based in manufacturing was ignored. During the 1950s and early 1960s Canadian fiscal and commercial policies reflected the state's extension of the traditional strategy of industrialization by import substitution to newer industries, such as those based on chemicals, in which foreign-owned subsidiaries often predominated. As in the National Policy era, the tariff and other forms of assistance provided for the expansion of manufacturing capital. At the same time, manufacturing interests remained dependent on growth in domestic demand generated by staples exports. Thus, the basic structure of the post-war compromises was designed to secure the consent of capital based in manufacturing and of workers in all sectors to the hegemony of the staples fraction . 13 Indigenous and foreign capitals engaged in manufacturing could benefit from policies oriented to providing them with an adequate share of Canada's growing domestic market. Workers could benefit from the jobs created and, through collective bargaining, could struggle more effectively to maintain their share of a growing national income. Contradictory elements of this strategy, however, began to emerge in the late 1960s, some of which will be discussed in subsequent chapters. Here we shall focus on the contradiction between staples-led growth and the expansion of domestic manufacturing. Many commentators have focused on the continental implications of the

16 Canadian textiles Canadian state' s post-war economic strategy . For instance, Richard French has observed: The de facto strategy behind commercial policy assumed u.s. goodwill toward Canada, expressed through a 'special relationship'. Canada exported resources into the u .s. market as well as limited quantities of Canadian manufactured and processed goods. The special relationship involved tariff protection for Canadian manufacturing, much of it u .s. owned; something close to free trade in the energy, auto and defence sectors; and something close to a currency union , resulting from the pegging of the Canadian dollar and bilateral commitments as to reserve ceilings. (French, 1980, 94)

Certainly, the state' s economic strategy implied a close relationship with the United States. Yet the centrality of staples entailed a broader foreign policy commitment, a commitment supportive of American initiatives designed to reconstruct a liberal international economic order. The u.s.-centred international order was to be based on a tripartite division of the world: advanced capitalist economies bound together by a dense network of trade and investment links, among which the United States would assume a paramount position; the Third World , liberated from formal colonial ties and hence open to American investment and exports; the communist bloc, largely isolated from the first two as a result of the Cold War. For the advanced capitalist economies and most of the Third World, the American dollar was to constitute the basis of a new international monetary system, co-ordinated through the International Monetary Fund (IMF) . The gold-dollar standard, in tum , would facilitate international capital and commodity flows . The General Agreement on Tariffs and Trade (GATT) would operate as the mechanism for multilateral negotiations designed to gradually eliminate tariff barriers . The resulting liberalization would facilitate trade in manufactures, especially among advanced capitalist economies, thus ultimately permitting the global rationalization of transnational corporations. This u .s. -centred international order, of course, was not constructed overnight, nor, once established, would it remain stable. During the 1950s emphasis was placed on policies that would facilitate the reconstruction of the war-ravaged economies of western Europe and Japan and on the dismantling of colonial empires, rather than on the immediate elimination of the tariffs erected during the Depression. This meant that throughout the 1950s and early 1960s Canadian negotiators at GATT talks could successfully pursue their two-pronged strategy: the reduction of tariffs on raw materials and intermediate goods, and protection of final-product assembly operations for the home market (Wolfe, 1973). In other words, Canada's commercial policy could serve the objectives of simultaneously creating an international environment conducive to the growth of staples exports

I 7 The textile case

and encouraging the extension of the process of import substitution to new industries. In the mid-I 960s, however, during the Kennedy Round of GA TT, the American state began to put pressure on its GA TT partners to reduce tariffs on manufactures. The Canadian state's support for this strategy, in tum, began to undermine the old basis for the accord between the staples fraction and capital based in manufacturing, raising the prospect of trade-induced deindustrialization. Without the tariff, Canadian markets could more easily be serviced by the parent companies' main factories in the United States or elsewhere. Nor would these branch plants be likely to take advantage of new export opportunities opened up by tariff reductions made by others. The series of studies sponsored by the Science Council has done much to illuminate the economic weakness of branch plant manufacturing. For instance, Bourgault (1972) has shown how the logic of branch plant investment behaviour differs from that typical of the 'profit maximizing' firm, in that its primary concern is to hold its parent's share of the Canadian market. The dominance of this corporate form in Canada has resulted in an industrial structure characterized by the existence of a multiplicity of capital-intensive plants unable to exploit economies of scale because of excessive market fragmentation . The resulting level of inefficiency placed Canadian manufacturing in a weak position to meet import competition, which would now come from western Europe and Japan as well as from those American companies previously excluded from the Canadian market. In addition, since branch plants have often remained heavily reliant on their parents for new products and processes, they are not in a position to compete effectively in a world market where innovative capacity, rather than price, is at a premium. If the Kennedy Round signalled the impending termination of the Canadian state's ability to promote industrialization by import substitution, the Nixon administration's reaction to the growing challenge to u.s. hegemony posed by western Europe and Japan starkly revealed the Canadian economy's vulnerability to external political decisions. As James Laxer noted, the Domestic International Sales Corporation (DISC) program 'has been designed to encourage multinational corporations to shift their production from branch plants to the United States' (Laxer, 1974, 141). Although DISC did not result in the feared exodus of branch plants to the United States, the program served to highlight the fact that much of Canada's industrial base was controlled by corporations whose home offices lay within the jurisdiction of the still powerful American state. Moreover, the 'sensitivity' of branch plants to American policies had already been amply demonstrated by their compliance with u. s. 'trading with the enemy' and anti-trust legislation (Canadian Forum, 1971).

18 Canadian textiles By the early 1970s, then, the contradiction between the staples-exporting and import-substituting components of the Canadian state's post-war economic strategy was becoming apparent. Trade-induced deindustrialization is a logical consequence of this contradiction. Yet it seems imminent only if we ignore the attendant political implications . That is, if the state were to permit deindustrialization to occur, the political interests of the staples fraction might be placed in jeopardy. Those in charge of branch plants or Canadian capitalists dependent on them (e.g. , Canadian autoparts firms) , indigenous industrial capitalists, and workers whose jobs and wage levels depend on the maintenance of a viable manufacturing base would no longer find it possible to satisfy their material interests within such a development process. 14 The threat of deindustrialization, in fact , has created conditions conducive to the emergence of forces posing a potential challenge to the hegemony exercised by the staples fraction. Regional fractions of capital have begun to coalesce around provincially sponsored projects, which threaten to undermine the federal government's capacity to co-ordinate economic policy. 15 Even the Canadian Labour Congress, which supported the state' s staples-Keynesian strategy, has begun to elaborate a somewhat nationalistic industrial strategy, centred on the goal of full employment. 16 The most coherent challenge thus far, however, has come from a nascent 'nationalist' fraction of the Canadian bourgeoisie. 17 Centred on the goal of technological sovereignty, it aims at displacing the staples fraction as the hegemonic force within Canada. There are , of course, alternatives that promise a new basis of accord between the staples fraction and these other forces . The strategy outlined in Looking Outward (Ecc, 1975), which would promote industry rationalization along continental lines, represents one such possibility . It would involve consolidation of the close relationship that has already developed between the staples fraction and industrial capital in the United States (Clement, 1977). More recently, the 'mega projects' strategy has been placed on the agenda; 18 it would require the creation of new links between capital in the resource sector, indigenous financiers, and Canadian capital engaged in the production of ' high technology' goods and services. This strategy would focus on the establishment of a new basis of accord between the staples fraction and nationalist wing of the bourgeoisie, an arrangement that would leave the former in the leading position but at the price of significant concessions to the latter. Whether the Canadian state will ultimately adopt a variant of any of these alternatives will depend on the outcome of a series of interrelated conflicts and their impact upon the balance of power in Canadian society. The battle to define the terms under which restructuring is to take place in Canada is far from over. Nevertheless, the state has already been forced to intervene in the process and the 1971 textile policy constituted its first major initiative.

19 The textile case TABLE I Percentage of non-resident ownership of Canadian manufacturing industries, 1970 Measurement (percentages) Manufacturing industry

Assets

Sales

Profits

Taxable income

Food and beverages Tobacco Rubber products Leather products Textiles and clothing

31.3 84 .5 93 . 1 22 .0 39.2 30.8 18.8 21.0 38 .9 55 .2 46.7 72.2 87 .0 64.0 51.6 99.7 81.3 53 .9

27 . 1 80. 1 91.5 21.4 28.5 22 .2 15.5 13.2 40.7 51.1 45 .0 72 .7 90.6 62 .7 42 .3 99.6 81.1 51.2

29.4 82.7 90.1 25 .2 54.9 23 .8 20.4 22.0 39 .8 62.4 64.7 78. 1 89 .8 78 .0 47.2 99.7 88.9 72 . 1

30.9 83 . 1 88.4 27 .3 54.6 23 .0 23 .2 22 .7 39.0 64.4 62.6 87.2 88.7 88 . 1 52 .9 99.4 89.1 72.6

58 . 1

55 .0

63.4

62.4

Wood Furniture Printing, publishing, and allied Paper and allied Primary metals Metal fabricating Machinery Transport equipment Electrical products Non-metallic mineral products Petroleum and coal products Chemicals and chemical products Miscellaneous manufacturing Total, all manufacturing SOURCE: Canadian Forum (197 I , 31)

THE TEXTILE CASE

The deindustrialization scenario for Canada, sketched above, focused on the problems posed by the predominance of foreign-controlled branch plants in key sectors of Canadian manufacturing. Yet, as table I suggests, the problems of the textile and clothing industries cannot be blamed on branch plants . Rather the problems faced by capital and labour in this sector can be attributed, in part, to the opening of new low-wage industrial sites in certain parts of the Third World. Yet here , too, the impact of external developments has been mediated by national policies that reflect the structure of hegemonic domination within Canadian society. Textile capital was one of the primary beneficiaries of the import-substituting component of the National Policy . The erection of the National Policy tariff of 1879 provided conditions conducive to its expansion. Between 1879 and 1885, in fact, seventeen new cotton mills appeared. Yet the complementarity of interests

20 Canadian textiles between the staples fraction and this section of import substituting capital was not easy to maintain. The subsequent development of textile capital was to be constrained by foreign policy concessions made to promote staples exports to Britain . First, the importance of the British market to the staples fraction meant that the Canadian market was not to remain the exclusive preserve of domestic textile capital. Textiles were one of Britain' s leading commodity exports, and from the late nineteenth century Britain's colonies constituted the primary export market (Hobsbawm, 1969). The consequences for colonies like India were dramatic; by 1873 India was absorbing 40 per cent of British cotton textile exports while the local village industry was driven back to supplying a mere 20 per cent of the home market. Although Canada held a somewhat different position within the British imperial system - that is, it was a source of cheap foodstuffs and an outlet for British portfolio investment - the repercussions were felt in Canada too . In 1897 the Canadian state unilaterally lowered the tariff rate on goods imported from Britain by creating the British preference: 'The Preference did not, nor was it meant to, slow the growth of Canadian industrialization with the exception of one highly significant commodity. Wool manufactures were Britain's largest export to Canada, varying to between a quarter and a fifth of the total' (Williams, 1979, 365). The impact on the woollen textile industry was marked: by 1910 output had fallen to less than half that of 1899. Nor was the impact confined to this section of the textile industry. The larger, more highly concentrated cotton textile industry would never hold more than two-thirds of the domestic market - except during the Depression and war years. And, as late as 1938, Britain was the supplier of 6o per cent of Canada's cotton textile imports. If Canadian textile capital was forced to share the domestic market with British imports during the National Policy era, in the post-war period the persistence of the old imperial connection and the Canadian state's concern to promote staples exports to newer markets (i.e. , the United States and Japan) meant that the Canadian textile and clothing industries were among the first to feel the impact of low-wage import competition. Third World industrialization strategies, in which the textile and clothing industries were often assigned a central place, initially seemed to pose a problem only for those former colonial powers like Britain, France, and the Netherlands which had come to depend on colonial outlets for their manufactured exports. Yet while many Third World states focused on import substitution , by the 1950s some, encouraged by international economic advisers, had already begun to follow Japan's strategy of export-led industrialization. The first advanced capitalist economies to confront the broader implications of the opening of these new industrial sites were Britain, the United States - and Canada.

21 The textile case With regard to Britain, the lower British preferential tariff rates, which initially applied to the 'White Dominions,' were subsequently extended to all Commonwealth countries as a strategy for maintaining the British Empire. In the post-war years the preference constituted a strong source of attraction for Indian, Pakistani , and Hong Kong textile producers. The particular vulnerability of the u.s. market was linked to its Asian foreign policy strategy , which centred on the restoration of Japanese capitalism and its integration into the network of relations binding the advanced capitalist economies (Halliday, 1981; Pempel , 1978; Maier, 1978). Yet Britain was not the only country to offer the new textile exporters the lower British Preference rates nor was the United States the only country to grant Japan 'most favoured nation' status in the 1950s. ' 9 The staples fraction's historic ties to Britain and its post-war support for American policy objectives - as well as its own interest in cultivating the Japanese market for raw materials - meant that the Canadian state adopted policies attractive to both groups of entrants into the international textile trade. In one sense, the Canadian state's relatively permissive attitude to textile imports can be seen as consistent with its earlier stance . During the National Policy era, it had been prepared to cede a portion of the domestic market to British imports, a measure designed to facilitate Canadian staples exports. Yet in that period import competition did not undermine the material basis for textile capital' s consent to the leadership exercised by the staples fraction; for the level of protection offered permitted capital accumulation to occur. As we shall see in chapter 3, however, the price effect of low-wage competitors posed a serious threat to textile capital's rate of profit. Capital (and consequently labour) in this sector were thus among the first to be faced with the prospect of deindustrialization . Neither the Canadian economy nor other advanced capitalist economies, however, need to be subjected to deindustrialization as a result of the flight of capital to low-wage areas . In fact, there is a growing body of literature that presents quite a different scenario: the rise of a 'new protectionism' characterized by the use of non-tariff barriers to block or significantly retard the adjustment process. 20 This new protectionism, some argue, is not likely to become an across-the-board trend. In sectors where transnational capital predominates, trade liberalization is likely to continue. The new protectionism will likely be confined to sectors, such as textiles , where the competition comes from relatively weak Third World sources and where an alliance of labour and capital in the advanced capitalist economies is able to mount an effective opposition (Helleiner, 1977; Strange, 1979). Nor will the new protectionism necessarily occur unregulated by international institutions, such as GA TT, which were established to secure the global conditions

22 Canadian textiles for the expansion of trade and investment. GA TT has already organized a framework for bilaterally negotiated export restraints ('Voluntary Export Restraints' or VERSs) on north-south textile and clothing trade. The Long-Term Arrangement on Cotton Textiles (1962) and its successor agreements (the various versions of the MultiFibre Agreement) in fact have been described as the 'prototype' for other internationally sanctioned protectionist policies21 (Helleiner, 1979). The new protectionist literature seems more realistic than that depicting deindustrialization as the most likely outcome, in that it takes into account the political necessity for the advanced capitalist states to intervene. Nevertheless, it does tend to ignore at least two other options that such states might pursue. First, in countries like Britain and France where textile capital has traditionally been export-oriented, it may take minimal positive incentives to encourage such capitals to develop overseas production sites. Although jobs in this sector of the economy would be thereby eliminated, deindustrialization need not follow, if industrial capital in that country has been able to establish or maintain a strong competitive position in more research-intensive sectors, as it has in West Germany and Japan. In this context, moreover, sectoral relocation may be politically feasible, since the dynamic sector of capital could obtain the support of organized labour by offering new, higher-paying jobs (Arrighi, 1978). This result could effectively undermine the capacity to resist of those who could not so benefit, by driving a wedge between the two strata of the working class - a policy likely to be particularly effective where regional, ethnic, and other differences have already been used to segment the labour market. Second, developments in high-technology industries could revolutionize production processes in more traditional sectors, thus reversing the decline in the latter's comparative advantage vis-a-vis low-wage areas. 22 Policies based on this option are sometimes mistaken for the new protectionism, since they may include an import regulation component designed to give local capitals the time (and the profits) to incorporate the new techniques - but they are different from the economically dysfunctional protectionism with which that literature is preoccupied. This technological modernization option, of course, would involve a process of concentration in which certain capitals would be eliminated, but their ability to resist could be undermined by cultivating the support of the more powerful capitals in that sector that would benefit. Rationalization and technological change would also result in the elimination of many jobs and the transformation ('deskilling') of those that remain. Yet adjustment policies designed to cushion the impact on labour could be adopted, the quality and form of which would depend on the strength of worker organizations in each country.

23 The textile case The analysis of the politics of Canadian development outlined in the previous section provides some insight into the political feasibility of following each of these options in Canada. fhus, the simple protectionist alternative does not seem practical, given the priority that the staples fraction attaches to the objective of trade liberalization. Moreover, as we shall see in chapter 4, the joint capital-labour brief that triggered the policy process appeared just as Canadian negotiators returned from the Kennedy Round GA TT negotiations in which it had become apparent that the Canadian state would have to alter the terms of the hegemonic compromise. The I 97 I textile policy, of course, could have been seen as a means of delaying the adjustment process, but this is unlikely to have been treated as a viable, long-run option. The question is: Which form of adjustment would the policy favour: industry relocation or industry modernization? Industry relocation seems unlikely, given domestic capital's historic preoccupation with the home market. In addition, the low innovative capacity of those sectors dominated by branch plants would limit the state's ability to overcome domestic resistance by offering alternative jobs and investment outlets for the capitals released from this sector. The second option seems the more attractive. It appears to offer a viable basis for reconstructing the compromise between the staples fraction and textile capital. The latter would stand to regain its competitiveness vis-a-vis the Third World and thus could accept the staples fraction's long-run objective of strengthening a liberal international order. For this purpose the staples fraction might well be prepared to make the concession of temporary controls on imports from low-wage sources. There are three problems, however, that this solution fails to address. First, it cannot be assumed that other advanced capitalist states would ignore this option. The question is thus raised: Can a modernized Canadian industry compete with its counterparts in other advanced capitalist economies as successive GATT rounds eliminate the tariffs currently limiting competition from these sources? Second, incorporation of the new technology and the accompanying processes of concentration and rationalization would require substantial investments. Under what conditions would capital in the industry be able to finance such projects, and what would the availability of such large investment funds imply for wage and price levels or for the sectoral distribution of state industrial grants? Finally, industrial restructuring would entail the elimination of a significant number of jobs as well as the 'deskilling' of many of those remaining. Would the workers previously employed in textiles be required to bear the full costs of restructuring? None of these questions can be answered merely through an analysis of the power relationships within this sector and between it and the staples fraction. The state's response will be conditioned by the outcome of the broader struggle to

24 Canadian textiles define the terms under which industrial restructuring will take place. Although the results of this struggle have yet to be determined, it seems useful to consider the ways in which the textile policy would fit into the three major alternatives that have appeared on the political agenda. While the 1971 textile policy might have opted for industry modernization as a means of coping with low-wage import competition, the policy ultimately would have had to come to grips with the issue of competition from other advanced capitalist producers . The policy could have done so in one of two ways. It could promote continental rationalization, which would be easier in the fibre division, where two American-owned companies, DuPont and Celanese, have held a dominant position. Yet continental rationalization might also have been induced in other divisions of the textile and clothing industries if indigenous capital in this sector could be forced to recognize that it could no longer confine its horizons to the domestic market. Alternatively, the policy might be based on the assumption that the textile and clothing industries should be cultivated as one of the sources of demand for the products of an indigenous high-technology sector. That is, the textile policy could have been seen as part of a broader industrial strategy centred on technological sovereignty. If the technological sovereignty option were selected, the reabsorption of displaced textile and clothing workers might be easier than it would be under continental rationalization, which even its proponents admit would involve a rather drastic pruning of Canada's branch plant economy. The selection of the liberal nationalist option, however, would be dependent on a very significant shift of power among the fractions of capital. It would presuppose the displacement of the staples fraction by the nationalist fraction of the bourgeoisie. Although the nationalist fraction seems to have acquired a certain visibility over the past decade, it is unlikely that a shift of such magnitude has occurred. A more realistic scenario is that it is renegotiating the terms of its relationship with the staples fraction through the debate on the 'mega projects' - a major resource/ staples project, which may be implemented so as to secure a larger share of the industrial and technological benefits for indigenous capital. If the mega projects strategy has, indeed, become the Canadian state's economic strategy, what might the implications be for textiles? The mega projects strategy calls for massive investment in the resource sector - some $400 billion over twenty years. If this policy is accompanied by investments in services and manufacturing to meet the demand for inputs, it may be difficult to finance the restructuring process in sectors such as textiles and clothing . 23 In addition , the mega projects strategy would reduce the dependence of indigenous capital in the high-technology sector on demand derived from industries such as textiles demand more difficult to meet in Canada, given the absence of a textile and

25 The textile case clothing machinery industry with which micro-electronics firms could work. Under this scenario the Canadian state could accept the elimination of textiles and clothing, thus in theory freeing capital and labour for the expanding resource sector and those supplying the latter with goods and services. The preceding discussion of the assumptions embedded in each option raises an interesting possibility. That is, the 1971 policy was formed at a very early stage in the industrial strategy debate - before technological sovereignty or mega projects were placed on the political agenda. In 1981, however, the Canadian state announced the establishment of a new policy instrument, the Canadian Industrial Renewal Board; by then the terms of the debate had broadened to include these options. It is thus possible that whereas the 1971 policy was seen as part of a broader move towards continental rationalization, the 1981 decision marked a shift in favour of one of these alternatives. If such a shift has occurred, it would suggest that a more basic realignment of forces is under way. This interpretation rests on a concept of power - hegemonic class domination in which the political position of the leading fraction of the dominant class is seen to depend, in the long run, on the state's capacity to establish a framework through which the interests of other fractions and of the subordinate classes can, to a certain extent, be satisfied. Yet to maintain hegemony the state need not intervene in every sector. It could simply ignore the plight of some as long as their difficulties could be treated as isolated instances. This would be especially likely in the case of textiles, since it was the first major sector to experience the effect of the contradiction between the two major components of the Canadian state's post-war economic strategy: staples export promotion and import substitution. Thus an explanation of why the Canadian state ultimately decided to intervene in the textile sector requires the elaboration of a conceptual framework that takes into account the strategic choices made by forces in this sector. In addition, we have yet to show how the state might be able to respond to such particular demands in a manner that would not go against the interests of the hegemonic fraction. These are the questions that will be addressed in the next chapter.

2 Sectoral politics and the policy process

The concept of hegemony reveals that the state cannot afford to ignore the threat to the political interests of the staples fraction posed by deindustrialization. Yet one cannot assume that economic tensions are automatically translated into political questions. For hegemony to be in jeopardy, forces capable of translating economic problems into politically salient issues have to exist. Moreover, to suggest that the state will develop a new basis of compromise is to assume that the state possesses the ability to detect and respond appropriately to such challenges. These questions require further exploration. This chapter will begin with a discussion of the political conditions likely to provoke state intervention in the restructuring of a particular sector. In the first section it will be argued that sectoral forces would need to establish some form of connection between their plight and what pluralists would call the 'key issues' operative in the conjuncture. The argument is not, however, based on the pluralist concept of the state. 1 Rather, it is based on the concept of the state's role as the guarantor of a particular structure of hegemonic class domination. 'Key issues' therefore are those that threaten to call into question at least one of the conditions for the maintenance of this pattern of power. The way the textile issue is formulated, of course, can vary according to the divergent interests of labour, textile capital, and clothing capital. Whether such divergent views are actually articulated, however, will be contingent upon the relative organizational capacities of these sectoral groups. Organizations provide the means for formulating strategy, and they affect a social agent's ability to pursue its strategy with effect. The question of organizational capacity will be explored in the second section. The final section will deal with the separate question of how states are able to formulate an effective response to the politicization of industrial restructuring. It should not be assumed that policy outputs simply reflect the relations of power particular to each issue area. Rather, it will be argued that a new policy should be seen as the resultant of the operation of the 'unequal structure of representation'

27 Sectoral politics inscribed in the state administrative apparatus . 2 It is this structure that enables a state to place limits on concessions made to particular forces and these limits tend to correspond to the broader pattern of class power in that society. ST R A T E G I C A L T E R N A T I V E s3

In periods of generalized economic crisis it may seem less important to inquire into the political strategies devised by particular capitals and groups of workers. One might focus instead on those struggling to alter the existing pattern of hegemonic class domination . The Canadian textile and clothing industries, however, came under pressure from low-wage imports long before other branches of domestic industry and thus before the politicization of the whole question of restructuring forced the Canadian state to search for a new basis of compromise. Thus, if they were to convince the state of the necessity for a new policy, capital and / or labour in this sector would have to formulate a strategy for rendering their plight politically salient. Any assessment of their strategic alternatives, of course, must take into account the concrete political conjunctures in which such strategies are formulated, since each conjuncture is marked by a somewhat different set of key issues. Yet it is possible to identify in advance the kind of issues that, if they arise, will touch the fundamental concerns of the state. In general terms, a key issue is one that poses a potential threat to the equilibrium of compromises of which the state is the guarantor. Recall the argument sketched in chapter 1 . It was suggested that the rhythm and direction of capitalist development in a particular society will be set by the pattern of power relations that obtains among the diverse classes and class fractions present in it. In normal (i .e., non-crisis) periods, that pattern will be characterized l:>y hegemonic class domination, a set of relations in which one fraction of the dominant class occupies a hegemonic position . This fraction sets the basic direction of development in accordance with its broader material interests. One of the conditions for its continued hegemony, however, is its capacity to take into account certain of the interests of the subordinate classes and of other fractions of capital. It is this capacity to incorporate other interests, even though it involves certain sacrifices, that distinguishes hegemony from rule by outright force or trickery. Yet such sacrifices cannot be allowed to reach the point where they pose a threat to the core material interests of the hegemonic fraction. The state plays an indispensable role in this regard: it provides the framework that enables the subordinate forces to satisfy their material interests, contingent upon the realization of the hegemonic fraction ' s core interests. Winners and losers alike may come to challenge the equilibrium of compromise

28 Canadian textiles on which hegemony has rested . They may do so consciously, by articulating a project for a new social order, or simply by gaining too much through existing bargaining channels and thus threatening the core material interests of the leading fraction . Any action that threatens the particular way in which hegemony has been secured constitutes a key issue which must be resolved or neutralized if the state is to carry out its primary task. By analysing the equilibrium of compromise through which a particular state is attempting to secure a pattern of hegemonic class domination, then, one can identify in advance certain potentially key issues. Consider the equilibrium of compromises that the Canadian state has been concerned to protect throughout the post-war period . The development and export of new staples products has remained the central focus of federal and provincial policies, but both levels of government - and the policies produced through negotiations between them - also provided an institutional framework through which other forces could derive benefits from the growth generated by staples exports. In chapter I we referred to the policies through which the process of import substitution was extended to the newer branches of manufacturing. Industrial relations legislation and certain social security provisions provided a framework that enabled workers to struggle for their share of a rising national income. Yet the results of the bargaining processes sanctioned by these policies whether carried out under industrial relations legislation, through the Tariff Board, or by the system of 'executive federalism ' (Smiley, 1976) established to co-ordinate various social security programs - could not be allowed to go beyond certain limits if the conditions for capital accumulation (or, more specifically, for continued success of a staples-led growth strategy) were to be maintained. The federal government, moreover, had to retain its capacity to establish a macroeconomic policy framework for organizing stable national economic growth. This post-war equilibrium of compromises, however, did give rise to destabilizing outcomes. For instance, under the conditions of high employment prevalent in the I 960s Canadian workers began to bid up the monetary price of their labour power. The expansion of new staples industries filled the coffers of certain provinces, contributing to a reduction in the federal government's capacity to establish an adequate fiscal policy framework . And, as we have emphasized, by the late 1960s the external conditions for the continued expansion of staples exports began to undermine the basis for the state's strategy of import substitution. In addition, throughout the post-war period this pattern of development produced certain losers (e.g. , those in older staples industries and former owners of firms swallowed up by larger firms) and drew 'new' entrants into the labour force (e.g., women, native peoples). As we shall argue below, the concomitant development of the state administrative apparatus provided the means of identifying some of these problems and of developing proposals for their solution in a manner consistent with the maintenance of the equilibrium.

29 Sectoral politics Yet Keynesianism could not live up to its promise of translating such manifestations of more fundamental tensions into administrative problems . Its adoption by advanced capitalist states spelt neither the 'end of ideology' nor the demise of politics. These problems remained politically significant precisely because they were placed on the state's agenda by the emergence of social forces articulating projects that in some way posed a challenge to the state's ability to secure the core elements of the equilibrium of compromises. The timing of the emergence of such forces and the manner in which they articulate a challenge cannot be predicted in advance. We can use the approach being advanced here, however, to remain sensitive to their importance. In other words, we should be able to assess the relative political significance of the social forces operative in a particular conjuncture by calling attention to the way in which they do or do not pose a potential challenge to the equilibrium of compromises organized through the state. An analysis of a particular equilibrium of compromises, then, helps to identify as key issues those that touch the state's fundamental concerns. For instance, we can understand how the rise of a nationalist movement throws into question the continentalist assumptions that formed a central component of the strategy for promoting staples-led growth in the post-war period. Similarily, we can see how the re-emergence of regionalism - or the rise of separatism- sent shock waves along the structure of executive-federalism through which many important compromises have been negotiated in the post-war period. In subsequent chapters we shall trace the way these and other issues have emerged at various points in post-war Canadian politics. Neither capital nor labour in the textile and clothing industries constituted the nucleus of the social forces that, in effect, would pose a threat to the post-war equilibrium of compromises. In formulating their demands, however, they could (and did) take advantage of the situation created by other forces . With every action they effectively engaged in a process of deciphering the lines of instability operative in that conjuncture and sought to establish a connection between these lines and their own demands . The range of strategic alternatives, however, was limited not only by the constellation of issues characterizing a particular conjuncture; for the quality of the resources available to capital and / or labour in the textile and clothing industries affected the ease with which such broader connections could be established. These resources, of course, included organizational capacity - a major factor, which affected the ability of each potential sectoral force to establish the kind of connection most expressive of its interests. Potential resources can also be regarded from another perspective: the characteristics of capital and labour in these industries, characteristics that do affect the ease with which such connections can be made. For instance, the rise of a liberal nationalist movement could provide a context within which the textile and clothing industries' plight could be portrayed as one of

30 Canadian textiles the consequences of the Canadian state's bias in favour of resource capital, a substantial proportion of which is American. But the threat of feeding nationalist opposition is not the only one that could be evoked by these primarily Canadian industrialists. Although medium capital dominates most branches of textile production, there are many small capitals , especially in knitting, hosiery, and clothing. In conjunctures marked by the emergence of small business as an oppositional force, textile and clothing interests could make use of this characteristic . In addition, the textile and clothing industries account for a not insignificant part of total manufacturing employment: approximately 12 per cent. This fact could be used with effect in conjunctures where, for instance, other social forces were challenging the state for its failure to live up to its commitment to full employment. These industries also employ a large number of women, who constitute nearly 40 per cent of textile workers and approximately 75 per cent of clothing workers - both figures significantly greater than the average for all manufacturing (23 per cent). Thus a threat to jobs in this sector could be portrayed as especially detrimental to working women in a context where the economic status of women had become politically salient. Finally, these industries form a significant part of Quebec's economic base; 65 per cent of clothing jobs and 52 per cent of those in textiles are located in Quebec, where together they accounted for 23 per cent of all manufacturing jobs in the mid-197os. Moreover, many textile mills are located in small communities; textile workers constituted over 20 per cent of the total labour force in Cowansville and Magog in the late 1960s and over IO per cent in Drummondville, Granby, and Valleyfield. Thus, with the emergence of a separatist movement in Quebec, the industries' plight could be dramatized by linking their fate to a critique of Ottawa's insensitivity to Quebec's needs. These and other industry-specific characteristics provided the raw materials with which capital and / or labour would work to produce an issue capable of moving the state. The relevance of any particular characteristic was dictated, in part, by the range of issues created by the broader forces operative in a particular conjuncture. Yet the manner in which the connection was made would vary according to each agent's broader objectives. First, the issue could be presented in a manner that simply evoked these more fundamental concerns of the state. This construction, which pierely suggests that oppositional forces would be strengthened if the state were to ignore the plight of these industries, reflects a basic concern to secure a shift in state policy. An example of this type of issue definition would be the suggestion that the fire of Quebec separatism would be fanned if the state were to continue to permit the relatively unimpeded flow of low-wage imports.

31 Sectoral politics Second, the issue could be presented as a development of a principle of opposition to the prevailing equilibrium of compromises. In this case, the textile issue would operate as part of a broader movement whose aim is to secure a significant shift in the parameters within which compromises are negotiated, that is, a modification of state policy. For instance, either capital or labour could state its case in a manner designed to strengthen the nationalist challenge to the continentalist and free-trade assumptions of post-war Canadian policy. The object here would be to build support for a new basic policy. Selection from the range of possible connections specified by the conjuncture and the manner in which they are presented - will be conditioned, in tum , by the relation of forces within the textile and clothing sector. That is, even though both capital and labour were adversely affected by import competition, the impact on each was class specific - a difference only crudely reflected in the distinction between declining profits and wage cuts or lay-offs, but with many other dimensions that we shall discuss in subsequent chapters. In addition, there are tensions between the small capitals in the clothing industry and their potentially (i.e., without effective import competition) oligopolistic suppliers in textiles. These inter-class and intra-class tensions showed in the presentation of competing definitions of what was at issue. Both the extent of the tensions and the consequent presentation of the issue very much depended on the organizational capacities of each potential force . ORGANIZATIONAL CAPACITY

A basic postulate of Marxism is that there is a structurally determined antagonism between capital and labour; their fundamental interests are incompatible. Nor are the tensions between different components of the dominant class eliminated with the emergence of monopoly capitalism. These tensions may lead to the formation of a fraction whose objective is to secure a basic realignment of the structure of the power bloc. Yet Marxist theorists, from Marx , Lenin, and Gramsci to more recent writers, have stressed that neither fundamental class antagonisms nor the competing interests of various potential fractions of capital need be declared as such in a particular conjuncture. 4 One of the determinants of the expression of class or intraclass antagonisms is organizational capacity . For instance, Poulantzas has argued that while the existence of classes and fractions is not determined by organizations, the latter 'play a constitutive role' vis-a-vis the formation of class positions in the conjuncture ( 1975, 25) . Przeworski has taken Poulantzas's argument a step farther, arguing that given the separation between the economic and political, characteristic of capitalism, a disjunction emerges between ' worker' and 'citizen. ' Thus ' struggle about class' - that is, by

32 Canadian textiles organizations such as unions or workers' parties, which assert the political salience of class - precedes 'class struggle' 5 (Przeworski, 1977). Building on the work of Poulantzas and Przeworski, Wright has made a distinction between the 'structural capacity' of a class - that is, 'those links which are generated directly by the structural development of a capitalist society' (Wright, 1978, 99) - and its 'organisational capacity' - 'the actual linkages among members of a class created by and through consciously directed class organisations' (1978, IOI). And, while structural tendencies may increase or decrease the likelihood khat fundamental class interests will be declared, it is the degree to which a class has developed its organizational capacity that exercises a direct effect on the concrete definition of these interests and on the ability of a class to advance them. All these theorists are primarily concerned to probe the conditions for the realization of the 'fundamental' rather than the 'immediate' interests of the working class. Yet they recognize that organizational capacity also affects the likelihood that the latter will be defined and effectively pursued in a given conjuncture. And, although many theorists tend to treat capital's 'secondary organizations' (trade associations, etc.) as if they play a less critical role in the constitution of capital's power qua class, it is none the less apparent that secondary organizations do play an important role. They affect the ability of capital in a particular sector or industry to declare its opposition to the existing policies of the state when these policies favour other fractions at the particular capital's expense. This is not to suggest that organizational capacity plays the same role for fractions of capital that it does for labour. Given labour's structural location as the subordinate part of capital, its ability to define and advance its collective interestseven if they are far from revolutionary- will be conditioned strongly by the degree of organizational cohesion it has achieved. 6 In cases such as the one with which we are concerned, if labour is divided at the sectoral level, it is unlikely to be able to advance a class-related definition of the issue even if each of the unions in that sector has been able to formulate such a definition. More important, even if unity were achieved at the sectoral level, the unions need strong links with other unions and with other social forces, through a party or social movement, if they are to advance an interpretation of the issue that develops rather than simply evoking a more fundamental challenge. The situation is different for capitalists who are already organized through the firm. Corporate structures provide them with the organizational resources to define and pursue their interests - especially large firms with effective resources; small firms may be more dependent on secondary associations for the political defence of their interests. 7 At the same time, in industries comprising a multiplicity of small firms, capitalists may find it more difficult to overcome market-induced competition. In this respect, structural differences among capitals can affect the relative importance of and difficulty in establishing secondary organizations.

33 Sectoral politics Ideology, of course, is aiso important. The actual ideologies operative within worker or capitalist organizations will affect the pattern and mode of selection from a given range of strategic alternatives. In terms of capital's secondary organizations, ideological differences between peak associations or policy institutes may indicate the formation of fractions and intensification of divisions between them. 8 Whereas the role of policy institutes in formulating class (or fractional) positions is beginning to be understood, trade associations are often seen simply as purveyors of narrow sectoral interests. James O'Connor ( 1973) also suggests that the trade association is more typical of competitive capitals, while monopoly capital is capable of recognizing the need for developing a class conscious position . G.W. Domhoff's (1979) analysis is more subtle in that it allows for the emergence of competing definitions of class interests, that is , conservative versus progressive strategies of class domination. This perspective is interesting. None the less, in cases where state policies pose a serious threat to the survival of a whole sector of capital, trade associations may well state their case in broader terms . How they do so, of course , is likely to be affected by the existence of policy institutes or other organizations capable of articulating alternative projects . In Canada during the 1970s, for instance, new , more nationalist associations like the Canadian Institute for Economic Policy were formed to challenge the continentalist position of older associations such as the C.D. Howe Research Institute, while the neo-conservative Fraser Institute was established to disseminate its critique of the 'statism' common to both the continentalists and the nationalists.9 With regard to labour, unions as organizations act as carriers of ideologies that specify 'who is represented .' Different conceptions of the represented, in tum, carry with them different orientations towards other social forces . Thus labour can be conceived as merely a commodity to be sold on the capitalist labour market and unions as a means of negotiating the terms of its sale. Alternatively, unions can be based upon a concept of workers as a class and their role understood as one of waging the 'economic' aspect of the class struggle. The first labour market view tends to coincide with a vision of labour as a narrow interest group, not aligned with any party (Gomperism) . The concept of unions as class organizations can be combined with a social democratic or Marxist orientation, entailing a direct link between unions and parties. Although by the end of the Second World War social democrats had largely abandoned a view of class struggle whose objective was the establishment of a socialist society (Przeworski, 1980a), they still retained a broader view of labour's interests than their Gomperist counterparts. 'Class' is not the only principle of identity that may be embedded in worker organizations; other principles can become important. In Canada, for instance, there has been a significant difference between the Canadian Labour Congress (CLc), which held a continentalist perspective throughout the 1950s and 1960s,

34 Canadian textiles and the more nationalist Confederation des syndicats nationaux (CSN) or the Confederation of Canadian Unions (ccu). Ideologies, however, are secondary to the organizations in which they are embedded. It is through organizations that ideological principles are translated into strategies for dealing with the problems confronted in a particular conjuncture. Moreover, organizational capacity determines the ability of a given force not only to define but also to advance its interests in conflict or alliance with other forces. Where competing definitions of what is at issue are possible, the relative organizational capacities of each of the potential forces determine the face of the issue presented to the state. w When conflicting interpretations are advanced, therefore, the one backed by those most effectively organized is likely to prevail - bearing in mind that in a capitalist society the sectoral strength of labour is ultimately dependent on this broader organizational capacity. When coalitions are forged , again the more coherent force is likely to place its stamp on the issue . (It is highly unlikely that labour' s class interests would prevail in the context of a sectoral coalition with capital. If labour were well organized, however, it could extract a higher price for its support.) Organizational capacities are likely to alter over time, partly in response to new problems and prospects thrown up by the development process. None the less it is possible to provide a tentative assessment of the relation of forces that obtained in the textile sector for most of the period with which we are concerned. In brief, both labour and capital in the clothing industry have been inhibited by organizational fragmentation, whereas capital in the textile industry has been well organized. It has thus been the latter that has been most able to decipher the conjuncture and to mobilize effectively within it. Textile capital has also been able to dominate any coalitions formed with these other forces. Although over half the textile and clothing workers are organized, their unions have displayed the fragmentation characteristic of the Canadian labour movement as a whole. In 1968 there were seven unions affiliated with three different union centrals. 11 The largest unions - the International Ladies Garment Workers Union (ILGWU) , the Amalgamated Clothing Workers Union (Acwu), the Textile Workers Union of America (TWUA), and the United Textile Workers of America (UTWA) - were affiliates of the CLC . The Federation nationale des travailleurs de l'industrie du vetement (FNTIV) was an affiliate of the CSN, which moved from a quiescent confessional syndicalism to a 'new left' and Quebecois nationalist position by the late 196os. 12 The Canadian Textile Council (now the Canadian Textile and Chemical Union) was the textile affiliate of the small nationalist trade union central, formed in reaction to the continentalist and red-baiting stance of the CLc's two predecessors, the Trades and Labour Congress (TLC) and the Canadian Congress of Labour (CCL). 13

35 Sectoral politics In addition, the CLc's own affiliates remained as divided, organizationally and ideologically, as they had been prior to the formation of the CLC. The ILGWU and the UTWA were originally craft union affiliates of the TLC. The ACWU and the TWUA had developed in the 1940s and early 1950s as part of the industrial union movement, spearheaded by the Committee for Industrial Organization (c10) in the United States and its Canadian counterpart, the CCL. This movement challenged not only the craft orientation of the TLC but also its Gomperist political orientation . It maintained close ties with the social democratic party, the Cooperative Commonwealth Federation, which were formalized when the CCF became the New Democratic Party in the early 1960s. The CLC, weak relative to its affiliates, has never been able to overcome these divisions . In addition, all four were branches of American unions , with headquarters and research facilities located in the United States. The continental (as opposed to national) communication pattern thus generated would also operate as a barrier to the development of a common position among Canadian textile and clothing workers. If the textile and clothing workers were organizationally and ideologically divided, so too were capitalists in the clothing industry . During the 1950s and 196os there were at least twelve trade associations speaking for the clothing industry (Style Magazine, 13 December 1971). The majority were small organizations created to deal with particular economic problems faced by a labour-intensive, competitive industry . There were employer associations like the Montreal Dress and Sportswear Guild, whose main function was to try to establish a 'co-operative' relationship with the unions as a strategy for maintaining an adequate work force in the face of competition from other, higher-wage industries. Others, like the National Association of Women ' s Wear Bureau and the Apparel Manufacturers Association, were designed to provide credit. Finally, all these associations were 'service' organizations; they did not concern themselves with securing changes in state policy . In the 1960s the federal government began to try to strengthen the clothing industry's organizations by supporting the national Apparel Manufacturers Council (AMC). The AMC, however, faced two major obstacles. First, since its member associations devoted the greater part of their limited funds to their own service activities, it was inadequately financed. Second, the AMC lacked the organizational capacity to constitute an effective 'industry' position. It had no annual meetings, involving all member firms, nor were there any all-industry publications. Further, approximately 35 per cent of the firms were not members , as a result of the exclusion of non-unionized firms from most of the affiliated associations. The fragmented organizational structure of clothing capital and of labour finds its opposite in the Canadian Textile Institute (CTI). Here the dominant firms have managed to weld the leading elements of textile capital into one cohesive

36 Canadian textiles organization capable of containing interfirm conflict and of speaking for the textile industry as a whole. 14 The CTI traces its roots to 1934, when three specialized industry associations established the Primary Textiles Institute. 15 Until the 1970s the institute's membership, which included nearly 80 per cent of the firms in the industry, was based on membership in one or more of the constituent associations. 16 Under this system regular operating expenses and the costs of services performed by a public relations firm, Communications Six, were met by an assessment levied on each constituent association in accordance with its contribution to employment in the industry. The man-made, knitting, and cotton associations, therefore, contributed the most under this system; but given the high level of concentration in the man-made and cotton textile industry branches, companies like Dominion Textile and Celanese paid the largest share. 17 The leading firms also made contributions in the form of free services; the dollar value of such services was estimated at $100,000 per annum in the 1960s. The strategic location within the CTI of the leading corporations is apparent, when the composition of the board and its committees is considered. The CTI's professional staff was formally responsible to a board of twenty-eight. Throughout the 1960s the board consisted of the presidents and vice-presidents of the constituent associations; fourteen members nominated by the constituent organizations, according to the size of the textile work force employed in each branch; and two members-at-large selected by the presidents of these constituent associations. The principle of selection seemed to place certain industry divisions (or, the largest corporations therein) in a leading position. Certainly, if the pattern of recruitment for the board's chair throughout the 1960s is examined, this tendency appears to be borne out. From 1961 to 1970 representatives of the following companies held the position: Bruck Mills, Canadian Industries Ltd (which ceded its textile operations to Chemcell / Celanese in the late 1960s), Hamilton Cottons/ Cosmos, Cleyn and Tinker, Harding Carpets, and Thor Mills. Moreover, the entire board was not active; rather, individual committee members, particularly the 'inner cabinet' of five or six members, provided the most staff guidance. An examination of the committee system serves to identify the companies that constituted this inner cabinet (see table 2) . The main policy committees were chaired by the dominant companies. Membership on these committees reflected a similar pattern, although, as on the board itself, wider representation was achieved - a necessary condition if CTI policy were to gain the support of the smaller firms . There were two other mechanisms for disseminating industry policy: the annual meetings of the CTI and the publications, the Canadian Textile Journal and the Manual of the Textile Industry of Canada . The Journal and the Manual were owned by the E.S. Bates estate and the Textile Technicians Federation of Canada

37 Sectoral politics TABLE 2 Corporate affiliation of chairmen of CTI standing and ad hoc committees 1966, 1%8, and 1970 Committee

Corporation

1966 Finance Import Policy Organization Export Development Public Relations Promotion and Marketing

Harding Carpets Dominion Textile Thor Mills Cosmos Imperial n.a.; vice-chair, DuPont Celanese

1968

Finance Import Policy Organization Export Development Public Relations Tariff Policy Promotion Industrial Relations Advisory, Department of Industry Anti-dumping AMC Liaison Labour Relations Policy

Thor Mills DuPont Harvey Woods Belding-Corticelli DuPont Cleyn and Tinker Hafner Fabrics (then DomTex linked) Dobbie Industries Hamilton Cotton Chemcell (Celanes1:) Dominion Textile Dominion Textile

1970 Finance Import Policy Organization Export Development Industrial Relations Tariff Policy Textile Policy Liaison AMC Liaison Labour Relations Policy

Harvey Woods DuPont Cleyn and Tinker Cosmos Imperial Cosmos Imperial Celanese President of CTI Dominion Textile Dominion Textile

SOURCE: Minutes, 1966-70

and were self-sustaining. Editorial policy, however, was worked out with the president of the CTI, the industry's public relations consultant, and the leading companies. 18 These publications had a circulation of approximately 3,600 and were distributed to all primary textile mills as well as all members of the technicians federation.

38 Canadian textiles Thus the CTI, unlike the unions and the clothing associations, was an organization with the capacity to establish a coherent, 'all-industry' line. In establishing this line, the dominant companies would play the key role, and, as will be seen in subsequent chapters, the line they chose presented a definition of the issue that simply evoked the wider threats to the equilibrium of compromises operative in each conjuncture. UNEQUAL STRUCTURE OF REPRESENTATION

The formation of issues from the problems experienced by capitalists and workers in a particular sector is an important area to probe. Yet an analysis of issue politics does not provide an adequate basis for understanding the state's response to demands. The state is not a simple transmitter, whose policy outputs are a direct function of political inputs. Embedded in the apparatus of the state is a structure that normally permits it to translate particular demands into policy compromises compatible with the maintenance of a particular pattern of hegemonic class domination. 19 It is able to do so to the extent that this structure of representation exhibits a pattern of inequality that corresponds to the broader relation of forces in society. Politics thus does not directly determine policy. The presentation of an effectively defined issue may trigger the policy process, and the way the issue is constructed may affect the terms of the compromise, for example, the kind and degree of benefits offered labour, and forms of assistance to capital. Nevertheless, the basic policy parameters are set by the broader relations of power as these are embedded in the policy-making apparatus of the state. This concept builds on the concept of hegemony discussed in chapter 1. That is, if the state is understood to be the organizer of the unstable equilibrium of compromises on which hegemonic class domination rests, then the state cannot simply accede to the demands of particular forces. It must be able to reinterpret these demands in order to produce policies that are not inconsistent with the maintenance of a given pattern of hegemonic class domination. At the same time, the maintenance of hegemony requires that at least certain of the interests of the subordinate classes and of non-hegemonic fractions of capital can continue to be realized. The state cannot afford to ignore dissident forces persistently, nor can it rely solely on repression. If the state is to maintain an unequal but positive-sum relation among these forces, then it can be the 'instrument' of neither the leading fraction (which must make sacrifices) nor dissident forces. The 'relative autonomy' of the state, made possible by the separation of the economic and political that occurs under capitalism, is crucial here. To the extent that past struggles have resulted in the institutionalization of this separation, the probability that 'appropriate' policy responses will be formulated is greatly enhanced.

39 Sectoral politics This is not to suggest that the state is an autonomous subject: the state does not have its 'own' interests, unrelated to class. 20 Nor does the state act as the perfect collective capitalist, calmly and rationally assessing particular demands from the standpoint of a 'grand plan' or strategy for maintaining class domination. Rather,

'The establishment of the State's policy must be seen as the result of class contradictions inscribed in the very structure of the State (the State as a relationship). The State is the condensation of a relationship of forces between classes and class fractions, such as these express themselves, in a necessarily specific form, within the State itself. In other words, the State is through and through constituted-divided by class contradictions' (Poulantzas, 1978, 132). The state is constituted by the inter- and intra-class antagonisms and tensions that characterize a given relation of forces. Therefore the state, in turn, can contribute to the maintenance of a particular pattern of hegemonic class domination. More specifically, the effect of class conflict on the state apparatuses can be understood as the constitution of the various organs and branches of the state as 'representatives' of the interests of the classes and class fractions present in a social formation. These institutional sites within the state, in turn, act as the means through which the state is able to 'hear' and formulate a response to the issues arising out of inter- and intra-class conflict. Yet just as the relations among these forces are unequal, so too does the quality and form of their representation within the state vary; the structure of representation is unequal. Poulantzas has identified the differences in the following manner: 'The dominant classes and fractions exist in the State by means of apparatuses or branches which, although subject to the unity of the state power of the hegemonic fraction, nevertheless crystallize a power that is peculiar to these classes and fractions. By contrast, the dominated classes exist in the State not by means of apparatuses concentrating a power of their own, but essentially in the form of centres of opposition to the power of the dominant classes' (1978, 192). In other words, the representatives of non-hegemonic fractions of capital are subordinated to the branch (or branches) that constitute the 'seat of power' of the hegemonic fraction. The paramount position held by the latter's representative within the state is the mechanism by which concessions to other fractions are held within the limits specified by the core interests of the hegemonic fraction. (Nevertheless, the representatives of the other fractions of the dominant class at least take as their operating assumption the class power of those they represent; the subordinate classes, however, are represented in a manner that presupposes their subordination to capital. 21 ) It can be argued that in the earlier form of the liberal democratic state, parliament constituted the site and parliamentary parties the means through which shifts, both minor and major, in the balance of forces were registered in the state. With the expansion of the state's 'positive' economic and social policy agenda, however,

40 Canadian textiles renegotiation of the terms of the compromises uniting various classes and fractions under the hegemony of one fraction has increasingly taken place in other parts of the state. Some Marxists have argued that corporatist institutions, which bring together state agents and officials drawn from unions and employer organizations, have been used increasingly to supplement parliament as the 'linchpin' of bourgeois hegemony. As Panitch has noted 'it would appear that the very preservation of bourgeois democracy in the context of extensive state intervention and a strong labour movement under monopoly capitalism entails a supplementation (but not a displacement) of parliamentary and party forms of representation / mediation (which formally dissociate state and class) with corporatist forms of representation / mediation which are explicitly class based' (Panitch, 1981a, 26). Such institutions have come to play a prominent role in certain advanced capitalist formations, and they may play an important role in helping redefine workers' interests so that they become complementary to those of the hegemonic fraction. Yet corporatist institutions seem to function primarily as a means of transmitting decisions arrived at elsewhere to the leadership of class (and possibly, fractional) organizations. The primary locus of the conflicts that result in the formation of new compromises remains the executive-administrative apparatus. This is the case even in Sweden, where corporatist structures have been granted formal authority over the design and implementation of labour market policy. 22 In other words, the various branches and departments of the state constitute the sites in which interests are represented in the policy formation process - albeit in a highly mediated form. Identification of the administrative representatives of particular forces is not easy. Yet an analysis of the task structure and conceptual framework of particular agencies provides some insight, since various branches have task structures that make them the effective representatives of the working class in the policy process, for instance, branches charged with monitoring industrial relations or with the development and administration of social policy. Yet such branches by no means represent workers' interests as workers define them, let alone the 'fundamental' interests of the working class. An analysis of the data collected and the parameters within which policy alternatives are thought out reveals the limited, highly mediated character of this form of representation. The information collected by 'labour' departments - even when it includes data, say, on occupational health and safety - is not designed to disclose the way these 'problems' are rooted in capital's domination of labour. Rather, data on working conditions, collective agreements, wage levels, etc., are understood within a structure of values and concepts that systematically ignores or denies fundamental class antagonisms by asserting a set of causal relationships compatible with the maintenance of class domination. Rising wage levels and/ or

41 Sectoral politics man days lost due to strikes are signs of threats to industrial peace and hence to capital accumulation. Or data on absenteeism may be correlated with data on poor working conditions, but the 'solution' will tend to be seen in terms of legislative enactments designed to improve capital's hegemony in the workplace, for example, Quality of Work Life schemes (Swartz, 1981). In addition, industrial relations and welfare program usually establish a disciplinary relation between state representatives and the subordinate classes they represent. As Poulantzas noted: the various 'social measures' taken by the Welfare State with respect to the reproduction of labour-power and the field of collective consumption are at the same time geared to the police-political management and control of labour power. The realities are by now well known: social welfare structures, unemployment relief networks and job placement bureaux; the material organisation of 'social' housing space ... asylums and hospitals - all these are so many political sites where legal-police control is exercised over labour power. (Poulantzas, 1978, 186)

This is not to suggest that capitalists are not regulated by the state. Yet the discipline to which they are subjected is exercised in the fundamental interests of their class. It is designed to maintain capitalist social relations in which capital is constituted as dominant vis-a-vis labour. There are, however, differences among the state representatives of the various fractions of capital. For instance, in both Canada and Britain the branches representing capital in the manufacturing sector have occupied a subordinate position vis-a-vis the seat of power of the hegemonic fraction. 23 The latter, of course, may be represented in several sites, but normally its interests as the hegemonic fraction (as opposed to its more sectional interests) will be embedded in the branch (or branches) charged with policies central to the equilibrium of compromises. The structure of representation embedded in the state executive-administrative apparatus is thus the mechanism through which new policy compromises may be formulated in a manner consistent with the maintenance of a pattern of hegemonic class domination. The demands of particular forces are translated by their state representatives, and in the process certain possibilities are filtered out. In addition, the representatives of labour and / or non-hegemonic capitals are not free to formulate and implement the response they deem appropriate, especially when this procedure involves new initiatives. They must argue their case within the wider policy network. In Canada, the Department of Finance has held the pre-eminent position within this network. Throughout the 1950s and 1960s Finance remained the primary department

42 Canadian textiles charged with maintaining the staples-Keynesian strategy on which the hegemony of the staples fraction was founded. This strategy offered labour a commitment to high employment, to be secured by Keynesian monetary and fiscal policies and social security benefits. Finance, through its control of fiscal and monetary policy (shared with the Treasury Board and the Bank of Canada) and its role in negotiating with the provinces, was placed in charge of these concessions. Finance has also continued to play a key part in shaping the foreign economic policies, which, inter alia, encouraged import substitution, although the departments of Industry, Trade and Commerce (nc) and External Affairs have also played a role. The foregoing is not to suggest that Finance simply 'won' each time it came into conflict with the other representatives . As Doern has observed, 'Economic coordination is achieved to a degree but it is clear that the political meaning of coordination can only be contemplated when one acknowledges that such coordination involves, in part, the temporary victory of one or two economic objectives over other economic values and objectives, the use of one or more instruments over other instruments and the relative triumph of one department over another and of one or more Ministers over others' (Doern, 1979, 95). Within a Marxist framework, the 'political meaning of coordination' is the maintenance of a particular pattern of class hegemony through the bargaining that occurs among these unequal administrative representatives . The conflict may appear in the form of the priority given to fighting unemployment over that given to combatting inflation, or as a conflict between those seeking to promote growth through policies promoting consumption and those favouring aid to business (especially in the staples industries). To be successful in maintaining hegemony, however, such bargaining cannot be of the 'winner take all' character. Rather, when political conditions so dictate, concessions proposed by the representatives of dissident forces must be made . The unequal structure of representation thus does not refer to a static set of relations among the various branches of the state. As the equilibrium is unstable, so too must the structure be flexible if it is to maintain the foundation of the leading fraction's position . Politics does not directly determine policy, but manifestations of instability - whether overtly or only implicitly political - are likely to be detected through the information collected by these state representatives . This information may give rise to a bargaining process that results in the formulation of new compromises and institutions through which to implement them. The institutional locus of the representation of the hegemonic fraction is thus not something that is permanently fixed . For a variety of reasons, including the adoption of new managerial techniques or economic strategies, the seat of power of the hegemonic fraction may be shifted to new agencies. Such adjustments within the structure of representation are necessary in fact, if the state is to be able to work out new patterns of policy compromise.

43 Sectoral politics In the textile case, as we shall see, sectoral politics did, indeed, produce issues capable of setting in motion this bargaining process within the Canadian state. This was especially evident between 1969 and 1971, the period during which the new textile policy was negotiated, but it was also operative in the 1950s when the Tariff Board signalled the need for new measures . Moreover, each set of negotiations resulted in the establishment of a new 'representative site' through which particular decisions could be taken in accordance with the terms of the compromise. Yet not all the changes in the mode of representation resulted from sector-specific developments . New branches and departments would be established as the state strove to acquire the means of developing an effective response to the broader tensions that have threatened to undermine the staples fraction's hegemony. These changes, which have altered both the quality of representation and the networks through which effective policy co-ordination is produced, have had an influence on the textile policy. The question is: Have these changes simply reflected the requirements for maintaining the staples fraction's position under new conditions, or have they indicated a significant shift in the broader structure of power?

3

Canadian textiles during the boom years

In general, the Canadian state was able to secure the conditions for the simultaneous expansion of the staples fraction and of import-substituting capital during the boom years. Yet by the mid-195os the underlying tension between the staples fraction's interest in cultivating export markets and manufacturing capital's dependence on a protected home market had begun to affect the textile sector. Although the Canadian state would later be moved to find a new basis of accord in the form of an industrial policy, throughout the boom years its policies tended to favour the staples fraction at the expense of textile and clothing capital and, by implication, the workers employed in the textile sector. ' This is not to suggest that textile interests were simply ignored. In fact, the unequal structure of representation did permit the negotiation of certain modifications that would somewhat mitigate the pressure of import competition. In addition, import competition provided a stimulus to industrial restructuring, which, although it produced certain 'losers,' can be viewed as a normal component of the process of capitalist development. Yet as import pressure mounted throughout the 1960s, even the 'winners' began to experience difficulties that would raise the spectre of sectoral deindustrialization. This chapter will examine the Canadian state's response to developments in world textile trade during the boom years and the consequences thereof for the domestic textile and clothing industries. It will begin with an assessment of the pattern of Canadian textile and clothing imports in relation to global trends. Here it will be argued that the state's relatively liberal stance reflected the restoration of the accord between textile capital and the staples fraction reached during the National Policy era. The second section examines the impact of import competition on domestic producers, suggesting that its effect on domestic prices would eventually threaten to stall the adjustment process that was under way. The final section will probe the process through which the state arrived at its decisions,

45 Canadian textiles TABLE 3 Output, trade, and local production of manufactures, per cent change 1966-57 Manufactured goods, trade

United States Japan Canada Britain Western Europe Underdeveloped countries

GNP

Imports

156 297 181 164 135 155

240 300 185 266 271 162

Manufactured goods, output

Exports

Total

By foreign firms

1.72

166 350 162 160 174 166

158 250 175 175 380 250

360 250 160

240

SOURCE: M. Barratt-Brown, The Economics of Imperialism (1974); calculated from figures in table

22,220

to determine how the structure of representation permitted a decision pattern that would undermine the conditions for the staples fraction's hegemony over capital and labour in this sector. CANADA'S LOCATION IN THE INTERNATIONAL MARKET FOR TEXTILES

Canada, like most countries with advanced capitalist economies, experienced boom conditions throughout most of the 1950s and 1960s. Although domestic economic policies contributed substantially to this growth, the reconstruction of a relatively liberal international economic order under u.s. leadership played an important part. The figures in table 3 give some indication of the relative importance of international forces in the post-war boom. Trade, especially in manufactures, actually expanded at a faster rate than domestic output - in itself impressive. Much of this trade in manufactured goods occurred among advanced capitalist economies, and transnational capital accounted for an increasing part of it. International institutions, like GA TT and the IMF, facilitated the growth in trade and the expansion of transnational capital, much of it u.s.-based. Although foreign direct investment in Canadian manufacturing rose less rapidly than in western Europe, in the context of the output of foreign firms as a percentage of total domestic manufacturing output, Canada continued to hold the lead (54 per cent), followed by continental western Europe (25 per cent) and Britain (22 per cent). 2 Nevertheless, the figures in table 3 exaggerate the extent to which Canadian subsidiaries participated in export trade, since the value of

46 Canadian textiles manufactured exports in the base year (1955) was much lower ($2 billion us) than the value of American exports ($ 1 1 billion us) or the exports of all western Europe ($28 billion us). And, although Canadian imports of manufactures grew at a slower rate than exports, their value remained high ($3.5 billion us). 3 Thus Canada continued to experience a deficit in trade in manufactured goods throughout the boom years. This deficit does not mean, however, that industrial expansion did not occur. During the 1950s and early 1960s the Canadian state was able to pursue a commercial strategy that reduced tariffs on raw materials and on many intermediate goods while protecting final product assembly operations. Although staples development for export was treated as a priority in Canadian domestic and foreign policy, a variety of incentives supported the extension of Canada's traditional industrial strategy to newer sectors. As table 4 indicates, this strategy met with some success in sectors like electrical products, transport equipment (including aircraft), and chemicals. In most of these sectors, however, foreign capital predominated, and the branch plants were often simply concerned with holding their parent firm's share of the Canadian market. Textiles, one of the traditional beneficiaries of the National Policy, was (with the exception of man-made fibres) not to be so favoured .4 Of course, the relatively buoyant economic conditions of the I 950s and 1960s did entail the expansion of domestic demand for textiles, which quadrupled between 1949 and 1967. Domestic producers were able to capture at least some of this market, since domestic output increased by 163 per cent over the same period. 5 Yet imports began to capture an increasing share of the growth in domestic demand: 40 per cent by 1966. In part, the growth in imports reflected a response to changes in the international textile market or, more specifically, the entry of new, low-wage sources of supply. Table 5 gives some indication of the differential rates of growth in domestic capacity . Western Europe and the United States certainly remained the largest producers; however, Japan and other Asian economies registered remarkable gains, especially in cotton goods production . To a lesser extent, the shift in the locus of production was reflected in trade patterns. The United States, with its large domestic market, itself absorbed the bulk of its increased textile output, whereas the export market remained especially important to western European producers, who continued to account for over half the world trade in textiles. However, they faced increasing competition from Japan and other Asian countries, where low wages constrained domestic consumption and where the state actively encouraged a process of export-led industrialization. By the mid-196os, Japan and other low-wage producers had captured nearly one-third of world textile trade. And, although Japan would subsequently shift to more

47 Canadian textiles TABLE 4 Changing structure of the Canadian manufacturing sector (percentages) Employment 1949 I. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11 . 12. 13. 14. 15. 16. 17. 18.

Food and beverage industries Tobacco products Rubber Leather Textile and knitting mills Clothing Wood , furniture, and fixtures Paper and allied industries Printing and publishing Primary metal Metal fabricating Machinery Transportation Electrical products Non-metallic mineral products Petroleum and coal products Chemical and chemical products Miscellaneous manufacturing TOTALt

Total employment (000s) Total value added in manufacturing ($million)

14.5* 0.9 1.8 3.0 6.6

1960

Manufacturing value added 1971

1949

13.4 0.6 2.7 1.9 5.7 6.1 8.3 7.4 5.2 7.0 8.4 4.4 9.2 7.6 3.2 1.0 4.8 3.5

15.7 I.I 1.9 1.7 5.4 6.6 7.4 10.0 4.7

8.9 4.8 2.4 1.2 3.5 2.3

15.3 0.8 1.6 2.4 6.4 6.7 9.2 7.4 5.7 6.7 7.6 3.4 8.5 6. 1 3.2 I.I 4.2 3.6

100.0

100.0

100.0

1,171

1,295

1,628

IO. I 10.4 6.5 5.3 17.8

1960

1971

5.1 2.7 2.2 5.4 1.8

16.2 I.I 1.6 1.2 4.4 3.5 6.0 9.8 5.6 9.9 7.1 3.1 8.3 5.9 3.5 2.7 7.1 2.9

14.5 1.0 1.7 1.0 4.4 3.3 6.5 8.2 5.1 8.3 8.3 4.0 10.9 6.3 4.0 2.0 6.6 3.9

100.0

100.0

100.0

5,331

10,533

21,738

19.7 8.8

* Exclusive of fish processing in Newfoundland t Errors in totals result from rounding. SOURCE: Helleiner (1975 , table I , 244)

sophisticated exports like automotives and electronics, there remained a large number of low-wage countries eager to follow the path it had blazed. As table 6 shows, the composition of Canadian textile and clothing imports reflected this shift in the sources of supply. Two characteristics, however, make Canada's pattern of imports distinctive. First, the United States and Britain continued to hold a larger share of the Canadian market than of total world textile trade. Although their share of total imports fell, relative to Japan and other low-wage producers, the erosion took place in relation to a much higher base. The United States remained Canada's main

48 Canadian textiles TABLE 5 Distribution of world textile capacity (per cent) Year

Cotton

Wool

Man-made

United States

1951 1966

18 15

15 9

31 28

Britain

1951 1966

23 4

26 25

9 7

Western Europe

1951 1966

12 16

4

5

15 14

Japan

1951 1966

4 9

9 11

9 15

Other Asia

1951 1966

13 27

I 2

2

Canada

1951 1966

1.3 1.7

0 .9

0.9 0 .6

SOURCE: cn (1968, 6) TABLE 6 Major sources of Canadian broadwoven fabric and clothing (total volume of imports, percentages) 1954

1959

1968

Cotton fabrics United States Britain Asia Japan Eastern Europe

74.8 8. I 8.0 1.6 0.5

68.4 3.2 9.6 10.9

1.5

30.3 2.5 23 .6 9.8 24.9

Wool fabrics Britain

90.4

5.5

82.7 14.5 2.8

47 .6 12.9 24.8

EEC

90.3 0.3 4.7

82.7 6.1 7.3

46.I 30.1 10.9

Clothing United States Japan Asia

46.7 26.8 0 .5

11.5 66.8 16.0

5.8 28.3 60.3

EEC

Japan Man-made fabrics United States Japan

SOURCE:

CTI

(1971)

1.5

49 Canadian textiles source of imported cotton and fabrics, while Britain continued to hold the lead in woollen cloth . Second, imports took a larger share of the Canadian market than of other advanced capitalist markets . By 1966 the per capita value of Canadian textile imports had reached $19.32 - well above Britain ($10.89), the United States ($6.07), and the EEC ($4.95). Moreover, at that time only Britain was importing a larger share of the exports of low-wage producers: twenty-nine pounds of cotton textiles per capita, compared with twenty-two pounds for Canada and six pounds for the United States. 6 The bulk of these imports were in the form of woven, especially cotton, fabrics, but as table 5 indicates, other divisions of the textile industry and parts of the clothing industry were affected. The details of Canadian policy vis-a-vis textile imports will be discussed in the last section, but the reasons behind the state's relatively liberal stance can be outlined here. The penetration of the Canadian textile market by Britain, the United States, and various Asian suppliers is connected with the priority assigned to staples exports. As noted in chapter 1, in 1899 the Canadian state had granted Britain a lower British preferential tariff rate, which was specifically designed to permit British textile producers to capture a share of the Canadian market for woollen and cotton goods. This concession was made, moreover, in order to facilitate access to the British market by Canadian staples products. Thus in a sense, the share held by Britain in the post-war years represents the maintenance of a pattern established in the National Policy era. The share held by the United States is also indicative of the Canadian state's concern to promote staples exports. American textile imports rose after Canada accorded the United States 'most favoured nation' (MFN) tariff status in the 1930s, by which time the United States had taken over Britain's place as the primary destination of Canadian raw materials exports .7 Commercial policies designed to facilitate staples exports to Britain and the United States also held wider implications, which would ultimately threaten the domestic industry's capacity to survive. In the 1930s the British preferential system had been extended to all parts of the British Empire, and this arrangement was maintained after the Second World War through Canada's membership in the British Commonwealth. Thus, new suppliers, such as India and Pakistan, were attracted not only to Britain but also to Canada. In addition, Canada was one of the few countries to support the United States in its attempt to incorporate Japan into the new network of trade relations established with the help of international institutions like GA TT . Thus Canada, like the United States, was one of the first to attract Japanese textile exports. Canada's support for the United States, however, was not the sole reason for the decision to accord Japan MFN status. Even before the war, Canada had begun to export staples to Japan. After the war, Japan- and the other expanding south-east

50 Canadian textiles Asian economies - became an increasingly important export market. Exports of ore, fuel , wheat, and forest products to the Pacific Rim countries nearly quadrupled during the 1960s, while exports to Japan alone increased by 240 per cent. Finally, the sale of Canadian wheat to China and the Soviet Union made it politic to accept imports from these areas , and textiles were a major source of export earnings for China and several eastern European countries. Thus, just as in the National Policy era, the Canadian state was prepared to cede a portion of the domestic textile market to suppliers located in countries that were important customers for Canadian staples exports. Yet, although textile capital had come to accept this policy in the earlier period, it was being applied under new conditions, which began to pose a threat to textile capital's very survival. DOMESTIC ECONOMIC IMPACT OF IMPORT COMPETITION

Textile capital had emerged from the war in a mood of optimism. The disruption of trade during the Depression and war years, substantial gains secured through the subsidies that accompanied wartime price controls, and measures to stimulate the economy initiated in the 1944 Budget and the ensuing buoyancy of demand- all encouraged 'industry confidence,' which was reflected in. a high rate of investment. According to a National Industry Conference Board study, between I 946 and 1951 the textile's industry's share in investment equalled its contribution to value added by manufacturing (NICB, 1956, 30). Over the next five years, however, the rate of investment in textiles declined in response to the growth of import competition. There were other indicators of the industry's distress. Between 1950 and 1954 employment in the wool cloth section declined by nearly 50 percent, from 9,200 to 4,500. Between 1952 and 1957, six worsted and sixteen wool fabric mills-66 per cent of the firms in that division of the industry - closed. In the cotton division the number of establishments declined by 32 per cent and employment by 38 per cent. Total textile industry employment dropped from 77,800 to 63,500. Output, measured in 1961 dollars, declined from $822.7 million to $763.1 million. (See Kelly, 1973, table 1.) Import competition, of course, explains only a part of the industry's problems. The Canadian economy was hit by a recession in the latter part of the 1950s, which affected most parts of the economy. In addition, the traditional wool and cotton cloth divisions were affected by competition from the newer man-made fibres: nylon, acrylic, and polyester. Import competition did help to stimulate an adjustment process. Thus some of the 'distress' indicators merely signalled the 'creative destruction' that forms a normal part of the process of capitalist development. Yet the continuing penetration of the Canadian market by low-wage

5 1 Canadian textiles textile imports would ultimately jeopardize the process of internal adjustment that the leading textile capitals had begun to make. 8 One aspect of the adjustment process involved attempts to incorporate new labour-displacing techniques and products. Although the industry is considered to be 'mature,' significant innovations occurred in the 1950s and 196os. The discovery of new, non-cellulosic man-made fibres, the development of new finishes for natural fibres and new dyes and printing techniques, and the introduction of the tufting process in carpet manufacture - all these factors combined with evolutionary changes in spinning and weaving machinery and the growth of the knitting division to produce a series of dislocations in the textile industry. The clothing industry was less directly affected by labour-saving technological change; for in this industry, 'productivity' could be increased only by capital's efforts in 'supervision' and arrangement of space, rather than by machine-pacing. Adaptation to new fabrics and an increased orientation to 'style,' however, offered additional opportunities to meet low-wage import competition. The following figures provide an indication that adjustment was, in fact, under way by the late 1960s. Employment in the clothing industry had risen by 6 per cent, whereas the value of output had increased by 33 per cent between 1949 and 1969. Style and managerial input were the major reasons for the disparity between employment and output, since capital stock employed had risen by a mere 5 per cent. In contrast, during the same period the textile industry experienced a decline in employment of 3 per cent, while output and capital employed had increased by 35 per cent (Kelly, 1972). Certainly the investment pattern established by the dominant textile companies indicated a strategy of adjustment through modernization. Between 1964 and 1968 Dominion Textile had spent an average of $20 million per annum on additions to fixed assets. Two new mills were established at Long Sault, Ontario, for the manufacture of polyester-cotton yam and fabric; in Quebec, a new mill constructed in St Timothee employed modem bleaching, dyeing, and finishing techniques, and a new mill in St Jean manufactured fabrics for the expanding sportswear industry. Throughout the 1955-70 period Dominion Textile undertook substantial investments in plant modernization and diversified by participating in several joint ventures. Wabasso's fixed assets grew from $29 million in 1962 to $40 million in 1973; it also patented a new finishing process in 1967. DuPont, the first company to manufacture nylon in Canada (1946), began to produce acrylic and spandex here in the early 196os. 9 Bruck Mills was the first company in Canada to invest in the rapidly expanding area of double-knits. Consolidated Textiles (ConsolTex) entered into a joint venture with Nissan of Japan in the mid-196os to use and market the new water jet looms. The acetate fibre firms merged to form Chemcell (later Celanese of Canada) in response to competition from non-

52 Canadian textiles cellulosic fibres and natural fabrics treated with chemical finishes . 1° Chemcell's later joint venture with Imperial Chemicals Industry (1c1) of the United Kingdom gave it access to the Canadian patent on polyester, the growth fibre of the 1960s. While the adoption of new techniques and products characterized both the textile branch and the clothing branch, the process of concentration was a particularly important aspect of the former's adjustment process. As Pestieau has noted: The primary textile mills underwent a major rationalization process in the postwar period; as a result, three firms now account for 85 percent of cotton yarn production, one firm produces 75 percent of Canadian cotton/ polyester-blended fabrics, and over 95 percent of man-made fibres is supplied by six firms, with five producing more than 90 percent of all woven man-made fabrics in Canada. In the field of worsted fabrics three firms account for 75 percent of Canadian production. (Pestieau 1978, 12)

Through this process, the Canadian primary textile industry became one of the most highly concentrated in the world. 11 Of course, Pestieau's figures refer to the 1970s, but by 1965 the textile industry had become highly concentrated, with the exception of the knitting division (see appendix). The program commenced in the mid-195os and was completed within a decade. The process of concentration and reorganization was led by the dominant textile firms, which are identified in table

7.

Dominion Textile played a leading role in the reorganization of the primary textile industry . In 1956 it had acquired Caldwell Linens, a major producer of household textile products: in 1960 it purchased the remaining equipment of Canadian Cottons. 12 The owners of Canadian Cottons had been shifting out of textiles since 1952. This movement began with the sale of some of its plant and equipment to Textile Sales, of which A.C. Salter of Canadian Cottons was president. An agreement had been made that Canadian Cottons would remain in business until the completion of the cotton inquiry under Tariff Board Reference 125. 13 Thus it was not until 1959 that Canadian Cottons sold its remaining textile interests to Dominion Textile. Its liquid assets were channelled into Canadian Corporate Management, a holding company with diverse assets . In 1965 Dominion Textile completed the acquisition of Tremont Worsteds and acquired Penman's, a major producer of knit goods. In 1966 DomTex moved out of carpet manufacture, selling its shares in Brinton-Peterborough Carpets to Armstrong Cork, an American company. This list of acquisitions understates Dominion Textile's role in reorganizing the industry. DomTex may have assisted in the take-over of Wabasso by H.R. Crabtree, through Woods Manufacturing, since F.R. Daniels, president of DomTex, was on the board of Woods in 1954, a year before the take-over. Daniels

53 Canadian textiles TABLE 7 The dominant textile companies in Canada, 1969* Company

Ownership

Canadian sales ($000)

Numbers employed

DuPont of Canadat Celanese of Canada Dominion Textile Wabasso Bruck Mills Cleyn and Tinker Consolidated Textiles Cosmos Imperial

U.S.

228,202 123,379 173,270 42,588 31,400 20,000 17,349 16,690

6,364 5,462 10,449 n.a . 1,867 1,000 540 n.a.

U .S.

Canadian Canadian Canadian Canadian Canadian Canadian

* The leading firms in the knitting sector, such as Harvey Woods, Electro-Knit Fabrics (Canada), and Silknit - all of which are Canadian-owned - have been excluded from this list, since they remain relatively small firms located in a much more competitive division. The carpet industry has also been excluded, because this branch is not affected by low-wage import competition; the major firms in this division are Harding Carpets and Celanese. t The DuPont sales and employment figures are the total of all its Canadian activities, including the 40 per cent (sales) devoted to chemicals. In addition, the sales figures include the resale of industriai fibres produced by its American parent, E.I. DuPont de Nemours. SOURCE: 1969 annual reports of the companies listed

knew Crabtree, who invited him to join the board of Fraser Companies, a forest products firm controlled by Crabtree. Both were connected to the Bank of Montreal. It appears that Crabtree, Gordon, and Daniels also participated in the reorganization of the woollen and worsteds sector. These three were members of the board of Paton Manufacturing, the largest Canadian worsted cloth producer until Paton was acquired by Cleyn and Tinker in 1965. Cleyn and Tinker, which now accounts for over half of domestic woollen and worsteds production, is the product of a series of successful mergers initiated in ihe early 1960s. In 1962 Leach Textiles (the Canadian distributing agent for Fawcett and Grant of the United Kingdom, headed by Tinker) and Model Dye Works merged to form Cleyn and Tinker. Fran~ois Cleyn had been a member of the board of the Wool Combing Corporation, which had sold its wool combing and processing plant in 1957 and acquired Model Dye Works in 196o. In 1962 it sold its fixed assets to Cleyn and Tinker. (The capital thus freed was subsequently used by four of the directors to expand from Monarch Knit - which had manufactured worsted yarns until 1959, when it began to invest in knitting - into the apparel industry through the formation ofMontex Holdings in 1964. 14) By the late 196os Cleyn and Tinker had acquired a knitting subsidiary, Italknit. Cleyn and Tinker is now Canada's largest wool fabrics' producer. The Hamilton group, centred around the Young family of Hamilton, Ontario,

54 Canadian textiles also played an important part in the reorganization of the industry. The Youngs then owned Hamilton Cottons and had a controlling interest in Cosmos Imperial, which had plants in the Hamilton area and in the Maritimes. In 1959 Hamilton Cottons acquired the textile assets of a major customer, Robinson Cottons of Woodbridge, Ontario. However, it appears that by 1961 the Youngs had begun to diversify out of textiles. Hamilton Cottons gradually ceded its textile business to Cosmos Imperial, while extending its investments from short-term financing (Brock Investment) to the leasing of machinery for the forestry industry (P.B. Yates Machinery) . By 1969 Cosmos had taken over the management of the group's entire textile interests. The Youngs' indirect role in the reorganization process also seems to have been significant. For example, the group had a director in common with Dominion Silks, a firm then owned by the Camelfords of Dunnville, Ontario, who also owned Dominion Fabrics. In the early 1950s Camelford and a member of the Hamilton Group were also on the board of Mercurey Mills of Hamilton, a knitting firm that declared bankruptcy in 1954. The Hamilton group were linked to Wabasso. Such connections may have facilitated the 1971 acquisition of Dominion Fabrics by Wabasso. Celanese constituted another centre for industry reorganization. Canadian Celanese had undertaken an aggressive program of acquisitions in the late 1950s, acquiring fibre users in an attempt to compete with the new non-cellulosic fibres. In 1956 it acquired Coaticook Textiles from Silknit, one of the leading knitting companies. In 1957 Celanese purchased the machinery, materials, and trade names of Rayflex Corporation of Canada. In 1959 it purchased Slingsby Manufacturing, a wool weaving company in Brantford, Ontario, and L. Forestier Ltee, an upholstery manufacturer in Plessisville, Quebec . Aux Tissages Fran~ais was acquired in 196o. In 1963 Celanese Corporation of America, backed by Power Corporation (a large Canadian holding company), merged its subsidiary Canadian Chemical and Cellulose, a chemical and cellulosic fibre producing company - with Canadian Celanese, previously a subsidiary of British Celanese, which had been acquired in 1958 by Courtauld' s of Britain in its bid to take over all cellulosic production in that country. This merger served to eliminate competition between the two Canadian producers of acetate rayon and permitted the streamlining offibre production and the rationalization offibre processing. In 1964 the new company (then Chemcell) acquired the assets of DuPlan of Canada, a processor of man-made fibres and entered into the joint venture with 1c1 (Millhaven Fibres) to produce polyester and nylon. Thus the dominant Canadian textile companies, principally Celanese and Domion Textile, had brought about a significant reordering of industrial capacity by the mid-196os. Through the links with the interests involved in other companies

55 Canadian textiles described above, they were able to direct the reorganization process in all but the knitting division, which remained highly competitive. The rationalization that has occurred in this division has been led primarily by two independent firms, Silknit and Harvey Woods. The influence of the majors is also less apparent in the synthetic fibre processing sector where the aggressive policies pursued by independents like Bruck Mills and Consolidated Textiles 15 occurred simultaneously with the expansion of Dominion Textile and Celanese into this field . Low-wage import competition thus had triggered industrial reorganization, including substantial investment in new techniques. The merger process had facilitated the phasing out of obsolete equipment and had permitted greater specialization within and between firms. The most notable feature, however, was the high level of concentration that obtained by the mid-196os. Only three major cotton producers of the original seven remained, and DomTex held clear leadership with over 50 per cent of the market. One producer of acetate and triacetate survived; Celanese / Chemcell produced the necessary intermediate inputs and was also a major fibre user through its fabric and carpet divisions. Into the early 1970s Celanese remained the sole producer of the important fibre polyester, and of polypropylene, a fibre used in carpet production. DuPont continued to hold the lead in nylon production and remained the sole domestic producer of acrylic. Cleyn and Tinker now dominated the woollen and worsted section, and its link with the producer of polyester, which is increasingly being blended with wool, created the potential for lowering input costs. Its relationship with a major British producer carried with it the possibility of co-operation with its traditional source of import competition. Although the domestic industry was adjusting to import competition, the continued pressure from low-wage imports constituted a major problem. While import pressure also affected the clothing industry, it was perhaps most keenly felt in the textile industry, which experienced competition both directly, in the form of woven fabric imports, and indirectly, through imports of low-cost cfothing. The price depressing effects of such competition, in tum , contributed to a low rate of return on capital invested in new plant and acquisitions, as table 8 shows. In addition, the increased bargaining power of Canadian labour created an upward pressure on wages. Labour's share of the national income had risen from 68.6 per cent in 196o to 70.5 per cent in 1968 (Wolfe, 1977, 26o). Table 9 provides some indication of the relation between wages within these industries and the average wage for manufacturing. The clothing industry, though located in large urban centres like Montreal and Toronto, could avoid some of this pressure, since it benefited from the relatively open immigration policy of that period. 16 Immigrants from lower-wage countries, such as Portugal and Greece, especially the women immigrants employed in the clothing industry, could be paid at well

56 Canadian textiles TABLE 8 Comparison of return on shareholders' equity for parts of the Canadian textile industry and selected branches of manufacturing, 1965-68 Industry

1965

1966

1967

1968

Cotton and woollen Man-made fibre Total Canadian textiles Primary metals Metal fabricating Machinery Transport equipment Chemicals and products All manufacturing

7.3 9.8 8.5 11.1 11.5 11.5 12.9 14.9 10.4

7 .0 7.9 7 .9 11.9 10.8 13.4 7.9 9.6 10.0

2.0 7.4 5.8 11.6 9.2 10.3 10.2 2.3 9.3

2.4 9.4 7.0 11.9 9.9 9.6 11.5 8. 1 7. 1

SOURCE: Kelly(1974, table n-3); and oes(1968, 1969, and 1970) TABLE 9 Wage levels in the textile, clothing, and selected industries, 1971 Value added per production worker

Industry

Average wage

Shoe factories Leather tanneries Cotton yam and cloth Man-made fibre, yam , and cloth Knitting mills (excluding hosiery) Men's clothing Women's clothing Children's clothing

$4,294 6,333 5,129 5,779 4,248 4,235 4,089 3,750

$8,120 12,230 11,540 12,640 10,150 7,910 8,000 7,710

Average , Canadian manufacturing

$6,695

$18,610

SOURCE: Helleiner (1975, table 16)

under the average wage. The primary textile industry, although it employed fewer immigrants, was also less affected than other industries because it was concentrated in small towns largely dependent on the industry. In addition, most of its operations were in Quebec, where employment and wages were lower than the Canadian average. 17 Higher wages won in the resource sector and in the leading manufacturing industries like automobiles did filter down, however, if only indirectly through minimum wage legislation. 18

57 Canadian textiles Thus, import competition initially functioned as a stimulus to the modernization and rationalization of the textile industry. Although there were certain 'losers' in this process, some capitals shifted out of the industry, while others consolidated their position. Nevertheless, the continued pressure of low-wage import competition combined with the monetary wage gains won by workers in the mid- I 96os to create a profit squeeze that threatened the adjustment process. As we shall see in chapter 4, it was this squeeze that pushed the leading textile capitals, working through the Canadian Textile Institute, to struggle for a change in state policy. Before we examine this struggle and the pattern of politics that preceded it, it is useful to consider why the unequal structure of representation permitted low-wage import competition to jeopardize the textile industry's future . TEXTILES WITHIN THE UNEQUAL STRUCTURE OF REPRESENTATION

During the 1950s the mechanism through which tariff policy was established remained the central site for negotiating the details of the compromise between the staples fraction and import-substituting capital in textiles. Although the Tariff Board - formed in the twenties to 'take the tariff out of politics' - acted as the public forum for assessing the relative strength of competing forces, Finance remained firmly in charge of tariff policy. 19 The Tariff Board operated under the institutional scrutiny of the Department of Finance, whose Tariffs, Trade and Aid Division held responsibility for assessing the validity of demands for alterations in the tariff schedule. Finance also set the board's terms of reference, and its chair was normally drawn from this division of Finance. The two additional members were selected according to the following convention: one 'protectionist,' drawn from the manufacturing h~artland of Ontario or Quebec; and one 'free trader,' drawn from the staples-exporting West (Drabek, 1965). More important, Finance assessed the Tariff Board's reportings and made recommendations to the minister of finance, based on this assessment. Of course, Finance did not act alone but in consultation with other departments on the Committee on International Trade Policy, which it chaired. Prominent on this committee throughout the boom years was the department whose primary concern was the promotion of Canadian staples exports: Trade and Commerce. National Revenue, however, which was responsible for gathering data on imports, often acted as the representative of the relevant import-substituting industry on the committee. The balance embedded in this aspect of the policy process thus reflected the structure of the compromise between the export-oriented and import-substituting fractions of capital. Incremental changes could be negotiated through Finance, the Tariff Board, and the committee. Finance, however, was

58 Canadian textiles placed to limit such concessions to terms compatible with the interests of the staples fraction. During the first post-war decade Finance and Trade and Commerce exerted strong pressure for a general downward revision of the tariff in the interest of moving towards free trade. In this action, however, special emphasis was placed on lowering the tariff on intermediate goods as part of a strategy for encouraging the expansion of selected industries, of which the textile industry, with the exception of the man-made fibre division, was not one. During the King / St Laurent regime, textile capital was unable to secure an inquiry to determine whether the industry's 'distress' warranted the imposition of additional protective measures. In fact, C.D. Howe, the architect of the state's industrial policy in this period, explicitly told the industry: 'The only way I know to obtain an efficient economy is, when these situations occur, to allow them to be corrected by natural means ... If the government went in for short term solutions, perhaps doubling the tariff, there would be no improvement in that particular industry. We would have a sick industry on our hands' (Globe and Mail, 2 March 1958). Although Howe was, in part, correct, the one hearing held during this period reflected the state's overwhelming concern with protecting Canada's traditional export market and thus the economic interests of the staples fraction . The Tariff Board's report noted that 'The importance of British wool fabric imports as an aid to maintaining exports at high levels, was emphasized in the representations received by the Board from a number of Canada's leading export industries. These included exporters of wheat and other agricultural products, lumber, plywood, wood pulp and canned fish' (Tariff Board Reference 116, 1955, 46). The board concurred with the exporters' view, emphasizing the importance of exports to the Canadian economy (22 per cent of national income in 1953); pointing out that Britain constituted Canada's second largest external market, and noting that 'traditionally wool fabrics have been regarded by the United Kingdom as its most important dollar earner in Canada (Tariff Board Reference 116, 1955, 46). The board concluded, moreover, that the source of the Canadian producers' distress was domestic: the decline in demand due to the increased use of synthetic fibres and to the propensity of consumer demand to shift to durable goods as incomes rose. Although competition from the British compounded the industry's problems, the board clearly indicated that the industry's claim carried less weight than that of the exporters. It would be wrong, however, to assume that the board-Finance policy network was inflexible in its position vis-a-vis the textile industry. By the late 1950s, at least, the industry increasingly had to operate in a context characterized by political instability. Balance of payments problems and rising unemployment were feeding the growing opposition to the Liberal development strategy. The diverse forces of opposition-western farmers, east coast fishing interests, small Canadian

59 Canadian textiles capitals, and labour - achieved a temporary unity under the Diefenbaker Conservatives in 1957 and 1958. The sectoral politics underlying the new Diefenbaker regime's significant decision to postpone the scheduled Tariff Board inquiry into the chemical industry, in order to launch a full-scale study of the entire textile industry (Drabek, 1965), will be examined in chapter 4. The findings of Tariff Board Reference I 25, published in the late 1950s and early 1960s, however, provide an interesting contrast to those of Reference 116, which needs to be considered here, since this report constituted an important step in the revision of the state's effective textile policy. Tariff Board Reference 125 attached greater weight to the industry's claims, recommending some increases in the level of protection . The broader significance of this inquiry, however, lay in the fact that it helped focus attention on the special problem posed by low-wage import competition. For instance, the report on the wool cloth industry division recommended a 'measure of assistance that will permit it [the domestic industry] to fight for its existence, at least until such time as there may be enunciated, by the proper authorities, a carefully considered decision in high policy [sic] regarding the future of the Canadian wool and cloth industry' (Tariff Board Reference 125, 1958, 44). The report on the cotton yarn and cloth industry recognized that the tariff provided an inadequate means for regulating imports from such sources. The hosiery and knit goods report, however, best captured the nature of the Canadian state's dilemma: It would have been logical to request the higher rates to which our calculations would lead had we not been confronted with the dilemma .. . [of) the problems and injustices which arise when the same rate has to serve on goods both from Great Britain and India, in the first instance, and the United States and Hong Kong or Japan, in the other. On the other hand, to treat British and u .s. goods fairly, as the proposed rates do, would be to leave the Canadian knitting industry open to destruction by foreign exporters and Canadian importers. In the rapidly evolving situation, the British Preference, a major principle of the Canadian tariff structure, has lost its significance. Rate differentials intended to favour Great Britain have little or no such effect in the face of exports from other countries . (Tariff Board Reference 125, 1958, 35)

In other words, the British Preference was no longer able to serve its intended function . In fact, it assisted India and other low-wage Commonwealth countries in their competition with British exporters. So, too, did the extension of MFN status to Japan work against Canada's major trading partner, the United States. The tariff, then, was an inadequate tool for regulating trade under these new conditions; and yet the Tariff Board was hamstrung, because its jurisdiction did not extend beyond the tariff. If Reference 125 drew attention to a new problem, the American state's

60 Canadian textiles initiative in 1956 - the negotiation of the first voluntary export restraint (VER) with Japan - indicated a solution to which the Diefenbaker regime had recourse even before Reference 125 was completed. In 1958 the first Canadian VER was negotiated with Japan. This restraint agreement was followed by others affecting a range of textile and clothing products imported from Japan and other low-wage producers. However, the Canadian state was breaking no new ground; it was merely supporting u.s. initiatives. At a meeting of GA TT ministers in 1959 the American representative raised the issue of 'market disruption,' which led to the establishment of a Working Party on the Avoidance of Market Disruption . More important, in order to secure domestic support for its position in the upcoming Kennedy Round negotiations, the United States sought and obtained a GATT-sanctioned arrangement, the Short-Term Arrangement Governing Cotton Textiles, to regulate the process through which such bilateral agreements would be negotiated. As one Canadian observer noted, 'the United States' main tactical support in these early discussions come from the Canadians' (Grey, 1980, 7). The Short-Term Arrangement was followed by the Long-Term Arrangement (LTA) in 1962, which provided a set of rules whereby individual states could regulate but not block the growth of textile imports from low-wage sources. The LTA legitimized bilateral restraint agreements (VERs), while requiring the countries resorting to such restraints to do so only under conditions of severe market disruption . Such agreements, moreover, were to include an annual growth allowance of at least 5 per cent. The LTA, in fact, was organized to circumvent domestic opposition to the Kennedy-Johnson strategy of accelerating the pace of multilateral trade liberalization. u. s. support, in tum, persuaded the Canadian Department of Finance that VERS need not operate against the interest of the staples fraction. In addition, the structure of representation through which Canada's VER decisions were negotiated was strongly biased in favour of the staples fraction. Its 'seat of power,' Finance, remained in charge of low-wage import policy. In discharging this responsibility Finance established a screening device similar to that used for tariff policy. Simon Reisman, then assistant deputy minister (ADM) for the Tariffs and Trade Division, established a committee, the Interdepartmental Committee on Low Cost Import (Lele). LClC was chaired by the ADM of Finance and included senior officers from External Affairs, Trade and Commerce, National Revenue, and, after 1963, the Department of Industry. 20 Through this structure of representation, a system of negotiation was institutionalized that could limit any threat to Canada's expanding trade and investment links with Japan and the other Pacific Rim countries. The new system worked as follows. The injured industry division could make

61 Canadian textiles submissions to LCIC . In considering these submissions, Trade and Commerce and External Affairs could be counted on to advise Finance as to the acceptable limits. National Revenue was present to provide an assessment of the extent of import penetration. It was in no position, however, to indicate whether an industry's claims to 'modem and technically efficient production' were valid. The establishment of the Department of Industry in 1963 altered this situation to a (limited) extent, since Industry's senior officials could draw on the expertise of the branch concerned with the performance and potential of the textile sector. Yet the Department of Finance dominated the committee. (In fact, one government official went so far as to argue that the committee existed merely to provide a vehicle for legitimizing Finance's decisions.) Certainly, the work was done by the international division of Finance; this section sought the advice of the trade department, even while it retained responsibility for defining the problem and elaborating Canada's negotiating position. The position was rather nicely summarized by Reisman's successor, Rodney de C. Grey (Journal, December 1967). Grey argued that Canada was not a major power and thus could not indulge in highly restrictive trade practices. Canada lived by [staples] exports, hence care had to be taken that import controls would not threaten Canada's export interests. Some protection might be necessary, but it must remain within the limits permitted by the liberal international order established through GATT and other global agreements. In the textile industry's case the international rules identifying the limits of acceptable protection had been specified in the Long Term Arrangement. From Grey's perspective (and that of Finance), 'The key problem is to be sure we are dealing, not with a mismanaged industry that is producing the wrong things in the wrong place, not with an industry suffering from some other malaise but with an industry that is really threatened by low cost imports' (Journal, December 1967). In some cases the textile and clothing industries were able to establish proof of injury. Yet they were hampered by the limited expertise of their representative inside the state apparatus. Their lack of acceptable evidence permitted Finance, well informed as to the importance of Canadian staples exports, to justify its unwillingness to exert 'undue pressure' on textile-exporting countries. Further, Finance's concern to avoid protecting an inefficient industry led it to seek a precise and narrow definition of the items and sources to be restrained. Finance's reluctance was reflected in the pattern of restraint agreements, which became increasingly liberal as the economy entered the boom years of the mid-196os: In 196o voluntary restraints exercised by Japan covered essentially all garments exported to Canada. By I 970, the restraints covered only blouses, shirts and trousers made from woven fabrics and knitted wear. Similarly, the arrangements with the People's Republic of China

62 Canadian textiles in 1963 covered all gannents, but the 1972 arrangement pertained only to shirts and trousers . The first restraint arrangement with the Republic of Korea (1967) included all cotton gannents and the five major categories of gannents made from man-made fibres, whereas in 1970 the coverage was reduced to shirts, blouses, trousers and sleepwear. (TCB, 1977, II, 4)

Yet, as we have seen, growth in the domestic textile market pennitted by the buoyant conditions of the 1960s was not enough to secure the 'material basis' of textile capital' s consent to the terms offered by the staples fraction's representative in the state. That low-wage imports formed an increasing portion of Canadian textile imports meant that the leading textile finns had to sell at prices too low to pennit adequate profit levels. This situation was exacerbated by textile workers' demands to maintain their wage position relative to workers in other sectors. Moreover, Finance and its allies within the federal administrative apparatus largely ignored textile capital's demands, as presented by the latter's representatives within the decision network, National Revenue and Industry. The relative weakness of textile capital's representatives vis-a-vis Finance, then, resulted in a decision pattern that could threaten not only textile and clothing capital but also the broader political interests of the staples fraction. This threat was compounded by the fact that the method of arriving at VER decisions did not contain even the legitimizing 'public hearing' aspect, which at least formed part of the tariff policy process. 'Participation', of course, provides no guarantee that consent will be maintained in the long run - especially when the material basis of that consent is being undermined by decisions taken within the unequal structure of representation. 21 Yet it can act as a means of persuading social forces that short-run sacrifices are necessary to secure long-run benefits. A public hearing, moreover, can be used to show that a particular interest is making unfair demands, which go against the 'national interest,' and thus can help to isolate the dissidents. As we shall see, not only would the 1971 textile policy alter the tenns of the compromise between textile capital and the staples fraction. It would also result in a modification of the structure of representation, giving more weight to the fonner's representatives, and incorporate a public hearing component. Before we examine the process through which these changes were brought about, however, it is necessary to analyse the political conditions that triggered the process.

4

Textiles as a political issue

By the mid-196os the Canadian state' s relatively liberal stance vis-a-vis low-wage imports had begun to affect the rate of profit in the textile industry, which posed a threat not only to textile capital but also to workers in this sector. 1 This development became politically salient, however, only when those forces affected were able to dramatise their plight by linking their case to the more fundamental concerns of the Canadian state. 2 At each conjuncture these forces were confronted by a range of strategic alternatives. The selection made therefrom, in tum, determined the nature of the issue presented to the state. This chapter will examine the strategic choices made by capital in the textile and clothing industries and by labour. It will be argued that throughout the period under consideration the organizational capacity of textile capital made it the primary force in defining what was at issue. Textile capital did not, however, act in isolation. In the later 1950s it established an alliance with clothing capital through the formation of the Canadian Apparel and Textile Manufacturers Association ( CA TMA). Its ability to operate as the dominant force within this alliance allowed it to strengthen its own case by utilizing the political resources of clothing capital. Although this alliance was effective enough to secure the modifications in the state's policy that were discussed in the previous chapter, the crucial coalition was that forged with the unions in the mid-196os. It was this coalition, in which textile capital again held the dominant position, that produced the issue forcing the state to define the terms of a new accord. This is not to suggest that the other forces were incapable of independent initiatives. In fact, there were various attempts to define the issue from labour's standpoint. In addition, it was clothing capital that destroyed CATMA and forced textile capital to find a new ally. None the less, textile capital's superior organizational capacity permitted it to structure the themes that made textiles an issue the state had to recognize.

64 Canadian textiles THE POLITICS OF TEXTILES IN THE

1950s

By the mid- I 950s the Canadian textile and clothing industries had begun to feel the impact of import competition. In seeking a change in state policy, capital and I or labour in textiles needed to find a way to connect their plight to the key issues of the day. In this period, for instance, the labour movement began to criticize the Canadian state for failing to live up to its commitment to maintain high employment. Opposition to continentalism had surfaced, although it primarily took the form of a backward-looking, pro-British nationalism. Regional dissatisfaction with the uneven impact of post-war growth posed an as yet inchoate challenge to executive-federalism. Finally, 'small business' had emerged as a point of opposition to the process of concentration that accelerated during the first years of the post-war boom. Selection from within this range of options, however, was conditioned by the relative organizational capacities of labour and capital in the textile and clothing industries. In Canada, unlike the Netherlands, relations among the textile and clothing unions blocked the formation of an effective working-class issue. 3 Thus, although the Textile Workers Union of America (TWUA) argued its case in terms of the need for corporatist planning institutions to regulate the pace of industrial restructuring, the other unions did not back its demands . The dominant themes the place of manufacturing in the Canadian economy and the conservation of small business - were thus the ones that textile capital selected . The first theme was emphasized by textile capital prior to the defeat of the King/ St Laurent regime; the second was stressed through the creation of CA TMA . First, the 'place of manufacturing.' In the immediate post-war period the textile industry felt its position in the Canadian economy to be secure. It recognized that development of new staples and the rise of new industries had created a more complex economy . In general , however, it viewed these developments as indicative of a stronger position for the manufacturing in a more nationally centred development process. As the editorial in the 1945 Manual noted: There's bound to be competitive pressure on the development of the national policy between durable goods industries and export industries (newsprint for example) and nondurable manufacturing industries (textiles for example) in post-war politics ... [However] the close integration of the primary textile industry in the basic industrial economy of Canada ... is now so firmly established that any changes in National Policy tending to undermine this particular industrial enterprise strikes immediately at the entire fabric of essential domestic industrial employment. Industry and employees engaged in the export trade must remain an adjunct, not an arbiter, of the domestic economy .

65 Textiles as a political issue Protection provided during the Second World War and sustained by the 1947 Foreign Exchange Conservation Act and the Korean war established such conditions of prosperity that the industry continued to view with equanimity the massive public and private investments in developments like the Alberta petroleum industry, the iron ore deposits of Labrador and northern Quebec, uranium, aluminum, and the St Lawrence seaway. Yet the sudden increase in imports in 1954 forced textile capital to re-evaluate these developments. The policy of the state was primarily designed to develop new industrial raw materials for export and to encourage the establishment of the newer secondary industries. Additional protection for the textile industry was not on the agenda. The CTI (then PTI) was initially able to link its position with that of other traditional industries in the revolt against these policies, which surfaced during the Gordon Commission on Canada's future economic prospects. The PTI argued its particular case in general terms, stressing the need for growth through policies to increase effective demand within the Canadian market. In arguing against the emphasis on export-oriented resource industries, the PTI advocated that 'Canada's aim for the future should be to obtain the supportable maximum in populationgrowth which will reduce her exportable surplus and, at the same time, will secure a maximum return for her resources' (PTI, 1956, ii). In such a dynamic, nationally oriented economy, textile capital argued that it would be prepared (and able) to perform a useful role . It could 'make efficient use of the nation's resources of manpower, raw materials, technology and money.' In providing employment for a large number of workers in 'small established centres,' textile capital supported a more geographically balanced growth process. It also stressed its potential as a processor of domestic raw materials given the new developments in man-made fibres . The PTI's brief also drew attention to the substantial investments already undertaken by textile capital. In so doing, textile capital served notice that imports of textiles, associated with a commercial policy designed to promote exports, posed a threat to the realization of its full potential: In view of the difficulties faced by the industry, capital expenditures have been restricted in certain cases to maintain working capital and, in others, the state of confidence in the industry has not been such as to encourage the purchase of new equipment. This lack of confidence has, unfortunately, also been apparent among the investing public which has considered that, to some extent, the textile industry was being allowed to diminish as a part of a policy designed to further the export of Canadian primary materials. (PTI, 1956, ii)

The brief submitted by Courtaulds was even more explicit in its demand for public commitment to guarantee the future of the industry: 'A clear statement by

66 Canadian textiles the Canadian Government that it didn't intend to rely on the Far East for a proportion of its textile needs would create the confidence needed by the Canadian textile industry to attract investment. ' 4 Through the PTI staff and the PTI's consultant5 textile capital addressed the departments of National Revenue and Finance - the two departments then charged with import policy. According to those involved, however, their case seemed to fall on deaf ears. Opposition to the development strategy pursued by the King/ St Laurent regime surfaced around the pipeline debate of 1956-57. The Trans Canada Pipeline, heavily subsidized by the state but privately owned, was an essential part of the Liberals' strategy of combining the expansion of new industries in central Canada with exports of cheap Alberta gas to American markets. In 1957 a coalition of dissident forces rallied to John Diefenbaker's populist-nationalist Tories to defeat the St Laurent regime (Grant, 1967). This loose coalition of older industries, 'small businesses' in central Canada, and producers of traditional staples in the Maritimes and Prairies included textile capital. Prior to the election Diefenbaker had explicitly indicated his support for the textile industry: 'Too long ... has your industry been subject to the innuendo of inefficiency when you sought a realistic appraisal of measures necessary to assist you to make your unique contribution to so many aspects of Canada's economy' (Globe and Mail, 2 March 1958). And the new Diefenbaker government was true to its word. Specific measures to protect the textile industry were undertaken, such as Tariff Board Reference 125 and the system of voluntary export restraints (vERs). In addition, textile capital benefited from broader measures to reduce Canada's trade deficit: the devaluation and the imposition of a temporary import surcharge. Policies to stimulate domestic demand - programs oriented to the traditional staples and new initiatives in the social security field- also helped. The Diefenbaker regime, however, failed to modify the basic thrust of the Canadian state's development strategy. For textiles, this meant that the market would continue to be shared with imports. Nevertheless, textile capital seemed to have accepted its place in an economy that continued to be centred on staples-led growth. From the Diefenbaker period onward it ceased to argue for policies to enhance the position of the manufacturing sector within the Canadian economy. It did not share George Grant's 'lament' at Diefenbaker's failure to shift the structure of power in favour of indigenous industrial capital. The specific concessions it had won were enough to re-establish its acceptance of its traditional, subordinate place in Canadian development. At the same time, textile capital did develop a set of tactics to protect its gains, tactics well suited to the politics of the Diefenbaker regime: it forged an alliance with the clothing capital. This strategy served to emphasize the 'conservation of small business' theme, which was central during the Diefenbaker era (Bellamy, 1963).

67 Textiles as a political issue The alliance of textile capital and clothing capital was politically useful to the fonner, given the Diefenbaker regime's political base. Yet its roots were not simply 'political.' In the late 1950s and early 1960s the clothing industry was directly affected by low-cost import competition. This was partly due to the relative labour intensity of garment manufacturing. In addition, the large retail companies were beginning to develop commercial relations with manufacturers in low-wage countries. Yet clothing capital was too fragmented to mount and sustain an effective political response and the low capital-intensity characteristic of the clothing industry meant that clothing manufacturers had the option of closing shop or lowering input costs by importing fabric from these same low-cost sources. Textile capital, however, still depended heavily on the market provided by the domestic clothing industry. The growth of low-cost clothing imports would pose a direct threat to its sales . Thus the alliance with clothing capital was in part based on textile capital's economic interests. Such an alliance also had the advantage of being politically effective in a conjuncture where the problems of 'small business' were receiving special consideration from the state. In 1958, the year the Diefenbaker regime won majority status (and negotiated the first VERs), the board of the PTI accepted the recommendation of G. Bruck (Bruck Mills) and E. King (DomTex) and voted funds for a new organization: the Canadian Apparel and Textile Manufacturers Association (CATMA). CATMA was a coalition of the PTI and the Montreal and Toronto dress and sportswear guilds and associations representing men's and children's apparel manufacturers, shirt and sleepwear manufacturers, and the rainwear division . It was a coalition in which the PTI enjoyed (an imperfect) hegemony. Although officially the PTI was to provide only 45 percent of the finances, CATMA drew most of its funds from thePTI . CATMA also drew heavily on the non-financial resources of the PTI. Its director, Dan Rosenbloom, worked with the PTl's public relations consultant to develop CATMA's public posture and to gain access to the media. 6 Statistical r~search done by the PTI staff fonned the backbone of CA TMA 's fonnal presentations to the state regarding VERS. The PTI used the forum CA TMA provided to 'educate' the clothing capital on the need for state intervention. Spokesmen affiliated with textile capital frequently called on clothing capital to overcome its competitive, short-run perspective. For instance, John Meyer's address to a joint CATMA-National Garment Manufacturers Association meeting7 argued as follows : 'Your concern, I fear, has been too narrow ... You cannot argue only the damage done your business by the flood of Asiatic imports or dumping done by the American competitors. Those are immediate concerns ... You have also to take a longer view. You have also to see your business in the context of the national economy and argue the national case with the same insistence that you argue your case' (Journal, July 1961). In

68 Canadian textiles general, these efforts to muster support for VERs were successful. By 1960 textile capital had begun to articulate a demand for a policy - a demand that grew logically from CATMA's argument for total low-cost import containment. As an alliance to promote the formation of a textile policy, however, CA TMA did not prove successful. This failure was, in part, deliberate. The PTI's support for CATMA had very specific objectives: to mobilize clothing capital behind a demand for state protection and to direct public attention to the low-cost import problem. The first objective was pursued through heavy financial support and educational efforts. The second objective was achieved through the PTI's tactical leadership. The PTI / CTI committees responsible for determining CATMA's strategy and tactics, the Import Policy Committee and the Public Relations Committee, encouraged CATMA to play an 'up front' role . This strategy drew attention to CA TMA as an alliance of many small (and a few large) companies that employed nearly 200,000 workers. The problem CATMA dramatized could thus be seen as the problem of an important section of 'small business.' The political support this issue generated permitted the executives of the dominant textile companies and the senior staff of the institute to work quietly for a policy that directly addressed the problems of the leading textile capitals. Although the alliance was successful in prompting the Canadian state to negotiate VERs - including the first international restraints on clothing - it was not significant enough to secure a more fundamental shift in state policy. While the plight of small business had surfaced as an issue during the Diefenbaker years, petty capital had not developed the organizational capacity necessary to sustain it. Or rather, Diefenbaker's populist regime spoke for small business and small-commodity producers. Lacking effective, autonomous organizations, the latter remained dependent on the regime's ability to reorganize the administrative apparatus. While some changes were indeed made - including the formation of the short-lived National Productivity Council, on which business and labour were represented and which reported through the departments of Trade and Commerce and Labour - these sites were not powerful enough to overcome the pre-existing bias. The relative political weakness of clothing capital thus mirrored the position of the social forces behind Diefenbaker. The link between textiles and the fate of small business secured through CA TMA was similarly inadequate to trigger a change in policy. Even if textile capital had attempted to expand CATMA's objectives, it was prevented from doing so by CATMA's demise. In January 1964 the CTI Board was informed of the formation of an Apparel Industries Council (predecessor of the AMC) to secure the rationalization of the tariff between fabrics and garments. Shortly thereafter, CATMA was dissolved. The demise of CA TMA can be interpreted as a result of its failure to overcome the

69 Textiles as a political issue underlying divisions between textile and clothing capitals . The latter had certainly come to resent their role as 'the cat's paw to pull out the chestnuts for the en .' This resentment grew when textile capital rejected clothing capital's proposal regarding CATMA's official position on the upcoming GATT negotiations, which called for a reduction in the textile tariff in order to grant both industries an equal level of effective protection. 8 Yet even this sector-specific issue should be understood in terms of the shift in the political conjuncture marked by the Diefenbaker government's defeat at the hands of Lester Pearson's Liberals . The Liberals' 1963 victory symbolized two changes. First, it marked a shift in regime support back to the main forces that had been party to the post-war settlement. Legislation such as medicare and the Canada Pension Plan appealed particularly to organized labour and the new middle class . It did so, moreover, in a manner compatible with the interests of the hegemonic fraction - but less acceptable to small business. Although small business was not completely ignored, it was clearly no longer a major political concern. In this context, the political salience of the alliance with clothing capital diminished considerably, whereas other allies, such as labour, became more important. Second, the Liberals returned to power with an explicit commitment to trade liberalization. This did not mean that they were prepared to destroy import substituting capital in order to advance the staples fraction's economic interests. Prodded by Walter Gordon, Tom Kent, and Maurice Lamontagne, the Liberals were beginning to work out a new strategy based on regional and industrial adjustment. The new departments of Industry, Regional Economic Expansion (DREE), and Manpower and Immigration symbolized this commitment. As we shall see, these changes in the state apparatus made possible the development of a 'new national policy for textiles .' AN ATTEMPT TO DEFINE LABOUR'S POSITION Labour's struggle in this period remained marginal to state policy. However, it did link the 'crisis of the textile industry' with rather different themes, the two major ones being the need to organize (addressed to the workers themselves) and corporatist planning of the adjustment process. 9 Workers in the textile industry bore the brunt of adjustment to import competition in the 195Os. As the TWUA's periodical noted: 'The early fifties for textile workers were reminiscent of the depression era. Plant shut-downs, wage cuts, layoffs and short work weeks were prevalent in all sections of the industry. Strikes were infrequent and were most often called in an effort to prevent wage cuts' (Textile Labour, April 1974). These conditions, however, helped in the organizing drive of the TWUA, UTWA , and the FCTT. Although textiles was one of

70 Canadian textiles the first Canadian industries to be organized on a factory basis, unionization had been a long and difficult process. Employers fiercely resisted early union initiatives (Rouillard, 1974; Royal Commission on the Textile Industry, 1938). Yet labour's victories during the war, especially the Department of Labour's new industrial relations legislation, which recognized the right of workers to organize, created more conducive conditions. The organized section of textile workers had nearly doubled between 1942 and 1953. The hardship of the 1950s helped extend union representation to nearly two-thirds of the textile workers. 'Corporatist planning' was a theme that the TWUA developed in the late 1950s. In the period of numerous closures and lay-offs, the TWUA led the textile workers' struggle, organizing mass demonstrations and mobilizing municipal councils to protest to the federal level whenever a mill closed. Its major demand, however, was not for protection as such. Rather, in concert with the Canadian Congress of Labour (CCL) and the CCF, it argued for a tripartite conference - unions, corporations, and the state - to consider the whole export-import problem. More specifically, a joint TWUA-CCF statement urged the government to (1) fill defence orders for textiles from Canadian sources; (2) stimulate public demand by cutting the sales tax on clothing; (3) provide orderly marketing through an import-export control board; (4) undertake price supervision to ensure neither consumers nor workers were exploited by monopolistic pricing; (5) promote modernization and increased efficiency in the industry; and (6) provide federally assisted relocation programs for workers (Textile Labour, November 1959). The TWUA's position thus linked the need for some protection with that of industry modernization. More broadly, it suggested that a tripartite or corporatist agency be established to co-ordinate adjustment, including an active manpower policy. Nearly a decade later, the FCTT-CSN would articulate a similar position. For instance, Marcel Pepin's address to a csN-sponsored meeting of textile and clothing workers called for ( 1) an adjustment assistance plan that concretely addressed the problems of textile and clothing workers; (2) better regional development policies to provide satisfying work alternatives; (3) union participation in planning the industry's development; and (4) a new consensus, to proceed from a social rather than an economic perspective in planning (CSN, 1969). By this time, however, the TWUA had dropped its independent initiative in favour of a coalition led by the CTI. That labour's definition of the issue was not heard by the state can be attributed partly to its organizational fragmentation. First, despite the merger of the AFL and cm - which, in Canada, led to the formation of the CLC through the merger of the CCL and TLC- the UTW A and TWUA harboured a mutual antagonism dating from the old fight between the Rowley and Parent-led UTWA and the TWUA, whose raiding of UTWA-organized plants had disturbed even anti-communist agents in the CCL

71 Textiles as a political issue (Abella, 1973). In addition, there was a division between the Ontario-based TWUA and the FCTT. The former was prominent within the CCL/ CLC: David Archer, CCL president, was a TWUA official, and George Watson, the TWUA's Canadian director, was one of the vice-presidents. In addition, the FCTT was part of the CSN, the Quebec union central, and the ccF had never managed to win a following among Quebec workers. 10 Secondly, the divided and relatively small stratum of organized workers in Canada had not been able to win the kind of concessions secured by stronger social democratic union movements in several western European countries. The federal Department of Labour was one of the weakest divisions within the federal administrative apparatus - so weak, in fact, that it was unable to maintain its jurisdiction over the national manpower service when 'manpower policy' became a more important element of the Canadian state's strategy. And certainly, as Panitch (1979) has argued, the Canadian labour movement remained too fragmented to provoke a serious effort to establish corporatist institutions. 11 It is not surprising, then, that the kind of demands presented by one of the textile unions, even if the union had the backing of the small New Democratic Party, could not be heard. THE DEMAND FOR A NEW ACCORD In 1969 the federal administration began to reassess existing policy towards textile and clothing imports. The review was not triggered by changes in the international textile trade as such, but rather resulted from the formation of an issue that intersected with more fundamental concerns of the state. One explanation of the demand for renegotiation has been provided by Donald Kelly ( 1974). Kelly argued that import competition was responsible for a reduction in the short-run return on textile investment, which placed the industry (its leading companies) in a higher risk-profile . Certainly the leading textile capitals had undertaken heavy investment programs, mainly between 1964 and 1967. In addition, the industry's rate ofreturn was very low in I 967 and 1968, as was shown in chapter 3. Moreover, the squeeze on profits occurred at a moment when competition for external financing had mounted, as multinationals increasingly resorted to Canadian sources for expansion. As a study conducted by the Department of Industry, Trade and Commerce (ITC) showed, between 1965 and 1969 'the contribution of Canadian sources (such as banks, bond markets, etc.) of the annual growth in externalto-firm finances of subsidiaries rose from 28 per cent to 73 per cent' (Canadian Forum , 1971, 41). And, as table IO indicates, bank loans to expanding resource and manufacturing industries often increased by 200-300 per cent, whereas loans

72 Canadian textiles TABLE 10 Chartered banks, quarterly classification of business loans, 1962-67 Total business loans (per cent) Industry

1962 $M

1967 $M

Change, 1962-67 (per cent)

1962

1967

Chemical and rubber Electrical apparatus and supplies Food, beverages, and tobacco Forest products Furniture Iron and steel Mining and products Petroleum and products Textiles, leather and clothing Transport equipment Other products Utilities, transport, and communications Construction Merchandizing Total business

59.8 79.4 276.5 195.5 31.0 220.9 105.9 111.3 195.3 83 .3 111 .5 224.9 364.4 987.4 4,038 .3

171.2 258 .5 503 .9 346.2 48 .8 391.4 263.4 265 .5 267. 1 292 .7 186.6 271.1 461 .6 1,288.4 6,918.5

+288 +325 +181 +175 +157 +179 +250 +240 +140 +350 +169 +209 +132 +130 +157

1.4 1.9 6.8 4.7 0.7 5.4 2.5 2.7 4.8 2.0 2.7 5.3 9.0 24.4 100.0

2.6 3.8 7.2 5.0 0.7 5.6 3.9 3.8 3.8 4.2 2.6 6.8 6.5 18.6 100.0

NOTE: Columns 4 and 5 do not add up to 100 per cent; not all industries have been included. SOURCE: Bank of Canada (1968)

to textile and clothing capitals increased at a rate lower than the average for all business loans. In this context a state-guaranteed share of the domestic market that would allow the leading textile capitals to recover their investments, thus ensuring their credibility, would seem attractive. While Kelly's argument may help explain why the leading textile companies sought a new policy , it does not show why they were successful, nor does it indicate what kind of protection was sought. The previous analysis has provided some clues. Thus one might expect the CTI to focus on low-cost import containment, rather than (as it did earlier) the need for more protection against import competition from the United States and other advanced capitalist formations . This expection is borne out, yet the definition of the issue is more interesting. As mentioned earlier in this chapter, textile capital began to agitate for a 'national policy for textiles' by the early 1960s. For instance, a Journal editorial argued that 'It is more clearcut government policies with more predictable consequences that are needed if we are to plan ... to provide maximum possible job

73 Textiles as a political issue opportunities ... We have spent our money to make our plants modem and efficient and we are prepared to spend more if we could have some indication of the part we are expected to play in the future development of the economy' (Journal, May 1963). Frarn;ois Cleyn, president of Cleyn and Tinker, stressed the need for state-corporate planning: 'If the Canadian industry is to continue investing in the future growth of this country, it must have a textile policy drawn up in cooperation with the Federal Government. Only with a degree of assurance that it can reasonably expect to operate in its chosen area can management continue to risk shareholders' money and will shareholders be willing to continue purchasing equity in textile companies' (Journal, January 1966). That textile capital could now stress 'industrial planning' may have been related to developments within the federal state. For instance, the Diefenbaker regime had created the National Productivity Council (NPC) , modelled on the British National Economic Development Council. Both the NCP and its successor, the Economic Council of Canada, (Ecc) expressed the federal government's interest in indicative planning. The EEC's task was to generate macro-economic data that would provide the state, capital and labour a 'medium and long-term perspective on the Canadian economy. ' Textile capital did not, however, revive its earlier argument for a major shift in the status of domestic manufacturing. The gains it had made under Diefenbaker had led it to accept the basic features of post-war Canadian development. Thus an editorial in the Journal argued that the export interests of 'farmers concerned about their market for grain in Japan and coal and base metal miners whose employment is largely dependent upon Japanese purchases' could be reconciled with the preservation of the domestic industry (Journal, February 1960). The same view is reflected in the 1961 chairman's address, which called for a 'national stock taking' oriented to industry-specific action rather than an 'ideological free trade versus protection' debate. The main problem, from the cTI's perspective, was to regulate the flow of imports from low-wage sources. Such control should be the cornerstone of a new 'national policy for textiles.' One element of its strategy was the political mobilization of all CTI members. Members were continually informed of their dependence on favourable government action. A typical statement is the following: 'No industry in this or in any other country, can hope to operate profitably without the support of the government even if only to the extent of establishing a firm policy platform from which to move freely without unnecessary impediments' (Journal, June 1964). Members were encouraged to approach local members of parliament (MPs). In June 1960 the Import Policy Committee suggested that 'further individual member initiatives in Ottawa would be helpful through local MPs, where desirable, and with the advice of the Institute or CATMA' (cn Minutes, June 1960; hereafter Minutes).

74 Canadian textiles In April 1963 the board resolved 'that the Institute would keep the members of any industry group, affected by imports, informed of the situation not for the purpose of developing organized complaint but in order that they might take all reasonable opportunity to keep the Government, at the official and political levels, well informed' (Minutes, April 1963). At the same meeting the Public Relations Committee 'urged all members to make themselves known to their elected representatives at the federal and provincial levels.' By 1966 a textile caucus committee composed of twenty-six MPS from the Liberal and Conservative parties had been established and was regularly to receive information from Cornthwaite and the Public Relations Committee. As the campaign mounted, the senior executives of the leading firms met with cabinet ministers whose policy responsibilities or constituency base rendered them relevant. For example, the minutes of the March 1967 CTI board meeting note that 'a small delegation had been organized to meet with Prime Minister Pearson and Cabinet Ministers Sharp, Winters, Drury, Marchand and Benson. ' At this meeting 'Jean Luc Pepin [who represented a textile riding, Drummondville, Quebec] had indicated a willingness to meet with the industry along with all Quebec Members of Parliament with textile interests .' While these tactics would suggest that all textile capitals favoured ' renegotiation,' such support would not have been sufficient to force the state to negotiate a new accord. Two additional elements, the support of organized labour and the government of Quebec, were needed to tip the balance. The demise of CA TMA and the failure of any one textile union to gain hegemony vis-a-vis the others left open the possibility of a CTI-initiated capital-labour alliance. As early as November 1964 Cleyn had sought to induce the board to establish informal meetings with the unions 'to consider the best methods of progressing the overall economic objectives as set out in the report of the Economic Council established in January' (Minutes, November 1964). Yet it was not until 1967 that the Industrial Relations Committee gained acceptance for this proposal. 12 This led to the establishment of the Labour Relations Committee, which was composed of officials drawn from the leading textile firms. This committee, chaired by Abbe Dion, met with the three unions three times a year to discuss the industry's problems and 'to consider the question of the lack of definition of federal trade policy and a joint presentation of this' (Minutes, December 1967). The unions were thus induced to join company officials in agitating for a new textile policy. The UTWA's director, William Foley, indicated that the union approached several cabinet members during the 1968 federal election campaign. TWUA and FCTT representatives took similar initiatives. Labour's support was useful in a period marked by generalized labour militancy . By the mid-196os organized workers in various parts of Canada had

75 Textiles as a political issue engaged in numerous strikes . The state's concern over the increasing number of 'man-days' lost through strikes - and the wildcat nature of many of them prompted the formation of the Woods Task Force, which, incidentally, called upon Abbe Dion, among other labour relations experts, to contribute to developing an assessment of the roots of the problem. However, the evocation of the issue of labour militancy, through the labour-management committee chaired by Dion was not the only element of the en's strategy for securing state action. The en also evoked the threat posed by the development of Quebec nationalism. Its case was thus clinched. The industry holds an important place within the Quebec economy, and the leading textile capitals had made this point politically important to the Quebec government during the Daniel Johnson regime. As Pierre Fournier (1976) has shown, DomTex and the other leading firms had joined with other large Quebec-based corporations to force the provincial government to curb union militancy. In October 1967 a series of articles appeared in major newspapers describing the flight of capital from Quebec. The first was published in the Toronto Globe and Mail on 6 October. As part of its argument that business was pulling out of Quebec because of an unfavourable investment climate, it mentioned a recent investment by Dominion Textile in Long Sault, Ontario. This campaign forced Premier Johnson to cut short a visit to Hawaii. On his return, Marcel Faribault (a director of Dominion Textile and other leading companies in Quebec) was appointed special adviser on economic and constitutional matters to the Quebec cabinet. The campaign also resulted in the establishment of the General Council of Industry, a council of sixty representatives of major corporations in Quebec that advises on economic policy, especially the provincial budget. In the spring of 1968 the labour-management committee met with the Quebec cabinet. At the meeting the premier of Quebec promised to write the prime minister outlining the industry's problems (Minutes, May 1968). The en board was subsequently notified that the premier had received a response 'inviting further dialogue ... which, it was understood, would be undertaken' (Minutes, June 1968). The en had also secured the support of the Ontario and Nova Scotia governments, but Quebec's support for the joint en-union brief to the federal cabinet in the fall of 1968 was politically decisive. The overt content of the brief reflected the en's hegemony within the alliance. It did not carry forward the earlier TWUA demands or the subsequent FCTT I csN position. Rather, the brief clearly called for a policy to guarantee the position of textile capital. Certainly it drew attention to the number of workers unemployed or on short time, a situation attributed to low-wage import competition. It argued that the present 'piecemeal' approach threatened to generate more textile-related unemployment. However, the central demand was for' A total policy which would

76 Canadian textiles indicate to domestic producers what position they should have in the Canadian economy opposite low cost imports: an objective toward which the industry can work in making investment decisions and which can guide the Government in the control of low cost imports on an overall basis rather than a layer-on-layer approach' (CTI, 1968). While this statement indicates the solution that was sought, it does not suggest why the demand should be met. The state was forced to consider renegotiating the terms of the accord by the connection the CTI established between the plight of textile capital and the state's more fundamental concerns: labour unrest and Quebec separatism. First, the general labour unrest that had led to the appointment of the Woods Task Force had created a greater sensitivity to situations that might exacerbate labour's antagonism. Nor was the connection difficult to make between the wider struggle and the textile case. As previously noted, one of the industry studies commissioned by the task force was on the textile industry, where FCTT had led a major strike against DomTex in 1966. In addition, Abbe Dion, a member of the joint labourmanagement committee, had served on the Woods Task Force. The joint industry-union presentation was thus more likely to be heard. The second reason perhaps was the more pressing: the situation in Quebec. Unemployment in Quebec had remained high relative to the Ontario and Canadian averages. Between 1969 and 1971 Quebec's unemployment was 90 per cent higher than Ontario's. More important, by this time forces existed within Quebec that could link declining employment in the textile industry with the failure of federalism. The Parti Quebecois, with its separatist project, had just been formed, and the new Trudeau regime was committed to combatting separatism. In addition, the csN had begun to incorporate 'new left' and nationalist themes in its official position, thus challenging not only foreign domination but capitalism itself. ' 3 It was this threat that the alliance with the textile unions and the province of Quebec effectively evoked.

5 Formation of the textile and clothing policy

The coalition led by textile capital did manage to present its case for a 'new national policy for textiles' in a manner that forced the state to recognize that inaction might ultimately place in jeopardy the staples fraction's hegemonic position. This chapter will examine the complex process through which the state arrived at the terms of the new accord. One of the central questions to be addressed is: How was the state, whose structure of representation had functioned in a manner that threatened the future of a Canadian textile and clothing industry, able to arrange such a compromise? It will be argued that while the political coalition assembled under the en's leadership played an important part in triggering the policy process, the capacity of the state to design an appropriate response was linked to changes that had been made in the broader structure of representation. The first section reviews these changes, while the second examines the way in which the new representational structure was arranged to yield an appropriate policy output. The third and fourth sections analyse the bargaining that occurred among these representatives, while the fifth discusses the parliamentary phase. CHANGES IN THE STRUCTURE OF REPRESENTATION

Although textiles was the first major sector to be faced with the prospect of trade-induced deindustrialization, by the late 1960s the federal government had begun to recognize the necessity of developing the administrative capacity to design policies and programs that would help import-substituting capital become internationally competitive while maintaining labour's consent. The strengthening of the state's administrative capacity, in tum, altered the quality of representation in such a way that, for example, the administrative representatives of import-substituting capital began to develop the capacity to translate the latter's demands into programs designed to promote industry adjustment. As a result of

78 Canadian textiles these changes, the expression of interests within the state was less and less likely to constitute a simple restatement. The interests could now be translated into the language of the prevailing policy paradigms, and in the translation a significant alteration occurred. These changes had actually commenced in the early 1960s. The Diefenbaker government's attempt to tackle the structural problems underlying Canada's balance-of-payments difficulties initiated the process that was continued under the Pearson government (Doem and Phidd, 1978). The Pearson government established a Department of Industry to develop programs that would improve domestic productivity and a department charged with developing programs to ease 'rigidities' in the labour market. By the late 1960s the growing involvement of financial capital in the international economy added an additional edge to the staples fraction ' s concern to promote progressive trade liberalization.' Thus the Canadian state was favourably disposed to u .s. pressure for across-the-board tariff concessions during the GATT Kennedy Round. The Kennedy Round concessions, in tum, underlined the necessity of developing the capacity to promote the adjustment of capital and labour engaged in import-substituting industries. This development involved not only the design of specific programs, such as the General Adjustment Assistance Program (GAAP), but also the merger of the Department of Industry with Trade and Commerce, announced in July 1968. The new 'super department,' Industry, Trade and Commerce (ITC) , was to operate as a means for strengthening the link between the export promoting and industrial development branches of the state. 2 Although the new department was thus designed to facilitate the arrangement of a new pattern of compromises between the staples fraction and import-substituting capital , Finance remained the seat of power of the staples fraction. Finance also retained control of the key policy instruments. As one observer noted, It is the continuing burden of the Department of Industry, Trade and Commerce that it is responsible for industrial development while the principal instruments affecting corporate decision-making lie elsewhere, in the Department of Finance . Business perceptions of government policy are most influenced by commercial policy and especially by tax policy, which reside ultimately in the hands of Finance , and only secondarily by the promotional, incentive and regulatory instruments managed by ITC . (French, 1980, 112)

More specifically, until 1969 the Department of Finance exercised direct control over Canada's effective textile policy through its dominance of LCIC . Yet textile capital was represented in the policy process through the Department of National Revenue in the 1950s and through the Apparel and Textile Branch (hereafter 'the branch') of ITC and Manpower and Immigration in the 1960s.

79 Textile and clothing policy During the 1950s the branch of National Revenue charged with administering customs policy had divisions responsible for particular groups of industries, and division officials worked in close and frequent contact within the leading firms in these industries. In discharging their duty, officials in the textile section developed an appreciation of textile capital's problems, which enabled them to represent its case in interdepartmental deliberations. National Revenue could also aid the industry in certain concrete ways. For example, the King I St Laurent government, committed to building a new international order based on multilateral trade liberalization, had recourse to its responsibilities as a GATT signatory in justifying its refusal to grant the textile industry additional protection. National Revenue, however, could and did utilize its mandate to develop duty valuation procedures under Article III of the GA TT convention to introduce several amendments to the Customs Act ( I 955 and I 958), which made it easier for textile capital to prove its case. It is thus no accident that throughout the 1950s textile capital's demands focused on the issue of customs valuation. Yet in the broader policy discussions National Revenue lacked the 'expertise' to assess the efficiency with which textile capital organized production, and consequently its ability to counter the arguments of Finance was rather limited. Furthermore, its mandate precluded consideration of programs to improve competitiveness. The establishment of the Department of Industry in I 963 gave textile and clothing capital the potential 'expert' representation it needed through the Apparel and Textile Branch. Certainly the nature of the branch's expertise-experience in industry rather than possession of a formal knowledge of, for instance, micro-economics - predisposed branch officials to textile and clothing capital's perspective. As Donald Kelly has noted, 'many of the senior branch personnel had been former business managers in the same industry they now represented and whose style of work and decision-making was more akin to the milieu found in the textile industry' (D. Kelly, 1974, 22). Further, the cTI's success in gaining semiofficial status for its advisory committee established a mechanism for developing a consensus between the leading firms and the branch on the nature of the industry's problems and its potential contribution to the Canadian economy. It would be a mistake, however, to conclude that the branch was a mere 'captive agent' of textile and clothing capital. Written into its mandate was a commitment to improve the industry's performance and to develop a critical assessment of existing strengths and weaknesses. Moreover, both the subsequent merger with Trade and Conunerce and Finance's continued jurisdiction over key industrial policy instruments forced branch personnel to learn to reformulate textile capital's position in a manner compatible with staples-led development. The operating procedures of the Department of Manpower and Immigration

80 Canadian textiles also made it a potential representative of textile capital. In exercising their mandate to develop and implement programs to increase the efficiency of the labour market, officials in that department have worked closely with trade associations and/ or the leading firms in each industry. It is largely through such direct contacts , supplemented by liaisons with the relevant line branches of the Department of Industry/ ITC , that officials collected information on future sectoral demand for labour. These methods of data collection provided a vital supplement to research by departmental economists or regional assessments made by economists in local manpower centres. In addition, the department has been dependent on capital's co-operation for on-the-job training programs and the effectiveness of other programs, such as the Manpower Consultative Service, a voluntary program designed to assist workers rendered jobless by lay-offs and closures. 3 And by the late I 96os textile capital in particular had established ' a good track record' with the new department through its willingness to participate in these programs.4 Although Manpower and Immigration was not a member of LCIC, it did possess the kind of expertise that would allow it to complement that of the Apparel and Textile Branch in that it could claim to assess the manpower implications of any change of policy. Despite its close working relationship with textile capital, however, it would be a mistake to conclude that such assessments would simply echo textile capital's claim that import competition was giving rise to a serious social problem. The department's primary objective had been to contribute to growth by improving the operation of the labour market . As a former senior official claimed, the department was 'not oblivious to the problem of poverty and the needs of marginal groups in the labour force .. . but such objectives can be said to be secondary to the primary objective of facilitating growth ' (Dymond, I 970). This growth orientation led officials generally to take a negative view of policies that perpetuated an inefficient distribution of the labour force. Textile capital's case could now be presented in the form of analyses undertaken by branches or departments with a wider mandate than National Revenue . Manpower, however, was not yet a member of the Low Cost Imports Committee, and the branch, along with other parts of ITC, was subject to the limitations posed by Finance' s control of the key policy instruments. As French has noted (1980, 27-32) the varient of Keynesian economics entrenched in Finance until the mid-197os tended to downplay the importance of structural problems. The en's strategy oflinking the industry's plight to the threat of Quebec separatism, however, helped to strengthen nc ' s claim to control import policy-at least as applied to the textile sector. None the less, as we shall see, the structure established to formulate the new policy would ensure that the interests of the staples fraction would remain paramount.

81 Textile and clothing policy SETTING THE PARAMETERS: ORGANIZATION OF THE POLICY PROCESS

The fonnation of a new textile policy involved a reorganization of the relationships among the various branches and departments representing the staples fraction and textile and clothing capital. The presentation of the CTI-union brief set the reorganization process in motion. Between the presentation of the brief and January 1969, when cabinet agreed that a new policy was required, the minister of ITC and the CTI worked together to consolidate support for the renegotiation of the basis of the accord between textile capital and the staples fraction. The CTI had already won the support of the Quebec government, and by January Ontario had been won over as well. The CTI also organized support in the House of Commons, arranging meetings with twenty-four federal members of parliament. At the executive-bureaucratic level, the minister of ITC garnered the support of the minister of finance for a review of existing low-cost import policy. Aware of cabinet support for a review, the chair of LCIC, Rodney de C. Grey, concurred but successfully insisted on the need for a comparative cost study to ensure that inefficient producers would not receive additional protection. On I 3 February 1969 cabinet adopted the recommendations of the Cabinet Committee on Economic Policy and Programs, which largely endorsed Grey's report. In the interim, cabinet authorized the continuation and strengthening of current low-cost import policy, suggested that additional efforts be made to speed up the detection of disruptive imports, and instructed Finance to make positive use of its existing powers. More important, however, ITC was authorized to take charge of a comprehensive review of conditions in the industry, with a view to establishing a long-tenn policy for textiles. That ITC, not Finance, was given responsibility for conducting the review indicated a significant victory for textile capital. That ITC was instructed to look to a 'policy' rather than a 'program' further underscored the magnitude of the impending change in the state's stance on textiles. An examination of the intra- and inter-departmental structure established to carry out this process, however, suggests that the victory was a qualified one; the Canadian state would not merely cave in to protectionist demands . The key committee was the Textile Policy Committee of ITC. The committee, chaired by the assistant deputy minister (ADM) for Trade and Industrial policy, included the directors of the following divisions: the Apparel and Textile Branch, the Office of Industrial Policy (OIP), General Relations, Area Relations , the Office of Economics. Specific tasks were assigned to each component in accordance with its respective area of expertise. Three of the divisions had been part of the fonner

82 Canadian textiles Department of Trade and Commerce. The Office of Economics, subsequently absorbed into OIP, consisted of a small group of economists charged with providing the economic overview used to assess the proposals of other branches. General Relations - the 'guardians of GATT' within ITC, whose main task was to co-operate with Finance in preparing the Canadian position in multilateral trade negotiations - was to assess the impact of the Kennedy Round negotiations on textile trade. Area Relations was the division that carried out support activities for field staff engaged in the promotion of Canadian exports in particular regions. Its task was to analyse the effect on Canada's exports, largely of raw materials, of past VERs and to provide an assessment of the competition Canadian exporters faced in the low-wage countries affected by any new textile and clothing import restrictions. The general task of the Apparel and Textile Branch has already been discussed. Its specific task was to prepare a study of the industry- its size, location, strengths, and weaknesses - and on the basis of these findings to assess the impact of policy alternatives proposed by 0IP. 0IP's general task was to co-ordinate and assess proposals made by the line branches and examine the industrial policy implications of the policies and programs of other departments. In this case it was to assess the impact of regional development programs, anti-combines legislation, and the General Adjustment Assistance Program (GAAP) on the textile industry. 5 It was also to evaluate the contributions of each ITC branch and, in conjunction with the Apparel and Textile Branch, to formulate the options for a Jong-term textile policy. In addition to the ITC committee, an interdepartmental committee was established 'to advise on, and assist in, the development of a Jong-term textile policy .' Chaired by the ADM of ITC, it was initially composed of senior representatives of the departments of Finance, External Affairs, Manpower and Immigration, Regional Economic Expansion, and Consumer and Corporate Affairs, and of the Treasury Board and the Privy Council Office. 6 Although certain members of this committee, notably Finance and Manpower, would play an important role, the committee, which met only three times, would not be actively involved in the negotiations. Interdepartmental liaison at this stage occurred primarily through direct contacts with members of the ITC committee. These, then, were the principal branches and departments involved in the process. The key question, however, is what is the significance of this structure. Clearly, Finance had lost control. It would continue to feed in its objections to increased protection, however, and in this, it would be most effectively assisted by the old trade and commerce branches of ITC. The Apparel and Textile Branch, backed by Manpower, would translate textile capital's demands into terms

83 Textile and clothing policy compatible with the progressive opening of the Canadian market to import competition. As one observer noted: Those groups with a 'trade and commerce orientation' perceived the textile policy as helping to achieve the broader goal of trade liberalization for Canada and, in fact, were often referred to as 'free traders' by the groups of different allegiance. On the other hand, those groups with an 'industry' orientation perceived the goal of the textile policy as a means to assist the domestic industry to adjust to technological and market changes and thus to retain their viability in the Canadian economy. (D. Kelly, 1974, 221; emphasis added)

Within this structure the most active parts had been assigned to the two branches from the old Department of Industry. To meet Finance' s demand for a comparative cost study, for instance, A. Guerin (branch) and L. Drahotsky (OIP) were sent to Britain, France, Norway, Sweden, and Switzerland to examine the performance of the textile industry in those countries and the role of the state in promoting it. This trip provided the branch with an independent assessment to counter General Relations' monopoly on knowledge of international conditions. Guerin and Drahotsky toured nine provinces, which also gave them an opportunity to assess the strength of provincial opposition to or support for a shift in textile policy. 7 That the industry divisions were assigned the leading roles suggests the enhanced bargaining power accorded textile capital's representatives. Yet it is important to recognize the difference in the perspectives adopted by these two branches. The branch's perspective was much closer to textile capital's, whereas OIP had close relations with other departments, such as Consumer and Corporate Affairs, that were more critical of capital in the highly concentrated textile industry. In addition, the occupants of key OIP positions, such as Drahotsky, 8 had been trained by Finance and thus leaned to its view of Canadian commercial policy. Thus while the branch, supported by Manpower, had more power to initiate, OIP, the trade-oriented branches, and Finance were positioned to limit textile capital's gains. NEGOTIATING THE NEW COMPROMISE: PHASE I

The structure for formulating the new policy , then, strengthened the hand of textile capital's representatives within the administrative apparatus. The branch's strategy in the negotiations, which began once the preliminary studies had been completed, stressed the industry's efficiency and evoked the same broader

84 Canadian textiles political issues that the cTI's coalition had: Quebec separatism and potential labour unrest. Conversely, the other agencies emphasized the centrality of Canada's trading (staples-exports) interests, as Finance had throughout the 1950s and 1960s. The terms of the debate, however, initially excluded any reference to a direct adjustment plan for labour - a point to be developed in the next section. Rather, the first round of negotiations focused exclusively on the renegotiation of the terms of the compromise between the staples fraction and textile capital. Following completion of an assessment of the various studies, OIP presented four options: continuation of the status quo; imposition of a guaranteed market share for domestic producers; free trade; and phased liberalization . No agency supported the guaranteed market option. The representatives of the staples fraction considered it a serious threat to expansion of Canada's exports to the Pacific Rim, especially to Japan. And to support their case they could produce data that indicated that Canada's trade surplus with Japan weakened the state's ability to win such concessions. In addition, Japan had alternative sources for the wheat, coal, copper, and other staples imported from Canada. Japanese retaliation against such a restrictive policy, they argued, would severely disrupt the economies of western Canadian resource-exporting provinces. Finally, Consumer and Corporate Affairs' data on the industry concentration could be used to suggest that protection would reduce competitive pressure - the primary stimulus to modernization and rationalization. The 'free trade' option was clearly unacceptable to the branch. Its strategy of emphasizing the industry's Quebec location and its importance as an employer induced the others to reject this option. There was some support for continuation of the status quo. In fact, Finance remained adamant in its opposition to removing the VER system from its jurisdiction. Finance lost its case, however, since most of the departments concerned accepted the argument that the current VER system was beginning to overload Finance's investigative staff - a point Finance conceded and the branch was able to establish that the resulting delays in concluding restraint agreements were causing widespread disruption. Should this system continue, the branch argued, by 1974 textile jobs would decline by an estimated 20,000. In addition, uncertainty produced by the current delays operated as a disincentive to industry modernization. Intra- and inter-departmental conflict was sharpest around the phased liberalization option. The main proposal in this case was for the establishment of a board to investigate claims of injury and assess capital's adjustment plans, to which Finance was opposed, because it would reduce the 'flexibility' currently enjoyed by Canadian negotiators and exacerbate regional political antagonisms. A combined finding of import-induced injury and the existence of viable plans for rationalization would be necessary before the industry could obtain protection.

85 Textile and clothing policy Furthermore, protection would be offered on only a temporary basis . Such a board, then, would need to possess the kind of expertise not only to assess the relationship between profits, employment, and imports ('injury ' ), but also to ascertain whether textile capital was adapting quickly to technological innovations . In addition, this option reinforced clothing capital's earlier formal victory, by endorsing the Tariff Board's Reference 144 recommendation that the tariff on textiles be reduced. While the general thrust of this option was to force capital in the textile sector to rationalize over a three- to five-year period by granting only temporary and conditional protection, it did include a proposal to give the state the legal means to impose import quotas if necessary. In addition, because of the failure of GAAP and Department of Regional Economic Expansion (OREE) incentives to make provision for retiring outdated plant, it was recommended that a GAAP-like program be mounted to provide financial assistance for firms forced to restructure . (Unlike the British cotton policy ,. however, this proposal did not foresee the use of grants to force the closure of obsolete plants.) Since this option emphasized rapid adjustment to international competition, it won the support of the branches from the trade side of ITC , Consumer and Corporate Affairs, and External Affairs. 9 Both Finance and the branch opposed it, albeit for very different reasons . Finance's opposition to an independent board has already been noted. In addition , Finance, which remained in charge of overall revenue and expenditure policy, opposed the financial assistance program, arguing that most firms possessed the funds to rationalize. The branch's opposition focused on the employment implications of the rapid adjustment envisioned by OIP.

The branch utilized its own study, and that conducted by Manpower, to point to the rapid job loss that would follow if this option were selected. It forecasted that 35,000 to 45 ,000 jobs would disappear in the textile and clothing industry , a decline that would also lead to a reduction of jobs in the service sector of textile-dependent towns. The resulting unemployment could cost the state an estimated $500 million over five years. And since most of these jobs were in Quebec, the political repercussions could be significant; 'Ottawa' could be blamed for destroying this important component of the Quebec economy. The branch also challenged OIP's assessment of the time needed to produce a viable industry by demonstrating that new developments that would increase the capital intensity of the industry would come on stream gradually over the next twenty years . Further, textile capital was progressive in outlook and would , if given the chance, take advantage of these developments. The proposed rapid adjustment process would thus unnecessarily reduce the size of the domestic industry before it could regain its competitive advantage over low-wage producers. The branch's own option,

86 Canadian textiles 'progressive liberalization,' was built on the assumption of this longer time horizon. The branch argued that 'progressive liberalization' combined the objectives of minimizing unemployment (hence potential labour unrest, which in Quebec might feed the separatist movement), creating a viable domestic industry, and protecting Canada's export interests. Effective protection over a fifteen- to twenty-year period would permit the industry to adopt these new techniques and products. For the rest, the branch accepted the elements of the 'phased liberalization' option: the independent board; alteration of the Export-Import Act to permit the unilateral imposition of quotas and of the Customs Act to facilitate early detection of restraint violations; and financial incentives to support the adjustment process. The progressive liberalization option, approved by all the administrative agencies involved in the process, would constitute the core of the 1971 policy . Certainly additional battles took place between Pepin's May 1970 announcement to the House that the policy was being drafted and October, when Bill C-215- 'an Act to Establish the Textile and Clothing Board' - was placed on the list of government orders. In these contests the main point at issue was the administrative structure to implement the policy; for the board would not be acting in isolation. Rather, a new Office of Special Import Policy (OSIP) would be established within ITC and the old interdepartmental committee (LCIC) (minus DREE) would continue to operate. During the drafting stage, considerable conflict erupted over the relationship that would obtain among these three organizations. Those concerned with the specific objective of promoting staples exports were once again pitted against those representing textile capital. The board, given its double mandate to determine injury and to assess capital's adjustment plans, would be staffed by those with an expertise similar to those in the branch. ' 0 OSIP, however, would recruit those experienced in trade negotiations. Further, although OSIP would report to the minister of ITC, it would be immediately responsible to LCIC, dominated by Finance, External Affairs, and the export-promoting branches of ITC. In these final negotiations the branch's main victory was to obtain for the board the sole right to assess the plans submitted by the companies. OSIP and LCIC, however, were given responsibility for analysing the board' s reports for the minister who, in tum, would not be required to publish them within a specified time. This arrangement would allow OSIP and the committee to delay the proceedings should they disagree with the board's recommendations. It would also provide the flexibility emphasized by Finance, since OSIP and the LCIC could recommend less restrictive measures . Once again , the compromise would give certain powers to textile capital's new representative within the state, while limiting them through the mandate given OSIP and the committee.

87 Textile and clothing policy The core of the policy thus provided a complex mechanism for concretely co-ordinating the interests of textile capital with those of the staples fraction. Through this process of co-ordination textile capital's interests would be redefined in terms of adjustment to import competition. The creation of an independent board, receiving submissions from exporters, importers, and domestic producers, would make the policy acceptable to Japan and certain low-wage trade partners-to-be. At the same time, the board's exclusive right to assess textile capital's rationalization plans, which entailed recruitment of those with the expertise to assess these plans, would give textile capital a new representative this time empowered to recommend import restraints, including the imposition of quotas. These consultations would also provide a means for communicating the terms of the new policy to textile capital. That OSIP would both assess the reports and carry out the negotiations also meant that an agency sensitive to the immediate concerns of the staples fraction could, with the backing of LCIC prevent the board from adopting a stance that would threaten the trade liberalization objective of the staples fraction. The policy represented a new and flexible framework for negotiating the pace of liberalization and the direction of adjustment. NEGOTIATION OF THE AAB: THE ROLE OF LABOUR'S REPRESENTATIVE

Although the major elements of the textile policy represented a compromise between textile capital and the staples fraction 11 one additional feature was inserted as the committee's recommendation went to cabinet: an adjustment assistance benefit program (AAB) for workers. The AAB was not inserted because of the political strength of the unions per se, but rather as a result of a last-ditch effort by OIP and the other representatives of the particular interests of the staples fraction in the cabinet and bureaucracy to undermine the branch's argument that textile capital should be preserved (albeit in more modem form) because of its role as a major employer in Quebec. The very political weakness of the unions within the coalition was also reflected in the limited benefits the program would offer. OIP had recognized the strength of the branch's main political argument before the fall of 1969. To counter it OIP approached Manpower with the suggestion that the latter draft a special adjustment plan for textile workers displaced by rapid adjustment. Manpower rejected this proposal, however, arguing its necessary 'neutrality' vis-a-vis labour. OIP then approached Labour, whose director of research, H. Waisglas, accepted the opportunity as a supporter of trade liberalization who recognized the importance of winning labour's consent to trade-induced dislocation. In addition, Waisglas was a committed federalist, who had been with the PCO - the office that had been pushing for an industrial strategy

88 Canadian textiles against Finance (French, 1980) and was most clearly associated with the Trudeau regime and its commitment to the defeat of the Quebec separatist movement. As Waisglas was later to argue: 'It should be emphasized that our regional expansion and manpower programs are concrete examples of the fact that Canada's regional problems are national problems. Anyone who knows the situation in Quebec will understand this fact. And the new textile and clothing policy for Canada is another example of how regional problems must seek their solution within a national framework' ( I 973, 583) . From the perspective of this branch of the Department of Labour the situation warranted its intervention. The earlier DEVCO and Autopact labour adjustment programs provided precedents. Finance and the Treasury Board, now joint 'guardians of the public purse,' supported Manpower, however, and initially managed to block the proposal. The proposal was not included in the memorandum to cabinet of 14 April 1970, which proposed the progressive liberalization option. At cabinet level Labour Minister Bryce Mackasey declared his refusal to support the policy unless the AAB were included. His position was important; for several western cabinet ministers were strongly opposed to the policy and Mackasey's support was needed. In addition, since the AAB was presented as weakening the political argument for protection, its adoption reduced the western ministers' fears that the policy would mean indefinite protection. The need to win the support of these political representatives of the staples fraction, rather than the political action of the unions, led to the inclusion of the AAB . The negotiation of the details of the AAB further illustrates the political weakness oflabour. First, the AAB was developed without any attempt to 'consult' with the unions. Instead, the Department of Labour based its arguments on studies prepared by Manpower and the branch. To build support for the program, the department courted Health and Welfare 12 and the PCO by demonstrating that the program complemented the labour policy review being conducted at that time. For instance, Labour could argue that the proposed supplementary unemployment benefit would be only temporary, because the impending increase in unemployment insurance would soon render it redundant. The department was finally able to win Manpower's acceptance by guaranteeing that Manpower would retain control of the retraining and relocation aspects. In addition, Labour would pay the bill for the pre-retirement benefits, while Manpower would be responsible for the surveillance of workers receiving benefits (then set at a maximum of $75 per week). Its brief was to ensure that recipients had no genuine prospect of finding new jobs, with or without retraining, and that, if improvements in the labour market occurred, they returned to work. Labour was unable to gain acceptance of the concept of special assistance for married women, however, despite the fact that they formed a substantial element

89 Textile and clothing policy of the textile and clothing work force. Nor did it win its battle with Finance and Treasury Board over the age at which pre-retirement benefits would begin. Thus only those over fifty-four (not fifty) who had worked for ten of the preceding fifteen years in the industry would be eligible. Further, they would be eligible only if the Textile and Clothing Board certified that lay-offs occurred because of imports and the fact that Manpower agreed the laid-off workers could not find new jobs at a wage level equivalent to the (relatively low) wages paid in the industry. Thus, benefits could not apply to those laid off as a result of technological change per se. The AAB also would not apply to many married women workers who had returned to work after their children had grown up. In addition, given the seniority clause in most contracts, the majority of the workers laid off, whether male or female, would probably be those with less than the requisite ten years' service-hence ineligible. For those who could receive the benefits, levels were set at only 50 per cent of an already relatively low wage and this sum would be reduced in direct proportion to any additional earnings. In addition, the lengthy approval process - board certification, application through the Unemployment Insurance Commission, Manpower certification - could lead to substantial delays in payment. The limitations of the Canadian AAB are starkly revealed when contrasted with the gains made by Dutch cotton workers in the mid-197os, whereby all who lost their jobs because of restructuring would receive their full wage for a year after termination of employment. At the end of this period, older Dutch workers could receive 90 per cent of their salary plus pension and social security benefits until they reached retirement age. Younger workers became eligible for regular social security programs, which offered more generous terms (80 percent of wages) than those operative in Canada (Langdon, 1980). Although the relative generosity of the Dutch adjustment plan can be explained partly by the more dramatic restructuring forced upon the cotton spinning industry, the greater organizational capacity of Dutch workers, developed through union action, was clearly the main factor. The activity of rank and file strengthened the hand of union officials in the negotiations with business and the state. It was this fact that permitted the extension of the plan to the less directly affected workers in the weaving branch of the industry. POLITICAL ACTION AND THE POLICY PROCESS

The new compromise was shaped by the relations that obtained within the executive-bureaucratic apparatus . While direct political action - through trade associations, unions, and parties-was not the means through which the policy was formed, none the less it was part of the total process. Yet there was a marked

90 Canadian textiles difference in the involvement of the different forces . The en was really the only force that maintained a close relation with its representative. The interests of the staples fraction were primarily represented through Finance and other administrative branches (although this fraction's position was reiterated by western cabinet members and MPS from both the Liberal and Conservative parties). Clothing capital and labour in both industries were kept at a distance from the process - with greater consequence, given the relative weakness of their administrative representatives. Other forces - consumers and importers - were even more marginal. In other words, the CTI continued to play a fairly direct role , supporting the branch politically and giving a clear indication of the kind of compromise it could accept. To the end of 1969 the branch kept the en informed . As early as May of that year the en's board could note that four options were being considered and that it had been invited to submit its assessment of each of these. Textile capital had also been permitted to comment on the background studies prepared by the branch and Manpower, and certain documents were rewritten to include the comments made by the Textile Policy Advisory Committee. This provided the branch with the data to oppose the •abstract efficiency' characteristic of the other three options. The CTI was also able to mount political pressure during periods of stalemate in the internal-to-state negotiations. For instance, the major companies announced delays in major investments due to 'uncertainty' produced by the absence of a policy. When the policy continued to be delayed, Dominion Textile established a subsidiary, the Hochelaga Merchandising Company, to invest in non-textile ventures and I or offshore textile mills. During the struggle over the drafting of the legislation, the en used its media connections to publicize the ' necessity' for quick passage of the policy. In August I 970 a major article appeared in the Financial Times that stressed declining employment in the major mills: DomTex's decision to delay conversion of their Magog mill to blended fabrics ; DuPont's decision to delay construction of a polyester plant in Morrisburg, one of the DREE 'designated areas' in Ontario (24 August 1970). The en also escalated its parliamentary campaign. In January 1970 the en Board noted: 'Efforts should be made to inform the textile constituency members of Parliament and members of the textile caucus of current developments. It was agreed that the President would send to each member an "aide memoire" to assist discussions with local Members' (Minutes, January 1970). The March meeting observed that the president of Cosmos Imperial, based in Hamilton, had met with the Hamilton MP and minister for health and welfare, John Munro; that DomTex had convened a meeting with local MPs; and that Wabasso and Harding had met with MPs and officials. Efforts had been made to encourage the Ontario and Quebec governments to reiterate their support. During the last-minute negotiations , the CTI decided to arrange visits to modern mills by cabinet ministers who might support the policy (Chretien and Gray) and

91 Textile and clothing policy those most keenly opposed. DomTex publicly commended Labour Minister Mackasey for a three-year retraining program developed by his department, and Jean Marchand's department, OREE, was similarly lauded (Annual Report, 1970). The CTI's opportunity to consult with the branch at key points in the negotiations and the political pressure it maintained, which supported the branch and Pepin in particular, did not transform the branch into a force for protectionism. The branch emphasized the importance of continual efforts to improve efficiency. More broadly, the policy itself was the resultant of the 'pulling and hauling' between textile capital's representative and those branches and departments concerned to safeguard the trade liberalizing objectives of the staples fraction. The CTI was able to generate political support for the policy, however, in marked contrast to the unions and the clothing associations. The non-role of the unions has been considered in the previous section. As for the clothing associations, the Apparel Manufacturers Council had been consulted prior to December I 969 and was kept informed of the general direction the policy process was taking. Further, clothing capital did seem to have made some gains through the policy. For instance, Bill C-215 seemed to support the Tariff Board's recommendation on tariff rationalization. A 'Productivity and Design Centre' was to be developed. Finally, when Pepin introduced the bill for second reading, he drew attention to the recent (June 1970) imposition of an import surtax on men's and boys' shirts. Although these elements seemed to indicate that the clothing manufacturers had been able to reinforce their representative, as had the CTI, the impression was misleading. The centre was certainly proposed by the Apparel Division of the branch, which, however, had to approach OIP for support for the project. In fact, the centre was not established until later, and then in a very modified form. 13 More important, the branch, dominated by the textile side, managed to tie implementation of Tariff Board Reference 144 to the broaderobjective of the policy, that is, to give textile capital enough time to adjust to new developments. Thus the Tariff Board's recommendations would not be implemented until other advanced capitalist states reduced their textile tariff. The limits to clothing capital's gain may also be attributed to the relative weakness of its trade associations. Had clothing capital been able to give its representative in the branch the kind of support the CTI had provided, the branch might have been forced to address its problems more directly. The importers association and the Consumers Association of Canada played a marginal role in the process, their input being confined to the discussion of Bill C-215 in parliament. The importers argued for minor amendments: that goods in transit when a VER agreement had been concluded be permitted entry and that the new board be required to give notice to importers upon receipt of a complaint. The

92 Canadian textiles Consumers Association merely asserted ' the consumer' s interest' in access to low-cost clothing. Neither these interjections nor amendments proposed by MPs had an impact on the core features of the policy. The parliamentary debate did, however, reflect the same ' industry versus exports' conflict that characterized the executive-bureaucratic phase. This split ran through both the Conservative and the Liberal parties. Western MPs attacked the policy as a protectionist threat to Pacific Rim trade. For instance, a Liberal MP from British Columbia, R. St Pierre, attempted to amend the bill so that the minister would have to release the board's reports within ninety days of their receipt, since he feared that the absence of such a time limit would enhance the en' s ability to win protection prior to parliamentary debate. On the other side, MPs from textile ridings criticized the Act as not protectionist enough. Certain Quebec Liberal MPs took a leading role in cross-examining opponents of the policy who appeared before the House Committee. Conservative and Creditiste MPs more directly attacked the bill as too 'free trade' oriented. The role played by all Liberal , Conservative, and Creditiste MPS was to make Bill C-215 appear as a moderate , balanced compromise. Only the New Democratic party took a position that cut through the 'protectionist-free-trade' dichotomy. New Democratic party MPS , from both western and textile areas, supported the bill , arguing that it established the principle of state assistance for workers whose jobs disappeared as a result of government policy. For instance, J. Burton (Regina East) argued that although the NOP favoured trade liberalization, 'When we are concerned with the affairs of an industry which employs some 200,000 people directly, as well as providing indirect employment for many more, this becomes a matter which cannot be treated lightly . It is for this reason that we are prepared to support the policy' (House of Commons Debates, 22 February 1971). In this respect the NOP attempted to articulate a labour position that surmounted regional differences. Yet no criticisms were voiced regarding the limited benefits offered labour through the AAB. This situation may have been due to the unions ' inability to help the NOP develop a critique. First, the unions had not been involved in the development of the program and thus did not have the opportunity the en had had to develop its own detailed criticisms - or even to aid their representative in its attempt to win somewhat more generous terms . Second, the NOP had very tenuous links to Quebec textile and clothing workers, because it had little support among the Quebec working class. Only the TWUA and the AGWU had formal links to the NOP. Thus, in both the internal-to-state negotiations and the parliamentary debate the limited organizational capacity of the Canadian working class meant that the growing economic power of organized labour had limited political effects. It was the CTI and its representatives in the state that could evoke the economic power of

93 Textile and clothing policy labour - and the separatist threat - to secure a more favourable compromise. Workers would benefit from this effort primarily as the •dependent part of capital,' that is, as employees of textile and clothing firms. Further, the AAB was only marginally related to workers' needs . Its inclusion as part of the policy did not signify the state's commitment to aid workers but was rather an attempt to moderate the political strength of textile capital's representative in the state . THE NEW ACCORD

The new textile policy was produced in such a way as to redefine the relationship between textile capital and the staples fraction, allowing for the regulation of imports while the latter adjusted to an increasingly competitive international economy. While responsibility for low-cost import policy was shifted from Finance to ITC, the terms of the policy and its implementation procedures sought to establish a direct link between potentially improved protective measures and industry adjustment. The package of measures included improved import surveillance and permitted unilateral imposition of quotas should exporting countries unduly delay restraint negotiations. A financial assistance program for the modernization of domestic production was established. This program and the proposed Productivity and Design Centre were to be the positive inducements to industry rationalization. Negative sanctions - protection conditional on submission of acceptable restructuring plans - were to be backed by an adjustment plan for workers that would mitigate the cTI's political threat of feeding labour unrest, especially in Quebec. This compromise was embedded in the administrative apparatuses established to implement the policy, notably the Textile and Clothing Board, the Office of Special Import Policy, and the Interdepartmental Committee on Low Cost Import Policy. Yet the cTI's practical assessment of the policy was largely accurate: the policy would not be able to satisfy all the major factions, including the unions, the provinces, primary resources and agriculture, Quebec, and the industry. Thus the implementation of the policy would probably be more important than the actual statement (Minutes, March 1970). The textile policy created a structure for the ongoing negotiation of the level of protection and the rate and direction of rationalization. This structure of negotiation would involve the board, which owing to its expertise would be more likely to support the branch and Manpower in their assessment of the industry's prospects; and OSIP and LCIC, which would likely be rather more sensitive to interests of the staples fraction. The board's power to determine whether injury due to imports had occurred and its monopoly on the definition of viable plans would give it important weapons in future struggles. OSIP and the committee,

94 Canadian textiles however, were empowered to assess the board's reports from the perspective of the state's external and domestic policy objectives. Both could delay action on the board's report and submit alternative proposals. Further, since OSIP would be the agency to negotiate restraints, it could determine whether to utilize its new power to threaten the imposition of import quotas. The operation of this system will be examined in chapter 6. The policy, then, was largely a framework within which textile capital's representatives in the state - and the CTI - could continue to negotiate the details of the compromise with those more directly concerned with the promotion of exports. Clothing capital made no real gains, although it, too, could seek temporary protection. The unions, which had been party to the CTI-led coalition, obtained little. While the board included an expert on labour relations, the board was by no means a corporatist structure: labour's representation remained highly mediated in form. Further, the Act had been carefully worded to prevent unions from initiating an inquiry, which left unions little recourse should firms simply decide to bow to the pressure of imports and shut down their domestic production facilities. Finally, the terms of the AAB placed severe limitations on the numbers eligible to receive the pre-retirement benefits, and those who were eligible were to be placed under the continuous scrutiny of the Department of Manpower.

6

Import regulation under the new policy

The main aim of the 1971 textile policy was to establish a new basis of compatibility between textile capital and the staples fraction, whereby the latter would concede the need for import regulation, while the former was to use the 'breathing space' thus provided to invest in new techniques of production. The mechanism for implementing the new policy - the Textile and Clothing Board / Office of Special Import Policy / Low Cost Import Policy Committee network appeared to contain an appropriate balance between the representatives of the parties to the ;iccord and to provide a means for effectively communicating the new terms to textile capital. Yet the details of the new compromise were to be hammered out in an environment marked by increasing international instability and worsening domestic economic conditions. The latter, in tum, would intensify the debate on the character of a.n appropriate industrial strategy for Canada. It is thus possible that the thrust of the new textile policy would be altered as a result of these developments . A full assessment of the policy outcome requires an analysis of three aspects: import regulation, industrial adjustment, and the rationale for and significance of the 1981 decision to establish the Canadian Industrial Renewal Board (CIRB). In this chapter the pattern of import control decisions arrived at through the TCB-OSIP-LCIC network will be examined in relation to changes in the wider international and domestic context. Chapters 7 and 8 will deal with the industrial adjustment process and the 1981 decision, respectively . The first section will examine global developments, since they both conditioned and were mediated by decisions taken within the network established by the 1971 policy. The second section will analyse the repoliticization of the textile question, showing how the CTI again was able to define the strategy for other forces within the sector. Finally, a partial assessment of the significance of the shift in the pattern of decisions, which was marked by the imposition of global import controls

96 Canadian textiles in I 976, will be provided . Here it will be argued that the shift did not alter the terms of the compromise but merely adapted it to new conditions. In fact, the apparently dramatic turn towards protectionism effectively increased the policy's impact by beginning to subject clothing capital directly to the terms of the compromise. GLOBAL DEVELOPMENTS IN TEXTILES AND CLOTHING IN THE 197Os The shock to the international economy delivered by the first OPEC oil price increases merely accelerated a process that had begun during the 1960s. The reconstructed economies of western Europe and Japan rose to challenge u.s. hegemony, and growing intra-advanced-capitalist rivalry became increasingly bound up with developments in the Third World (notably the 'economic miracles' worked in the newly industrialized countries or 'Nies') and the socialist economies. ' Destabilization of the post-war international order, in turn, combined with heightened capital-labour conflict within the advanced capitalist formations to produce signs of malfunctioning: inflation, unemployment, balance-ofpayments deficits . Such indicators, however, merely presented in aggregate form the uneven sectoral impact of international disorder. In the textile and clothing sector, by the early 1960s advanced capitalist economies had begun to feel the impact of the incorporation of Japan, the NICs, and the socialist economies into the liberal international order. Yet in the 197Os the general rise in unemployment potentially placed the 'textile crisis' in a new light: the threat of 'deindustrialization' linked to the shift of industries to low-wage areas of the world, a threat compounded, for some, by their relative weakness in the new high-technology sectors. In a period of stagflation the impact of growing low-wage import competition on state policies was reflected in the difficulty surrounding the renewal of the Multi-Fibre Agreement (MFA) in 1978 and 1981. The textile crisis, however, was due not only to the acceleration of exports from low-wage suppliers, especially of clothing; increased intra-advanced-capitalist rivalry played its part here as well. An analysis of the way in which these two sector-specific aspects of the emerging crisis in the broader international order combined provides the necessary background for understanding the timing and significance of the shift in the pattern of import control decisions in Canada. That is, while the surge of clothing exports from low-wage sources eventually affected all advanced capitalist economies, differences in the timing of the u. s. and EEC responses to the development affected Canada. In addition, increased rivalry among advanced capitalist textile producers had significant impact upon the Canadian market. First, although world textile and clothing exports increased by I 33 per cent in

97 Import regulation TABLE II Indices of production, selected countries ( 1971

=

I 00)

1971

1973

1974

1975

1976

1977

EEC Textiles

103

112

105

97

107

104

United States textiles clothing

104 103

128 116

119 113

109 106

120 118

124 120

Japan textiles, clothing, and footwear

IOI

Ill

100

97

102

98

South Korea textiles clothing and footwear

121 142

201 389

208 510

263 654

344 972

378 1067

Malaysia textiles clothing and footwear

106 107

144 172

106 123

166 186

198 258

212 263

SOURCE: Cable (1979, table 29, 31-3)

the first half of the 1970s, exports from the NICs and newer sources like Malaysia and Sri Lanka expanded by 233 per cent (ILOTC, 1979). The increased share of world trade in this sector captured by low-wage sources, however, was not evenly distributed between textiles and clothing. Exports of textiles from low-wage sources increased by 146 per cent, while their exports of clothing rose by a remarkable 31 I per cent (UNCTAD, 1978). Nor is such a high percentage increase merely reflective of a low base point. Hong Kong, the major source of low-wage clothing, had replaced the EEC as the leading exporter of clothing by 1975, and South Korea and Taiwan, both of which experienced sharper rises in production and exports, had captured third and fourth place, which put them well ahead of the United States (which dropped from third to sixth place between 1970 and 1975) (European Parliament, 1977, 22). While newer entrants like Malaysia and Macao tended to concentrate on the lower end of the clothing market, Hong Kong, Taiwan, and more recently South Korea have challenged advanced capitalist producers of 'fashion' items . Table 11 provides some indication of the dramatic growth of the textile and clothing industries in South Korea in contrast to the relative stagnation of the clothing sector in the United States, the EEC, and Japan the third no longer a low-wage supplier, owing to rising wages and the revaluation of the yen. Low-wage producers' increased share of the world textile and clothing trade

98 Canadian textiles TABLE 12 Net trade in textiles and clothing in selected countries ($ billion u .s.) Textiles

Clothing

Country

1973

1976

1973

1976

of which: Belgium-Luxembourg France West Germany Netherlands United Kingdom Sweden United States* Canada* Japan Australia Hong Kong South Korea Singapore

1.97 0.68 0.29 0.30 0.19 0. 19 -0.32 -0.36 -0.63 1.32 -0.58 -0.48 0. 14 -0.28

1.47 0.78 -0.27 0.30 0.14 0.05 -0.46 0.32 -0.89 2.39 -0.70 -0.74 0.62 -0.25

-0.89 0.01 0.45 -1.63 -0.45 -0.63 -0.26 -1.88 -0.21 -0.20 -0.90 1.27 0.74 0.09

-2.75 -0.27 0.13 -2.72 -1.09 -0.49 -0.59 -3 .05 -0.61 -0.37 -0.26 2.70 1.84 0.10

EEC,

* Exports f.o.b. minus imports c.i.f. SOURCE: Cable (1979, table 40, 48)

was not evenly distributed between the two industries; neither was the impact of their exports on advanced capitalist markets. Table 12 provides some indication of these differences. What it does not show, however, is the difference in timing. Between 1971 and 1973 the EEC' s clothing imports increased by 222 per cent and Japan's by 470 per cent, compared with 165 per cent for Canada and 142 per cent for the United States . 2 As the European Parliamentary Committee noted, this disparity was linked to the American government's conclusion of 'a series of voluntary export restraint agreements with the principal countries of South East Asia, which severely reduced the possibilities for these countries to expand their exports to the American markets' (European Parliament, 1977, 24). That is, 'Nixonomics' - the strategy designed to restore American hegemony - had a textile-specific dimension. 3 Yet, as in the early 1960s, the United States again sought to legitimize both its domestic policy and the international order through multilateral negotiations to extend the Long-Term Arrangement on Cotton Textiles (LTA) to cover all fibres. The MFA, signed in December 1973 by roughly fifty GATT members, superseded the LTA. The MFA was to provide forthe 'orderly' growth in textile and clothing exports from low-wage producers. It established two sets of procedures

99 Import regulation for negotiating voluntary export restraints . Article m , the more restnct1ve, 'emergency action' clause, favoured short-term, product- and country-specific agreements but permitted unilateral action if the exporting country refused to conclude an agreement within a specified period . Article IV permitted negotiation of comprehensive restraints (i.e., from fibres to clothing) for a longer period. The MFA also established a Textile Surveillance Body with eight members (four exporting countries and four importers), which symbolized GATT's concern that the rules of the agreement be respected. 4 While the MFA was concluded in late 1973, the EEC was slow to negotiate its new agreements, in part because of the relatively 'liberal' stance taken by West Germany, Denmark, the Netherlands, and Britain (Cable, 1979, 63). Several of these countries had been pursuing policies that encouraged the outflow of investment to low-wage 'offshore' plants in eastern Europe and North Africa much as Japan and the United States had begun to do in Asia and Latin America during the 196os. 5 As a consequence , between 1973 and 1975 clothing exports from low-wage sources to the EEC doubled, and those to Canada increased by 140 per cent, while American imports from such sources remained relatively constant. By January 1976, however, the EEC had concluded its major agreements, which slowed the flood and led to an attack on the Canadian market. As the European committee noted: Developments in the Canadian market are also of interest. During the initial period of application of the MFA Canada did not introduce any restrictive measures under Article 1v, other than a number of minor limitations as regards insurance cover and the country of origin. As soon as the EEC measures entered into force on I January 1976, thus slightly reducing pressure on the community, the exporting countries launched an attack on the Canadian market. Canada was thus obliged to introduce extremely severe restrictive measures under Article XIX of GA TT , covering not merely disruptive imports but all imports into the Canadian market. (European Parliament, 1977, 25)

The committee is correct in its appraisal of the limited character of Canada's restrictive measures. The Textile and Clothing Board had tended to stress 'warnings' prior to recommending restraints , and, when the latter were proposed, the board displayed a clear preference for Article m-type restraints. As C. Pestieau noted: In all instances the Tee has attempted to be as precise and specific as possible in its recommendations. In many cases the type and weight of the product to be protected have been spelled out, and the reason for including more than one product . .. is explained in the Board' s report. In reading its recommendations one has the strong impression that the Tee

1oo Canadian textiles has been making a real effort to keep restrictions to a minimum and to exclude related product lines in which Canadian manufacturers are not threatened. (Pestieau, 1976, 34)

Throughout the first half of the decade, the scope and number of restraint agreements declined, so that by 1975 only 6 per cent of Canada's imports were under restraint. Canada remained committed to free trade even after the new policy had been adopted, with this difference: most restraints applied to textiles, not to clothing. Of the eleven products on which the board had recommended restraints to the middle of 1975, only two, men's and boys' shirts and suits and jackets, were apparel items. The Tea's cautious approach can be attributed partly to the relative prosperity enjoyed by textile capital to I 974. Although an increasing share of the domestic market (by volume) went to imports, the leading firms had expanded sales and launched new investment programs. Employment rose to the highest level in over a decade: IOI ,600 in 1974. Thus, the major force for protection, textile capital, sought assistance on only a limited number of products and, despite delays linked to the role of 0SIP and the committee, had limited cause for complaint - against textile imports from low-wage sources. When clothing capitals began to take advantage of the heightened rivalry among advanced capitalist textile producers (see below), however, the en's inability to forge a new coalition with textile capital meant that it could take limited preventive action. And clothing capital, which had been marginal to the formation of the policy, tended to remain outside the reach of the main policy instrument-the inquiries conducted by the Textile and Clothing Board. Thus Canada's restraint decisions during the first half of the 1970s were consistent with the balance of forces that obtained during the formation of the policy. Textile capital won most of the cases it brought to the TCB and had been enjoying relative prosperity, while clothing capital largely ignored the TCB, despite the increasing pressure from imports . Certainly the sudden surge of clothing imports in early 1976 helped to change the situation. If the European committee's assessment of the 'liberal' character of Canada's restraints was correct, however, its explanation for the dramatic switch that is, the imposition of global import quotas in November 1976- overlooks the political importance of another development: increased rivalry among advanced capitalist textile producers. While low-wage producers did increase their textile exports to advanced capitalist markets, they remained in a deficit position, to a total value of approximately $2 billion in 1975 (ILOTC, 1978, 140). Table 12 shows that both Hong Kong and Singapore remained net importers of textiles. More specifically, advanced capitalist economies continued to dominate in the production of man-made fibres and fabrics. (Although countries like South Korea and Brazil had

1o I Import regulation begun to produce man-made fibres, these were mainly utilized as inputs, ultimately for the export-oriented garment industry.) While man-made fibres had been a growth sector in the boom years, by the 1970s it was experiencing a crisis of overproduction. Some of the surplus fed into the clothing industries of low-wage areas, thereby further cheapening their material costs. The greater part, however, was destined for other advanced capitalist markets. Textile trade among advanced capitalist economies amounted to $5. 7 billion in 1975 while exports to low-wage areas totalled $4.7 billion (ILOTC, 1978, 139). The crisis was unevenly experienced in the rival advanced capitalist economies . Western Europe was hardest hit; in 1970 its share of world textile exports had dropped to 23 per cent- and this before EEC Commissioner D' Avignon's attempt to establish a cartel (Tsoulakis and da Silva Ferreira, 1979). In 1976, alone, the European producers chalked up losses of over $1 billion. Japan's share also declined, albeit less dramatically, from 14 to 13 per cent. In contrast, the United States, aided by the devaluation of the dollar and lower energy prices, managed to increase its share by I per cent (from 27 to 28)6 (Cable, 1979, 13). The crisis of the post-war growth division of the textile industry was further compounded by the crises in the more traditional spinning, weaving, and finishing divisions. The legacy of protection in western European countries, such as France, had permitted the maintenance of a fragmented industry relying on traditional techniques; as tariff barriers came down, these industries were forced to undergo a rapid and painful adjustment. In Japan rising wages and the upward evaluation of the yen forced small and medium-sized producers using traditional methods 7 to close down or migrate to the lower-wage countries of the region. In making these adjustments they were aided by the state and Japan's giant trading companies, the sogo shosha, which operate 'as a kind of umbrella for overseas economic activity, including investment, by small and medium-sized Japanese firms [who] went abroad to reconstitute their profit margins' (Halliday, 1981, 12). 8 The western European and Japanese experiences stand in marked contrast tc that of American textile capital, which was aided by non-union wages, devaluation of the dollar, and various measures to promote industry modernization. These developments were reflected in the pattern of Canadian imports, which will be discussed in greater detail below. It might be noted, however, that Japan's share of the Canadian market declined steadily after 1973, while that of the United States increased. In fact, Cable specifically attributes the United States' tum from a deficit to a surplus position on textiles to its success in penetrating the Canadian market: 'The USA has more traditionally operated a trade deficit on textiles and clothing. Interestingly, in the last few years a small surplus has emerged on the textile side (accounted for largely by a growth of textile exports to Canada) while its clothing deficit has deteriorated sharply to $3 .5 billion in 1977' (Cable, 1979,

102 Canadian textiles 47). It was this pressure from other advanced capitalist producers, especially the United States, that led to a dramatic tum about in the domestic textile industry in late 1974. By mid-1975 , 20 percent of Canadian textile workers had been laid off. This situation, of course, reflected clothing capital's increased use of textile imports from western Europe and the United States as a means of fighting low-wage import competition (see table 11). Initially, the board remained impervious to the industry' s requests for protection, arguing that tariff or anti-dumping legislation, not the Textile and Clothing Board Act, should apply in the case of imports from advanced capitalist economies. In 1975, however, the board did attempt to go beyond its low-wage import competition mandate, recommending the imposition of a surcharge on polyester filament yam, the ' growth' fibre of the 1960s and 197os. 9 But this recommendation was dropped as the board' s report passed through os1P and LCIC to the ministerofnc. The passivity of the Canadian state regarding textile imports from advanced capitalist countries - not the escalation of low-wage clothing imports per se - thus led to the repoliticization of the textile and clothing issue and to the subsequent shift in the pattern of decisions. REPOLITICIZATION AND THE SHIFT IN CANADIAN IMPORT POLICY As the above analysis suggests, global developments in the textile and clothing trade did have a pronounced but delayed impact on the Canadian industry, linked to the decision pattern followed in the first six years. This pattern, in tum, can be attributed to the exclusion of imports from advanced capitalist economies from the board's jurisdiction-an exclusion that textile capital and its representatives within the state had accepted. It is also linked to the en' s original failure to regain the support of clothing capital, which was also reflected in the policy formation process. The combination of competition among advanced capitalist textile producers and limited controls on clothing imports from low-wage sources produced the domestic economic conditions underlying the shift to a more protectionist stance. The political action that transformed this situation into the kind of issue to which the Canadian state was forced to respond, however, was initiated and led by the CTI. Consider the Senate hearings, ' 0 which provided the sounding board for their grievances. The hearings began in February 1976,just as clothing capital began to feel the pressure of the surge in low-wage imports. These hearings had been planned since Senator Desruisseaux of Quebec had called on the Senate to examine the industry's problems in May 1975 -that is, when textile capital was feeling the pressure of import competition directly from other advanced capitalist economies.

103 Import regulation The en also dominated the hearings. Of the nine meetings of the Senate Committee on Banking, Trade and Commerce held between February and June 1975, the en and leading textile companies were present at six, the textile unions at two, and clothing capital and the two traditional importers associations at one each. In addition, the en had managed to maintain its leadership of the coalition with the unions with one exception: the CSN . The csN, however, now had only a precarious hold in the industry, owing to the secession of its textile and clothing affiliates in 1972, which had joined the new Centrale des syndicats democratiques (cso). As an analysis of the proceedings will show, the CTI also managed to muffle the opposition of the still-fragmented clothing capitals,'' whose presentation was but a pale echo of the en's. An assessment of the CTI' s strategy , however, requires some discussion of the issues operative in this conjuncture. As in other advanced capitalist formations, the Canadian state's information collection processes were registering rising inflation and unemployment and a worsening balance of payments position. Further, the state's attempt to deal with these problems only increased capital and labour's opposition to the regime. Thus the imposition of a statutory incomes policy in 1975 united an otherwise fragmented union movement in opposition to wage controls, generating, in turn, an intra-union debate on desired changes in state policy. 12 The business community launched a media campaign that suggested that the government's economic policies - price controls, the rising Canadian dollar, and the burden of public expenditure - were causing a flight of capital. The worsening balance of payments deficit pushed the federal government into heightened conflict with western resource-based provincial governments, as each level of government pursued its own strategy for 'upgrading Canadian sources' and increasing the domestic supply of energy. Finally, the Parti Quebecois was showing increasing strength vis-a-vis the scandal-plagued Bourassa government, at a time when a provincial election was in the offing. The CTI, as it had in the 1950s and 1960s, accurately read the lines of tension manifested in the conjuncture and managed to suggest that the state's broader political problems would be exacerbated if it failed to attend to the situation in textiles. For example, the en favourably contrasted its productivity gains (5 . 1 per cent per year) to that of the average for all manufacturing (4.2 per cent per year) . Celanese and DuPont stressed the industry's potential role in upgrading Canada's petroleum and wood resources - a potential being lost because of the government's overly liberal import policy. More important, in a context marked by persistent and rising inflation the CTI could contrast its price restraint- increases of only 4.5 per cent per year over the last decade - with that of all manufacturing (over 6 per cent). The CTI and corporate officials also handled the questions of wages and

104 Canadian textiles unemployment very skilfully . They pointed to wage rates as a compet1t1ve disadvantage vis-a-vis the United States, let alone Asian producers. Rising wages were, in tum, linked to the 'flight of capital' that had already commenced. The CTI made its points, however, in a way that did not jeopardize the support of the three main unions, while making the industry stand out as one able to secure labour peace. Thus R. Perowne of DomTex - one of the firms that had invested in the United States' 3 - could argue as follows : I think the history books will show that Dominion Textile has had over a number of years, some bitter battles with the unions, to the point where I do not think we can afford any more of these bitter battles . The last one was in 1966 and it almost ruined our company . I'm not knocking the unions because I think that we have as responsible unions as any other industry in the country . But we have the cso representing one group, the cm representing another and the CNTU representing another and they are all fighting and competing one with another. The fact of life is that they all want more . .. We get a little sick and tired of all this being downgraded as a low paying industry. Why shouldn't our people get more money? We don't like it when we are accused of paying just bare subsistence allowances to people . So we have been doing something about it . . . We have an excellent work force but our problem is to be able to maintain a degree of stability with our work force .. . Every time there is a world recession, not only do we have our own recession here but we have dumping of goods from the United States and other places. Then we have dumping from low-wage countries on top of that. (Senate, 1976, 75: 15)

It is not known whether the listeners did possess the sense of history' 4 to which Perowne referred; however, he did skilfully evoke the problem of rising wages and linked it to the need to rationalize collective bargaining- an objective then high on the agenda of the Trudeau regime. ' 5 Moreover, the government was trying to appeal to low-paid workers, who were given a higher ceiling under the AIB. At the same time, DomTex was portrayed as a responsible employer, concerned with maintaining a stable work force at a decent level of pay, as long as the state was prepared to accept the consequences of its ' full employment' commitment by regulating imports. This motif appeared in other submissions, which often stressed how management and the unions had worked together, for example, with the Department of Manpower and Immigration (now Employment and Immigration), to try to place redundant workers - with little success, given the high rate of unemployment, especially in Quebec. The unions, with the exception of the csN, echoed these themes. If the en' s reading of the broader political conjuncture led it to emphasize certain core issues, the way in which these issues were linked to its particular

105 Import regulation critique of the textile policy effectively narrowed the implications for state action. In this sense, the CTI' s strategy displayed a continued acceptance of the basic terms of the 1971 compromise and, at the same time, an acute awareness of the institutional locus of its problems. In other words, textile capital's spokesmen placed less emphasis on the TCB's own reluctance to recommend Article IV bilaterals and focused instead on both the delays between the completion of the TCB reports and their publication and the 'watering down' of the TCB's recommendations. Throughout the Senate inquiry, the CTI treated the TCB (and the Textile Branch of ITC) favourably. For example, F.P. Brady of DuPont termed the TCB 'a very good instrument ... a very good tribunal ... a good fact-finding body .. . [and] one forum where we could direct our inquiries' (Senate, 1976, 77: 15). The problem was attributed instead to the administrative agencies that operated to screen the TCB reports. Here LCIC was singled out. For instance, the head of the CTI argued that the delays in processing the reports were caused by LCIC: 'The interdepartmental committees become involved in the act and the months pass. I can't say as certain, but I believe that the interdepartmental committees on occasion review facts which the Board has found to be facts . The Board is a factfinding body. I don't think any government bureaucrat or bureaucracy in general should look over the Board's shoulder as to findings of fact' (Senate, 1976, 75:12). That is, the CTI knew that the state's relatively liberal stance was linked to the role played by the representatives of the staples fraction in LCIC. Statements by the unions and by clothing capital echoed this criticism. Thus what textile capital called for was not only a switch from Article III to Article 1v restraints but also a strengthening of the TCB's position within the decisional network and the replacement of LCIC by a committee composed of textile and clothing trade associations and unions that would advise the minister. This demand, however, was not directly articulated by the CTI. Brady of DuPont certainly proposed the elimination of the interdepartmental committee stage, and he and other corporate officials suggested the establishment of an advisory committee. It was left to one of the union spokesmen, P.E. Dalpe of the cso, however, to make explicit the link between these two propositions (Senate, 1976, 89:9). While the clothing associations and three of the unions largely echoed the CTI, they did add certain points, some of which would become relevant in the course of the 1976-77 board inquiry. For instance, the Shirt Manufacturers and the AMC emphasized the role of the large retail companies. They argued that these companies, which had come to dominate the retail end of the trade, were displacing traditional importers. In fact, the Shirt Manufacturers Association alleged that one of the largest companies, Simpson-Sears, was purchasing 60 per

106 Canadian textiles cent of its clothing requirements offshore. This point was subsequently picked up by G .L. Bennett, a member of the Textile and Clothing Board, who noted that the former head of the TCB felt:'[T]here might be more stability and more of a guarantee to the domestic producer . . . if certain of the large importers - the retailers ... - were to give some sort of commitment and co-operative guarantee to government that they would buy some of their goods here in Canada and only a certain percentage offshore' (Senate, 1976, 79: 14). As for the unions, the UTWA and the TWUA added nothing to the cTl's submission, despite the CLC's attempt to define an industrial strategy that would make labour's concerns a central consideration. 16 The two Quebec-based centrals, however, did raise additional issues. Both emphasized the wage disparity between Quebec and Ontario and decried the apparent drift of industry across the border into Ontario. In other respects , however, their proposals differed markedly. Dalpe's request for a bipartite advisory committee has already been noted. He also argued that the unions should be included among the agencies permitted to initiate a request for an inquiry. In addition, he called for broader economic planning, including an active manpower policy, to be carried out through a corporatist institution including business, government, and the unions . In this Dalpe was more in concert with the CLC than were the CLC's own textile affiliates (see chapter 8) . The cso's position was also different from the more radical line taken by the csN . For instance, the CSN suggested expropriation without compensation of companies, especially foreign-owned ones, that threatened closures. 17 In its subsequent submission to the TCB the CSN also proposed the establishment of a tribunal before which such companies would have to appear - a demand later articulated by the United Auto Workers and the CLC. In this sense, the csN's analysis , too, was closer to the cLc's than that taken by the UTWA and the TWUA. The CSN differed from all the other unions, however, not only in its overt distance from the employer's position: it was alone in emphasizing the importance of American imports. Thus, while DuPont, DomTex, and the CTI may have referred to the problem of increased competition from advanced capitalist textile producers, the unions other than the CSN made no reference to it. Further, the CTI' s demands focused on low-wage import competition by emphasizing its satisfaction with the TCB's performance and mandate, except for its preference for Article III restraints. Yet neither set of restraints - Article III or 1v - could apply to trade with the United States or western Europe. In contrast, the CSN argued that it was a myth that the industry suffered from low-wage competition, when in 1974, 74 per cent of Canada's textile imports were from other advanced capitalist economies, with 54 per cent from the United States (Senate, 1976, 88:17) . The CSN urged the

107 Import regulation government to tackle the real problem, linked to Canada's (and Quebec's) broader dependence on the United States. While, as we shall see, a nationalist argument had begun to gain support in certain branches of the Canadian state, it was by no means the dominant state strategy, which instead favoured continental rationalization. Again, for reasons that will be explored below, it was not in the industry's interests to join those opposing continental free trade. In other words, all parties, except the CSN, were operating within the parameters of the 1971 policy and, more broadly, the continentalist orientation of the post-war Canadian state. and, since the csN stood alone in its interpretation of the issue, it was easily isolated. It had no impact on the other unions, the Senate committee's analysis, or on subsequent government action. In fact, the Senate committee's report rather faithfully mirrored the en's definition of the problem and its solution, as did the government's response. THE STATE'S RESPONSE The repoliticization of the textile question did result in certain modifications. Even before the Senate finished its hearings, the minister of ITC appeared before the Senate to announce the establishment of an Ad Hoc Textile and Clothing Advisory Committee to be composed of three senior executives from textiles, three from the clothing division (one from each of the main producing provinces, Manitoba, Ontario, and Quebec), and the ADMS from the trade and industry sides ofITc; it was to be chaired by the senior ADM. This committee later achieved a permanent advisory status. Although it did not replace LCIC, it did strengthen the 'pro-textile' side of the decision system. In addition, it brought clothing capital and certain provinces directly into the negotiations that would shape the industry's future. More important, the repoliticization of the textile issue helped produce a shift in the pattern of import control decisions. In September 1976 the minister of ITC had requested an inquiry into the effect of imports of a wide range of clothing products. By November, however, a coalition of the clothing and textile trade associations had managed to secure an interim report, which led to the imposition of global quotas on clothing imports, limiting them to 1975 quantities. The full report, submitted in May 1977, recommended the negotiation of extensive restraint agreements with twenty low-wage countries, to last for a five-year period, with the quotas to be kept in place until agreements were concluded. 18 The restraint agreements were eventually concluded with these countries. Although 0SIP (now Office of Special Trade Relations, 0STR) and LCIC allowed more liberal growth provisions than expected and kept the agreements to a threerather than a five-year limit, these, combined with the two years of quotas, provided a five-year 'breathing space.' In addition, the valuation procedures for

108 Canadian textiles TABLE 13 Market shares held by imports and domestic textile and clothing producers (volume as percentage)

Net domestic shipments Total imports Low cost as percentage of total imports

1971

1975

1976

1977

1978

1979

73.2 26.8 70.7

65 .3 34.7 83.6

55 .8 44.2 87.2

64.6 35.4 85 .9

68.6 31.4 87.4

68.7 31.3 86.2

SOURCE: TCB (1980, table 35 , 77)

TABLE 14 Per capita imports of textiles and clothing, 1978 ($u.s.) From developed countries

From developing countries

Country

Textiles

Clothing

Textiles

Clothing

All sources of textiles and clothing

Canada United States* Japan

35.48 4.15 3.73 11 .30

6 .30 2.91 1.87 8. 18

7.25 3.27 8.69 7.03

16.25 15.36 7. 13 15 .66

65 .27 25 .70 21.42 42.40

EECt

* 1977 t Excludes intra-trade of nine EEC members , which accounts for roughly three-quarters of total member clothing exports and three-fifths of their textile exports. SOURCE: Figures compiled by cn, 1981 (unpublished).

EEC

apparel imported from South Korea, Taiwan, and Hong Kong were made more restrictive (in 1977, 1979, and 1980) through ministerial memoranda. Values for duty procedures were altered to include selling price to the Canadian purchaser (all charges on transport from factory to port, storage, commissions, brokerage rates, etc.) plus a specified percentage mark-up . Moreover, these restraints, combined with reduced pressure from certain suppliers who did not fill their quotas, seem to have been effective in limiting imports from low-wage sources. Table 13 shows that imports from all sources dropped significantly after the quotas had been imposed and continued to fall to the point where in 1979 they accounted for a lower share of the domestic market than in 1975. Table 14 shows that Canada imported only marginally more, on a per capita basis, from low-wage sources than the EEC did. Both Canada and the EEC, however, were importing much more from such sources than Japan and the United States. Further, when the

109 Import regulation growth rates for imports of textiles and clothing from low-wage sources between 1975 and 1978 are compared, Canada shows a lower rate of increase (142 percent) than the United States (160 per cent), the EEC (163 per cent), and Japan (211 per cent). 19 While low-wage imports increased their share of total textile imports into Canada between 1977 and 1978, this fact was significant in only one case, worsted fabrics - which coincided with the decline in Japan's share of Canadian imports of all textile products, including a marked decline in its share of the worsted fabric market. Finally, Canada imported more textiles, as measured by value, from other advanced capitalist economies than from low-wage sources. Its per capita imports from such sources is also far higher than those of the United States and Japan. (The figure for the EEC is lower than it should be, owing to the exclusion of statistics representing intra-EEC trade. Even if they are taken into account, however, the figure is still lower than Canada's - approximately $27 . 72 per capita. 20 ) Thus, 1976-77 marked a shift in the decision pattern pertinent to the import regulation aspect of the policy. Global quotas were followed by Article 1v restraint agreements with low-cost suppliers, especially of clothing. These agreements have been relatively effective in containing the growth of low-wage imports of textiles and clothing. Further, the board's 1980 report suggests that this pattern will be maintained. The report recommended that 1. a wide range of textile and clothing products be placed on the import control list, with general permits issued to importers from other advanced capitalist economies (including Japan) and only individual permits for importers from low cost sources; 21 2. any bilateral restraint agreements on these products, already concluded or negotiated between now and January 1, 1982 when existing VERS are to expire, be extended until 1990; 3. additional measures of protection - a ceiling on all imports from low cost sources, maximum growth provisions of one percent per annum and no provisions for swing, carry-over or carry-forward - be negotiated on seven sensitive products. These include acrylic yams and worsted fabrics. 22 In other words, the TCB now favours 'comprehensive' restraints, along the lines negotiated by the United States. It is also attempting to extend the time horizon significantly, exceeding the current international norms of three to five years. While the proposed extension is not likely to be accepted by the administrative agencies that assess the TCB's reports for the minister, the persistence of the economic and political conditions that helped the industry achieve this shift in decision pattern suggests that the general thrust of the TCB' s recommendations will be adopted. 23

I Io Canadian textiles The change in the decision pattern pertinent to imports has thus reflected the state's attempt to regulat the effects of one of the developments in the international textile and clothing trade: the surge of clothing production (for export) in low-wage sources . The tougher measures adopted have not however, addressed other developments associated with this trade: increased rivalry among advanced capitalist textile producers and Canada's weak position therein . This omission can be attributed , in part, to the textile industry's ' learning experience' in the mid-197os. The Textile and Clothing Board was not the appropriate forum for addressing such problems, which fell within the purview of the Anti-Dumping Tribunal. (In fact, the industry did secure two anti-dumping inquiries in I 977, one on polyester filament yam and the other on acrylic fibre . The first was successful , while the second led to a finding against only one of the companies charged.) Yet jurisdictional limitations do not fully account for textile capital's readiness to share such a large (and growing) segment of the domestic market with other advanced capitalist (especially American) producers - a position reflected in the emphasis it gave, in all its statements before the Senate committee, to 'improving the Textile and Clothing Board's capacity to contain low wage imports.' This willingness to share can be understood only through an analysis of the other aspect of the policy: industrial adjustment.

7 Industrial restructuring under the I 97 I accord

The analysis of the impact of the 1971 policy thus far has focused on the import control aspect. An adequate assessment of the policy, however, must include an examination of the process of industrial restructuring. For the terms of the new compromise between textile capital and the staples fraction required the former to accelerate the pace of modernization and rationalization in order to become competitive in a more liberal international environment. As we shall see, the policy has been quite successful in this respect; the leading textile capitals have come to understand their part of the bargain and have been acting accordingly . In analysing the industrial restructuring process the data on imports should not be forgotten . First, the data examined in chapter 6 confirmed a point raised in the first chapter: that Canadian textile producers would face stiff competition from other advanced capitalist sources. Yet the Canadian Textile Institute sought only limited protection (in the form of temporary anti-dumping measures) from these competitors. This stance can be attributed to the en ' s recognition of the state's commitment to trade liberalization and , more specifically, its need for continental rationalization. Second, it was argued that the apparent shift in the decision pattern on import controls effectively extended the terms of the compromise to capital in the clothing industry. Yet the policy mechanisms developed to deal with capital in the highly concentrated textile industry could be adapted only imperfectly to the competitive clothing industry. This chapter begins by fleshing out an argument outlined in chapter 1: that advanced capitalist states are not faced with a simple choice between deindustrialization and change-retarding protectionism in devising policies for sectors such as textiles; they also have the option of promoting the adoption of labour-displacing technologies. The second section discusses the process through which textile capital came to recognize the full implications of the new accord, and the third examines the way in which the state attempted to adapt the policy instruments to

1 12 Canadian textiles

the problems posed by its extension to clothing capital. The final section argues that if the policy has been reasonably successful from the standpoint of restoring the material basis for textile and clothing capital's consent to the leadership exercised by the staples fraction, neither the Adjustment Assistance Benefit program nor broader labour adjustment measures have seriously addressed the needs of workers whose jobs have been, and will continue to be, affected by industrial restructuring. COMPARATIVE ADVANTAGE FOR WHOM?

Critics of the new protectionism as it applies to sectors such as textiles often assume that manufacturing industries can be divided into two distinct groups.' On the one hand, there are 'dynamic,' research-intensive industries characterized by high rates of product and process innovation, in which transnational capital tends to predominate. On the other, there are 'traditional' industries, such as textiles, with static product markets and labour-intensive or slowly changing production processes. Industries of the first type, in which advanced capitalist economies are said to hold a comparative advantage, were the ones most affected by post-war trade liberalization. Conversely, Third-World countries, whose very underdevelopment creates a large pool of cheap labour, possess a comparative advantage in traditional industries, on which they have been unable to capitalize, owing to the persistence of trade barriers in advanced capitalist economies. More sophisticated analyses recognize that changes within 'dynamic' industries have led transnational corporations to locate the more standardized, labour-intensive processes in low-wage countries; but they still suggest that these countries are better advised to concentrate on traditional industries that are not controlled by transnational capital. The problem with this approach is not simply that it overlooks the extent to which capital in traditional sectors is becoming transnational. More important, it fails to consider the possible linkages between dynamic and traditional industries, which are destroying the technical basis of the Third World's comparative advantage. As Hoffman and Rush have noted, •As microelectronics revolutionizes production in the developed countries, the traditional export successes in the Third World (e.g., garments and electronics) are threatened. That trade, which has grown more rapidly in the last decade, relies heavily on the comparative advantage of low-wage, high skill labour . . . But micro-processors are eroding that advantage' (1980, 289). Despite 'right to work' legislation in the American south and the use of cheap migrant labour in western Europe, advanced capitalist textile producers have been moving to adopt labour-displacing techniques throughout the post-war period.

113 Industrial restructuring Some of the new techniques, such as the new knitting machines, utilizing computerized control of machine operation and patterning, were referred to in chapter 3. Firms engaged in spinning and weaving were perhaps slower to pick up on the more radical process innovations, such as open-end spinners and shuttleless looms. 2 None the less, the relatively incremental improvements that have been more readily adopted have made these processes, too, into relatively capitalintensive operations. For instance, labour's share of value added in the British weaving industry declined from 60 per cent in 1955 to 25 per cent in 1970 (Rothwell and Zegveld, 1979, 84). In the 1970s rising wage costs and increased competition from low wage sources have provided a strong stimulus to adopt the more radical innovations. Further, as Rothwell and Zegveld suggest, micro-electronics will open up new possibilities, especially in weaving (use of micro-processors in mill-monitoring) and carpet manufacture (ink jet printing, which increases flexibility of design). And in Japan, robotics for use in textile manufacture are finding a growing market among domestic producers (Kanemoto, 1979, 13). These developments will further reduce the number of workers employed in textile production. Innovations already adopted have enabled the more efficient advanced capitalist producers not only to retain their domestic market in most textile product areas but also to remain the leaders in world textile trade. If the innovations produced by the dynamic sectors have been altering the techniques employed by textile manufacture, in the long run their impact on the clothing industry is likely to be even more dramatic. Bergom-Larsson's description of a modern Swedish factory indicates something of the impact of the changes already introduced by leading firms in Sweden: 'To gradate a jacket, for example, with 30 pattern parts in 20 to 40 sizes can take IO days for one grader. The computer does the same work in IO minutes. A numerically-controlled machine is responsible for the actual cutting. With the same precision it can cut up to 100 layers of cloth. The capacity is 25,000 garments in a 140 hour week. The work goes more than IO times faster than in manual cutting' (Bergom-Larsson, 1978, 29). Computerized pattern grading and marker making and numerically controlled cutters, processes that have dramatically reduced the labour-time involved in these operations, are now being complemented by electronically controlled laser cutting and computerized, robotically fed sewing machines. While the earliest versions of such sewing machines are of interest mainly to producers of fairly standard products, such as jeans and shirts, more recent developments will widen the potential range of application: Microelectronics has facilitated the development of photoelectric edge-sensing equipment which monitors the edge of the materials to be sewn and draws heads along with it. Robotic

I 14

Canadian textiles

sewing machine heads can now be computer programmed and controlled to perform an infinite variety of stitches that are required - and they never forget how and never drop a stitch. Automatic fabric manipulators control the movement of the material and ensure that it is in the correct position to be sewn .. . and continuous changes in the operating parameters can now be programmed into machine-heads - previously the specific process would have to be halted while the appropriate changes were made manually. (Hoffman and Rush, 1980, 294)

To the extent that production and design processes incorporate such labourdisplacing electronic devices, the 'comparative advantage' of low-wage areas, even in this once highly labour-intensive industry, is being eroded. 3 Of course, the translation of technical possibilities into actual industrial practice is not automatic. A wide range of factors, such as the high cost of capital, 'conservative attitudes' of small (or even large) manufacturers, resistance of workers to deskilling and / or job loss, could lead capitalists to seek changeretarding protectionism or to relocate in the Third World, where states are often prepared to maintain low wages and labour force docility through overt repression. While all strategies might be pursued simultaneously- even by the same firm - the option favoured by a particular state will condition the choices made by individual capitalists. The state can favour relocation, accelerate technological change and rationalization, or simply block the adjustment process. Given the time lag between technological innovation and its widespread adoption, however, policies designed to promote technological modernization may well be accompanied by import controls; that is, protection can indeed be combined with adjustment. The option favoured by a particular state not only will reflect the position enunciated by sectoral forces; it will be conditioned by the structure of hegemony in each country. Our analysis of the terms of the 197 I accord would lead us to expect the Canadian state to promote technological modernization. THE ADJUSTMENT PROCESS IN TEXTILES

The primary instrument of the textile policy - the confidential discussion of industry plans during the course of TCB inquiries4 - seems to have encouraged at least the leading textile firms to continue to modernize and rationalize their operations. Thus the TCB' s I 980 report could reflect on the outcome of a decade of its operation by commending the industry for better than average productivity gains. Although the TCB pointed out that the improvement is partly reflective of better capacity utilization following the post-1976 stabilization of the market, it 'often appeared to result directly from capital expenditures on faster, more productive equipment' (TCB, 1980, 30). The 1981 report showed that capital

I I 5 Industrial restructuring expenditures on machinery and equipment have remained high, despite the downturn in the market since 1980. In 1981 over $150 million was invested in new machinery and equipment - over twice the amount (in current dollars) spent in 1978 (TCB, 1981, table 16). The 1981 report also included a survey on the age of equipment in use, which showed that in 1980 only 28 per cent of the major pieces of equipment were older than twenty years; 48 percent were in the range often to nineteen years; 24 percent were less than ten years old. These figures need to be seen in relation to the expected life of textile machinery . For instance, the older 'ring' spinners, which are still the most widely used spinning machines, have an estimated life of thirty years. In addition , ' rebuilt' spinners can reach speeds nearly equal to those of their more modern competitors. The most interesting data are in the report's appendices, which give a detailed account of the machinery in use in the main subdivisions of the industry. The worsted and woollen fabrics subdivisions have the best record in terms of the proportion of shuttleless looms to the more traditional looms: 35 per cent in worsted and 75 per cent in woollen fabric production (TCB, 82, 83). Over the past five years, however, ninety shuttleless looms have been installed in the cotton-corduroy-denim subdivision, and now nearly one-quarter of the looms in the man-made fabric subdivision are of the shuttleless variety. Although ring spinners accounted for the vast majority of spinning frames in I 980, this figure will have changed significantly since the Tea's survey, as DomTex has now completed the installation of 2,400 open-end spinners in its Domil plant. A glance at the annual reports of the leading companies confirms the impression that textile capital has continued the modernization process begun in the 1960s. DomTex claims to be the first firm in North America to use the ultra-modern, electronically controlled Asselin paper and needle puncher. Its finishing plant in Magog employs mini-computer controls and digital spectrophotometers; its Caldwell plant, using shuttleless weaving looms, is one of the largest in the world; and its distribution centre for sales yarn is now fully computerized. Celanese's polyester plant has shifted from 'batch' to continuous process production, which has quadrupled capacity, increased speed, and improved quality control. Its carpet division employs the new colour injection process, which allows for greater flexibility in pattern design. Both DomTex and Celanese are investing in the high growth area of civil engineering fabrics. That the leading textile capitals have been investing in the new techniques should not be in dispute. The promise of market stabilization through import controls - if the companies can show that they have developed viable adjustment plans - seems to have been adequate to encourage the larger firms in this initiative. Nevertheless , since the 1978 Task Force report, the CTI has been pushing for

I 16 Canadian textiles

additional program support, along the lines of the adjustment program for the footwear industry. 5 Although the I 97 I policy had made GAAP grants and loans available to textile capital, the low participation rate (nine textile companies) suggests that this program did not meet the needs of smaller capitals for whom the high cost of new machinery- made worse by the devaluation of the dollar, since all textile machinery is imported - constituted a barrier to adjustment. A recent ( unpublished) study prepared by the textile division of the Textile and Consumer Products Branch has put forward an even more comprehensive proposal than the en's. It argued for a five-year incentive program, which would include payment of 80 per cent of the costs of a consultant's report; a grant (25 per cent of capital costs) to encourage further concentration, especially in the knitting, hosiery, and carpet divisions; and a contribution to offset the cost (up to 50 per cent) of any investments over $250,000 recommended by the consultants.6 These proposals reflect the fact that while 'conditional protection' may be an adequate policy instrument for the larger textile capitals, the protection provided is not enough for the smaller ones, with inadequate cash flow and/ or limited organizational resources. While the large firms possess the financial and organizational resources to plan and implement adjustment programs, the smaller firms do not. The branch's solution is to provide loans and grants to these smaller firms and also to encourage them to merge . There was, however, another set of proposals included in the textile division's analysis: the increased use of duty remission schemes to allow domestic producers to import complementary products; and 'serious consideration' of a Texpact, a sector-specific, free-trade arrangement with the United States, modelled on the 1966 Autopact. Neither of these proposals is new . In fact, the Economic Council of Canada had explicitly argued that: Extensive rationalization has already occurred in the synthetic textile industry. But further rationalization is inhibited by the smalI size of the market and the need to maintain product variety. However, there is evidence that this industry could compete in the North American market under Canada-u.s. free trade especially since this would create scope for further rationalization. The synthetic textile industry in these respects is comparable in important ways to the auto industry before the 1965 Agreement was concluded. (EEC, 1975, 127) Moreover, since the outset, the board has been effectively encouraging industry rationalization, as its 1980 report indicated: In the early seventies, it was suggested to fabric manufacturers that, rather than try to supply every type of fabric required in Canada, they should attempt to rationalize their operations and concentrate on the more viable lines of production. Over the years, therefore , fabric

I 17

Industrial restructuring

manufacturers, particularly those producing woven (as opposed to knitted) fabric, phased out many product lines and specialized in those fabrics most in demand by garment manufacturers. (TCB, 1980, 95)

Throughout the 1970s corporate-board discussions clearly have so encouraged a process of accelerated concentration7 and specialization that woven-fabric producers and fibre producers no longer follow the classic import-substituting strategy of trying to produce the full range of fabrics for the Canadian market. Rather, they achieve longer production runs on fewer fabrics, and imports fill the gap. Yet the new complementarity is not the primary reason that the CTI and the leading textile companies have not tried to shut out imports from advanced capitalist sources, since complementarity has been achieved in a way that largely benefits these firms, most of which are transnationals that can import from their parent firms or their subsidiaries. 8 Duty remission schemes or even a 'Texpact' would only accelerate this process. It would be misleading, however, to suggest that the move towards continental integration has taken place smoothly or that the full implications of the 1971 policy were grasped at the outset. A more detailed examination of the post-1971 history of the leading firms suggests that the leading textile capitals had to learn the full meaning of the new accord through the series of discussions they engaged in with the TCB. Consider first the fate of the two medium-sized firms whose performance in the 196os had been impressive: Bruck Mills and ConsolTex. Both were taken over by foreign capital shortly after the policy was enacted, but for quite different reasons . In 1972 ConsolTex was acquired by Carrington Viyella of Britain - a very large subsidiary of 1c1 - and in 1973 Marubeni and Toyobo of Japan acquired control of Bruck Mills. 9 Both Bruck and Conso!Tex emphasized the related financial and technological advantages that were to accrue from their new affiliations. For ConsolTex, however, one of the main benefits of its new partnership was that it provided access to the American market via Carrington Viyella' s New York subsidiary. In other words, ConsolTex had understood the state' s commitment to trade liberalization as well as technological modernization and took action accordingly to secure a place for the company in the American (and potentially , western European) market. Brock's Japanese investors, however, held a very different view of the policy. As Toyobo' s Yagamuchiexplained to the Senate, the take-over of Bruck was 'based on the philosophy ... that a large investment in Canada, together with the advanced technology available, would result in a stronger company and would replace the trade concept of exporting textiles to this country. The existence of the Canadian textile policy convinced us to become investors' (Senate, 1976, 76:19). Brock's new investment program took the more

118 Canadian textiles traditional approach of production for the domestic market. This led to losses at a time when the other fabric producers continued to expand sales and to increase their profits. 10 Although Bruck began to rationalize in the mid-197os, its recognition of the thrust of the 1971 policy came too late to provide the returns expected by its Japanese owners . In the late 1970s Marubeni and Toyobo ceded control of Bruck to the much more successful ConsolTex. 11 The two American-owned man-made fibre companies, DuPont and Celanese, initially seemed inclined to shift out of textiles into the resource sector. In 1970 DuPont cancelled its plan to establish a polyester plant in Morrisburg, Ontario and closed its research and development (R&D) facilities in Maitland. It entered into a joint venture (Ducanex) with Lacanex, a Canadian mineral exploration and development firm with two Mexican silver mining subsidiaries. In 1970 Celanese acquired 50 per cent of the Alberta Sulphate Company and invested heavily in Bralome Oil and Gas - in line with its policy of increasing its participation in Canada's natural resource field. Following the announcement of the policy, however, the Apparel and Textile branch was authorized to conduct a joint study with these firms, outlining the problems and potential of the man-made fibre industry. The study emphasized the capital-intensive character of fibre production and this division's importance as an employer of skilled labour. The report also pointed out that the fibre division imports chemical inputs that are essentially upgraded forms of raw materials produced in Canada; however, DuPont and Celanese, as chemical producers, might be induced to produce these intermediates in Canada. All these characteristics suggested that the industry warranted 'continued encouragement. ' The study appeared to boost the confidence of both companies in the future of the fibre industry. DuPont moved to rationalize its nylon operations, providing fewer yarns in Canada in order to obtain longer production runs while others were imported from its parent. While its attempt to move into the production of polyester (which would have reduced its dependence on nylon) led to a substantial loss owing to the global overproduction crisis that emerged in that area, its nylon and acrylic fibre activities were moving in the direction of rationalization favoured by the Canadian state. In I 97 I Celanese had already indicated its renewed commitment to the domestic textile industry: 'new opportunities have opened up in the fibre and textile areas and we have moved to expand our operations accordingly' (Annual Report, 1971). In 1972 it sold its share' in Alberta Sulphate and in the following year, its oil and gas holdings. At the same time, it announced a joint venture with Mitsubishi Gas Chemical Company and Pan Canadian Petroleum to produce methanol, which would add another link in the chain from petroleum to fibre production. 12 It acquired Galtex, the largest domestic yarn texturizer; it expanded

119 Industrial restructuring its polyester and polypropylene facilities; and it consolidated its weaving operations. The introduction of its new polyester fibre process in Millhaven was also complemented by downstream investment in its carpet producing facilities in Quebec and Alberta. (The recent problems that have plagued this sector, however, led Celanese to sell its carpet plant in Sorel, Quebec.) Most important, Celanese has responded to the duty remission scheme offered by the state by rationalizing its polyester fibre production facilities: 'The overall operation of the [man-made fibre] division benefited from the man-made fibre duty remission order, an Order-in-Council which permits the duty free entry of man-made fibres and yams based on production in Canada. This has permitted an opportunity for the rationalization of production and consequent improvements in productivity' (Annual Report, 1978, 3). Celanese can produce a more limited range of polyester deniers in Canada, thus achieving longer production runs, while purchasing from its American parent what it no longer produces here. If the two foreign-controlled man-made fibre companies have moved from 'miniature-replica' branch plants towards 'rationalized subsidiaries' (Cordell, 1971), the largest Canadian-owned firm, DomTex, has also prepared for free trade. Unlike ConsolTex, however, DomTex has been able to do so while remaining Canadian owned. DomTex's original response to the policy followed the classic importsubstitution pattern. It obtained full control of Lana Knit and Hubbard Dyers (both in the knitting division), both of which it subsequently closed when the bottom fell out of the market for knitted cloth. It gained control of El pee, a producer of yam for the then-expanding carpet division; of Fibreworld (Canada), a producer of woven plastics; and of Jaro Manufacturing, a producer of non-woven fabrics. DomTex's control of Fireside Fabrics gave it an entree into the booming corduroy market, making it, in fact, the sole domestic producer of finished corduroy. It began to compete with Wabasso in the market for denim through an investment in Drumrnondville, Quebec which has shown an excellent rate of return. It benefited from the bankruptcy of Cosmos Imperial, taking over that company's only modem mill (industrial fabrics) in Yarmouth, Nova Scotia. The closure of Cosmos and the rationalization of Wabasso left DomTex the sole producer of a wide range of cotton and cotton-blend yams and fabrics. In addition, it maintained a steady rate of investment in the new labour-saving technology in the spinning to finishing stages of production. DomTex's domestic diversification project was more successful than Bruck's, giving it an entree into new or growing product lines, which partly reduced its dependence on the clothing industry and decreased the labour intensity of its production processes. Its most important investment decision, however, was made in 1975, when it acquired DHJ Inc., a medium-sized American textile company

120

Canadian textiles

with plants in the (non-unionized) American south, western Europe, South America, Japan, and Hong Kong. The acquisition of DHJ offered access to the American market, sales outlets in eighty countries, and, of course, manufacturing facilities in lower-wage areas . This move was followed by the take-over of an American denim producer, Swift Textiles, and more recently by the acquisition of Celanese Corporation's (u .s.) civil engineering fabrics business. By 1978 sales of DomTex's international division accounted for 31 per cent of its total sales. DomTex can now accommodate a variety of free-trade options. Industrial adjustment in the textile industry has thus placed the leading textile capitals - notably ConsolTex, Celanese, and DomTex - in such a position to benefit from continental and even multilateral free trade. As one informed observer, Peter Clark, noted: The primary textile mills have transnational linkages . Their operations are structured in a way that they may be attracted to the Free Trade option for many of the same reasons that the Automotive Products Arrangement has worked to the benefit of the automobile assembly industry . Smaller textile firms, on the other hand, tend to be worried about exposing themselves to the competition of giants whose scale of operations is much larger than their own. A major attraction of closer Canada / u .s. trade links for the textile industry is the prospect of harmonizing external trade policies on textile imports at the same degree or level of protection enjoyed by manufacturers in the u .S.A. This would provide Canadian producers with much more effective insulation from disruptively priced imports . ' 3

Clark went on to suggest that the negotiation of an official Texpact might be difficult to arrange for a number of reasons. Selective duty remission schemes, however, can be implemented unilaterally. and if the branch's new grant program were approved and/ or the recent Ontario and Quebec programs 14 were effectively utilized, several of the smaller capitals would likely merge, modernize, and rationalize, so that they too would become 'internationally competitive. ' 15 The move towards continental rationalization, accompanied by the increasingly transnational organization of textile production, also helps explain the CTI' s position on the growth of imports from the United States. An unimpeded flow of imports from low-wage economies would create a downward pressure on prices and/ or reduce demand in the clothing industry. Thus, from the standpoint of the leading textile capitals, such imports should be regulated but not shut out. Movement towards trade liberalization with other advanced capitalist economies, especially in the form of duty remission schemes that place domestic capital in a favoured position, however, is now of interest. The policy thus is helping improve the competitiveness of domestic textile capital. In this way the state has operated effectively to 'concretely co-ordinate' the interests of textile capital with those of the dominant staples fraction.

1 2 I Industrial restructuring

ADJUSTMENT IN THE CLOTHING INDUSTRY Clothing capital was initially beyond the reach of the Textile and Clothing Board. In addition, as late as 1977 the proposed Productivity and Development Centre, which was to have been a federally funded operation to promote adjustment in the apparel industry, had yet to be established. The imposition of import controls on a broad range of clothing products, however, began the process of subjecting clothing capital to the terms of the accord originally reached between the staples fraction and textile capital. Although it is too early to assess the full impact of the policy on clothing capital, it is possible to outline the kind of changes that its negotiations with the TCB have set in motion. In general, the effectiveness of the TCB's negative incentives (i.e., 'conditional protection') is being supported by the reorganization of clothing capital's trade associations, which took place between 1976 and 1978, and through provincially based, federally funded productivity programs that these associations are to administer. In the course of its 1976-77 inquiry, the TCB commissioned a study by Kurt Salmon Associates that was to compare a sample of Canadian and American clothing firms to determine the relative strengths and weaknesses of the Canadian industry. While the study did enable the TCB to conclude that Canadian clothing manufacturers have 'a strong manufacturing capability,' it also drew attention to several areas where the Canadian capital compared poorly with its American counterpart. They included: use of labour saving attachments and automated equipment; formal quality-control mechanisms; the overall work of operators; operator and supervisory training; professional development; and financial management (TCB, 1977, appendix 7, 35). These areas, the study suggested, could be seen as related to the predominance of small family-owned firms in Canada. The TCB accordingly admonished clothing capitals to modernize their production processes and managerial-supervisory techniques. The TCB recognized, however, that a variant of the original proposal for a productivity and development centre would have to be implemented if the barrier to modernization posed by small firm size were to be overcome. This action, however, required removal of another obstacle. As initially conceived, the proposed centre was not implemented, partly because of the fragmented, traditional character of clothing capital, which was reflected in its trade associations; for the centre was to be run by these associations . The state attempted to deal with this issue by seconding Peter Clark, a civil servant with extensive experience in international trade negotiations, to the Apparel Manufacturers Institute of Quebec and the new national association, the Canadian Apparel Manufacturers Institute (CAMI), in August 1976. Clark initially worked with National Revenue, but in 1967 he moved to

122

Canadian textiles

Finance's secretariat for the Interdepartmental Committee on Low Cost Import Policy. He spent several years in Geneva, helping to prepare for the GATT Tokyo Round, and acted as Canada's representative on the Textile Surveillance Board set up under the MFA. Clark spent another year with Finance, working on Canada-u .s. trade policy and assisting in the co-ordination of interdepartmental discussions in preparation for the Tokyo Round. Clark was thus well prepared to bring to the clothing trade associations a perspective consistent with the terms of the textile-staples accord . The attempted reorganization of the trade associations under Clark's leadership cannot, of course, be credited directly with the establishment of the first of these centres, which is operated by the Manitoba Fashion Institute (MFI). ' 6 Nor is the process for obtaining federal funding for additional centres an easy one. It seems that the branch has been concerned to ensure that the regional trade associations develop support among their member firms for participation in the programs, through the preliminary studies that the associations are required to undertake. 17 Nevertheless, CAMI and Clark's consulting firm, COGIT International, have acted as disseminators of a modernizing ideology among clothing capitals whose adjustment capacity has been limited by the predominance of traditional, family-owned firms. Consider the brief presented to the TCB in 1979, which was endorsed by all the main trade associations. The brief echoed the analysis presented in the TCB' s 1977 report, calling for increased concentration, specialization, and automation. It drew attention to the electronically controlled and programmed sewing machines already in use in many factories and to new techniques, which by the year 2000 would substantially reduce the industry's reliance on labour, especially that involving higher skill levels. In addition, the brief endorsed the acceleration of a process that has already begun, that is, the transition from classic apparel manufacturing enterprises to apparel companies prepared to supply the Canadian market through imports as well as domestic production - a point reiterated in the TCB' s recent report.' 8 Implementation of this concept would help firms reduce the range of items supplied by domestic plants, whose output could be complemented by imports. Clark noted that unlike textile capitals, the branch plants' 9 and companies manufacturing under licence from American firms in the clothing industry are reluctant to engage in continental free trade. None the less, the dynamic smaller and medium-sized Canadian firms might welcome access to the large American market2° (COGIT, 1979). A Texpact would also give them access to American fabrics (minus the present tariff-induced mark-up) and reduce their dependence on the highly concentrated retail sector in Canada. A formal bilateral agreement with the United States may not be negotiated,

I 23

Industrial restructuring

since it is not clear whether the United States is willing (or able) to obtain exemption from GATT's universality principle as it did in the case of the Autopact. 21 The Textile and Clothing Board, however, has argued for a duty drawback on fabrics not domestically produced, in proportion to the amount of fabrics purchased from Canadian suppliers. 22 More broadly, the kind of industrial adjustment promoted by the board favours the establishment of the type of firm the larger, technologically advanced, and specialized 'apparel company' prepared to benefit from trade liberalization on a continental and global basis. Thus, since 1976 clothing capital has become an actual party to the accord . In order to secure protection from low-wage import competition, the organizations of clothing capital had to appear before the Textile and Clothing Board, which gave the TCB an opportunity to make clear the conditions under which protection would be forthcoming. The partial reorganization of the clothing trade associations, facilitated by Peter Clark's secondment, has provided one mechanism for disseminating the terms of the accord. The delays experienced by the Ontario and Quebec associations with regard to their applications for grants to support productivity centres appear to have been aimed at forcing the associations to develop the active consent of their member firms. Despite the creative use of the available policy instruments, the mechanisms established by the 1971 policy have proved less than adequate in promoting restructuring in this industry. The TCB' s procedures for ensuring that protection would be provided only for firms undertaking viable restructuring plans - the consultations between the board and the companies party to the complaint worked fairly well for the highly concentrated textile industry. Yet in most divisions of the clothing industry there is a large number of firms not all of which see the need for supporting a request. Since the TCB is not empowered to compel firms not party to the complaint to submit their plans, it could not ensure they were complying with the terms. In other words, the TCB does not possess the means of discriminating between 'progressive' and 'traditional' capitals within each industry division. 23 Protection for the former would also benefit the latter. In addition, the Textile and Consumer Products Branch's 1980 study of the clothing industry showed that many divisions of the industry comprised a multiplicity of firms too small to finance and efficiently utilize the newer production techniques. Nor did the incentive package offered under the Enterprise Development Program (EDP) constitute an adquate means for overcoming the difficulties. Between 1970 and 1980 only 8 per cent of the firms in the clothing industry had received EDP assistance. According to the branch, part of the problem could be attributed to program criteria that, for instance, offered low-interest loans only on a 'last-resort' basis, or required proof that use of a consultant constituted a 'significant burden,' before a grant could be made.

124 Canadian textiles TABLE 15 Employment in the textile and clothing industries, 1970-78 Year

Textiles

Clothing

1970 1971 1972 1973 1974 1975 1976 1977 1978

93,000 93,000 99,000 103 ,000 101,000 98,000 92,000 86,000 88 ,000

97,000 98,000 102,000 104,000 102,000 101,000 102,000 95,000 97,000

NOTE: Figures are rounded to the nearest thousand . SOURCE: en (1979, appendix B, 5)

ADJUSTMENT ASSISTANCE FOR WORKERS?

Bankruptcies, mergers, production and plant rationalization, and technological change - these as well as industry relocation are affecting and will affect workers in the textile and clothing industries. Old craft skills become redundant because the industries are able to rely on (cheaper) unskilled labour (Rothwell and Zegveld, 1979, 156). Managerial supervision is tightened as part of the drive to improve productivity. Shift work becomes the norm as capitalists tum to continuous production in an effort to recoup their investments in expensive new machines. Finally, fewer workers are required to produce a slowly growing volume of output. An assessment of the impact of changing working conditions unfortunately is beyond the scope of this study. In addition, the degree of labour displacement is difficult to estimate with precision . The changes described in the previous sections, however, have been accompanied by a decline in employment, as table 15 indicates . This decrease is not due to declining output; the real domestic product of the textile industry rose by 8 per cent between 1973 and 1978, whereas the number of workers employed declined by 14 per cent over the same period. Output of the clothing industry increased by 14 per cent between 1973 and 1978, while the number employed shrank by 7 per cent. 24 And, as the adjustment process continues over the next twenty years, the demand for labour, especially skilled labour, is likely to decline dramatically in the clothing industry (COGIT, 1979, 311).

12 5

Industrial restructuring

TABLE 16 Textile and clothing board certifications, 1971-76 Year

Number of certified lay-offs

Total number of employees affected

1971 1972 1973 1974 1975 1976

14

1,787 733 228

6

2

17 8

2,530 1,084

SOURCE: Labour Canada ( 1977, 7)

Measures to ease labour adjustment are well within the scope of the Canadian state. For instance, federal collective bargaining legislation has been altered to pennit workers to strike over technological change, and several provinces have adopted similar legislation. General 'manpower' programs have been developed that reduce financial hardship and provide retraining. None of these measures solves the problems that capitalist development poses for workers; they can only mitigate the effects thereof. Yet the degree to which such policies even mitigate the effects of industrial restructuring is affected by the relative power of workers in each country . In this section it will be argued that neither the Adjustment Assistance Benefit program nor the broader manpower programs of the Canadian state seriously address the problem of job destruction resulting from the restructuring of the textile and clothing industries. This failure is largely due to the relative weakness of organized labour in Canada, in both general and sectoral tenns. 25 First, consider the limited scope of the program for workers in the textile and clothing industries whose jobs have disappeared as a result of industrial adjustment. As pointed out in chapter 5, the program was restricted to employees fifty-four or over who have worked ten of the past fifteen years in the industry and whose job loss has been part of a lay-off or closure that the Textile and Clothing Board has certified as due to import competition. Table 16 shows the number of certified lay-offs and employees affected thereby. Although a direct comparison between the total number unemployed due to lay-offs and closures and those certified is not available, it is possible to compare the numberofjobs lost in 1975, as recorded in aggregate fonn in table 15, with the number of workers who were part of a certified lay-off in the same year: 6,000 versus 2,530. Even if it is assumed that half of the certifications in 1976 were for those laid off in 1975, the gap remains large: 6,000 versus 3,072. In addition, the

126

Canadian textiles

TABLE 17 Participation rates in the

AAB ,

1971-76

Year

Number eligible

Number of recipients

Per cent eligible receiving

1971 1972 1973 1974 1975 1976

152 121 32 136 315 229

106 35 9 77 172 91

69.7 28 .9 28.1 56.6 54.6 39.7

SOURCE: Labour Canada (1977, 12)

same study showed that in most cases of certified lay-offs, less than one-quarter of the workers affected were eligible to receive benefits; as table 17 indicates, approximately half of them did not participate in the program. The low level of program utilization can be attributed, in part, to the use of seniority provisions in collective agreements, since nearly two-thirds of all textile and clothing workers are unionized. Under seniority clauses older workers are somewhat protected, because they can replace others within the finn who have less seniority .26 Yet it should be remembered that the AAB was designed by Labour Canada, the department most familiar with collective bargaining practices. The department could thus rely on the existence of seniority provisions to reduce the level of program expenditures . 27 In addition, the lengthy process of certification, which involves two steps - certification by the board (that the lay-offs resulted from import competition) and certification by Manpower (that a particular worker could not find other work)- has operated as a disincentive. Thus the AAB is at best a program of last resort for older workers affected by restructuring. Workers not eligible under the AAB can receive unemployment insurance and apply for various relocation, retraining , or community 'make work' assistance benefits. In addition, partial state-funding of joint labour-management committees, with an 'independent' chair usually drawn from the local business community, can publicize these programs and supplement the work of the local Manpower Centre by contacting other potential employers in the region. Since the state's involvement in this area has been limited primarily to DREE incentives, however, the committees cannot create new jobs; they have to rely on the existing demand for labour. 28 In addition, they operate outside the collective bargaining process. Union representatives therefore have to fall back on moral suasion rather than the power of their members to deal with questions such as severance pay. Participation also tends to associate the union with management's decision rather

127 Industrial restructuring than placing it on the side of its members , who bear the brunt of the lay-off or closure. Thus, despite the existing array of programs, textile and clothing workers who lost their jobs in the 1970s have faced serious difficulties in finding jobs with an equivalent or better rate of pay. The results of the labour force tracking survey conducted by the Micro Economic Analysis Branch of ITC give some indication of the scope of the problem faced by these workers. 29 The survey examines the experience of 753 clothing workers and 2,664 textile workers laid off during the 1974-76 period. At the time of the surveys (1977 and 1978), 18 per cent of the clothing workers and 15 per cent of the textile workers were still without work; however, these figures ignore those who 'left the labour force . ' Yet given the location of many firms in areas where there are few alternative jobs and given the high proportion of women in the sample (73 percent in clothing, 37 per cent in textiles - roughly proportional to their share of total industry employment), the ' left the labour force ' group should not be ignored. When these individuals are added in, one-third of textile workers and nearly two-fifths of clothing workers had not found other jobs. 3° Finally, of those who did find jobs, 30 per cent actually had to take a cut in pay - a significant percentage in that the average hourly wage in textiles is only 73 per cent of the average for all manufacturing, while clothing workers earn even less (66 per cent). Over half the workers surveyed, then, clearly had to bear the costs of industrial restructuring. These statistics provide only a superficial measure of the hardship encountered by displaced textile and clothing workers. They cannot capture the shock and outrage felt by people who, with their parents, may have worked in the local mills for decades . They do not reveal the personal cost of seeking new jobs when other local employers are not hiring or of the resulting despair. Yet they do suggest that neither the textile policy nor broader labour adjustment measures have worked to mitigate the hardship experienced by workers. This lacuna, in tum, reflects the . relative weakness of labour in Canada. As the analysis presented in chapter 6 showed, with the partial exception of the Quebec unions (and the ccu) , the textile and clothing unions continue to define the problem in the en's terms . While unions like ACTWU have prepared studies that call attention to the social costs of unemployment, it must not be forgotten that unemployment is not simply the result of import competition from low-wage areas but rather is inherent in the adjustment process. Yet the unions' effective support for the en's position is not surprising. No one union possesses the resources to develop an independent analysis of the situation confronting it and fragmentation in this sector has merely mirrored the broader organizational incapacity of the Canadian labour movement. The 1971 Textile and Clothing Policy, then, has been most successful as a

128 Canadian textiles means of concretely co-ordinating the interests of textile capital with those of the staples fraction. The dominant textile capitals have undertaken an ambitious investment program, investing at an average annual rate of $177 million between 1970 and 1978; and they plan an additional investment of about $3 billion over the next decade, according to the president of DomTex (Globe and Mail, 5 February 1980). Investment in new techniques and products has helped make them internationally competitive. In the process they have become transnational corporations, or the 'rationalized subsidiaries' of parent firms located in the United States. Trade liberalization now poses no serious problem for textile capital. Its definition of its interests is now in accord with that of the staples fraction . The 1971 policy has been somewhat less successful with regard to capital in the clothing industry and has done very little to assist workers in either the textile or the clothing industry. These limitations can be attributed, in part, to the relative political weakness of clothing capital and the textile and clothing unions, a weakness reflected in the policy formation process. Yet there is an interesting difference in the treatment accorded these two. The largest textile unions joined with the en in presenting the brief that officially triggered the policy process. Yet labour's representative within the policy process was given a part to play when those representing the staples fraction recognized that textile capital might reject the terms of the compromise and once again organize labour in support for its demand for a large and protected home market. Conversely, clothing capital had refused to support the en's original demand and only effectively consented to the policy's terms when it came under heavy pressure from low-wage imports. None the less, the 1971 policy included programs aimed at capital in the clothing industry, and since 1976 both the branch and the board have worked to adapt the policy to the needs of progressive elements of clothing capital. The state's orientation to clothing capital implicitly recognized the latter's class power. Clothing capital's active consent to the terms of the policy is critical if the sector is to become internationally competitive, because capital controls the investment process. In this sense political action is less important than class position - at least when labour is unable to act collectively in its own name.

8 Textiles and the politics of industrial restructuring: into the 1980s

In June 1981 the federal government announced a new national policy for Canada's textile and clothing sectors. This move, which involved the establishment of a new agency, the Canadian Industrial Renewal Board (CIRB), could be interpreted as an attempt to rectify some of the weaknesses of the 1971 policy. The new board, with a budget of at least $250 million to spend over five years, is able to provide fairly generous assistance to the smaller textile and clothing capitals previously unable to develop or to finance restructuring plans. In addition, the CIRB can offer enriched incentives to attract new industries to textile-dependent towns and a variety of direct labour adjustment measures. The new package of policy instruments that the CIRB has at its disposal thus seems designed to meet the difficulties encountered by smaller capitals in attempting to comply with the terms of the 1971 policy and to address at least some of the problems that industrial restructuring poses for textile and clothing workers. Yet it would be a mistake to explain this development in narrow sectoral terms. The formation of the 1981 textile policy occurred in a context markedly different from that which obtained when the terms of the 1971 policy were being negotiated. The deterioration of the Canadian economy since the mid- 1970s has been undermining the material basis of consent, providing fertile ground for the spread of a liberal nationalist challenge to the staples fraction's growth strategy. Moreover, the imposition of wage controls in 1975 prompted the CLC to begin to formulate its own full-employment-centred industrial strategy as an alternative to both the continental rationalization and the technological sovereignty industrial policy options. Heightened conflict over the terms under which restructuring is to take place, in tum , has led to a series of state initiatives designed to maintain or restore the conditions of hegemonic domination. These developments raise the question of whether the 1981 textile policy merely complements the earlier initiative or whether it is indeed ' new' in that it

130 Canadian textiles fonns part of an industrial strategy that rejects continental rationalization in favour of one of the other alternatives placed on the political agenda in the 1970s. In order to locate the 1981 textile policy decision in this wider context, the first section of this chapter outlines the parameters of the Canadian industrial strategy debate as they appeared in the early 1980s. The second section discusses the changes that have occurred within the state as a result of the heightened conflict over an industrial strategy, and the third examines the process through which the decision to establish the CIRB was arrived at, showing how it was shaped by these broader developments. PARAMETERS DEBATE

OF

THE CANADIAN INDUSTRIAL STRATEGY

The 1971 textile policy was fonnulated during the first years of the post-war boom, when only a small nationalist movement seemed concerned about the prospect of deindustrialization. By the end of the decade, however, the state's apparent inability to deal with the problems of high unemployment and stagflation had begun to erode the material basis for the staples fraction's hegemony. The potential political implications of the burgeoning economic crisis are revealed, in part, through an analysis of the parameters of the debate that has developed over an industrial strategy for Canada. The challenge to the staples fraction that has received the most attention has been the liberal nationalist technological sovereignty option, which would place indigenous manufacturing capital, based in the high-technology sectors, at the centre. Yet the labour movement has also become a party to the debate.' Although its full-employment centred version of an industrial strategy stops short of the British Labour left's 'Alternative Economic Strategy' (AES) , the CLc' s alternative does differ in significant ways from the other major proposals. 2 More important, if the CLc's strategy became the basis for state action, workers in industries like textiles might be in a more effective position to influence the direction and pace of the restructuring process. Economic nationalists, both liberal and left, began to challenge the continentalist presuppositions of post-war Canadian policy in the late 1960s. An important component of their critique was an emphasis on the distortion of Canadian development induced by the predominance of American transnational corporations in the leading resource and manufacturing sectors. More broadly, the economic power of these transnational corporations was seen as the basis for the state's adoption of policies that supported Canada's dependence on resource exports, largely to the United States and often by these same transnationals. The other side of the coin - the poor export perfonnance and high import propensity of domestic

I 31 Into the 1980s

manufacturing capital - was similarly linked to the domination of leading sectors by foreign-controlled branch plants. Although both the liberal Committee for an Independent Canada and the left nationalist Waffle had disappeared from the national political scene by the mid-197os, their analysis was adopted and developed by the Science Council of Canada, whose board convenes leading members of the Canadian bourgeoisie involved in high-technology industries. The Canadian Institute for Economic Policy, whose analysis links liberal nationalist and post-Keynesian prescriptions, has also given some support to this option. The Science Council has put forward the most coherent version of the liberal nationalist industrial strategy . Centred on the goal of technological sovereignty , its proposals call for concerted state intervention to strengthen 'core' Canadian capitals based in the high-technology sectors . The measures proposed would include the use of a strengthened Foreign Investment Review Agency (FIRA) to improve the bargaining power of Canadian capitals requiring access to technology developed elsewhere. Yet this strategy would not ignore indigenous capital in the more traditional sectors . It would provide assistance to smaller Canadian capitals and promote the development of links between these and the new core capitals. In this way a new positive-sum relationship could be established, whereby smaller capitals would receive assistance in restructuring but would look to Canadian sources of supply, thereby generating domestic demand for the goods and services organized by capital in the high-technology sectors. The continentalist rejoinder has received the fullest elaboration in various publications of the Economic Council of Canada, whose board assembles , among others, officials from the corporations more closely identified with the state' s post-war policies. Arguing from a more traditional, neoclassical perspective on the role of the state, proponents of this strategy suggest that, in the medium term, continental trade liberalization would constitute sufficient incentive to induce American-based transnationals to rationalize the operations of their Canadian branch plants. Although this policy would lead to the destruction of many jobs in the manufacturing heartland of central Canada, the adoption of an appropriate fiscal and monetary framework, supplemented by specific adjustment programs for workers and affected communities, would limit the dislocative effect- and the extent of domestic opposition. Thus, on the one hand, the continental rationalization strategy represents one of the ways in which the state might try to re-establish the political conditions for the continued realization of the core interests of the staples fraction . It is also the strategy most consistent with the post-war economic policies of the Canadian state. The post-war version of continental free trade was designed primarily to encourage staples-led growth; however, the Defence Production Sharing Agree-

132 Canadian textiles ment, the Autopact, and, as we have seen, the 1971 textile policy sought to extend this practice to certain sectors of manufacturing. On the other hand , the liberal nationalist , technological sovereignty option represents a potential challenge to the staples fraction ' s leading position by seeking the support of other indigenous capitals (and of labour) for a state-guided restructuring process in which Canadian capital in the advanced sectors would assume the leading position. There is, of course, a way in which the interests of the liberal nationalist fraction might be co-ordinated with those of the staples fraction: the 'mega projects' strategy, through which new links could be established between resource development and indigenous capital supplying high-technology inputs. As we shall see in the next section, after the 1980 election the federal government favoured this alternative. Yet the mega projects strategy, like the other two, involves restructuring on terms favourable to the main fractions of capital . This is where the CLc's attempt to formulate its alternative becomes important. Rising unemployment, due increasingly to plant closures and lay-offs, has certainly created the material basis for the labour movement's break with the continentalist and mildly Keynesian terms of the Canadian post-war settlement. It was the imposition of wage controls in 1975, accompanied by the state' s flirtation with corporatist planning, however, that pushed the CLC leadership to formulate its alternative to restructuring on terms dictated by 'the banks and the multinationals . ' 3 If working people are not to be forced to bear the lion's share of the costs of restructuring , the CLC argues, then an industrial strategy in which the central goal would be full employment must be adopted . The CLC's alternative shares certain features with that of the liberal nationalists. The CLC officially rejects continental free trade , arguing: 'Free trade with the United States is not a realistic alternative. Given the branch plant nature of the Canadian manufacturing sector, a free trade or common market arrangement with the United States would result in a North American rationalization process that would leave Canada a net loser' (CLC , 1980, 8) . The CLC also emphasizes the necessity of measures to ensure further processing of resources prior to export: co-ordinated federal-provincial purchasing policies complemented by state efforts to direct private sector purchasing to domestic suppliers; and the use of fiscal policy and a strengthened Foreign Investment Review Agency (FIRA) to increase domestic research and development (R&D) and to ensure that existing branch plants invest in a manner that strengthens the Canadian economy. The CLC' s analysis and prescriptions, however, differ in several important ways from the liberal nationalist position. First, the CLC recognizes that capital has already managed to reduce labour's share of the national income: 'If we look at the entire period from 1972 through 1979 pre-tax corporate profits have gone up by 300 per cent ... By comparison,

133 Into the 1980s average earnings have only risen 11 I . 7 per cent. As a result, there has been a drastic shift of income from wages and salaries to capital' (CLC, 1980, 2) . And the state has not been neutral in relation to this process. Corporate tax cuts, the wage controls imposed in 1975, and restrictive monetary and fiscal policies have played a significant part. In opposition to such policies, which are aimed at controlling direct and collective consumption in favour of investment, the CLC would argue for the restoration and improvement of social programs. In other words , industrial restructuring need not take place at the expense of social welfare. In this respect, the CLc's position is in contrast to that of the liberal nationalists' . Although the latter have not spelled out the social policy implications of their strategy, their proposals effectively require enormous investments, both public and corporate, oriented to improving the position of the nationalist fraction of capital. 4 Second, the CLc's proposals would include state controls over investment, whether by foreign or indigenous capital. Thus the CLC would enlarge FIRA's jurisdiction to include the regulation of capital exports - an aspect that the liberal nationalists clearly do not address, despite the behaviour of 'exemplary ' Canadian corporations like Northern Telecom, which began shifting key functions to its American subsidiary in the I 970s . The CLC also has taken a clear position in favour of 'positive public ownership' (i.e. , the establishment of state-owned firms in leading sectors) . Regulation of Canadian and foreign-controlled transnational capital and the selective use of public ownership would be backed by the establishment of an investment fund ( 15 per cent of pre-tax profits), which might allow the state to influence the timing and location of private investment, and by legislation to permit the unions to utilize their pension funds for investment purposes. In addition, the CLc's 1982 policy statement argues for the annual publication of an account of the investment and loan activities of financial institutions and the provision of 'credit quotas' to reward those who have directed funds into specific industries. (At the convention, moreover, the delegates succeeded in passing an amendment calling for the nationalization of the banks.) Third, the CLC knows that policies designed to restore full employment must include a significant regional component. It is critical , however, of the methods used by the Department of Regional Economic Expansion (DREE) to deal with the problems of uneven regional development. Despite a relatively high utilization rate, DREE's major program to attract capital to designated areas - the Regional Development Incentives program - has been unable to overcome existing regional disparities. The CLc's alternative would include tougher selection procedures to avoid disasters like the Bricklin case, in which public funds were used to produce a luxury sports car in New Brunswick - a wild entrepreneurial dream , which soon collapsed. More important, it would make only a small part of DREE funds available in the form of outright grants. The greater part would take the form of

134 Canadian textiles state equity holdings. In addition, regional considerations would be built into the criteria for releasing corporate money locked up in the proposed investment fund . Finally, the CLC's strategy explicitly attempts to grapple with the problems posed by rapid technological change, proposing measures designed to ensure that the cost of technological change and industry rationalization will not be borne primarily by the workers. Its 1978 document on technological change argued for nation-wide changes in collective bargaining legislation that would strengthen the unions' capacity to influence the pace and direction of technological change. Its 1980 statement called for the establishment of a tribunal to oversee the adjustment process: 'Before major layoffs or plant closures can occur companies must justify their decisions before a public tribunal. This means a complete opening of the books. There must be at least one year advance notice. Compensation by companies must be paid for retraining, relocation, severance pay and compensation to the community' (CLC, 1980, 6). The proposed tribunal would have a mandate to compel companies to reach agreements with workers affected by import competition, industry rationalization, and technological change - unlike the Textile and Clothing Board whose concern for labour is limited to the certification of those eligible for preretirement benefits. While the tribunal would oversee the adjustment of capital, potentially reinforcing the powerofunions at the plant level, the implementation of an 'active manpower policy,' funded by firms in each sector, would provide training for the jobs opened up by the expansion of newer sectors. 5 Perhaps the most interesting development is the preparation, through the CLC, of a collective bargaining handbook designed to assist the affiliates in negotiating on issues surrounding technological change. The threat of deindustrialization has thus provided fertile ground for the politicization of the question of industrial restructuring. The entry of labour and the liberal nationalists into the debate, in tum, holds forth the prospect of the adoption of a new industrial strategy that would differ in significant ways from that embedded in the 197 I textile policy. Both groups reject continental rationalization and both want to see the state take a more directive role in promoting intersectoral economic links. The liberal nationalists, however, have not addressed the major problems faced by labour whereas the CLC' s alternative would attempt to do so. This alternative implies that restructuring should not take place at the expense of social consumption. It would regulate the investment decisions of Canadian as well as foreign multinationals (i.e., firms like DomTex) and seek to increase the ability of workers to affect the pace and direction of restructuring at the level of the firm. Its labour adjustment proposals go well beyond the limited benefits available under the AAB . In addition, capital would have to pay for retraining, relocation, etc., rather than funding such programs through general tax revenues. The question is: Just how much impact have these new forces had on state policy and the power relations that have been sustained by it? If we examine the

135 Into the 1980s 1981 textile policy, we can make a tentative assessment of the effect the entry of the liberal nationalists and the CLC into the debate has had on the state. Such an assessment, however, requires a prior discussion of the major changes that have occurred in the state apparatus. THE STATE'S RESPONSE

The development of competing versions of an industrial strategy for Canada represents only one political manifestation of the erosion of the material basis of consent that set in during the 1970s. The importance of a strategy for re-establishing the conditions for hegemonic domination was registered, inter alia, in the state's own mechanisms for data collection and analysis, which indicated the weakness of Canadian manufacturing: its declining contribution to employment; its poor R&D record; and its contribution to Canada's balance of payments difficulties. In order to formulate an appropriate strategy, however, the state apparatus itself would have to be developed. The most notable changes were the establishment of a series of task forces, organized along corporatist lines, and the creation of two new central agencies, the Ministries of State for Economic and for Social Development (MSED and MSSD). 6 The question is: Were these changes designed merely to enable the state to preserve the post-war status quo or was the structure of representation being modified in order to correspond to a new balance of power in Canadian society? This question is clearly important from the standpoint of textiles too; for if the state were attempting to consolidate a new relation of forces, it would be through such administrative changes that the implications of such a policy shift for textiles would be worked out. The federal government, in fact, had begun to build the administrative capacity for economic planning in the late 1960s. French (1980) has discussed some of the changes, notably those involving Finance, the Treasury Board, and the Privy Council Office (PCO). The most relevant change from the standpoint of industrial strategy, however, occurred when the PCO was given the mandate 'to shake Finance and its satellite, Industry, Trade and Commerce, out of what the Planning and Priorities Secretariat saw as complacency in matters of industrial development' (French, 1980, 104). Although the PCO faced formidable resistance, by the winter of 1974-75 it had forced ITC to present its version of a 'broad gauge' approach to industrial strategy. The ITC proposal 'included a set of objectives for industrial development, an appendix describing sectoral strategies for 23 industries and specific recommendations as to the structure and process for attempting to implement the analytical framework' (French, 1980, 117). The document was discussed by the lnterdepart-

136 Canadian textiles mental Committee on Trade and Industrial Policy (ICTIP), charged with establishing an effective link between the position Canada would take at the upcoming GATT negotiations and 'an industrial policy thrust rendered urgent by the increasingly evident weakness of the country' s manufacturing sector' (French, 1980, 119). ICTIP, chaired by Osbaldeston ofnc, recommended the establishment of twenty-three sectoral task forces . These groups would bring together officials from the major companies and unions in each sector to discuss the sector profiles prepared by ITC. Federal and provincial officials would act as observers. 7 The decision to establish twenty-three sectoral task forces resulted from conflict within the administrative apparatus. The stance taken by the PCO and ICTIP was based on the recognition that a new basis of accord between the staples fraction and import-substituting capital would have to be worked out if the latter were to be able to accept the heightened import competition that would follow from the Tokyo Round negotiations. The decision to involve corporate officials in the next round of bargaining is understandable. If the state were to force the pace of restructuring in anticipation of increased import competition, it would need to secure the compliance of those who control the investment process. The task forces, however, were ultimately to include union officials as well. To understand why labour's involvement in industrial policy discussions was becoming important, we need to look at certain developments that occurred in the 1960s; for it was not the formation of a CLC ' alternative strategy' that led the state to concede that the unions should be involved. In the mid- 1960s a high level of employment had coincided with the rise in labour militancy documented by Jamieson ( 1968). This combination triggered two distinct state initiatives. First, the Woods Task Force on Labour Relations conducted a wide-ranging study of the Canadian industrial relations system. Some of its recommendations were included in the 1973 amendments to the Canada Labour Code; others, notably the call for the rationalization of Canada's fragmented bargaining structure, were to be the subject of further studies . 8 In fact, rationalization of the collective bargaining structure was placed high on the agenda of the Canada Labour Relations Council (CLRC) established in the early 1970s. Although CLRC was corporatist in form, its mandate fell squarely within the traditional mandate of Labour Canada - industrial relations - and hence marginal to the economic planning network. The second initiative, however, was to make labour policy an increasingly important component of economic planning. Although the labour militancy of the 1960s resulted in only a marginal increase in labour's share of the national income, it did coincide with the onset of price inflation. This coincidence did not pass unnoticed by the Canadian state; for organizations such as the Organization for Economic Co-operation and Development (OECD) had been warning of the 'Phillips curve' trade-off between full

137 Into the 1980s employment and price stability throughout the decade, as had the Economic Council of Canada. Thus an attempt was made to secure the cLc's support for a voluntary incomes policy through the Prices and Incomes Commission (PIC) in 1968 (Wolfe, 1977). Although PIC failed to obtain the CLC's consent, the administrative machinery for implementing an incomes policy was kept intact, and, as inflation and wages began to rise again in 1974, a new effort was made to obtain the CLC's voluntary participation in an incomes policy (Giles, 1980). When these negotiations failed, a statutory incomes policy, administered through the Anti-Inflation Board (AIB), was implemented. The intrastate negotiations surrounding the introduction of the statutory incomes policy are interesting vis-a-vis the changes they effected within Finance, guardian of the post-war compromise. 9 In addition, Labour Canada gained admission to the economic policy network through its membership on the critical interdepartmental committee, 'DM-IO,' charged with developing post-controls economic policy. The most significant development, however, flowed from consultation with CLC officials, in which a variant of corporatist planning was offered in exchange for compliance with an incomes policy. Although these discussions initially appeared to have failed, they did serve to indicate the state's recognition that labour's explicit consent was needed if capital were to realize the level of profits required for restructuring. That is, if not restrained, labour could place the whole restructuring process in jeopardy. Although the twenty-three sector task forces and the major projects task force (which reported in 1982) were organized along quasi-corporatist lines, it should be emphasized that they constituted only an embryonic form of corporatist planning. They were simply to submit their reports, which were then fed into the real decision-making arena, the interdepartmental economic policy network in which Labour Canada, organized labour's chief representative within the administrative apparatus, enjoyed only a marginal role . More broadly, the state's experiment with corporatism did not emerge in response to the CLc's entry into the industrial strategy debate; rather, it reflected the success of locals at the bargaining table, which was putting pressure on the Canadian state to find a means of controlling wage increases without engaging in a full-scale assault on unions. These quasi-corporatist bodies thus approximate the CLC's description of 'liberal corporatism': an attempt to have ' the institutions of organized labour . . . function to ensure the acquiescence of the workers to decisions taken by new institutions in which their representatives have no real power' (CLC, 1976, 9) . The only difference is that, within the unequal structure of representation, the decisions were taken not by these bodies but elsewhere. A more significant development, then, was the creation of a new central agency, the Ministry of State for Economic Development (MSED). MSED now sits at

138 Canadian textiles the centre of an economic policy network that includes all or parts of the following departments: Agriculture; Communications; Consumer and Corporate Affairs; Environment; Fisheries and Oceans; Industry, Trade and Commerce; Labour; Regional Economic Development; Science and Technology; Supply and Services; and Transport (Doern, 1981: appendix A). MSED is well placed to co-ordinate the economic planning and policy activities of these departments, since it assists the Economic Development Committee of cabinet in determining the division of resources within the economic expenditure envelope. Finance continues to play a critical role, but MSED seems in a better position than the PCO to influence the state's position on industrial restructuring. The question is, which of the industrial strategy alternatives does MSED favour? It seems clear that since its inception MSED has favoured the mega projects strategy, the primary purpose of which is to arrange a new relationship between the staples and the nationalist fractions of capital. 10 This strategy assumes that the staples fraction will maintain its leading position, since the resource projects scheduled for the next two decades are seen as the 'engine of growth.' Yet MSED has also supported the activities of agencies within Energy, Mines and Resources and ITC, whose primary objective is to encourage the use of domestic sources of supply, especially of those products and services that have a high-technology component. In addition, MSED has looked favourably on the activities of those agencies charged with developing programs to strengthen indigenous hightechnology capitals (e.g., the technology branches of ITC and the Department of Communications) . In other words, the nationalist fraction of capital has not managed to displace the staples fraction from its leading position. None the less, MSED's orientation seems to signal an attempt to establish a new relationship between the staples and nationalist fractions. Through the mega projects strategy, the nationalist fraction would secure more favourable terms, although its expansion would remain dependent on the growth prospects generated by staples projects. What implications might this new relationship hold for capital in the more traditional import-competing sectors and for labour? With regard to the first, MSED appears supportive of ITC / RIE initiatives to secure world product mandates for subsidiaries of foreign multinationals, a measure long advocated by liberal nationalists. In certain respects, however, this strategy is consistent with that of the 1971 textile policy. That is, it is designed to secure a new relationship between import-substituting capitals and the staples fraction such that the former can accept trade liberalization. It will receive assistance for restructuring projects, which will allow it to participate in world markets. The implications for capital in sectors hke textiles, however, are less clear. MSED shares Finance's concern that measures designed to ease the adjustment process may turn into protectionist subsidies 'propping up mature industries that will never be competitive in this generation.' 11

I 39 Into the 1980s With regard to labour, MSED seems particularly interested in the use of corporatist mechanisms for gaining the explicit consent of labour - so much so that one observer has argued: ' Since both the CLC and MSED appeared to share an interest in consultation [corporatism] and the development of an industrial strategy, labour wondered if they had not found a powerful new ally within government. They soon began to focus their attention on MSED, and neglect their traditional but lacklustre Department of Labour' (Langille, 1981 , 184). In more substantive terms, the mega projects strategy has included some specific concessions to labour. They take into account the minimum price for labour's support as enunciated by the CLC through the Major Projects Task Force: the creation of an advisory board, structured along corporatist lines and empowered to make recommendations to ITC/ DRIE' s Major Projects Assessment Agency, plus a commitment to amend the Canada Labour Code to ensure that workers on major projects on federal land will be protected by collective agreements. 12 MSED has also encouraged Labour Canada to proceed with its proposals for improving the industrial relations climate throughout Canada. In addition, MSED appears supportive of the kind of labour market policy approach recommended by the Canadian Employment and Immigration Commission' s (CEIC) Task Force on Labour Market Development ( I 98 I) . Although this strategy would encourage the movement of labour from declining sectors and regions to the new centres of expansion in the western resource-based economies, it would also involve measures to cushion the impact of restructuring on those workers less able to move. 13 The Canadian state has responded, then, to the politicization of the issue of an industrial strategy for Canada by experimenting with corporatist mechanisms for securing consent and, more important, through the establishment of a new central agency that supplements Finance in securing the broader political interests of the hegemonic staples fraction. MSEo's approach has been aimed at establishing the conditions for a new positive-sum relationship between the staples and nationalist fractions of capital. It has also recognized, of course, the importance of winning the consent of certain elements of import-substituting capital and of labour. It must be emphasized, however, that labour's consent is being sought not because of any direct political action on its part to advance its full-employment-centred strategy, but rather because of the potential threat to the state's industrial strategy posed by the militancy of the rank and file. TOWARDS A NEW TEXTILE POLICY ? Both the entry of the liberal nationalists and the CLC into the industrial strategy debate and the state's response to this and other signs of the erosion of the material basis of consent certainly had an impact on the process through which the I 98 I

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textile policy was formulated. Capital and labour in textile and clothing industries were involved in the 1978 sectoral task force exercise, and MSED did play a part in the internal-to-state negotiations that resulted in the establishment of the CIRB. In this section the decision making process will be analysed to determine the specific impact these developments had on the content of the 1981 policy. The textile and clothing sector task force did not provide any significant new input into the textile policy. To find such a source we need to examine the conflict that occurred, within the unequal structure of representation, between the representatives of capital in the textile sector and those in the staples fraction. Nevertheless, it is useful to examine the task force report to determine whether the changes that appear to have affected the organizational capacity of labour and clothing capital actually resulted in a redefinition of the issue. That is, has the reorganization of clothing capital's trade associations affected its capacity to advance its interests? Has the entry of the CLC into the industrial strategy debate - a development that included the cLc's attempt to co-ordinate the position taken by its affiliates in these sectoral task forces - affected labour's capacity to formulate and advance its own definition of what is at issue? In terms of the composition of the task force, textile and clothing capitals were accorded parity in that each supplied nine members. The unions accounted for only four. ' 4 Tex6le capital, however, continued to hold the predominant position. The chair was drawn from DuPont, with officials from Celanese and Cambridge Clothes acting as vice-chairpersons. More significantly, textile capital supplied most of the support staff: three from the en; one from Corporation House, the en's consulting firm in Ottawa; three from DuPont; two from DomTex; one each from Celanese and ConsolTex. CAMI, the Apparel Manufacturers Association of Ontario, and the Manitoba Fashion Institute each provided one staff member. Although the task force's composition attests to textile capital's superior organizational resources, it would be a mistake to assume that numerical strength is automatically translated into the capacity to impose one's definition ofthe issue. For instance, clothing capital and / or labour could have submitted a minority report, as did the automotive task force. Alternatively, contentious issues could have been 'referred to further study.' An analysis of the report, however, shows that despite the possession of the CLC's background document, the unions in this sector simply acted once again as supports for capital's demands. The reorganization of clothing capital's associations does seem to have permitted a more precise articulation of their needs, but their demands reflected acceptance of the terms of the 1971 accord. In other words, . the core of the report revealed textile capital's position. It supported the terms of the 1971 policy while noting the need for several improvements if the policy were to be successfully implemented. Thus the report

141 Into the 1980s noted that the TCB was doing an excellent job but that the trade side of ITC had become too dominant. 15 The report also endorsed textile capital's criticism of proposed amendments to Canadian competitions policy, noting that care should be taken that new measures would not hinder the mergers and acquisitions so essential for industry rationalization and for the efficient utilization of the new techniques. Nevertheless, clothing capital was able to obtain textile capital's endorsement for its proposals regarding the need for more productivity centres, consultancy grants on the terms offered under the Footwear and Tanning Industry Adjustment Program (FTIAP), and improved facilities for training managerial and supervisory personnel. In fact, textile capital was prepared to concede that it, too, could benefit from these forms of direct assistance . The report also detailed clothing capital's numerous criticisms of OREE policy, including its exclusion from grants offered under the Montreal Special Area incentive program. Finally, clothing capital managed to get the issue of a Tex pact referred for further study, a move that gave it more time to negotiate acceptable terms. Clothing capital's improved organizational capacity helps explain its ability to secure endorsement for its demands, although it should be noted that these demands were for the kind of program assistance required for compliance with the terms of the 197 I policy. Clothing capital's performance stands in marked contrast to that of the unions. The unions made no effective demand for an improved adjustment program for labour. 16 In fact, the one union submission included in the report - the ACTwu's paper on 'some social consequences of increased unemployment' - did not deal with unemployment generated by the restructuring process itself; rather, it was used to underline the importance of capital's demand for continued regulation of imports from low-wage sources. Nor did the unions express rejection of the form of assistance sought by capital - despite the fact that the three CLC affiliates had in hand the background paper prepared by the CLC, which was highly critical of corporate tax cuts, OREE incentives, and the like. The only expression of tension between capital and labour came in the form of the following statement: Both industry and labour leaders are keenly aware of the need to modernize and to take advantage of existing and future technological advances, and are confident that, through negotiation between the two parties, agreements can be reached and plans devised for the rapid but orderly introduction of technologies which will assist the industry to operate at higher levels of efficiency. It is recognized that a too-rapid or ill-planned introduction of new technologies could adversely affect this harmony . (ITC, 1978, 7)

That is, the unions are not unaware of the implications that the new technology holds for their members. They have, in fact, won some concessions at the

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bargaining table, as reflected in the relatively high percentage of textile and clothing workers covered by agreement, including technological change clauses (Peitchinis, 1980, table 4) . Nevertheless, Buchanan's (1980) study of union attitudes towards technological change, which included interviews with ACTWU officials, shows that unions recognize the limited protection that such clauses afford them. 17 Thus the l 978 sector task force essentially provided yet another opportunity for capitals in the textile and clothing industries to articulate their demands - and to use the unions' endorsement as a means of underlying the importance of state action in this regard. The CLC had not been able to break the hegemony that textile capital has exercised over its affiliates (and the Centrale des syndicats democratiques) in this sector. The reorganization of the clothing associations does seem to have helped clothing capital to articulate its particular needs and to delay official endorsement of a Texpact. It should be remembered, however, that the state played a not unimportant part in bringing about the reorganization. It did so, moreover, in order to facilitate the extension of the 1971 accord to the clothing industry. In fact, perhaps the most striking feature of the report is the way in which it confirms the consent of all parties to the basic terms of the 1971 policy compromise; that is, technological modernization, industrial concentration, and (plant and product) rationalization are seen as steps required to render this sector internationally competitive. All the major demands articulated focused on policies and programs designed to facilitate compliance, particularly on the part of smaller capitals. Because all members of the task force accepted the basic terms of the 1971 policy, it is difficult to see the sector task force as a potent source of any significantly 'new' input. Rather, to understand why the 1981 policy contained certain new features we need to examine the conflict that occurred between the state representatives of these capitals and the representatives of the hegemonic staples fraction. 18 MSED, which assists Finance in representing the broad interests of the staples fraction, did play a part in shaping the 1981 policy . The first round of negotiations, however, involved textile and clothing capital's representatives and the Economic Analysis Branch of ITC . The Textile and Consumer Products Branch had been engaged in an industry review throughout 1979 and the early part of 1980. The industry profiles it produced attempted to demonstrate that both had moved towards the objectives of the 1971 policy. Industry rationalization and modernization were most marked in textiles, but certain divisions of the clothing industry, notably shirts, jeans, and men's suits, had made considerable progress. The studies, however, raised several concerns as to potential impediments to future restructuring. They pointed to the

143 Into the 1980s 'climate of uncertainty ' created by import competition, from low-wage sources of clothing imports and from advanced capitalist (especially u .s .) sources of textiles. Given the projected demand for investment in other more profitable sectors, it was unlikely that capital in this vulnerable sector would be able to obtain external funds to finance further restructuring programs. While this was especially true for the smaller and medium-sized capitals in the clothing industry, it also applied to textiles. The branch, then, was able to show that considerable progress had been made since 1971 . At the same time, it argued for new policy instruments with which to pursue the aims of the original policy . In this view it went beyond the demands expressed in the task force report . It recommended grants to encourage mergers and acquisitions as well as grants that would cover up to 50 per cent of the capital costs incurred as a result of restructuring projects valued at over $250,000. The Economic Analysis Branch, sponsor of the labour force tracking survey referred to in chapter 7, had also commissioned a study on 'Trade Adjustment Assistance' by Econanalysis Inc. ' 9 Operating on the assumption that multilateral trade liberalization was not only desirable but probable, the study attempted to estimate the labour adjustment problems likely to result from increased import competition. It used two case studies to demonstrate its point that such problems were indeed manageable. Significantly, one of these studies involved the textile-dependent town of Sherbrooke, Quebec. Although Econanalysis shared with the labour force tracking survey a tendency to minimize the effects of trade liberalization, it did recommend direct and indirect forms of labour adjustment assistance, not only for reasons of 'fairness and equity,' but also to undercut union resistance. The conflict between the textile branch and those parts of ITC comitted to trade liberalization continued throughout 1980. It was a battle in which data on industry productivity (actual and potential) and regional contributions to employment were ranged against the Economic Analysis Branch's studies, which were designed to show the economic and political feasibility of rapid adjustment out of these 'declining' industries. Basically the conflict was, again , a conflict between the representatives of capital in the textile and clothing industries and the champions of the economic interests of the staples fraction. The main difference between this and the previous round was that the arguments of both parties had become more sophisticated. The former could now utilize the dominant economic discourse to defend those they represented, while the latter were now more mindful of the importance of addressing the problem of labour resistance to adjustment. The stalemate persisted until pressure for a resolution , stemming from broader developments, was brought to bear on these two parties. First, Herb Gray, appointed minister of ITC when the Liberals were returned to

144 Canadian textiles office in 1980, after an electoral contest in which they appealed to nationalistic sentiments, was a strong proponent of state-directed industrial restructuring. Gray's appointment increased the pressure on the department to produce a comprehensive industrial strategy. Second, the new Ministry of State for Economic Development began pressing the departments and branches in its envelope to produce ' strategic overviews.' These reports were to take into account MSED's guidelines, which stressed, inter alia, the need to shift labour and capital into resource and high-technology sectors. While both developments exerted a general pressure on the protagonists in the textile debate, the release of the Textile and Clothing Board's controversial July 1980 report made it imperative for the government to demonstrate that it rejected the TCB's 'highly protectionist' recommendations. The 0SIP (now Office of Special Trade Relations) network was used to moderate the board's proposed restraint program. The ten-year time horizon accordingly was reduced to the internationally acceptable four- to five-year time span. OREE was brought in to help identify dependent communities and draft a compromise on the remaining issues . In the spring of 198 1 ITC' s compromise proposals were presented to the Cabinet Committee on Economic Policy. They included support for the more moderate VER program recommended by 0STR-Lc1c; support for the gradual introduction of a T~xpact; acceptance of the Textile Branch's proposals for a new incentive package for textile and clothing capital; and endorsement of the idea of an adjustment package designed to attract new industries to textiledependent towns and otherwise to ease the burden placed on those who would lose their jobs . In other words, textile capital and clothing capital, especially the latter, were to be given another five years in which to adjust to a more liberal regime. The new forms of direct assistance to be offered were the removal of the main obstacles faced by the smaller capitals in this sector, while community and labour adjustment programs were to overcome labour (and Quebec) resistance to the reduction of import controls in the future . The basic structure of the new compromise had thus been hammered out within ITC. ITC's proposals, however, had to pass through MSED, which submitted its assessment in May 1981. Despite MSED's preference for phasing out uncompetitive industries in order to free resources for its mega projects strategy, the ministry, like Finance before it, was forced to accept a compromise that differed in only one major respect from the terms of the 1971 accord - stronger measures to ease the adjustment of labour, a point that the Textile and Consumer Products Branch had already conceded as the price of its success in winning direct financial assistance for textile and clothing capital. MSED officially conceded that capital in the textile industry had become competitive, noting that the industry was dominated by multinational firms

145 Into the 1980s capable of implementing appropriate restructuring programs in the future. Textile capital's competitive position could be strengthened, however, by improved anti-dumping procedures and by talcing steps to secure access to the American market. 20 MSED did not accept nc's more positive assessment of clothing capital's performance, arguing that the latter remained highly fragmented and was engaged in many lines of production in which it had no prospect of becoming competitive. The Textile and Clothing Board was sharply criticized for propping up a low-wage industry, contributing to inter-regional tensions, and jeopardizing Canadian exports to south-east Asia and state trading countries like Rumania and China. MSED argued for even lower levels of protection than those sanctioned by 0STR-LCIC, suggesting that import pressure seemed the only really effective means of ridding the economy of these inefficient producers. It did accept nc' s proposed financial incentive package: a grant program for hiring consultants modelled on the FTIAP; assistance for mergers and acquisitions; and a grant to defray the capital costs of investment projects. MSED, however, recommended a lower level of support for textile and clothing capital in order to free resources for a more generous program of community and labour adjustment assistance. The concern here was to isolate those determined to protect their past investments or their membership base (i.e., owners of firms and union officials). 21 MSED's most important contribution was the proposed establishment of a new 'limited life' agency, which would be charged with the administration of all three components of the adjustment package: textile and clothing modernization assistance; regional redevelopment; and direct labour assistance. Several arguments were advanced for this form of administration, including federal visibility (vis-a-vis Quebec) and the potential for attracting the direct support of leading corporate representatives. 22 Yet the formation of a new agency also provided an opportunity to remove responsibility for the adjustment process from the TCB, which was seen as a kind of 'captive agent' of protectionist forces. This aim was consistent with another recommendation made by MSED: that the rca's import surveillance function be talcen over by a revamped Anti-Dumping Tribunal. MSED's proposal was accepted to the extent that implementation of the 1981 policy was placed in the hands of a new agency, the CIRB. Yet MSED, like Finance in the earlier period, did not win on all counts. Through the 'Sector Firms' Program, the CIRB is empowered to offer lower interest on loans for mergers and acquisitions, grants covering up to 80 per cent of the costs of consultants' fees, and grants of up to 25 per cent (now 50 per cent) of the capital costs of approved modernization projects. Part of the $267 million placed at its disposal will be allocated to direct and indirect forms of labour adjustment. Textile and clothing workers will be eligible for enriched mobility allowances, portable wage subsidies, and retraining. The CIRB can subsidize up to

146 Canadian textiles 50 per cent of the capital costs incurred by firms in new industries prepared to locate in designated areas (Business and Industrial Development Program). The creation of the CIRB, however, has not removed the TCB from the textile policy network, nor has it altered the direction of industrial restructuring. The Parliamentary Sub-Committee on Import Policy recently rejected the proposal that the TCB be merged with the Tariff Board and the Anti-Dumping Tribunal noting, inter alia, that the TCB 'is carrying out its mandate in a satisfactory manner' 23 (Parliamentary Sub-Committee, 1982, 32). In addition, the TCB will continue to enjoy sole access to corporate plans submitted during an inquiry. At the same time, by making available its assessments of industry performance, such as those contained in its 1981 report, the TCB will have an input into CIRB decisions . 24 The TCB is likely to continue to work with OSTR and LCIC in defining the extent of Canada's VER system. Although the government rejected the Tea's nine-year time horizon, the restraint agreements announced in February 1982 are closer to those recommended by OSTR-LCIC than those recommended by MSED. In addition, the TCB, along with the Textile and Consumer Products Branch, will assist the division of the CIRB charged with decisions on which firms should receive assistance within the textile and clothing industries. The other two divisions of the CIRB will oversee the community redevelopment program ( with the assistance ofRrn's regional officers) and the labour adjustment package. Although the new board will report to the committee of economic development ministers, MSED, those charged with the textile and clothing assistance measures are empowered to make decisions, and they accept the basic lines of the policy laid out in 1971. It would seem, in fact, that the sector firms program is the strongest of the three administered by the CIRB. By the end of April 1983 the CIRB had authorized disbursement of $43 million of which $41 million had gone to firms in the textile, clothing, and footwear industries. 25 The large textile firms have received the lion's share: over $30 million to DomTex and its subsidiaries, $3.146 million to Celanese, $992,000 to Courtaulds, and $726,000 to DuPont. In a press release of 29 April 1983 the CIRB called attention to its role in assisting the adoption and development of new production techniques and promoting industry rationalization. The CIRB seemed less pleased with its progress in promoting mergers and acquisitions and in the response of (clothing and footwear) industry associations to the 'common services' program. The limited interest shown in the common services program reflects the difficulty faced by the state in overcoming the organizational effect of industry fragmentation. At the same time, CAMI continues to sponsor conferences that drive home the lessons: merge, modernize, and train managerial personnel. And, as more firms go under, the survivors appear to be

147 Into the 1980s listening. Finns such as Brodkin Industries Ltd, Beverini, and Cream Jeans stress the importance of reducing the number of lines produced and modernizing production and distribution (Citizen , 19 October 1982). Tan Jay h.:s received $2.2 million from the CIRB to develop automated production systems (Globe and Mail, 13 September 1982). Thus , despite the broader changes that have occurred in Canada over the past decade, the 1981 textile policy does not break with the terms of the earlier compromise. The new instruments that the CIRB is to administer will help capital in this sector to meet its obligations more effectively. Industry modernization, rationalization, and concentration will be accelerated and new initiatives are likely to be taken to secure access to the American market. That textile capital has been able to maintain the concessions obtained in 1971 despite the adoption of the mega projects strategy for restoring the staples fraction's hegemony can be attributed partly to its ability to organize and sustain an effective coalition of forces, now including clothing capital. Had it failed to comply with the terms of the 1971 accord, however, it is doubtful that its administrative representative could have overcome the objections of MSED and other branches, well placed to defend the interests of the staples fraction within the state apparatus . The new concessions made to smaller capitals in this sector are not outright concessions; assistance will be made available only to those prepared to develop and implement plans designed to render them internationally competitive. The 1981 policy thus essentially reinforces the earlier initiative. The really new features of the 1981 policy - the community and labour adjustment programs - are directed at labour. Yet they were inserted, not because of the CLc' s entry into the industrial strategy debate, but rather because the state has come to recognize that labour militancy could check the restructuring process. Not surprisingly, then, the policy bears little resemblance to the kind of restructuring favoured by the CLC. The portable wage subsidy program, which enhances the labour market competitiveness of individual textile and clothing workers at the expense of other unemployed workers, is a good example of the kind of ' divide and conquer' strategy that the CLC condemned at its 1982 convention. 26 Under the new policy the largest expenditures will be made to assist capital , in textile and clothing or in new industries; yet the form in which assistance is offered does not include any of the control mechanisms proposed by the CLC. Such controls, however, are needed, since the policy will increase the weight of transnational capital, both Canadian and foreign, within this sector. As others follow the lead of companies like DomTex, they will likely locate significant parts of their production activities in the United States as well as in low-wage economies of the Third World.

148 Canadian textiles POLITICS OF RESTRUCTURING: IMPLICATIONS OF THE TEXTILE CASE

The analysis of the decision to establish the CIRB has sustained the broader argument advanced throughout this study (i.e., that the politics of restructuring in textiles cannot be understood in sectoral terms alone). In 1981, as in 1971, the state's decision was the resultant of a bargaining process in which the staples fraction's representatives within the state were able to ensure that the conditions for realizing long-run interest in trade liberalization would be achieved. The textile case, however, holds additional implications. The I 97 I textile policy and the new policy instrument, the CIRB, are seen by the state as an integral part of its industrial strategy. Thus, although the terms offered capital and labour in other sectors are unlikely simply to replicate those provided under the textile policy, the main thrust is likely to be the same. The state will assist capital prepared to invest in labour-displacing technologies and will encourage further concentration as a means to this end. These initiatives will support a process of rationalization, not only within the national economy but also on a continental and global basis. In the end, the Canadian economy will be even more deeply integrated into the new international division of labour in which transnational capital will determine the quality and location of future jobs. Some attempt will be made to cushion the impact on workers and their communities, although the state will try to ensure that adjustment assistance is provided in ways that will not counteract market signals (i.e., reduce the supply of low-wage labour). Yet the prospects for the future need not be so bleak. Direct state involvement in a restructuring process that so decisively favours transnational capital, both Canadian and foreign, can generate precisely the political opposition that it seeks to pre-empt. As we have seen, there are at least two broad alternatives around which such oppositional forces might rally: the nationalist technological sovereignty option and the nc's full-employment-centred strategy. Neither alternative entails a complete break with the capitalist world economy, but the nc's proposal poses something of a challenge; for it recognizes that 'nationality' carries little weight in the calculations of transnational capital. At present, however, the CLC does not have the power to make its strategy the operative one. Although it is certainly beyond the scope of this study to indicate how the labour movement might develop the requisite strength, certain implications might be drawn from the analysis of the politics of restructuring in textiles. As we have seen, what benefits the state has been prepared to offer labour have not derived from the overt politicization of labour's economic struggle. Rather, it has been the state representatives of the hegemonic fraction who have recognized that labour resistance could block or significantly retard the restructuring process.

149 Into the 1980s The terms offered labour have improved since 1971 only because the state's broader strategy has been built on the assumption that labour militancy at the bargaining table must be contained if the state's strategy is to be successfully pursued . 27 The state thus appears more prepared than it was in the early 1970s to make concessions designed to secure labour's consent to the conditions required to implement the series of intracapitalist compromises embedded in its industrial strategy. The kind of concessions that the state is prepared to make, however, are far from adequate. Programs such as portable wage subsidies effectively divide workers, while the community development programs contain no measures to ensure that capitals that benefit from the grants and training programs will remain in the communities. More broadly, the kind of policy instruments employed do not deal with the basic problem of capitalist control over the investment process, even though this problem has become even more obvious in a period during which capital has assumed an increasingly transnational form. The terms offered labour are not likely to be improved significantly by union participation in corporatist bargaining sessions at the national or provincial levels. Union participants, of course, could employ a strategy similar to that of the en, evoking the militancy displayed by rank and file, a militancy that has not been destroyed by the AIB or by persistent high unemployment. The evocation of labour militancy might be enough to win a few concessions. Yet the real decisions will continue to be taken within the administrative apparatus, which is structured to reflect the basic balance of power within Canadian society. If the labour movement is to bring about a shift in the balance of power sufficient to transform the structure of representation, it will need to develop the militancy that rank and file members have displayed. Labour must adopt a strategy that goes beyond occasional 'days of protest' and is not confined to issues such as interest rates . The Canadian labour leadership needs to concentrate on strengthening its capacity for a dialogue with rank and file on the questions associated with industrial restructuring if it is to become a positive political force in the industrial strategy debate. The strengthening of labour's organizational capacity would certainly involve initiatives such as that suggested in the CLC's 1978 position paper. That is: 'If the labour movement is to realistically promote a national industrial strategy, the Congress must have departments that are working on a continuing basis with the affiliates in each sector of industry. In brief, trade departments that will be capable of providing greater service to the affiliates and which will promote a liaison on a continuing basis from which a greater understanding can grow' (cLc, 1978a, n.p.). Yet more is involved than improving the leadership's capacity to speak to its members. The CLC's full-employment-centred industrial strategy must be developed through discussion with rank and file and the other labour centrals. Without

I 50 Canadian textiles

this process, the CLC strategy will remain an abstraction; it cannot speak to the members or draw upon their experience - nor will it obtain their support. The changes affecting the lives of Canadian textile and clothing workers are similar to those increasingly encountered by workers in other sectors of the Canadian economy. As the possibility of deindustrialization spreads to previously secure industries, the material basis of hegemony is threatened. The Canadian state has recognized this threat and is prepared to intervene in the process of industrial restructuring in order to defend the hegemony of the staples fraction of capital. Yet the terms it is prepared to offer labour at present are unlikely to be better than those provided under the textile policy - unless the labour movement develops the organizational capacity to tum the defensive strength it has displayed at the bargaining table into a positive force for an industrial strategy centred on the needs of Canadian working people. This goal can be achieved if labour is able to produce a decisive shift in the basic balance of power. For only such a shift in power can bring about major changes in the structure of representation within the state apparatus.

APPENDIX

TABLE Al Selected manufacturing industry groups, classified by their top four enterprise industrial concentration ratios, 1965* Highly concentrated oligopoly

--

Food and beverage Textile industries Knitting industries Primary metal industries Clothing industry Metal fab. industries Transport equipment industries Electrical products Petrol. and coal products Chem. and chem. prod. indust.

Moderately concentrated oligopoly

Low-grade oligopoly

Atomism

Number of indust.

VFS as per cent of sample major ind . groupt

Number of indus.t.

VFS as per cent of Number sample major of ind. group indust.

per cent sample

7 6

16.9 46.3

3 6

24.3 36.7

8 3

55 .7 15.9

4 2 I

85.7 .6 7.1

I 2

6.2 5.0

I 7

5

8.1 25 .0 84.4

4 I I

70.0 2 .8 98.9

5

I 2

2.7 26.7

2

15.5

3

2

26.7 70.4

15.2

5

VFS

69.4

Number of indust.

Total sample

VFS

per cent sample

I I 2

3.0 I.I 100.0

10 I

69.4 8.5

I

.7

I

I.I

Number of indust.

VFS as per cent of all in indust. group

19 16 2 6 21 8

100.0 92.1 100.0 73.0 98 .9 100.0

8 8 2

100.0 100.0 100.0

IO

89.2

* These are based on the following definitions: highly = industries in which the largest four enterprises account for between 75-100 per cent of value added and employment; moderately = largest four account for 50-74 per cent; low-grade = largest four account for 25-49 per cent; atomism = largest four account for up to 24 per cent. t Abbreviated for value of factory shipments as a percentage of the total sample from the major industry group. SOURCE: Consumer and Corporate Affairs ( 1971)

TABLE A2 Changing levels of concentration in selected divisions of the textile and clothing industries, 1970-80 Value of shipments Leading enterprises (per cent) Industry Division Cotton, wool, fibre, and yarns Cotton yarn and cloth mills

Year

Enterprises

($000)

4

8

x*

100.0 100.0

1980 1978 1976 1974 1972 1970

7 7 7 8 9 10

661,755 446,857 363,864 370,047 309,607 282,532

X

100.0

97 .5 93.3

X

Wool yarn and cloth mills

1980 1978 1976 1974 1972 1970

40 36 34 43 44 51

235,712 191 ,992 170,349 164,668 128,992 121,982

48 .0 47 .7 52.2 40.2 35 .2 38 .1

Fibre and filament yarn manufacturers

1980 1978 1976 1974 1972 1970

10 9 8 7 7 8

552,870 426,405 269,733 270,536 197,990 198,085

X

X

90.5

X

X

100.0

93 .8 93.9 82.8

100.0

X

12

16

20

50

X

X

71.2 72.4 73.9 60.4 54.7 58 .6

84.6 86.0 85.4 74.8 69 .8 72.2 100.0 100.0

92. 1 94.4 92.8 85 .0 82.0 81.1

96.8 97.5 96 .3 91.3 89 .2

100.0 100.0

X

X

TABLE AZ (Continued)

Value of shipments Leading enterprises (per cent) Industry

4

8

12

16

Division

Year

Throwsters, spun yarn, and cloth mills

1980 1978 1976 1974 1972 1970

65 65 69 71 67 69

717,083 557,020 480,033 462,536 355,084 283,706

36.8 39.6 35.2 39.3 36.8 36.8

51.7 55.9 50.5 56.5 55.5 55.6

61.3 65.1 60.8 64.8 64.7 66.2

68.9 72.2 69.2 72.0 72.9 73.9

Fibre processing mills

1980 1978 1976 1974 1972 1970

17 18 20 19 22 28

29,613 24,223 26,943 26,038 20,951 22,051

63.9 63.0 61.6 59.7

87.0 84.0

X

49.3

83.5 81.1 71.2

95.9 94.7 93.1 95.8 94.1 85.5

1980 1978 1976 1974 1972 1970

23 24 19 24 24 23

424,460 427,744 305,533 228,964 202,793 136,439

X

98.4

99.5

X

X

X

99.7 98.9 99.2 99.4

Automobile fabric accessories

Enterprises

($000)

X

X

81.8

X

X

X

X

96.2 96.8

83 .8

X

98.0 99.5 99.1 93.8 99.9 99.7 100.0 99.8 99.8 99.8

20 75.5 78.1 76.0 77.8 79.8 80.5

50 97.6 98.0 97.9 98.1 98.8 98.4

100.0 100.0 100.0 X

98.9 100.0 99.9 100.0 99.9 100.0

100.0 100.0

TABLE A2 (Continued)

Value of shipments Leading enterprises (per cent) Industry

?O

Division

Year

Hosiery mills

1980 1978 1976 1974 1972 1970

60 59 62 70 76 92

192,067 132,212 109,267 96,179 90,754 112,447

29.2 28 .3 27.3 24.8 24.1 24.9

46.8 48.3 44 .2 41.5 40.8 39.0

61.4 60.8 57 .2 54.4 53.4 51.0

73.1 71.2 67.3 63.8 62 .8 61.1

81.5 78 .2 75.4 71.9 70.6 67 .8

99.2 99.2 98.1 97 .0 95 .8 91.5

Knitted fabric manufacturers

1980 1978 1976 1974 1972 1970

69 60 67 76 63 47

343,171 260,213 216,817 243,675 167,087 134, 181

27 .7 27.6 28.3 27.9 33.0 35.1

45.5 44.4 43.5 43.2 47.4 51.8

58 .8 57 .8 54.5 54 .3 60.0 65.8

68.2 67 .0 63.7 63 .7 70.2 75 .6

74.3 74.1 71.4 72.0 78 .1 82 .3

98 . I 98.9 97.1 95.8 98.4

Other knitting mills

1980 1978 1976 1974 1972 1970

135 135 142 156 152 157

409,466 319,371 305,166 260,776 212,241 168,062

18.3 18.5

29.8 29.2 28.3 32. 1 32.3 33 .0

39.2 37.6 35.7 40.8 40.6 42.0

47.4 45.3 42 .5 47.0 47 .7 49.0

54 .3 51.8 48 .6 52 .2 53.4 54.6

85.9 85 .3 79.0 79.5 80.3 80.5

Enterprises

($000)

4

X

19.6 18.6 20.9

8

12

16

50

TABLE A2 (Concluded)

Value of shipments

--

Leading enterprises (per cent)

Industry Division

Year

Enterprises

($000)

4

Men's clothing factories

1980 1978 1976 1974 1972 1970

440 434 441 448 428 447

1,513,407 1,171,547 1,015,620 790,465 621,140 512,214

20.6 17.1 14.0 12.7 11.7 12.0

27 .3 23 .8 20.7 20.4 19.6 19.6

33 .1 29.3 26.0 26.7 25.6 24.9

38.3 34.0 30.5 31.6 30.3 29.8

42.7 38.4 34.7 35.9 34.4 34.0

64.1 59 .8 55.9 57.2 55.3 54.7

Women's clothing factories

1980 1978 1976 1974 1972 1970

533 537 525 559 573 601

1,338,588 1,119,684 913 ,509 745 ,710 607,101 512,804

6.4 6.3 7.3 7.5 8.2 8.0

11.9 10.9 11.8 11.5 12.3 11.7

16.4 15.0 15.4 15.0 15.3 14.9

20.5 18.7 18 .6 18.2 18.2 17.8

24.0 22.0 21.7 21.0 20.9 20.3

42.7 41.4 39. 1 37.8 36 .3 35.6

1980

123 114

287,053 217,662 177,480 170,539 135,241 114,306

21.0 20.1 17.1 16.5 13.7 13.1

31.9 30.3 27.0 27.9 25.5 24.6

39.8 38 .2 35.2 36.6 35.8 34.1

46 .3 44.8

52.6 51.0 47 .7 47 .9 48 .8 46 .8

84. 1 82.6 80.0 76.7

Children's clothing factories

1978 1976 1974 1972 1970

114

134 138 141

8

12

16

41.8

42.7 43.1 40.8

20

50

78.1

78.6

• Figures not available. NOTE: Unfortunately, Statistics Canada's data do not show the true level of industry concentration, since they do not take into account the percentage of the market held by firms, such as DomTex and Celanese, which are vertically integrated. SOURCE: Statistics Canada. Data organized by Jill Jackson .

Notes

INTRODUCTION

French (1980) designates these the two 'grand options' around which the industrial strategy debate has centred. The debate has, of course, become more complex. One would now include the 'mega projects' approach and, as I shall argue in chapter 8, the CLc's 'full-employment-centred' strategy. In addition, there are regional or provincial strategies, as the work of Pratt ( 1977), Pratt and Richards ( 1979), and Fournier ( I 980) suggests. Since this study focuses on a federal policy, however, I shall be primarily concerned with the debate as it appears at the national level. 2 It should be noted that the term 'textiles' is normally used to refer to the production of fibres, yam, and woven and knitted cloth but at times, it is stretched to include the clothing industry . Throughout this book I shall refer to the textile sector when adopting the more comprehensive usage and to the textile industry (or textile capital) when using the term in the more restricted sense. 3 In his book on industrial strategy French (1980) located the federal government's decision to follow a sectoral approach in the period just prior to the 1978 sectoral task force exercise. Yet Pepin introduced the textile and clothing policy into parliament in 1970 with the statement that the policy was to be viewed as the first in a series of sectoral policies, and the textile policy, moreover, was followed by other sectoral initiatives . 4 Foreign-controlled firms, however, accounted for a disproportionate share of the value of shipments: 47 per cent in textiles, 18 per cent in knitting, and IO per cent in clothing. As we shall see, foreign ownership has increased in the textile industry since the 1971 policy was enacted. 5 See Frobel, et al . ( 1980) for a study of West German industry that makes a strong case for this position. The literature on the implications of this new international division of labour for the Third World contains some interesting questions. See Warren (1980) I

160

Notes to pp. 4-9

and Lipietz (1982) for two divergent interpretations within the Marxist literature. Although important, this aspect of the problem cannot be addressed in this study, which takes as its focus simply the response of one advanced capitalist state to these developments. 6 In his review of The Canadian State, Donald Smiley (1978) argued that there are four different political economy approaches to state-society relations in Canada: Porter's society-elite pluralist approach, Presthus and McLeod I Rea's corporatist perspective, Cairns and Hockins's state dominance view, and Marxist political economy. Some would argue that the Marxist variant really comprises two groups, the 'left nationalists' and the 'Marxists.' There is, indeed, a healthy diversity within the broadly defined Marxist approach, which should be recognized . Yet I prefer to follow Smiley's broad definition in the interest of avoiding the 'more Marxist than thou' attitude, which gets in the way of fruitful debate . CHAPTER I

1 I follow Fowke (1967) in defining the National Policy rather broadly to include: the unification of the British North American colonies through Confederation; the acquisition of Rupert's Land from the Hudson's Bay Company and its constitution as a staples-producing frontier; state subsidization of a transcontinental rail network; the 1879 tariff; and immigration . 2 See various issues of Studies in Political Economy, the Journal of Canadian Studies, the Canadian Journal of Social and Political Thought, This Magazine, and Canadian Dimension for published interventions into this debate. 3 My conception of class and development is based on Poulantzas's work and that of Adam Przeworski (1979, 1980b). The latter' s analysis of the 'material basis of consent' forms the basis for my definition of hegemony, although I have made his twoclass growth game more complex by including two fractions of capital. 4 Ryerson (1973) and Kealey (1980) . Labour I le travailleur is the journal in which much of the new labour history is published. 5 Laxer (1974) argued that American capital has replaced Canada's 'native traders and bankers' as the decisive force in Canadian society. Clement (1975), however, produced impressive evidence to show that the latter remain at the heart of Canada's 'corporate elite,' and that they have established an asymmetrical partnership with those who control the parent firms in the United States (Clement, 1977). Watkins (1977) argued that the leading fraction is the staples fraction, an alliance of Canada's indigenous financial capitalists and resource capital, both domestic and foreign. 6 With regard to these conditions, Craven and Traves's (1979) analysis of the politics of the National Policy provides some insight. They show how the National Policy had the

161 Notes to pp. 9-13 effect of dividing worker and farmer opposition to capital by providing each with a stake in a different part of the policy . Glen Williams's (1979) argument is also insightful; for he shows how industrial capital stood to benefit from the aspects of the policy designed to permit industrialization by import substitution. 7 For Poulantzas, the comprador fraction is 'that fraction whose interests are entirely subordinated to those of foreign capital, and which functions as a kind of staging-post and direct intermediary for the implantation ... of foreign capital in the countries concerned' (1976, 42). An internal or 'domestic' fraction is one that, although it rises on the basis of certain contradictions between it and foreign capital, remains dependent on the processes of internationalization in which American transnational capital is the leading force. A nationalist fraction would be one 'that is really independent of foreign capital and which could take part in an anti-imperialist struggle for effective national independence ... ' (1976, 43). This delineation emphasizes the conflicting development strategies that may be advanced. It does not, however, provide a name for capitals whose interests have come to be defined in terms subordinate to those of the hegemonic fraction. One might, for instance, define that fraction of capital, based in manufacturing, that accepts the hegemonic fraction's leadership as an import-substituting fraction . If certain capitals in this sector begin to express a challenge to the hegemony of the leading fraction, then it becomes appropriate to refer to a 'nationalist' or 'internal' fraction. We may be witnessing the development of an internal bourgeoisie in Canada, whose challenge comes in the form of the 'technological sovereignty' option . Although technological sovereignty does not imply a complete break with the u.s.centred international order, I shall hereafter use the term 'nationalist' or 'liberal nationalist' for purposes of simplicity. 8 I do not wish to imply that the state is always able to design and implement such strategies for averting political crisis. See Abraham (1980) for an analysis of the Weimar Republic's inability to fashion a new basis of compromise, which laid the basis for fascism. Levine's (1981) analysis of the New Deal period in the United States shows the difficulties associated with the attempt to establish a new accord in the United States, a country that, like Canada, was able to avoid recourse to fascism in order to establish a new class and intraclass framework of compromises . 9 See Frobel et al. (1980) for a fascinating study based primarily on the West German experience. They argue that a new international division of labour is in the process of formation in which low-wage industrial sites in the Third World and eastern Europe will increasingly draw industrial investment, leading to the relative deindustrialization of advanced capitalist economies. Their analysis also includes the possibility of rationalization of plants in advanced capitalist economies, but that, too, will lead to a

162 Notes to pp. 13-18

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reduction of jobs. My analysis of the Canadian textile policy seems to support this part of their analysis - although, I will argue, a change in the balance of forces in Canada could lead to a more optimistic prognosis. See Panitch ( l 98 l), who offers evidence to support his claim that Canadian industrialists 'failed to survive' because the working class was strong enough to prevent them from raising the absolute level of exploitation. They therefore had to rely on imported techniques, which allowed relative surplus value appropriation . And foreign capital frequently retained ownership of these techniques, via licensing as well as foreign direct investment. See Buci-Glucksmann and Therborn ( 1981) for a good discussion of the notion of a Keynesian state form. See Watkins (1967) for a classic example of staples-Keynesian economic analysis . Watkins, of course, has changed his position since he wrote this article . See Watkins (1977) for an account of his current perspective on staples theory . Farmers, too, were part of this compromise, as V. Fowke's (1967) characterization of the 'new national policy' suggests . Cordell (1971) suggests that the rationalization of the Canadian subsidiaries of American transnational corporations will reduce the scope of managerial authority in Canada and eliminate a number of executive posts. It is thus conceivable that Clement's comprador bourgeoisie would come over to the side of the liberal nationalists as a means of strengthening their bargaining power vis-a-vis those in corporate headquarters. See Pratt (1977) for a good description of the Alberta government's project and the forces that have rallied behind it and Fournier ( 1980) for the Parti Quebecois' project and its social base. See chapter 8 for a description of the CLC's strategy . The existence of a more 'nationalist' - or, in Poulantzian terms, 'internal' - fraction requires more than the presence of capitals whose interests are potentially in conflict with the continentalist staples fraction . It also requires the development of organizations capable of articulating an alternative project. Unfortunately there has been almost no research done on this area. Stevenson (1977) pointed to the existence of a group of indigenous capitals based in high technology sectors. Certain of these (Spar, Leigh Instruments) have close links with the Science Council. In addition , the Canadian Institute for Economic Policy, started by that nationalist scion of the Canadian bourgeoisie Walter Gordon, has been publishing a series of studies that present a nationalist and post-Keynesian critique of past and current government policies . See Shepherd (1980) and Beale (1980) , two recent studies published by the nationalist Canadian Institute for Economic Policy, which argue for the adoption of this alterna-

163 Notes to pp. 18-27

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tive. It seems that the Canadian state began to pursue this strategy in 1980. See chapter 8 for further discussion . Japanese textiles actually had begun to penetrate the Canadian market in the 1930s. Canadian textile capital's response to this development - notably Dominion Textile's decision to close a new rayon fabricating mill, which left many workers with no means of support - led to the appointment of the Turgeon Royal Commission on Textiles . The commission's report remains a valuable source of material on the history of the Canadian textile industry. Helleiner (1977 , 1979), Blackhurst et al. (1977) , Strange (1979), Krauss (1979) , Tsoulakis and da Silva Ferreira (1980) , Balassa (1980) . Some would include state intervention designed to promote industrial restructuring, including the growth of an indigenous high-technology sector (Lazar, 1981). It seems useful, however, to draw a distinction between measures designed to retard restructuring and those designed to encourage it. Accordingly, I shall use the term in its more restrictive sense, to denote change-retarding trade barriers. The MultiFibre Arrangement's official name is the Arrangement on International Trade in Textiles . This argument is developed in chapter 7. See also Mahon and Mytelka (1983) . The president of Celanese Canada, one of the leading textile firms, has claimed that the federal government must scrap its 'winners and losers' approach; for 'such an approach implies government support only for high technology and natural resources and thumbs down on traditional manufacturing sectors which are put in a secondary role' (Globe and Mail, 13 May 1982). This statement may misrepresent the situation, but it is suggestive of the way in which the Liberal government's economic strategy has been perceived by leading textile capitals. CHAPTER 2

See R. Alford (1975) for a general discussion of the levels of analysis (situational , organizational, and structural) associated with pluralist, elite, and class-centred paradigms of state-society relations. Alford effectively argues for an analysis capable of combining all three. Among contemporary Marxist theorists, certain of the so-called ' Althusserians' -especially Poulantzas, and Laclau (1977)- have come closest to this goal by making creative use of Althusser's distinction between ' mode of production' and 'social formation,' but none has really developed an adequate perspective on the kind of issue politics that this study focuses on . 2 See Mahon ( 1977, 1979) for earlier formulations of this approach. The concept of the unequal structure of representation was originally developed to deal with the material uncovered during the research on my doctoral dissertation from which this study grew .

164 Notes to pp. 27-33 3 By strategy I do not mean the choice among alternative forms of action (e.g., demonstrations, lobbying), nor am I dealing directly with the question of alliances, although the choice between 'developing' and 'evoking' the broader issues would likely reflect this issue . The particular problem with which I am concerned here is how capital and/ or labour in the textile and clothing industries could effectively present their case for relief from import competition, a demand that the state would likely perceive as contrary to the national interest and attempt to make into a 'non-issue.' 4 Certain Marxists have also begun to grapple with the theoretical questions raised, inter alia, by feminists, regarding societal antagonisms that cannot be reduced to class . In general terms Laclau's (1977) work is particularly insightful. Jane Jenson (1983) has begun to extend Brodie and Jenson' s ( 1980) analysis of the conditions for politicizing class divisions to those affecting the prospects for the advancement of feminist identities . The emergence of such opposition forces, in tum, holds consequences for the structure of representation within the state, as Sue Findlay's (as yet unpublished) paper shows (Findlay, 1982). Non-class antagonisms are important, as Marxists are beginning to recognize. Yet, since my study focuses on a case more directly concerned with inter- and intra-class tensions, I have not tried to examine the implications for politics and state structure here. 5 Brodie and Jenson's (1980) analysis of the history of Canadian parties builds on Przeworski's argument. 6 This formulation may be a little misleading if organizations are understood in the formal sense . Thus cohesion may be achieved by alliance among different unions at the plant, industry, or national level. In Canada, the most striking example in the post-war period was the common front of public sector workers in Quebec, which brought together the Federation des travailleurs du Quebec, the Confederation des syndicats nationaux, and the CEQ. 7 See S.D. Clark's (1939) seminal study of the Canadian Manufacturers' Association. Clarke argued that, after the merger wave of the early ·1900s, the large firms had less use for the CMA, since they had the organizational capacity to present their own demands . 8 See Domhoff ( 1979) for a discussion of the kinds of issues dealt with by such policy institutes, as opposed to those dealt with by trade associations and the like. Lowi (1966) has also suggested that there is a relationship between types of policies and forms of political organization. There has been little research on the role of such policy institutes in Canada, which may suggest that they have not played such a critical role here. Yet Traves's (1978) study of the Canadian Reconstruction Association suggests that they have not been completely absent from the political scene. 9 The C.D. Howe Institute has worked from a conceptual framework that combines traditional Keynesian notions of macro-economic planning (as has its American sister

165 Notes to pp. 33-8

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association, the National Planning Association - see Domhoff, 1979) with a predisposition towards continentalism. The Canadian Institute for Economic Policy works from a post-Keynesian (see Eichner, 1979) position, which is at the same time nationalist. Issue definitions, however, do not determine the character of the state's response. They only provide the political conditions for this, as will be argued in section three . Numerous changes have affected the organizational structure of the textile and clothing unions in the period under consideration. For instance, the FNTIV and the FCTT left the csN to join the new Centrale des syndicats democratiques in 1972 and the Acwu and the TWUA have merged to form the ACTWUA . However, the year 1968 was chosen not arbitrarily but rather because it was then that the brief formally setting in motion the policy process was presented by the CTI and the textile unions . See chapter 4. The secession of the FNTIV and the FCTT from the CSN seems to suggest that its textile and clothing union officials were never deeply committed to the CSN's objectives . The cso certainly does not share the csN's 'left' analysis. See chapter 6 for a discussion of the differences as they pertained to the textile question in the 1970s. Although the UTWA has followed a Gomperist line for most of its history, it was a militant union through the period of its greatest growth (the 1940s), when Kent Rowley and Madeleine Parent were its Canadian leaders. Their ouster in the early 1950s marked the re-establishment of the Gomperist line. At present, the CTI represents less than 50 per cent of the firms engaged in textile production. Nevertheless, it represents the economically dominant firms, which account for approximately four-fifths of industry output. See appendix on industry concentration at the end of the text. In 1963 the PTI was reorganized and adopted a new name, the Canadian Textile Institute. This was altered in the early 1970s. Originally the constituent associations were based on the cotton, silk and rayon, knitting, wool, carpet, and cordage industry divisions. At present, membership may be on a direct (corporate) or constituent association basis. In 1965, 18,114 workers were employed in cotton yarn and cloth production, 13,944 in the man-made fibre processing sector and 23,480 in hosiery and knitting (Consumer and Corporate Affairs, 197 1). S. Comthwaite of Communications Six. Comthwaite had acted in this capacity since the early 1950s, when he joined Johnson, Everson and Charlesworth, the firm that had acted as Domtex's public relations agent since the early 1940s and for the PTI since 1944 (interview with J. Merriman, former editor of the Manual and the Journal). I am not using the term 'representation' in the usual way, that is, representation of interests through the autonomous organizations (unions, trade associations, parties, etc.) of social forces. Rather, I am referring to the highly mediated representation that

166 Notes to pp. 39-45

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occurs through departments or branches of the state apparatus whose mandates give them a concern for particular forces. The debate between 'instrumentalists' and 'structuralists,' which concerned Marxists in the early 1970s, had begun to wane until liberal political economists, such as Theda Skocpol (1981), entered the fray. Miliband, among others, has attempted to reply to Skocpol's critique (Miliband, 1983). Poulantzas, in fact, has gone so far as to suggest that the working class remains 'at a distance' from the state. Yet, inasmuch as representation is not understood to mean the declaration and struggle for fundamental class interests within the state, this proviso seems unnecessary. Moreover, it stands in the way of an analysis of the very real effects of the working class on the policies of advanced capitalist states and thus on the state agencies charged with the development and implementation of these policies. I am indebted to Bo Rotstein for information on this. Rotstein has done extensive research on the National Labour Market Board, one of the key corporatist institutions in post-war Sweden, as part of a larger project co-ordinated by G. Therborn. Clearly, as Rotstein argues in a draft article, these kinds of institutional innovations are not without significance. However, the novel features of the Labour Market Board have less to do with the corporatist character of the board and more to do with the ideology and 'organizational technology' developed within that institution by its director. In chapter 8 I shall return to the question of the relationship between corporatist (or quasi-corporatist) bodies and the unequal structure of representation. See Longstreth (1979) and Jessop (1980) for a discussion of the relation between agencies representing industrial capital in Britain and the critical Bank of England / Treasury nexus in London, which constitutes the seat of power of financial capital ('the City'); cf. my argument for the Canadian case (Mahon, 1977).

CHAPTER

3

See chapter 4 for a discussion of the politics that made this necessary and chapter 5 for an analysis of the policy process. 2 See table 1, which indicates the degree to which foreign capital had penetrated Canadian manufacturing by 197 1. Externally based transnational corporations have been less successful in penetrating the Japanese (9 per cent) and American (6 per cent) economies. As Ende! J. Kolde has noted, Canada holds a special status in the history of the development of transnational capital: 'The significance of the Canadian ventures [in the early part of this century] was that for the first time in history, foreign-owned companies were accorded substantially the same rights and privileges under formal charters of incorporation as were domestic firms. This was a large step towards multinational enterprise' (cited in Cordell, 1971, 22, n. 11).

167 Notes to pp. 46-52 3 The comparable figures for the United States and western Europe are $5 billion, us and $14.5 billion, us respectively . In addition, most of Canada's exports of manufactures in this period were from the sectors favoured by the Defence Production Sharing Agreement (electrical, aerospace) . After 1966 when the Autopact between Canada and the United States was concluded, automotives became Canada's largest manufactured export. 4 See table 1. To a great extent, foreign ownership was concentrated in the man-made fibre producing division of the textile industry, where DuPont and Celanese / Chemcell were dominant. Celanese, however, also held an important position in the manmade fabric division. It is not surprising that foreign firms were strongest in this division; for transnational corporations based in the chemical industry had control of the technology for producing man-made fibres . Lynn Mytelka has done some basic research on this question, which she kindly consented to share with me. 5 The Canadian textile industry has never been a significant exporter. Until recently, less than 10 per cent of its domestic output was sold in export markets, and Canada accounted for less than I per cent of total world textile trade throughout the boom years. 6 'Low cost' refers to low-wage and socialist country exports. The pricing policies of socialist countries pose a special theoretical problem, which I have not addressed. The data provided by Frobel et al. (1980) suggest that eastern European economies, however, are offering transnational capital advantages similar to those found in the Third World. 7 According to one ex-Finance official, domestic textile capital largely tended to ignore the problem of u .s. imports, since they 'had traditionally been imported in the main by domestic producers to round out their product lines' (Grey, 1980, 5). I have never been able to obtain figures on the importing practices of domestic textile firms; however, several of the industry people I interviewed have alluded to such importing. As we shall see, one of the objects of the new textile policy is to encourage domestic manufacturers to import certain products as a means of rationalizing domestic production. 8 Clothing capital experienced less import competition, holding on to 70 per cent of the domestic market until the 1970s. See chapter 4 for a discussion of clothing capital's position on VERS. 9 DuPont of Canada is a subsidiary of E.I. DuPont de Nemours of the United States. The structure of the industry will be discussed below . 10 Celanese of Canada is controlled by Celanese Corporation of America. 11 See Mytelka (1980) and European Parliament (1977). 12 Canadian Cottons was Dominion Textile's sister company, the product of the mergers initiated by the same group of merchants who had organized Dominion Textile, 18901905.

168 Notes to pp. 52-64 13 Interview with Eric Hebner. Hebner was the textile industry's consultant on tariff matters. He was the senior partner in the Ottawa consulting firm Corporation House. 14 Montex, one of the few companies to integrate forward from textiles to clothing , declared bankruptcy in 1970. 15 As will be shown in chapter 7, Bruck Mills and Consolidated Textiles - both Canadian companies - were taken over by Japanese and British capital after the textile policy was enacted. In 1979 ConsolTex took control of Bruck. 16 During the course of my research I came across several newspaper articles , written in the 196os, which alleged that the Ontario government had been actively involved in recruiting labour for the clothing industry from low-wage countries, such as Greece. 17 See chapter 4 for more details . 18 The allegation that certain clothing manufacturers employing immigrant labour often manage to pay less than the minimum wage has also recurred in press reports . The Montreal Star carried a series on this issue in the summer of 1975. 19 See Traves ( 1978) for a fascinating account of the politics behind the establishment of the board. An association of industrial capitalists fought for the Tariff Board partly as a means to drive a wedge between the farmers and workers movements. The proposal was also part of the pre-Keynesian strategy for achieving stability via regulation. 20 See chapter 5 for a discussion of the Department of Industry. 21 See Alford and Friedland (1975) for a general discussion of the role of participation. For Alford and Friedland, although participation may work in the short run to legitimize the system, in the long run, if participation is not accompanied by power, the powerless will resort to political violence . In some respects , Alford and Friedland's distinction between 'structural power' (participation with power) and 'symbolic power' (participation without power) - a distinction that tends to coincide with class position - is similar to my argument re the unequal structure of representation . I do not, however, place as much emphasis on agency-clientele relations. In addition, Alford and Friedland's view of power is more one of an elite-mass relationship. CHAPTER

4

1 The difficulties faced by textile workers in making gains at the bargaining table could have led to strikes against textile capital - which they did to some extent. The CSN textile affiliate, for instance, led a major strike against DomTex in the mid-196os. On the whole, however, textile capital was careful to present its case in terms that singled out the government' s liberal import policy as the reason it could not offer more . 2 After more and more sectors came under pressure from import competition in the 1970s, it was easier to mobilize around the issue of deindustrialization . In the 1950s and 196os, however, textiles was one of the few sectors that faced this prospect. 3 See Langdon (1980) for an account of textile politics in the Netherlands. Interestingly ,

169 Notes to pp. 66-76

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the textile unions made their greatest gains shortly after the old division between the confessional and socialist unions had been overcome through the creation of a new trade union central. A brief submitted to Royal Commission on Canada's Future Economic Prospects by Courtauld's (Canada) Ltd . Cited in the Manual, 1956. Eric Hehner of Corporation House. Drabek refers to Hehner as a departmental agent, 'since he represents various clients in their dealings with the Department of Finance . Moreover, he has the reputation of knowing thoroughly the intricate workings of the Customs tariff' (Drabek , 1965, 55). The industry had an effective relationship with the following newspapers: the Montreal Gazette, the Toronto Globe and Mail, the Financial Post, and Le Devoir (interview with S. Comthwaite). The National Garment Manufacturers refused to join CA TMA because of an unresolved conflict with Dominion Textile. Interview with S . Rosenbloom . See the conclusions drawn in Tariff Board Reference 144 (1970) . A minor theme, raised by the TWUA local in Milltown , New Brunswick, was that of state-support for co-operative ownership of the means of production . In 1954, Textile Sales announced the closure of its Milltown mill . The TWUA local responded by setting up a co-operative to lease the plant and machinery . For three years, the Milltown workers - assisted by the municipal government and experts in 'cooperativism' from St Francis Xavier University - kept the co-operative alive. In the summer of 1957, however, Textile Sales notified the co-operative of its plans to sell the mill. An appeal to the federal and provincial governments failed and the mill closed. A later effort to set up a workers ' co-operative in St Jerome, Quebec, did receive support from the Quebec labour movement and the Quebec state . As one reader pointed out , the cTcc-csN president during the 1950s, Gerard Picard, was active in the Quebec wing of the CCF. So, too, was the man who came to prominence in the 196os, Michel Chartrand. Nevertheless , neither the ccF nor the NOP has ever won a significant working-class following in Quebec. This is not to say that some attempts were not made. For instance, the National Productivity Council reported to the departments of Labour and Trade and Commerce . However, unions were not regular participants in the economic policy process. An interesting illustration is the attempt at a joint CA TMA-union approach to the minister of finance in 1961. The meeting did not take place, 'due to the disinclination of the Minister of Finance to receive the delegation' (Minutes, February 1961). By then, both Bruck and Consolidated Textiles had accepted the unionization of their workers and Dominion Textile had emerged from the strike led by FCTT locals . See Black Rose Collective (1972). Their position was first enunciated in 1968 in a document entitled 'Second Front' , which urged unions to move beyond industrial action to struggles around social issues such as housing . In 1971 , action on the 'third'

170 Notes to pp. 76-83 (political) front commenced with the adoption of 'Ne comptons que sur nos propres moyens. ' See Lipsig-Mumme (1980) for a critical analysis of the historical development of the strategy of trade unions in Quebec. CHAPTER

5

1 The foreign currency assets of the Canadian banks quadrupled between 196o and 197 1. The banks were entering international merchant banking consortia financing the global activities of transnational (industrial) capital: the Royal Bank via the Orion Group; Toronto-Dominion via the Midland and International Bank; the Bank of Montreal via Australian International Financial Corporation; Bank of Nova Scotia via United International Bank and EuroFinance; and Canadian Imperial Bank of Commerce via International Energy Corporation. 2 The merger of ITC and the development of programs like GAAP were only a part of the state's response. In the mid-196os the Task Force on the Structure of Canadian Industry was established to provide an assessment of the problems of Canadian manufacturing . Its findings (PCO, 1968), which emphasized, inter alia, the problem of too many producers due to the strategies of branch plants, were echoed in subsequent reports such as the Gray Report ( 197 1) and various Science Council of Canada studies. An acceptance of this analysis, however, would have required a significant change in the strategy of the Canadian state and in the relation of forces underlying it. These studies did give new nationalist forces a sounding board within the state, however, and led to the establishment of the Canadian Development Corporation and the Foreign Investment Review Agency . More recently, the Trudeau government has moved to strengthen the position of Canadian capital in the energy sector (see chapter 8 for discussion). 3 See chapter 7 for a fuller discussion of the role of the Manpower Consultative Service. 4 Of course, legislation passed in Quebec in 1969 made use of state-supported bipartite manpower committees, mandatory in any lay-offs affecting ten or more workers. The legislation increased the 'participation rate' of the Quebec-based textile industry . 5 GAAP was developed to cope with the effects of the Kennedy Round tariff cuts. Stegemann ( 1973) notes that GAAP was to help Canadian firms take advantage of new export opportunities rather than cushioning the impact on domestic firms hit by increased import competition. 6 Labour was added to the Interdepartmental Committee in the latter part of 1969. See the third section below . 7 Quebec, Ontario, Nova Scotia, and Manitoba generally supported the initiative. Saskatchewan and Alberta voiced their opposition at the federal-provincial conference held in 1969. British Columbia supported their stand. 8 Drahotsky worked for the Tariff Board. He was the only major participant in the policy process who refused to grant me an interview.

171 Notes to pp. 85-101 9 External Affairs was engaged in preparing the White Paper on foreign policy, which would advocate the strengthening of Canadian ties with countries other than the United States - the so-called 'third option.' IO Puul Barker, formerly of the Apparel and Textile Branch, was chosen as the first director general of the board. The appointed members consisted of one representative of the federal government, one from secondary industry, and a labour expert. 11 There is no reference to the clothing industry, since, despite appearances, the policy offered it little. As will be seen in the next chapter, only two of the inquiries between 1970 and 1976 referred to clothing products. Other elements of the policy that seemed to favour the clothing industry - such as the recommended implementation of Tariff Board Reference 144 - were not, in fact, implemented. 12 Health and Welfare's support may be partly attributed to pressure on the minister from an important group within his riding, the Young family, which controlled Cosmos Imperial. However, his department's institutionalized concern for the 'less advantaged' created a more fundamental pressure to support the AAB . 13 A new Fashion Design Assistance program, however, was developed in the early 1970s. CHAPTER 6

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The industrialization strategies pursued by these Asian and Latin American states has drawn competing Japanese and American capitals to these areas to use the cheaper labour and capture markets. While western European capitals have focused more on Africa, detente has drawn them towards eastern economies, as Tsoulakis and da Silva Ferreira (1980) have shown. Struggles to increase consumption in eastern Europe have provided some of the impetus behind this 'opening to the West.' See Przeworski (1981) for a discussion of Poland that centres on the importance of food consumption. Japan, however, began from a lower base: $122 million in 1973, compared with the EEc's $1,459 million. See G.M. Meier (1973) for a discussion of the American textile debate in 1970. Cable (1979) shows that the EEC, Japan, and the United States each held one of the importer's seats, with Canada and Scandanavia sharing the fourth. Langdon (1980) and Frobel et al. (1980). While Canada has not directly promoted the relocation of Canadian clothing capital to low-wage areas, several Canadian companies are 'multinationals. ' For instance, Ports International manufactures all its clothing in its three Hong Kong factories. Between 1977 and 1980 EEC textile imports from other advanced capitalist countries jumped 44 per cent, compared with a 19 per cent increase for imports from the newer Third World sources and IO per cent from Hong Kong, South Korea, and Taiwan. The United States accounted for a large part of the increase, especially in 1979, when its exports to the EEC reached the value of $2 12 million, compared with $80 million from

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India and South Korea (The Economist, IO April 1982 and 6 December 1980). The Economist lauded American textile capital's strategy, which has involved the adoption of new machinery (imported from Switzerland and West Germany), increased specialization, and concentration. (The share of output accounted for by the leading fifteen companies has risen from 25 per cent to 40 per cent in the past few years. The Economist also noted that about one-third of the remaining firms will have gone out of business or been absorbed by their larger competitors by 1990.) Clearly, Canada is not the sole, or even the primary, target of u .s. exporters . As we shall see, however, American and Canadian textile capitals are developing much closer links, and some steps have been taken towards the creation of a continental market for textiles in North America. According to Cable (1979, table 44), only 36 per cent of Japan's looms were automated in 1974, compared with 100 per cent in Canada, the United States, and Taiwan. In South Korea 95 per cent of the looms were automated. As Halliday notes, 'the shosha control a very high percentage of the foreign trade, as well as a considerable proportion of the domestic trade, of both Taiwan and the ROK [South Korea]: probably 50 percent of Taiwan's exports and 40-45 percent of its imports; the figures for the ROK are probably slightly higher since more of its total trade involves Japan' ( 1981, 12). Japan's deepening involvement in these NICS is an important element in its global competitive strategy, as is the effort of the EEC countries to penetrate the eastern European economies. In 1977 the Anti-Dumping Tribunal found domestic polyester filament fibre producers had suffered material injury, owing to dumping by the United States, Italy, Austria, West Germany, France, Switzerland, Japan, Hong Kong, and Taiwan. The Senate hearings were, of course, only the more public part of this process of renegotiation. This situation would soon change when Peter Clark helped reorganize the clothing associations later that year (see chapter 7 for discussion) . See Giles (1980) and Lord (1978) for a more in-depth analysis of labour's opposition to wage controls. Lord focuses on the debates within the Saskatchewan and Manitoba federations of labour, while Giles focuses on debates within the CLC. Recall the findings of the Turgeon Commission (Royal Commission on the Textile Industry, 1938), which was especially critical of DomTex for its attempt to prevent unionization. The DomTex 'history book' has added a few pages since then - for example, its bitter opposition to the Rowley and Parent-led UTWA as well as the long 1966 strike to which Perowne refers. See Giles (1980) for a discussion of the history of the Department of Labour's concern to rationalize collective bargaining in Canada. The closure of Associated Textiles' Louiseville plant had drawn criticism in Quebec . Associated Textiles, an American-owned operation, seemed to be shifting production

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to its Latin American plants. An Associated Textiles official appeared before the Senate, sounding very defensive. The board has also tried to promote the negotiation of a compromise among the capitalists involved, the textile and clothing industries, and retail trade. Its 1977 report included a joint submission from the industries' trade associations, the retailers' associations, the importers' association, and the unions . The evidence presented in the 1980 report suggests that the persistence of conflicting economic interests has prevented the achievement of such a compromise. However, the report again emphasized the importance of such privately conducted negotiations and, by placing the onus on the retailers, suggested that it found the latter to be at fault. Calculated from figures given in table 3 of the board's 1980 report The degree of import penetration clearly varies within the EEC . Britain, for example, is a major importer, whereas France has remained more protectionist. These products include most cotton yams, all man-made fibre yams, broad-woven fabric of all fibres, and household products, as well as a wide range of clothing items . If the board's recommendations are adopted, the board will be able to react quickly to a renewal of low-wage exports of textiles . These are terms defined within the MFA . 'Swing' refers to the ability to shift quota entitlements from one product line to another; 'carry-over' refers to the ability to use that proportion of the quota not utilized in the previous year; 'carry-forward' refers to the capacity to borrow on next year's entitlement. In the fall of 198 1 the Canadian state participated in the negotiations that led to the renewal of the MFA . Although Canada had yet to sign the new MFA in August 1982, in December 1981 the government announced that it had concluded five-year restraint agreements with thirteen 'low-cost' suppliers, covering 95 per cent of anticipated clothing imports, and that it was negotiating with seven other countries. The new VERS also cover a wide range of textile products, from cotton yam and fabric to more sophisticated blends. The terms of the 1981 MFA included provisions to limit the growth of imports from Hong Kong, Taiwan, and South Korea and reiterated previous commitments to allowing greater increases in imports from 'small suppliers and new entrants .' (See the negotiating committee's conclusions appended to the MFA, 22 December 1981 ; and New York Times , 23 December 1981.) CHAPTER

1 2

7

A more developed critique of the economic dualism of the new protectionism is presented in Mahon and Mytelka (1983) . One of the first producers of open end spinners was the Czech Kovoslav National Corporation . Eastern European producers, in other words, are not confined to the use

174 Notes to

3

4

5 6

7

8

9 IO

11

12

13

pp. 113-20

of traditional, labour-intensive techniques. The West Germans, however, seem to have been leaders in recent textile machinery development. West Germany's share of textile machinery exports increased from 18 to 35 per cent between 1954 and 1973 (Rothwell and Zegveld, 1979, 83). This does not mean that many of the exporting firms located in the Third World will not adopt these new techniques, as Hoffman and Rush recognize. These techniques, however, will largely destroy any comparative advantage based on low wages. I did not, of course, have access to these discussions. My analysis is based on inference drawn from the board's reports, the actual investment decisions made by leading companies, and the 1979-80 analyses developed by the textile and clothing divisions of the Textile and Consumer Products Branch. See chapter 8 for a discussion of the textile and clothing sector task force report. See chapter 8 for a discussion of the branch's success in this regard. The branch's reviews of industry performance played an important part in the decision process that led to the formation of the CIRB. My comments in this section focus on DomTex, Celanese, DuPont, and ConsolTex. It might be noted, however, that with the closure of Montrose Worsted Mills in 1980, Cleyn and Tinker achieved a position equivalent to DomTex in the cotton yam and cloth division. Cleyn and Tinker now accounts for 90 per cent of domestic worsted cloth production . It has invested in labour-displacing technology as the Tee's data on technology in use in this sector suggest. It is also engaged in research to develop new products, such as flame-resistant upholstery cloth (Globe and Mail, 16 November 1981). For instance, DomTex's Swift Textiles subsidiary produces denim in Tunisia and corduroy in France, and both fabrics are shipped to Magog, Quebec, for dyeing and finishing (Financial Post, 15 May 1982). Japanese capital began to invest offshore in a significant way only after 1970. Brock's poor performance was also due to the turnabout in the market for knitted goods, since this is an area in which Bruck had invested heavily in the 196os. The take-over gave the Japanese a share in Consoltex. Relations between the British owners and Canadian management became rather tense in 1982 - apparently because of the Canadians' reluctance to support a merger with Celanese, a firm that has had close relations in the past with Carrington Viyella's parent, 1c1. PanCanadian now holds a 35 per cent interest in Celanese's new $2 55 million methanol plant in Edmonton. More recently Celanese decided to increase further its investment in Alberta's petrochemical industry, so that ultimately its petrochemical and textile operations will hold equal weight (textiles still accounts for 65 per cent of Celanese's business) (Globe and Mail, 9 December 1981). Text of a speech delivered to the University of Toronto Faculty of Management Studies seminar, 30 November-I December 1978 (reproduced in coan, 1979)

175

Notes to pp. 120-2

14 Ontario has made $15 million of its $290 million Employment Development Fund available to capital in this sector, and in 1980 the Quebec government followed suit with an $80 million fund extended over four years (Biggs, 1980). 15 In fact, lower energy prices are giving Canadian man-made fibre producers an edge in the British market, as recent British complaints against unfair competition suggest (Globe and Mail, 26 February 1980). 16 The Manitoba Fashion Institute has also secured access to trained but low-wage immigrant workers from South Korea and the Philippines through a special arrangement with the Department of Employment and Immigration. Ironically, this program received publicity because of complaints voiced by these workers that they were receiving lower wages than they had been promised. One Korean worker even pointed out that the original offer - landed immigrant status plus a monthly salary of $450 offered lower wages than she would have received in South Korea. Commenting on the story, the head of a major men's and women's clothing firm in Toronto noted that 'this program would never happen' in Toronto or Montreal but that 'Winnipeg is more non-union' (Globe and Mail, 20 May 1982). There seem to be some interesting differences between the strategies of clothing capital in Winnipeg and those in Toronto and Montreal. 17 It seems that delays in granting federal funds to the Ontario and Quebec programs are due to this stipulation. 18 The board's 1981 report also included an assessment of the age of machinery in use in the clothing industry. Age, however, is less significant here than in the textile industry, since the lighter equipment used in clothing production has an estimated life of only fifteen years. (Over 75 per cent of the equipment in use in the firms surveyed was less than ten years old.) The board, however, noted that: 'Among the types of equipment incorporating new technology; 82 percent of the specialized pressing equipment is less than ten years old, (61 percent less than five years old); 88 percent of the marking and grading equipment is less than ten years old (66 percent less than five years old); and 90 percent of the fusing equipment [which can replace sewing in some areas] as well as the conveyor systems are less than ten years old (70 and 68 percent respectively being less than five years old)' (Tee, 1981, 62). In other words, the leading clothing capitals have been investing in some of the new techniques, especially over the past five years . It should also be noted that the board's survey of companies engaged in contracting found that they were using equipment at least as modem as that employed by clothing manufacturers. 19 Foreign firms account for less than 2 per cent of the establishments and only IO per cent of the value of shipments for the domestic clothing industry. The latter are concentrated in the jean and foundations divisions of the industry. 20 P. Nygard, chairman of Tanjay International - a leading manufacturer of women's wear - is reported to have called a meeting of clothing capitals to develop support for

176 Notes to pp.

21

22 23

24

122-4

the common market idea. Nygard argued 'We are trapped as long as we can only produce for 24 million people .. . But if there was a common market, we could narrow our production lines, improve our productivity and become specialists in a large and important marketplace' (Globe and Mail, 13 September 1982). Tanjay has plants in the u.s. and imports from Asia. One of the problems seemed to be the American state's lack of interest in extending the Autopact solution to other sectors. The Reagan administration, however, seems more favourably disposed to bilateral, sectoral free-trade arrangements (Globe and Mail, 21 August 1981). This type of program is already in place for shirt manufacturers. It will be interesting to see if the state attempts to enforce the terms of the policy on those elements of clothing capital whose strategy for competing with low-wage imports is to rely on non-union labour, working in the shops of small contractors or in their own homes. The contractor's share of clothing output increased at a faster rate than regular factory production between 1971 and 1979. While manufacturing value added in women's clothing factories increased by r 54 per cent, that of the contractors increased by 217 per cent (figures compiled by J. Infantino from Statistics Canada's Women's and Children's Clothing Industries) . A recent study of the putting-out system undertook the more difficult task of estimating the numbers involved in this type of clothing production; it concluded that approximately one-quarter (7 ,ooo) of the total number of workers employed in Ontario's clothing industry were homeworkers (Johnson and Johnson, 1982, 103-4). This study shows that the wages and working conditions of homeworkers tend to be far worse than those of workers in factories . Clearly, if the federal government were to recognize this problem, it would have to work with the relevant provincial governments, since the clothing industry comes under provincial labour codes. At present, the only means for regulating the homework system is through provincial employment standards legislation. In Quebec and Ontario supervision of the legislation is handled by joint labour-management committees (the Advisory Committee for Ladies' Dress and Sportswear in Ontario and the Parity Committee Committee in Quebec). Johnson and Johnson, however, suggest that these committees are inadequate as a means of enforcement (1982, chapter 5, passim). Calculated from figures provided in appendix e of the en's 1968 brief. One should be cautious in drawing inferences from these data, however, since they do not show the relationship between an individual firm's output and employment levels. In addition, some of the discrepancy can be attributed to the firm's behaviour as recession sets in. Firms try to hoard trained workers by first reducing over time, then going on short time or resorting to temporary lay-offs. Thus the numbers employed would not necessarily increase substantially as output picks up, even if the firms were using the same production techniques.

177 Notes to pp. I 25-7 25 In 1977 the ACTWU was the largest union, with 29,291 members, followed by the ILGWU (21,413) the TWUA (6,771), and the United Garment Workers of America (2,294). The cso textile and clothing affiliates together had 15,007 members and the CTCU had I, 766. The CSN, which Jost most of its textile and clothing members when the cso was formed in the early 1970s, had less than I ,ooo. Union coverage in this sector varies. Collective agreements covered 95 per cent of cotton workers; 90 per cent in synthetic textiles; 73 per cent in woollen and worsteds; 68 per cent in men 's clothing; 54 per cent in women' s clothing; 43 per cent in hosiery and knit goods; and only 22 per cent in children's clothing . 26 Labour Canada's report incorrectly argued that the increase in the participation rate was due to the higher level of benefits (from 50 to 66 per cent of the previous wage) that came into effect early in 1975. The report goes on to suggest that the program now constitutes a disincentive to job-seeking. This is somewhat difficult to believe, given the low level of benefits that can be obtained even with the marginal increase. Moreover, the change in participation rates can be understood in relation to the drop in the demand for labour. In 1972 and 1973, while some plants did close or lay off employees, demand was strong in other plants. This situation was dramatically reversed by 1975. As table 15 shows, employment has not risen significantly since 1975. 27 I am not suggesting that the department was involved in some kind of conspiracy; the choice is perfectly explicable in terms of the difficulty faced by Labour Canada in obtaining funds for any kind of program for Jabour. 28 There is, of course, a new program for selected communities: the Industrial and Labour Adjustment Program (ILAP). It includes a program of repayable grants for local firms to establish, expand, or restructure their operations, with up to 75 per cent of consulting costs and 50 per cent of capital and pre-production costs; training programs for workers willing to move into new fields; a community employment program for those who have exhausted their unemployment benefits; a portable wage subsidy for workers over forty-five; and the AAB . The program has been allocated only $350 million for a three-year period (Globe and Mail, 20 January 1981). This program complex is certainly broader in scope- for those few communities selected . The program is designed to give maximum political visibility by selecting a few key communities affected by the restructuring process. As we shall see in the next chapter, the package of benefits offered Jabour in the textile and clothing industries through the CIRB was modelled on ILAP. 29 The figures were used to argue a rather different case in a study conducted by Econanalysis Inc. (1978) for the Economic Analysis Branch of ITC. The study did an econometric analysis of the data gathered on the experience of workers affected by the partial closure of a DomTex mill in Sherbrooke, Quebec to support its argument that the pace of trade liberalization can be accelerated, especially if political support for

178 Notes to pp.

127-32

'protection' is undermined by the development of a more substantial adjustment program for labour. This study led to the design of the CIRB as we shall see in chapter 8. 30 Approximately one-half of those surveyed gave 'housework' as their reason for leaving the labour force , and a significant number of them were men! CHAPTER 8 1 For instance, French (1980) completely ignores the CLC in his delineation of the 'grand alternatives,' even though his analysis encompasses the 1978 sectoral task force exercise in which the CLC's affiliates were involved. Eastman and Brown (1981) examine the participation of the CLC affiliates in the sectoral task force exercise in greater detail but do not discuss the CLc's position paper, circulated prior to the task force exercise, nor do they refer to its 1976 Manifesto. This is not surprising; for, as they point out, the decision to include CLC representatives came almost as an afterthought- an indication that the CLC has not developed the power to achieve recognition as a positive force in the debate on industrial strategy . 2 See CSE (1979, 1980), Hodgson (1979) , Trades Councils (1980) , Rowthorn (1981), Cripps (1980) , and Coates (1981) for descriptions of the Alternative Economic Strategy that reflect the debates that have developed within the British Left as to its relevance as a strategy for achieving socialism . The AES envisions a fairly extensive nationalization program, including the major financial institutions. In addition, the AES proposes the use of planning agreements , to be concluded between large firms and their unions and enforced by the state. Finally, the AES includes a global import regulation policy that could permit greater control over the pace of restructuring and provide state revenues to finance the expansion of social programs. Global import controls also could help to ensure that domestic industries, rather than imports, would benefit first from policies designed to stimulate demand. Several of these proposals seem relevant to Canada and thus merit consideration by the CLC. The crucial question, however, concerns the means for developing the power to implement an industrial strategy in which labour's needs are given priority. Here, the political problems raised by critics of the AES , such as Coates, and even some of its supporters, like Rowthorn, must be borne in mind. 3 The strategy described below is drawn from an analysis of the economic policy statements presented at the CLC conventions in 1976, 1978, 1980, and 1982 . Although these·documents received official endorsement, I do not wish to imply that most delegates left the conventions prepared to fight for such a strategy . Given the organizational fragmentation of the CLC, such policy documents are often forgotten after conventions as affiliates return to deal with more pressing matters. The CLC leadership, too, manages conveniently to forget unwelcome resolutions and amendments.

179 Notes to pp. 133-8

4

5

6

7

8

9

IO

Nevertheless, the CLC leadership has been elaborating a consistent line, which, if developed through a debate reaching the rank and file, could represent a meaningful alternative to the terms offered by the various fractions of the bourgeoisie. Britton and Gilmour's study for the Science Council made the rather ominous charge that 'too many' Canadians were employed in health, education, and welfare as opposed to scientific and technical positions (Britton and Gilmour, 1978, chapter 3). The only Canadian Institute study which has addressed social policy issues was critical of a welfare system in which the working poor 'could often improve their financial situation by quitting their jobs and applying for social assistance' (Ross, 1981, xiiixiv) . Ross recommended the extension of the present child tax credit as a mechanism that would not impair work incentives or increase state expenditures. This kind of proposal, which fails to address the basic problem of intersectoral and interfirm disparities in wages and working conditions and the difficulties of unionizing workers in 'ghetto' jobs, is consistent with the general move by the state to cut back on universal social programs while attempting to maintain the system (Gough, 1979). Interestingly, the 1980 statement failed to mention the joint initiative taken by the Business Council on National Issues and the CLC leadership to establish a bipartite National Manpower Board which would take charge of research and planning functions now performed by CEIC. As of January 1982, MSED assumed the regional policy functions of DREE; it is, accordingly, now called the Ministry of State for Economic and Regional Development. The 'trade' side of ITC was merged with External Affairs (to strengthen the economic aspect of Canadian foreign policy), and the industry branches were merged with the operational side of DREE to form the new Department of Regional and Industrial Expansion. See Brown and Eastman (1981). Brown and Eastman note that while the Alberta cabinet refused to endorse the 1978 exercise, officials did help to select the participants for certain sectors, such as petrochemicals. They also note that there is some dispute as to the timing of the decision to include union officials in the task force exercise . See Connaghan (n.d.) and Mailes (1973) for two examples of the kind of follow-up studies sponsored by Labour Canada. The Canada Labour Code applies only to sectors like transport and banking, which are under federal jurisdiction. Provincial governments, however, have moved faster than the federal government in implementing some of the reforms, such as industry-wide bargaining. French ( 1980) suggests that the adoption of a statutory incomes policy signalled the end of Finance's refusal to play a leadership role in economic planning. See Maslove and Swimmer (1980) for a discussion of the interdepartmental negotiations surrounding the adoption of the 197 5 policy. The following description of MSED's strategy is drawn from an analysis of a copy of

180 Notes to pp. 138-42

II 12 13

14

15

16

17

the MSED memo to cabinet on economic development in the 1980s, which was leaked to the press in the fall of I 98 I. See Doern ( I 98 I, 1982) for a critical assessment of the federal government's economic strategy . Statement by the minister for economic development, Bud Olson, cited in the Globe and Mail, 13 February 1982 Globe and Mail, 25 May 1982 Note that the Dodge Report clearly rejected the cLc's proposed 'grant levy' system through which firms in each sector would be required to contribute to a training fund. A bipartite industry board would then dispense the money to firms doing the most training. None the less the Dodge Report recommended the establishment of a joint business-union manpower committee, which would collect data forecasting future demand for different skills in each industry. MSED is in accord with that suggestion . Labour did not have parity on any of the sectoral task forces. The CLC, however, secured a position of formal parity in Tier II and the Major Projects Task Force. Note that two officials from the Retail Council of Canada were listed as 'participants,' and observers were sent from the governments of five provinces: Quebec, Ontario, Manitoba, British Columbia, and Prince Edward Island. Textile capital had raised this point in its presentations to the 1976 Senate Committee. The task force went farther, recommending the creation of an associate deputy minister of industry or of a new Department of Industry. This is interesting inasmuch as it reflects an awareness of the unequal structure ofrepresentation. I would not, however, draw any connection between their demand and the separation of ITC referred to in footnote 6 above. The latter move resulted from an MSED initiative designed to (I) strengthen the economic policy capacity of External Affairs so that it could more aggressively develop new export markets, and (2) prevent conflicting outcomes such as those between the sectorally oriented industry branches concerned with maximizing efficiency and DREE, too sensitive to regional pressures. Note that neither the csN nor the ccu was invited to participate. Had an invitation been issued, it is likely that their representatives would have filed minority reports. Both have been working together to articulate an alternative view of what is at issue - a view particularly critical of the role of transnational capital. In I 982 they were joined by officials from the ILGWU, such as Ross Sutherland, and Dan Heap, MP for Spadina, whose position is clearly to the left of his party's . Heap has, in fact, developed a critique of the NDP's position on textiles in an attempt to change it. I have not done a detailed analysis of provisions for technological change in collective agreements. The vast majority of textile and clothing workers bargain under provincial rules, which make no reference to the need for such provisions. However, Buchanan's survey of collective agreements in units covering over 500 workers showed that eighteen agreements in texdles made some provision for severance pay, training / retraining, and advance notice. Only 3.3 per cent, however, provided wage or employment guarantees. Further, only 16,070 workers were covered by these agree-

181

18

19 20

21

22

Notes to pp. 142-5

ments (Buchanan, 1980, table 16, 91) . The large clothing factories fared somewhat better (Buchanan, 1980, table 15, 90). It does seem that the unions have some awareness of the job implications flowing from industrial restructuring and have decided to deal with them through the collective bargaining process. Their support for import controls may thus be based on the calculation that firms will be more likely to make some concessions in collective bargaining in return for the unions ' political support. While this is not an irrational position, it does inhibit the potential for the development of a common front among the textile and clothing unions and, more broadly, within the labour movement as a whole. My analysis is based on newspaper reports, on interviews with officials from the Textile and Consumer Products Branch, the TCB, MSED, and DREE , and on key background documents (see bibliography) . Glenn P. Jenkins, noted for his attack on the VER system for raising the costs to consumers of clothing, was one of the authors of this report (Jenkins, 1980). Finance in fact recommended the streamlining of anti-dumping procedures in a report prepared in 1980. The Parliamentary Sub-Committee on Import Policy, chaired by Bryce Mackasey, has endorsed these recommendations . It should be noted that in August 1983 the Textile and Clothing Board announced that it would hold hearings on the prospects for a free-trade arrangement with the United States, as requested by the minister of ITC and DREE . The report should appear sometime in 1984. MSED' s 'communication plan' made it clear that the state should make a special effort to publicize the new program in textile-dependent towns, bypassing ' protectionist' union officials in an effort to obtain rank and file support for adjustment. The question of federal visibility goes beyond the Quebec issue. It is part of the new thrust that seeks to restore to the federal level of the state the capacity to co-ordinate economic policy. In October I 98 I the government announced that the following had been appointed to the CIRB, which would be chaired by Paul Desmarais: H.M. Barford (CAMC0); Claude Castonguay (Imperial Life, member of the Trilateral Commission); R. Gratton (Credit Foncier, member of the Canadian Institute for International Affairs); E.C. Kolber (Cemp Investments); P. Laurin (Alcan); C.S. Malone (Canron, member of the Conference Board of Canada and the C.D. Howe Research Institute); D.S. McGiverin (Hudson's Bay); P. Soubry (Versatile Farm Equipment); R. Johnstone (then deputy minister for ITC, now with External Affairs); G. Lavigueur (Federal Business Development Bank); D . Love (deputy minister for employment and immigration); R.C . Montreuil (DREE); G.F. Osbaldeston (MSED); J. Kerr (the Consumers Association of Canada); and Sam Fox (ACTWU) . The board will make final decisions on proposals recommended by the staff. It is also hoped that its business members will help attract new industries to textile towns by contacting colleagues planning to establish new facilities .

182 Notes to pp. 145-9 The CIRB's community development program (BIDP) works in a similar manner to the portable wage subsidies. Certain communities - Sherbrooke, Trois Rivieres, Drummondville, Valleyfield, Victoriaville, Cornwall, Hawkesbury- will gain a competitive edge over other communities seeking to attract firms to replace those lost through restructuring. 23 Finance's original proposal did not include reference to the idea of merging the TCB, Tariff Board, and Anti-Dumping Tribunal, but the idea did surface in the course of the subcommittee hearings. 24 The staff administering the textile and clothing program is largely drawn from the Textile and Consumer Products Branch and thus shares the branch's view of the kind of adjustment required. Differences, such as those between the TCB and the CIRB, have arisen on a few points, notably the question of contractors versus large firms employing modem techniques. The CIRB favoured support for the latter, whereas the TCB clearly felt that contractors have an important role to play. The TCB 's 198 1 report noted that 'these firms are well organized, well equipped and efficient. They could replace to advantage the sewing operations of many manufactures' ( 1981 , 70) . This is certainly one strategy for decreasing costs in what remains the most labour-intensive part of the process, but its success is premised on the lower wages contractors have to pay for nonunion labour. The CIRB, however, has apparently been won over to the TCB's position. 25 Shortly after the CIRB was created, the footwear and tanning industries were included. 26 One might want to consider the ctRB's potential in relation to the Industry and Labour Adjustment Program (ILAP), established in January 1981, since ILAP brings together a similar package of benefits, such as enriched mobility allowances, early retirement supplements, wage subsidies, and Joans to firms prepared to set up in designated communities. An article in the Globe and Mail of 17 May 1982 pointed out that the direct labour benefits have been relatively ineffective: 'General unemployment is high in designated areas and so although about 330 portable wage subsidy vouchers (topping up wages by $2 an hour for a special group of older laid-off workers) have been issued in Ontario, for example, only 38 of those people have obtained jobs and hence taken advantage of the benefit.• The article went on to note that while the industry side of the program has succeeded in disbursing more funds, 'job creation under the industry side takes time - the first ILAP-aided company in Windsor, Ontario, one of the first designated cities, will not complete its expansion until early next year.• 27 That a branch of ITC, rather than Labour Canada, would promote this kind of adjustment planning may come as a surprise. Since the mid-197os, however, ITC has exhibited an awareness of the potential problem of labour resistance. For instance, the Technology Branch has sponsored a series of studies on the labour implications of technological change by the well-known labour economist Stephen Peitchinis. Labour Canada, especially its Women's Bureau, has only begun to sponsor conferences on the labour implications of the micro-electronics revolution - but it is far behind those parts of the state more directly concerned with the adjustment of capital.

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187 Bibliography Mallory, J. (1976) Social Credit and the Federal Power in Canada. Toronto Martin, Andrew (1975) 'ls democratic control of capitalist economies possible?' In Stress and Contradiction in Modern Capitalism, edited by L. Lindberg, R. Alford, C. Crouch, and C. Offe. Lexington, MA - (1979) 'The dynamics of change in a Keynesian political economy: the Swedish case and its implications.' In State and Economy in Contemporary Capitalism, edited by Colin Crouch. London Maslove, A. and G. Swimmer (1980) Wage Controls in Canada, 1975-78. Montreal McCallum, J. (1980) Unequal Beginnings: Agriculture and Economic Development in Quebec and Ontario until 1870. Toronto Meier, G.M. (1973) Problems of Trade Policy. Oxford Miliband, R. (1983) 'State power and class interests.' New Left Review, 138, 57-68 Milner, S.H. and H. Milner (1973) Decolonization of Quebec. Toronto Naylor, R.T. (1975) History of Canadian Business, 1867-1914, 2 vols. Toronto - (1972) 'The rise and fall of the third commercial empire of the St Lawrence.' In Capitalism and the National Question in Canada, edited by G. Teeple . Toronto O'Connor, James (1973) The Fiscal Crisis of the State. New York Ozawa, Terutomo (1980) 'Government control over technology acquisition and firms' entry into new sectors: the experience of Japan's synthetic-fibre industry.' Cambridge Journal of Economics, 4:2 Panitch, Leo (1977) 'The Development of Corporatism in Liberal Democracies.' Comparative Political Studies, 10, 61-90 - (1979) 'Corporatism in Canada. ' Studies in Political Economy, I, 43-92 - (1981a) 'Dependency and class in Canadian political economy .' Studies in Political Economy, 6, 7-34 - (1981b) 'Trade unions and the capitalist state.' New Left Review, 125, 21-44 Pempel, T.J. (1978) 'Japanese foreign economy policy: the domestic bases for international behavior.' In Between Power and Plenty, edited by Peter J. Katzenstein. Madison, WI Pentland, H. Clare (1981) Land and Capital in Canada , 1650-1860, edited by Paul Phillips . Toronto Pestieau, Caroline (1976) The Canadian Textile Policy: A Sectoral Trade Adjustment Strategy? Montreal - (1978) The Quebec Textile Industry in Canada. Montreal Posgate, Dale and Kenneth McRoberts (1976) Quebec: Social Change and Political Crisis. Toronto Poulantzas, Nicos (1973) Political Power and Social Class. London - (1974) Fascism and Dictatorship. London - (1975) Classes in Contemporary Capitalism. London - (1976) The Crisis of the Dictatorships. London - (1978) State, Power, Socialism. London

188 Bibliography Pratt, Larry (1977) 'The state and province-building: Alberta's development strategy.' In The Canadian State, edited by Leo Panitch . Toronto - (1982) 'Energy: roots of national policy.' Studies in Political Economy, 7, 27-6o Przeworski, Adam (1977) 'Proletariat into a class: the process of class formation from Karl Kautsky's "The class struggle" to recent controversies.' Politics and Society, 7, 343-401 - (1979) 'The material basis of consent: economics and politics in a hegemonic system.' Draft version of article in Political Power and Social Theory, 1 - (1980a) 'Social democracy as a historical phenomenon.' New Left Review, 122, 27-58 - (1980b) 'Material interests, class compromise and the transition to socialism.' Politics and Society, IO, 125-54 - (1981) 'Democratic socialism in Poland.' Studies in Political Economy, 5, 29-54 Richards, John (1981) 'Populism and the Left.' Studies in Political Economy, 5 Richards, J.G. and L.R. Pratt (1979) Prairie Capitalism: Power and Influence in the New West. Toronto Roberts, Benjamin, H. Okamoto, and G.C. Lodge (1979) Collective Bargaining and Employee Participation in Eastern Europe, North America and Japan. New York Rothwell, Roy and Walter Zegveld (1979) Technical Change and Employment. London Ross, David (1981) The Working Poor: Wage Earners and the Failure of Income Security Policies. Ottawa Rouillard, Jacques (1974) Les Travailleurs du Coton au Quebec, 1900-1915. Quebec Rowthom, Bob (1981) 'The politics of the alternative economic strategy.' Marxism Today, 25:1 Ryerson, S.B. (1973) Unequal Union . Toronto Schmitter, Phillipe and Gerhard Lehmbruch (1979) Trends toward Corporatist Intermediation . Beverley Hills, CA Shepherd, J. (1980) The Transition to Reality. Ottawa Simeon, Richard and David J. Elkins (1974) 'Regional Political Cultures in Canada.' Canadian Journal of Political Science, 7, 397-437 Skocpol, Theda (1980) 'Political response to capitalist crisis: neo-marxist theories of the state and the case of the New Deal.' Politics and Society, IO, 155-201 Smiley, Donald (1976) Canada in Question: Federalism in the Seventies, 2nd ed. Toronto - (1978) 'Review of The Canadian State: Political Economy and Political Power.' Canadian Journal of Political Science, 11, 656-9 Spero, Joan Edelman (1977) The Politics of International Economic Relations. New York Stegemann, K. (1973) Canadian Non-Tariff Barriers to Trade. Montreal Stevenson, Garth (1977) 'Federalism and the political economy of the Canadian state.' In The Canadian State, edited by Leo Panitch. Toronto Strange, Susan (1979) 'The management of surplus capacity: or how does the theory stand up to protectionism 197o's style?' International Organization 33:3, 303-334

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Authored Government of Canada studies Bourgault, Pierre (1972) Innovation and the Structure of Canadian Industry . Background Study No. 23, Science Council of Canada Britton, John and T . Gilmour (1978) The Weakest Link: A Technological Perspective on Canadian Industrial Underdevelopment. Background Study No. 43 , Science Council of Canada Brown, D. and J. Eastman (1981) The Limits of Consultation: A Debate among Ottawa, the Provinces and the Private Sector on Industrial Strategy. Supply and Services Canada Buchanan, L. (1980) 'Organized labour and technological change .' Economic Council of Canada Memorandum Connaghan, Charles J. (n.d.) Partnership or Marriage of Convenience? Labour Canada

190 Bibliography Cordell, Arthur (1971) The Multinational Firm, Foreign Direct Investment and Canadian Science Policy. Background Study No. 22, Science Council of Canada Econanalysis Inc. (1978) Trade Adjustment Assistance: The Costs of Adjustment and Policy Proposals . ITC Jamieson, Stuart (1968) Times of Trouble: Labour Unrest and Industrial Conflict in Canada, 1900-1966. Study No. 22, Task Force on Labour Relations Malles, Paul (1973) The Institutions of Industrial Relations in Continental Europe. Labour Canada Peitchinis, S .G . (1980) The Attitude of Trade Unions towards Technological Changes. ITC, Technology Branch National Industry Conference Board, Canada (1956) A Study of the Canadian Primary Textile Industry . Prepared for the Royal Commission on Canada's Future Economic Prospects Canadian government documents, reports, etc. Bank of Canada (1968) Statistical Summary Consumer and Corporate Affairs ( 197 I) Concentration in the Manufacturing Industries of Canada Dominion Bureau of Statistics (1968, 1969, 1970) Corporate Financial Statistics Economic Council of Canada ( 1975) Looking Outward: A New Trade Strategy for Canada House of Commons (1970-71) House of Commons Debates - (1971) Minutes of Proceedings and Evidence of the Standing Committee on Finance , Trade and Economic Alfairs Industry, Trade and Commerce, Micro Economics Analysis Branch (1979) 'A report on the labour force tracking project/ costs of labour adjustment study' - A Report by the Sectoral Task Force (1978) The Canadian Textile and Clothing Industries Labour Canada (1977) 'Situation report on the Adjustment Benefit Program' Parliamentary Sub-Committee on Import Policy (1982) Report on the Special Import Measures Act Privy Council Office. Report of the Task Force on the Structure of Canadian Industry (1968) Foreign Ownership and the Structure of Canadian Industry (Watkins Report) Royal Commission on the Textile Industry (1938) Report (Turgeon Report) Science Council (1979) Forging the Links Senate ( I 976) Proceedings of the Standing Senate Committee on Banking, Trade and Commerce Tariff Board Reference 116 (1955) Report on the State of the Canadian Wool Cloth Industry Tariff Board Reference 125 (1958) Report on the Wool Cloth Industry - (1958) Report on the Cotton and Cotton Products Industry

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Foreign publications Bergom-Larsson, Maria (1978) 'Women and technology in the industrialized countries,' Science and Technology Working Paper No. 8. New York European Parliament of the European Community (1977) Report Drawn Up on Behalf of the Committee on Economic Affairs on the Crisis in the Textile Industry, Doc. 438/77 . Brussels Freeman, Chris (1978) 'Technical charge, employment and unemployment.' Chapter 3 of Science and Technology in the New Socio-economic Context. Paris GATT (1971) Adjustment Assistance Measures Relevant to the Cotton Textile Industry. Geneva International Labour Organisation Textile Committee (1979) General Report, 10th session. Geneva MISCELLANEOUS

Theses Acheson, T.W. (1971) 'Social origins of Canadian industrialism: a study in the structure of enterpreneurship.' Doctoral dissertation, University of Toronto Bellamy, David (1963) 'Small Business Loans Act: case study in pressure group politics.' MA thesis, Queen's University deWilde, James (1978) 'Modem capitalist planning and Canadian federalism: the case of high-technology industries.' Doctoral dissertation, McGill University Drabek, Stanley (1965) 'The Tariff Board and the development of Canadian tariff policy: a study of the tariff board references and their influence on the Canadian tariff.' MA thesis, Queen's University Giles, Anthony (1980) 'The politics of wage controls: the Canadian state, organized labour and corporatism, 1975-78.' MPA thesis, Carleton University Kelly, Donald (1974) 'Development of a new textile policy for Canada: a case study of government-industry relations in Canada.' DBA, Harvard University

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193 Bibliography - (1979) Review of Import Restraints Measures on Textiles and Clothing. Montreal COGIT (1979) The Eighties and Beyond: the Apparel Industry in Transition . Ottawa Primary Textile Institute (1956) 'Outlook for the Canadian textile industry.' Brief submitted to the Royal Commission on Canada's Future Economic Prospects. Ottawa Other Bruck Mills (1950-73) Annual Report Canadian Textile Institute (1958-70) Minutes of the meetings of the Board of Directors. Montreal (unpublished) - (196o-75) Canadian Textile Journal. Montreal (cited as Journal) - (1828-75) Manual of the Textile Industry of Canada . Montreal (cited as Manual) Celanese of Canada (Canadian Celanese, Canadian Chemical and Cellulose, Chemcell) (1954-80) Annual Report Consolidated Textile (1955-75) Annual Report. Montreal Dominion Textile (1948-80) Annual Report. Montreal DuPont of Canada (1954-75) Annual Report. Montreal Wabasso (1950-74) Annual Report Interviews and letters Armstrong , Jack. President of the Canadian Textile Institute. Montreal, Quebec. Interviews, 8 July 1974; 14 and 15 August 1974 Barker, Paul. Executive Director, Textile and Clothing Board. Ottawa, Ontario. Interview, 25 January 1974 Belanger, Jean. Director General, Chemicals Branch of Industry, Trade and Commerce; formerly with the Office of Industrial Policy . Ottawa, Ontario. Interview, 19 November

1974 Berry, Bill. Director of Economics, Canadian Textiles Institute. Montreal, Quebec . Interview, 6 November 1974 Brady, Frank. Vice-President and General Counsel, Dominion Textiles . Montreal, Quebec. Interview, 15 August 1974 Bruck, Gerald. Then President of Bruck Mills . Montreal, Quebec. Interview, 12 August 1974 Bryan, F.J. Director, Apparel Manufacturers Council. Ottawa, Ontario. Interview, 9 September 1974 Catellier, Raymond. Tariffs Trade and Aid Division, Department of Finance. Ottawa, Ontario. Interview , 26 September 1974 Chapleau, M . Director, Textiles and Consumer Products Branch, ITC . Ottawa, Ontario. Interview , 18 January 1982 Clark, P. Director, CAMI and COGIT International. Ottawa, Ontario. Several interviews during fall I 980

194 Bibliography Comthwaite, Stan. Communications 6. Montreal, Quebec. Interview, 14 August 1974 Davidson, R.M. Director of Research and Investigtion, Combines Investigation Act. Department of Consumer and Corporate Affairs. Ottawa, Ontario. Interview, 20 November 1974 Drayton, L.E. Director of Research, Textile and Clothing Board. Letter, 16 July 1973 Foley, William. Assistant to the President, United Textile Workers of America. Hamilton, Ontario. Interview, 9 January 1975 Grey, Rodney de C. Assistant Deputy Minister, Department of Finance. Ottawa, Ontario. Discussion, 24 October 1974 Guerin, A. Then General Director, Apparel and Textile Branch, Industry Trade and Commerce. Ottawa, Ontario. Interviews, 24 January 1974; 12 February 1974 Halliday, J. Office of General Relations, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 20 November 1974 Hebner, Eric . Consultant, Corporation House. Ottawa, Ontario. Interviews, 9 September 1974; 25 September 1974 Howarth, Gorse. Deputy Commissioner of the Foreign Investment Review Agency. Formerly Vice-President of Hochelaga Merchandising (A Dominion Textile subsidiary); Apparel and Textile Branch, Industry Trade and Commerce; and Department of Finance. Ottawa, Ontario . Interview, 26 September 1974 Howie, Lance. Director General of Forest Products Branch, Industry Trade and Commerce. Previously with National Revenue, Office of Industrial Policy, and the Apparel and Textile Branch. Ottawa , Ontario. Interview, 19 November 1974 Jacques, Yvon. Canadian Federation of Textile Workers. Montreal, Quebec. Interview, 6 November 1974 Jeffrey, Jack. Senior Industry Advisor, Manpower and Immigration Ottawa, Ontario. Interview, 20 November 1974 Johnson, Leo. Department of History, University of Kitchener-Waterloo. Once employed by Riverside Silk. Kitchener, Ontario. Interview, 31 October 1974 Kelly, Don. Canadian Brewers Association. Ottawa, Ontario. Interview, 12 April 1974 Kennedy, Ian. Fonner Economist, Canadian Textile Institute. Toronto, Ontario. Interview, I April 1974 Kenny, Frank. DuPont of Canada. Montreal, Quebec . Interview, 16 August 1974 Kirkwood, D.H. W. Assistant Deputy Minister (Policy) , Department of National Defence. Formerly with the Privy Council Office. Letter, 18 December 1974 Knowles, Douglas. Asia Bureau, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 19 November 1974 Kuzik, Chris. Ontario Apparel Manufacturers Council; formerly with the Apparel and Textile Branch, Industry, Trade and Commerce. Toronto, Ontario . Interview, 21 January 1974 Love, Douglas. Deputy Minister, DREE; formerly Deputy Minister of Labour. Ottawa, Ontario. Interview, 13 February 1975

195 Bibliography MacDonald, D. Policy Branch, OREE . HuJI, Quebec . Interview, 30 June 1982 MacKillup, Jim. Office of Special Import Policy, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 27 September 1974 MacPherson, Patt. Celanese of Canada. Montreal, Quebec. Interview, 16 August 1974 Mcilhinney, George. Apparel and Textile Branch, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 27 February 1974 McKennirey, Mr. Director, Office of Special Import Policy, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 12 February 1974 McMullen, C.G . Merger and Monopolies Branch, Consumer and Corporate Affairs. Letter, 2 December 1974 Merriman, J. (retired) Editor, Canadian Textile Journal. Montreal, Quebec . Interview, 9 July 1974 Moyer, N. Sector-Firm Program, CIRB. Ottawa, Ontario. Interview, 2 July 1982 Oliver, Craig. Supply and Services. Formerly Finance. Now ADM, ITC . Ottawa, Ontario. Interviews, 21 November 1974; 18 January 1982 Olsen, Dennis . Department of Sociology and Anthropology, Carleton University. Ottawa, Ontario. Interview, 12 September 1974 P~pin, the Hon . Jean Luc. Former Minister of Industry, Trade and Commerce. Ottawa, · Ontario. Interview, 21 November 1974 Peters, Laz. Director, Montreal Dress and Sportswear Guild . Montreal, Quebec. Interview, 15 August 1974 Picard, Jean . Chairman, Canadian Textiles Institute; President, Textile Sales. Montreal, Quebec . Interview, 23 August 1974 Portigal, Alan. Research Division, Department of Labour. Ottawa, Ontario. Interview, 11 February 1975 Romain, Mrs . Personnel, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 13 February 1974 Rosenbloom, Dan. Chief, Collective Bargaining Division, Department of Labour. Former Director of Canadian Apparel and Textile Manufacturers Association. Ottawa, Ontario. Interviews, 23 July 1974; 11 February 1975 - Letter, 12 March 1975 Rowley, Kent. Secretary-Treasurer, Canadian Council of Unions . Former Director, United Textile Workers of America (Canada). Toronto, Ontario. Interview, 12 September 1974 Sarna, A. Office of Special Import Policy, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 12 February 1975 Saunders, B.A. Apparel Division, Industry, Trade and Commerce. Ottawa, Ontario. Interview, 18 May 1974 Seymour, Edward. Education Officer, Textile Workers Union of America. Toronto, Ontario. Interview , 7 January 1975 Stuart, Campbell. General Director, Office of Industrial Policy, Industry, Trade and

196 Bibliography Commerce. Formerly, Canadian Industries Ltd; Office of Special Import Policy. Ottawa, Ontario. Interview , 27 September 1974 Sulzenko, W. Ministry of State for Economic Development. Ottawa, Ontario. Interview, 18 January 1982 Thur, Otto. Chair, Textile and Clothing Board. Ottawa, Ontario. Interview , September 1980 Upshall, (Mrs.) E. Canadian Importers Association. Letter, 21 August 1973 Waisglas, Harry . Director, Research Division of Department of Labour (then on temporary leave to the Institute of Industrial Relations, McMaster University) . Hamilton, Ontario. Interview (telephone) , IO December 1974 Watson , George. Canadian Director, Textile Workers Union of America. Toronto, Ontario. Interview, 7 January 1975

Index

adjustment assistance 86, 143-8; Adjustment Assistance Benefit program (AAB) 87-9, 92-4, I 12, 125-6, 134; community assistance 126, 134, 144-8; tocapital 129,131,138, 144-8;seealso General Adjustment Assistance Program Amalgamated Clothing Workers Union (ACWU) 34-5, 92 anti-dumping legislation 102, 1 I 1, 145 Anti-Dumping Tribunal I IO, 145, 146 Anti-Inflation Board. See Incomes policy Apparel Manufacturers Association 35, 140 Apparel Manufacturers Council 35, 68, 91, 105 Apparel Manufacturers Institute of Quebec 121

balance of payments 58, 78 , 96, 103, 135 branch plants 3-4, 17-19, 23-4, 46, 131-2 Britain 20, 22,41,45,49,58-9,83,99, 117 British preference. See Tariffs Bruck Mills 51,55, 67, 117-19

C.D. Howe Research Institute 33 Canada Labour Code 136, 139 Canada Labour Relations Council (CLRC) 136 Canadian Apparel and Textile Manufacturers Association (CATMA) 63-4 , 67-9, 73-4 Canadian Apparel Manufacturers' Institute (CAMI) 121, l40, 146 Canadian Congress of Labour (CCL) 34-5, 70-1 Canadian Employment and Immigration Commission. See Department of Employment and Immigration Canadian Industrial Renewal Board (CIRB) 4,95, 129-30, 140, 145-8 Canadian Industries Limited 36 Canadian Institute for Economic Policy 33, 131 Canadian Labour Congress (CLC) 18, 33, 70-1, 106, 133-5, 139, 141-2; and industrial strategy 18, 129-30, 132, 134, 136-8, 140, 147-50; union affiliates 34-5, 141 Canadian Textile Council 34 Canadian Textile Institute (CTI) 35-8, 57,

198 Index 115-17, 120-2, 128-9, 138, 140-5, 65-8,72-5,77,79-81,90-2 , 94-5, l02-4, l06-7, III, 115-17, 120, 147 - see also Adjustment assistance; 127-8, 140; and tariff policy 69, 93; Hegemony; Organizational capacity coalition with unions 70, 81, 84, 94, capital expenditures. See Investment 103; predecessors 36, 65 capital 27, 29, 31, 78 , 103, 114, 131-3, celanese 24, 36, 51, 54-5, 103, 115, I 18-20, 140, 146 148 - clothing 26, 30, 34, 44, 63, 66-9, 72, class 32, 128; and hegemony 6-7 , 12, 39, 79, 81, 85, 90-1, 94, 96, 100, l02-3, 40, 42; and power 9, I I, 27 , 39-40, 42; labour as a 33; see also Capital, l05 , l07, 111-12, 121-3, 128-9, fractions of; Hegemony 140-5, 147 - fractions of 8, 10-11, 14, 132; and Cleyn and Tinker 36, 53, 55 , 73-4 clothing exports. See International trade Canadian development 8-9; basis for clothing imports. See Domestic market; 18; domination of labour 40; financial Import competition; Quotas 11, 78; in traditional manufacturing sector 22; industrial 8, 11 , 14, 18, 22, clothing industry 19, 27 , 29, 35, 44, 51-2, 66; merchant 8; nationalist 9, 18 , 55, 64, 67, 77, 89, IOI, III, 113, 24, 132-3, 138-9; relation between 119-21, 123-5, 128, 140, 142-3, staples and import-substituting 77-8, 145-6; employment rate 51, 85, 92, 136, 138; relation between staples and 124, 127; level of unionization 126; nationalist 24, 132 , 138-9; relation output 5 I, I 24; see also Labour between staples and textile 23, 44, 62, collective bargaining 28, 126, 134, 139; 81, 84, 86-7, 91, 93, 95, 111-12, federal legislation 125; rationalization of 120-2, 128, 140, 143; staples 11-12, l04, 136 14-15, 18,20,23-4, 26,43-4,57-8, Committee for an Independent Canada 131 6o,62,69, 77-8,80-1,84,87-8, Committee for Industrial Organization (c10) 90-1, 93 , 95 , l05, 111-12, 120-2, 35,70 Committee on International Trade Policy 128-32, 138-40, 143, 148; tension between fractions 8-9, 13, 18, 31-2, 57 57; transnational 7, 13 , 21, 45, 112, Confederation des syndicats nationaux 133, 147-9;seeals0Capital;Hegemony; (CSN) 34, 70- I , 75-6, l03-4, l06-7 Organizational capacity; Staples consent 13, 15, 123, 128, 142; corporate - in traditional manufacturing sector 41, mechanisms for securing 139; material 112, 130-1 basis for 12, 21, 62, I 12, 129-30, 135, - small 30-1, 116, 120-2, 129, 131 , 139, 150; of import-substituting capital 139;oflabour 15, 77,87,137, 139,149; 142-4, 147 - takeovers by foreign 117 see also Hegemony - textile 19, 21-2, 30-1, 34-5 , 44, 50-1 , Consolidated Textiles (ConsolTex) 51, 55, 119-20, 140 57-8,62-9,71-5,77,79-83,85-7, 90-1,93-5, 100, 102-3, l05 , II0-12, continental rationalization 3, 24, 107, 111,

199 Index 120, 130, 148; rejection ofby labour and liberal nationalists 129, 134 continentalism 31,33, 107,117,123,131; labour movement's break from 132; opposition to 64, 130 Cooperative Commonwealth Federation (CCF) 35, 70-1 corporatism 40, 64, 69-70, 72, 106, 132, 137, 149; union participation in textile industry development 70, 94, 106; see also Unequal structure of representation Customs Act 79, 86 deindustrialization 3, 6-7, 9, 11-13, 18-19, 22, 77, 111, 130, 150; and foreign control 4; and staples fraction 13, 18, 26; and textile capital 21; sectoral 44; threat of 3, 17-18, 96, 134 Department of Consumer and Corporate Affairs 82-5, 138 Department of Employment and Immigration 69, 80, 82-4, 86, 88, 90, 122, 138-9, 142, 145; and Keynesian economics 42, So; and VER system 6o; as seat of hegemonic power 42, 6o; changes to 135, 137; import policy role 42, 66, 81, 93; see also Low Cost Import Policy Committee; Tariff Board Department of Health and Welfare 88 Department of Industry, Trade, and Commerce(nc) 42, 57-8, 6o-2, 68-9, 71, 78, 80, 82-3, 85, 93, 138, 140, 145; Ad Hoc Textile and Clothing Advisory Committee 107; Apparel and Textile Branch (Textile and Consumer Products Branch 78-82, 118, 123; changes to 135; Economic Analysis Branch 142-3; Major Projects Assessment Agency 139; Office of Special Import Policy (Office of Special Trade

Relations) 86-7, 93-5, 100, 102, 107, 144-6; other divisions of 127; proposals to Cabinet Committee on Economic Policy 144; Sectoral Task Force 136-7, 140, 142-3; Textile Policy Committee 8 I; see also Textile policy Department of Labour 68, 70-1, 87-8, 91, 126, 136-8; Adjustment Assistance Benefit program see Adjustment assistance Department of National Revenue 57, 6o, 62, 66, 78-80, 121 Department of Regional Economic Expansion (DREE) 69, 82, 85-6, 90-1, 126, 133, 138, 141; Regional Development Incentive Program 133 dependent industrialization See Industrialization by import substitution Diefenbaker, John 58, 6o, 66-9, 73, 78 domestic market 44-6, 49-50, 66-7, 72, 83-4, 86, 100-1, 108-9, 113, 118, 128; and indigenous capital 24; British share of 20-21, 47; u.s. share of 20, 47, IOI, I IO; see also Import competition; International trade; Manufacturing; Textile imports Dominion Textile (DomTex) 36, 51, 55, 67,75-6,90-1, 104,1o6,115, 119-20, 128, 134, 140, 146-7; acquisitions· 52, 119-20; diversification 51, 90; role in textile industrial restructuring 52; takeovers 119-20 DuPont 24, 51, 55, 90, 103, 105-6, 118, 120, 140, 146 Economic Council of Canada 73-4, 116, 137 European Economic Community 49, 96-9, IOI, l08-9 executive federalism 28-9, 64

200 Index Federation nationale des travailleurs de l'industrie du vetement (FNTIV) 34 Foreign Exchange Conservation Act 65; see also New protectionism Foreign Investment Review Agency (FIRA) 131-3 fractions thesis of capital See Capital, fractions of France 20, 22, 83; protection of textile industry 101 Fraser Institute 33 free trade 31, 57-58, 73, 84, 92, 100, 107, I 16, 119-20, 131-2; see also Trade liberalization General Adjustment Assistance Program (GAAP) 78 , 82, 85, I 16 General Agreement on Tariffs and Trade (GATT) 16, 21-2, 45, 49, 6o-I, 69, 79, 82, 98-9, 122-3, 136; Kennedy Round 17, 23, 6o, 78, 82; see also Tariffs General Council of Industry 75 Gordon Commission 65 Gray , Herb 90, 143-4 Hamilton group 36, 53-4 Harding Carpets 36, 90 hegemony 6, 10, 12-13, 19, 41, 114; and class domination 9, 25-8, 38, 129, 135; and consent 15, 27-8; and the state 27 , 40, 69; fractions 10; maintenance of 38; of Canadian Textile Institute in alliance 75; of textile capital over CLC affiliates 142; staples fraction 12, 15 , 18, 26, 45, 77, 130, 139, 142, 147, 150; United States 13, 17, 45, 96, 98; see also Capital, fractions of; Class; Consent high technology . See Technology Hong Kong 20, 59, 97, 100, 108, 120 Howe, C.D. 58

import competition 17, 2 1, 3 1, 44, 50, 57, 64,67,71,80,83,87 , 102,106, 125-6, 134, 316, 143; from low-wage sources 19-21,24, 30,46, 51 , 55, 57,59-6o, 62, 73, 75-6, 96 , 100, 102 , 106, 108-IO, 113, 120, 123, 127 , 141, 143; from United States 72 , 1o6, 143; see also Textile imports imports 46, 93, 100, 102 , 104, 106, 117; containment of low-cost 68 , 72 , 109, 110; control list 109; controls 61, 73, 95, 107, III, 114-15, 121, 144; global controls 95, 100, 107; policy 66, 81, 93, 103; surcharge 91 , 102; see also Import competition; Tariffs; Textile policy incomes policy 103, 129, 132-3 , 137; Anti-Inflation Board (AID) 104, 137, 149 industrial strategy. See Canadian Labour Congress; Continental rationalization; Technological sovereignty industrialization by import substitution 4, 6-7, II, 15, 17, 20, 25, 28, 117, 119; and National Policy of 1879 7-8 interdepartmental committees 79, 82, 105, 137; DM-IO 137; on Trade and Industrial Policy (ICTIP) 136; Committee on International Trade Policy 57; see also Low Cost Import Policy Committee International Ladies Garment Workers Union (ILGWU) 34-5 International Monetary Fund (IMF) 16, 45 international trade 13, 16, 21, 44-6, 71, 81 , 96-102, 108-10, 113 investment 23, 45, 65, 76, 90, 99, IOI , I 17-19, 128, 132-3, 136, 143; capital expenditures 65, 114-16, 124, 143, 145-6; in new textile techniques 55, 113, 128;intextiles 24,50-1,65-6,71 Japan 16-17, 20-2 , 46, 49-50, 59-6o,

201 Index 84,87,96-8, IOI, 108-9, 117-18, 120; MFN status 2 1, 49 King/ St Laurent regime 58, 64, 66, 79 Labour 22-3, 27, 33, 40, 69, 78, So, 84, 86, 88, 93, 103, 106, I 13, I 18, 124, 125, 132, 136, 148-9; adjustment 70, 84,112,125, 129,134,141; adjustment assistance see Adjustment assistance; and technological change 22, 89, 114, 124-5, 134, 141-2, 148; as a class 33; break with continentalism 132; certified lay-offs 89, 125-26; clothing unions 34,64,91,94, 105, 126-8, 137, 140-1; co-operation with management 74, 126; economic status of women 30, 88-9, 127; fragmentation of 70-1, 103, 127; immigrant 55-6; import competition 31, 63, 69, 75, 134; in textile and clothing industries 24, 29-30,34-5,44,55,63-4,90,92,124, 127-30, 140, 142, 145, 147; labourmanagement committees 75, 126; militancy 74-76, 136, 139, 147, 149; organizational capacity of see Organizational capacity; policy 70-71, 88, 1o6, 134, 136, 139; Quebec 30, 76, 92, 106; relocation programs 70, 88, 126, 134; retraining 88, 91, 125-126, 134, 145; sectoral strength of 32, 34; textile unions 34, 64, 69, 71, 74, 76, 91, 94, 103-105, 126-128, 137, 140; wages 28, 55, 62, 87, 103-104, 106, 113, 127, 137, 145, 148; see also Adjustment assistance; Canadian Labour Congress; Corporatism; Restructuring; listings for individual unions liberal nationalism 29, 129-30, 132-5, 139; and technological sovereignty 131

Long-Term Arrangement on Cotton Textiles 22, 6o-1, 98 Low Cost Import Policy Committee (Lc1c) 6o-1,78,80-1,86-7,93,95, 102, 105, 107, 122, 144-6 Mackasey, Bryce 88 Manitoba Fashion Institute (MFI) 122, 140 man-made fibres 46, 50-2, 58, 62, 65, IO 1, 118-19; dominance of advanced capitalist industries I oo manufacturing 15, 46, 50, 56-7, 64, 71, 73,103,114,127, 132;effectofdynamic sectors on traditional I 12-13; labour intensive 67, 112-13; predominance of American transnational corporations 45, 71, 112, 117, 130; research intensive 112; role in Canadian economy 64, 66; weakness of 135-6; see also Industrialization by import substitution; Deindustrialization Ministry of State for Economic Development (MSED) 135, 137, 139-40, 142, 144-7; mega-projects strategy see Technological sovereignty Ministry of State for Social Development (MSSD) 135 modernization 22-3, 51, 57, 84, 111, 114-15, 117, 120-1, 141-2, 146; assistance to textile and clothing for 70, 93, 145 Montreal Dress and Sportswear Guild 35 Multi-Fibre Agreement (MFA) 22, 96, 98-9, 122 National Association of Women's Wear Bureau 35 National Garment Manufacturers Association 67 National Industry Conference Board 50 National Policy of 1879 13-14, 21, 46, 49,

202 Index 50; and fractions thesis 8, 14; and import substituting capital 19-20; and staples fraction 13, 20, 44; and textile capital 19, 44; and tariffs 12, 14 National Productivity Council 68, 73 Netherlands 20, 64, 89, 99 New Democratic Party (NDP) 35, 71, 92; Waffle movement 131 new protectionism 21, 22, 112; see also Imports; Tariffs; Textile policy Nova Scotia 75, 119 Ontario 75-6, 81, 90, 1o6, 120,123 organizational capacity 31-2, 34, 89; of clothing capital 26, 29, 32, 34, 64, 140; of labour 26, 29, 32, 34, 64, 92, 125, 127, 140, 149, 150; of textile capital 26, 29,32 , 34,63-4, 140 PTI. See Canadian Textile Institute Pacific Rim countries 92; exports to 50, 6o, 84 Parliamentary Sub-Committee on Import Policy 146 Parti Quebecois 76, 103 Pearson, Lester 69, 74, 78 Pepin, Jean-Luc 3, 74, 86, 91 Pepin, Marcel 70 post-war compromise. See Post-war settlement post-war settlement 15, 28-9, 69, 132, 137 Prices and Incomes Commission (PIC) 137 Privy Council Office (PCo) 82, 87-8, 135-6 public ownership 133

Quebec 92,120, 123, 144-5; employment and wages 56, 85, 104, 1o6; government of 74-5, 81 , 90; labour in 30, 74;

location of textile industry 30, 56, 74-5 , 84, 87, 119, 143; nationalism 30, 75-6,80,84,86,88,95 quotas 85-7,93-4, 100, 107-9 rationalization 18, 22, 85 , 87, 93 , 111 , 114, 116, 118-20, 124, 132, 134, 141-2, 147-8; and competitive pressure 57, 84; of collective bargaining 104, 136 regionalism 29-30 relative autonomy IO, 38 reorganization. See Restructuring resource sector 56, 65, 118, 144; predominance of American transnationals 130; resource development and indigenous capital 132; see also Staples; Technological sovereignty restructuring 3-4, 6-7 , 12, 44, 51, 85, 89, 93, III, 123, 129, 132, 134, 143, 144, 148; and Jabour 23, 64, 112, 124-7, 130, 139, 141, 147, 149; closure of obsolete plants 55 , 85; concentration of textile industry 52, 55, 64, 117, 123, 142, 147-8; industrial adjustment 57, 69, 84, 86-7, 93, 95, 114-16, 120, 122-4; rapid adjustment to international competition 55, 85 , 145; role of Canadianstate 3, 13,26-7, 129, 131-2, 136, 138, 144, 148, 150; role of Celanese 54-5; role of Dominion Textile 52-5; role of Hamilton group 53-4; through modernization 51, 114; see also Modernization; Rationalization Science Council of Canada (sec) 17, 131 Sectoral Task Force. See Department of Industry, Trade, and Commerce Senate hearings 102-3, 105, 107, 110, 117 Small business 30, 32, 64, 66-9 South Korea 97, 100, 108

203

Index

South-east Asia 98, 145 staples 11, 14-15,66;andgrowth 12-15, 29, 66, 79, 129, 131; exports 16, 20, 25,28,46,49-50,57-58,61,65, 82, 84, 86; see also Hegemony; Capital, fractions of Sweden 83 Tariff Board 28, 57-9, 91, 146; Reference 116 58-59; Reference 125 52, 59, 6o, 66; Reference 144 85, 91 tariffs 16, 46, 59, 102; and GATT 16-17, 78; and policy process 57, 62; British preference 20-1, 49, 59; Most Favoured Nation status and United States 49; Most Favoured Nation status and Japan 21, 49, 59; reduction on textiles 58, 69, 85, 9 I; see also VERS; Textile policy technological sovereignty 3, 18, 24, 148; and liberal nationalism 129-32, 148; megaprojects strategy 18, 24, 132, 138, 144, 147; potential challenge to staples fraction 18, 130, 132 technology 85, 117, 131, 132, 138, 141; labour-displacing 22, 51, 111-14, 119, 148; microelectronics 112-13; robotics 113; sector 24, 130-31, 144; textile machinery 51,113, 115-16;seealso Labour; Modernization; Restructuring Texpact. See Trade liberalization Textile and Clothing Board (TCB) 86, 89, 93, 95, 99-100, 102, 105-6, I IO, I 14, 115, 117, 121-2, 140, 145-6; 1980 report I09, I 14, 144 textile imports 21, 27, 47, 49, 5I,71, 100, 109, 120; from advanced capitalist countries 20, 58, 96, 100, 102, I06, 109-11, 117, 143 textile industry 19, 27, 29, 44, 46, 50, 52, 55-9,63-4,66,77,79,81,89, 101-2,

110-11, 116, 118, 120, 124-5, 128, 130, 140, 142, 143, 146; employment ratein 50,76,84,85,92, 100,102,124, 127; in other countries 83; level of unionization I 26; output 50, 124 textile policy 24, 49, 59, 68-9, 71-4, 76-8,80-3,88,90-2,95, 114, 127,146,148; 1968cnbrief 75, 81; 1971 policy 3, 5, 18, 23-4, 43, 62,86-7,94-5,100, 107,114, 116-17, 123, 127, 129-30, 132, 134, 138, 140-4, 147-8; full implications of 1971 policy 96, 11 I, I 17-18; CTI critique of 93, 105; Import regulation aspect of 93, 95, 100, 109; 1981 policy 129-30, 135, 139-40, 142 , 145, 147, 150 Textile Technicians Federation of Canada 36 Textile Workers Union of America (TWUA) 34-5,64,69-71,75,92, 106 Third World 4, 13, 16, 19-20, 23, 96, I 14, 147; comparative advantage in traditional manufacturing 112, 114 Thor Mills 36 trade, world textile. See International trade trade associations 32-3, 35, So, 89, 91, 103, I05, I07, 146; reorganization of clothing 121-3, 140, 142; see also listings for individual associations trade deficits 46, 66, IOI trade liberalization 16, 23, 6o, 69, 79, 83, 87, 90, 92, 111-12, 117,120, 123, 128, 138, 143, 148; and transnational capital 21 ; phased liberalization option 84, 86; progressive 78, 86, 88; Texpact 116-17, 120, 141-2, 144 trade unions. See Labour Trades and Labour Congress (TLC) 34-5, 70 Trudeau, Pierre Elliott 76, 88, 104

204 Index

unemployment 3, 28, 42, 58, 75, 85-6, 88, 90, 96, 103, 130, 132, 149; clothing related 85; in Quebec 76, 85, 104; inherent in adjustment process 124, 127; social costs of 127; textile related 75, 85 unequal structure of representation 26, 38, 39, 42, 44, 57, 137, 140; role of Department of Finance 42 United States 7, 16, 18, 35, 46-7, 49, 59-6o,78,96-9, 101-2, 104, 106-9, 116-17,119-20,122-3 , 132,145,147; exports to 20, 49, 130; hegemony 13 , 17, 45, 96, 98; see also Continentalism; Domestic market; Free trade; Tariffs United Textile Workers of America (uTW A) 34, 69, 70, 74, 106

Voluntary Export Restraints (VERs) 22, 6o-2,66-8,82,91, 107,109,144,146; and Department of Finance 84; with low-wage countries 98-9, 107; see also Tariffs wages 28,31,40,55,57,89, 101,103-4, II3, 127, 132-3, 137, 145; controls see Incomes policy; disparities between Ontario and Quebec 56, 106; see also Labour Western Europe 16-17, 22, 45-6, 96, 101-2, 1o6, II7, 120 Woods Task Force on Labour Relations 75-6, 136