CANADA: CAN THE PROGRESSIVE CONSERVATIVES WIN?

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85S00316R000100100007-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: August 31, 2010
• Sequence Number: 7
• Publication Date: May 1, 1984
• Content Type: REPORT

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lV M 1 ? 1
Directorate of
Intelligence
Canada: Can the
Progressive Conservatives Win?
EUR 84-10095
CR 84-10631
May 1984
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Directorate of Confidential
Intelligence
Canada: Can the
Progressive Conservatives Win?
This paper was prepared by
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Office of European Analysi
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welcome and may be directed to the Chief, West
European Division, EURA,
Confidential
EUR 84-10095
CR 84-10631
May 1984
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Canada: Can the
Progressive Conservatives Win? 25X1
Key Judgments After. enjoying a lead of up to 39 percentage points in Gallup Polls over the
Information available past year, Canada's Progressive Conservative (Tory) Party now finds itself
as of 10 May 1984 6 percentage points behind the incumbent Liberals. The Tories have been
was used in this report.
plagued by highly publicized intraparty bickering involving regional
rivalries and differing philosophical approaches to social and economic
policy. Internal strife is making it difficult for the Tories to convince the
electorate that they constitute a credible "government-in-waiting," and,
indeed, is the main reason why the party has been in opposition for all but
nine months since 1963.
In the early months following his election as Tory leader last June, Brian
Mulroney, by force of personality and the rank and file's hunger for power,
kept the party's factions quiet and established a facade of unity. In
November, however, dissension in the Tories' federal parliamentary contin-
gent resurfaced-particularly over the constitutional protection of French-
language rights in Manitoba and the maintenance of federal social welfare
programs. In our opinion, party infighting probably will expand under the
pressure of the coming election campaign.
Prime Minister Trudeau's decision to retire as Liberal leader also com-
pounds Tory problems. The Liberals are now embarked on a hotly
contested race to choose Trudeau's successor. The race is likely to
dominate the media between now and the Liberal. leadership convention in
June. The Liberals seem certain to emerge from the race not only with a
new leader, but also with a reinvigorated public image. Moreover, the
Liberal government will set the date of the next election and will time it for
the moment polls show most advantageous.
If, in spite of themselves, the Conservatives win the next election, we do not
believe that Canadian policy toward the United States would change
substantially. The Tories would, in our opinion, tone down the nationalist
tenor of current Liberal economic policy. They would, however, remain
committed to developing Canada's resource-based economy and ready-
albeit more reluctantly than Trudeau's government-to intervene in the
domestic economy to effect that end. In addition, although the Tories
probably would be more rhetorically supportive of US foreign policy, they
would, in our opinion, keep themselves at arm's length from Washington
and pursue an external policy that was, in substance, not markedly
different from that of the Liberals.
iii Confidential
EUR 84-10095
CR 84-10631
May 1984
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Key Judgments
Fragile Unity at Best
Competing Provincial Demands
A Foothold in French Canada?
Ontario: Key to Victory
Prospects: Victory or Defeat?
Implications for the United States
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Canada: Can the
Progressive Conservatives Win?
The political prospects of Canada's Progressive Con-
servative Party rarely have seemed more promising
than they did late last year. In the polls they were tens
of percentage points ahead of Prime Minister Tru-
deau's Liberal Party; they had a fresh, dynamic
leader in Brian Mulroney, who seemed to have a fair
chance of improving his party's showing in Ontario
and even in Quebec, the Liberals' stronghold; and the
prospect of victory-in elections, which nearly every
political observer believed would be held in the fall of
1984-had partly overcome the Tories' pervasive
factionalism.
Since then, the outlook for the party has become
much cloudier. We think elections still are likely next
fall, but the chances have risen that the Tories will
once again snatch defeat from the jaws of victory. The
Liberals have now erased the Tories' margin in the
polls, and the old fissures have reappeared in the Tory
Party-fissures that seem to follow faultlines in the
larger Canadian polity. This paper examines the
party's current prospects and the implications for
Ottawa's relations with the United States.
The Tories are a perennially fractious party, and the
most pressing task facing Brian Mulroney when he
became leader last June was to reduce factionalism
and concentrate authority in his own hands. He has
centered policymaking in the Office of the Leader of
the Opposition rather than at party headquarters
where other party leaders could more easily bring
their influence to bear. In addition, Mulroney only
recently lifted a ban on Tory parliamentary nomina-
tions that he imposed last October ostensibly to allow
more time to find the most talented individuals. We
believe, however, that Mulroney used the period to
bring more of his supporters into the party and thus
have greater influence on the selection of candidates.
Mulroney also acted to mollify former rivals and those
Tories who supported his predecessor, Joe Clark. He
appointed 11 of Clark's former cabinet ministers to
his shadow cabinet.' Eight of the 11 had supported
Clark's reelection bid and two-John Crosbie and
David Crombie-had sought the leadership them-
selves. Mulroney has given 87 of the 100 Tory MPs
some extraparliamentary responsibility; Clark made
only 60 such appointments during his tenure. More-
over, Mulroney has stated publicly that once in power
he will give about 3,000 patronage jobs to Tories who
work in the coming campaign. Clark was faulted by
many Tories for failing to dispense patronage after
their election victory in 1979.2
Although these moves will promote party unity, we
believe factionalism will persist. One important fis-
sure, for example, that divides the Tory leader from
his parliamentary delegation is a perception among
Tory MPs that the leader makes policy without
consulting his supporters in Parliament. A report
prepared last year by a Conservative MP noted that
most of his colleagues believed the leader had too
much discretionary power and that their views had
been ignored for the past decade.
In addition, Mulroney's credibility has been under-
mined publicly on several occasions by Tory finance
critic John Crosbie's calls for a reexamination of the
universality of Canada's social welfare system and
consideration of the use of means tests. Mulroney
repeatedly has said that social benefits are the birth-
right of all Canadians, and his government would
' In parliamentary systems, the members of the opposition parties'
shadow cabinets are assigned responsibility by their leaders for
criticizing specific areas of government policy. The Finance Critic,
for example, is designated to keep track of and critique in
Parliament the policies sponsored and administered by the govern-
ment's finance minister.
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Confidential
consider them a "sacred obligation." Crosbie's state-
ments, which flagrantly disregard his leader's public
position, underscore the existence of factionalism in
the party that not even the prospect of an electoral
victory has been able to eradicate.
Competing Provincial Demands
Another serious problem for the Tories, in our view, is
federal-provincial relations. In the Canadian political
system the federal prime minister and the provincial
premiers are natural antagonists, largely because of
the way constitutional powers are divided between
Ottawa and the provinces. Under Trudeau, federal-
provincial relations have been characterized by con-
frontations over constitutional reform and national
energy policy. Since the mid-1970s, however, there
have been no Liberal provincial governments in Cana-
da, and, therefore, Trudeau has been able to promote
federal positions without hurting provincial Liberal
organizations. Mulroney, on the other hand, would
have to take account of the seven of 10 provincial
premiers who are Conservative and are principally
concerned with fulfilling the demands of their local
constituents rather than devising policies in the "na-
tional interest."' Although Mulroney has pledged to
be conciliatory toward the provinces, he nonetheless
believes, according to his book Where I Stand, that
Ottawa must be "empowered at all times to preserve
the security and integrity of the nation."
In the preelection period Mulroney and the Conserva-
tive provincial premiers will present a united front ,
publicly. In private, however, Mulroney probably will
have a troubled relationship with his provincial Tory
brethren. Aside from policy differences, several pre-
miers command national attention and are likely to
resent the focus of Conservatives shifting to Ottawa.
In our judgment, Alberta's Lougheed and Ontario's
Davis rank behind only Pierre Trudeau as Canada's
' Conservative provincial premiers in May 1984 included William
Davis in Ontario, Richard Hatfield in New Brunswick, Brian
Peckford in Newfoundland, John Buchanan in Nova Scotia, James
Lee in Prince Edward Island, Grant Divine in Saskatchewan, and
Peter Lougheed in Alberta. In addition, William Bennett heads a
government in British Columbia that is Social Credit in name but
ablest politicians; Mulroney, on the other hand, won
his first election last September. The Tory premiers
are likely to make conflicting demands on Mulroney
that he will be unable to. reconcile and, as a result,
their provincial organizations may not provide the
federal part with aggressive support in the next
election
Western Alienation
Although an important part of the Tories''electoral
base is in Western Canada-the party holds 48 of 76
federal seats in Manitoba, Alberta, Saskatchewan,
and British Columbia-the region is dissatisfied with
the party's policy orientation. The West, as a region,
is alienated from the rest of Canada. Westerners
believe federal policy is designed to benefit Central
Canada-Ontario and Quebec-where population
and industry are concentrated, by keeping the West a
hinterland supplying raw materials to Central Canada
and serving as consumers for its manufactures. West-
erners, however, have supported Mulroney, despite his
being preeminently a Central Canadian, because they
sense he may be able to defeat the Liberals
The most dangerous dilemma facing Mulroney and
the federal Tories in their relationship with the West
lies in the area of national energy policy. Press reports
indicate anger still simmers in the region over what
Westerners see as lost economic activity due to the
Liberals' National Energy Program (NEP). The
West's animosity toward the NEP, in fact, probably
would have caused an east-west confrontation at the
Tory leadership convention last June-with Ontario
supporting the lower-than-world-level domestic oil
prices mandated by the NEP, and Alberta demanding
world prices-were it not for the current international
oil glut and the fall of world oil prices.
Westerners expect the Conservatives to end the feder-
ally administered oil-pricing regime. They would be
pleased if the price of all oil produced in Canada rose
to world levels. Such a move, however, would alienate
consumers in Central Canada. The Tories are aware
from bitter experience that they cannot afford to
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Confidential
Ted Byfield, publisher of the Alberta Report, com-
menting on a recent visit to Calgary by Ontario
Conservative Premier William Davis and several of
his cabinet ministers:
What we must therefore infer from the Ontario
mission to the West, after you endure all of the
pointless platitudes and meaningless talk and note
what they're doing is what they have been doing all
along, is that Central Canada is determined to
preserve through the 21st century the same game
they have played throughout the 20th. What we
have to convey to them in no uncertain terms is
that this game has ended. We want change, funda-
mental constitutional change, particularly in the
Senate, that will render impossible forever such
outrages as the National Energy Program. In other
words, we either want into Canada, or we want out.
The day when we will go on meekly accepting
colonial status is over and gone.
antagonize these voters, particularly the Ontarians.4
The Clark government's 1979 plan to increase domes-
tic oil prices was the decisive factor in its fall and in
the widespread defection of Ontario voters to Liberal
ranks in the ensuing election. Although Mulroney
describes the NEP as an "unrelieved disaster," he has
promised only that Canadian prices will "reflect"
world prices
Another area of confrontation between the federal
Tories and the Westerners lies in the constitutional
protection of minority language rights at the provin-
cial level. Mulroney is a passionate advocate of bilin-
gualism as the nation's moral responsibility and a
practical means of keeping Quebec in Canada. Many
Western Tories, however, regard bilingualism as a
' Because of the Tories' electoral impotence in French Canada, the
importance to the Tories of Ontario and, indeed, all of English
Canada, cannot be overemphasized. The Financial Post has esti-
mated that the Conservatives probably need about 45 percent of the
vote in English Canada just to elect a minority government. In
1980, for example, the party won 40 percent of the vote outside
Quebec; the Liberals, only 35 percent; and yet the Liberals were
costly Liberal whim.' In Manitoba, for example, the
provincial Tories recently blocked the plans of the
government in Winnipeg to protect French-language
rights constitutionally. If Western views on bilingual-
ism came to predominate in the party, however, we
believe the Tories' electoral prospects in Quebec
would be destroyed.
The Conservatives are thus in a quandary: siding with
the West endangers crucial votes in Central Canada,
while allying with the Center could reduce Western
support. On balance, we believe the Conservatives will
make energy policy to meet political necessities in
Ontario, not to satisfy the West. Tory policy, for
example, probably will require federal involvement in
oil pricing-the aspect of the NEP most resented by
the West. We also believe Mulroney will continue to
support the protection of minority language rights.
Conservative strategists may reckon those policies will
not cost the Tories much in the West because the
Liberals are anathema there. In a close election,
however, the loss of even a few seats in the region
could be critical.
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A Foothold in French Canada?
Mulroney won the leadership partly because, with his
commitment to bilingualism, he was perceived capa-
ble of breaking the Liberals' stranglehold in Que-
bec-the Liberals now hold 74 of the province's 75
federal parliamentary seats. We believe the odds are
against the Tories because polls show they are still
remarkably unpopular throughout French Canada. In
the general election in 1980, the Liberals won 100 of 25X1
the 102 constituencies in Canada with electorates at
least 10 percent French speaking. This total put the
Liberals two-thirds of the way to a majority in the
282-seat Parliament.6
' Ontario's political scene has recently been disturbed by the
Conservative provincial government's refusal to guarantee. language
rights in its Constitution for Ontario's 500,000 Francophones.
Mulroney's probable support for such a guarantee in Ontario could
cause some Tories there to stay home in the next election; his
failure to do so, on the other hand, would further weld the
province's Francophones, and its large ethnic communities in
metropolitan Toronto, to the Liberal Party. (C NF)
6 The national results of the 1979 election were Liberal-114 seats;
Conservative-136 seats; New Democrat-26 seats, and the na-
tional results of the 1980 election were Liberal-147 seats;
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Mulroney's election, however, did spark new interest
in the Tories in Quebec; party membership rose from
50,000 to 75,000 between last September and March.
Mulroney is a staunch opponent of Rene Levesque's
separatist Parti Quebecois (PQ) and its goal of inde-
pendence. He has promised Canadians that if Quebec
"gets rid of the PQ" he will negotiate political peace
with the province "in a minute." He has even equated
his position on separatism with Prime Minister Tru-
deau's; Levesque emphasizes this similiarity for PQ
supporters, who generally detest Trudeau, by dubbing
Mulroney a "mini-Trudeau."
Mulroney's antiseparatism, however, probably has
failed to build a Tory bridge to the pervasive national-
ist-as opposed to separatist-sentiment in Quebec.
While recent polls indicate support for independence
is ebbing, they also show most Quebecers believe their
province merits a privileged place in the Canadian
political system. We believe that if the Tories fail to
accommodate Quebec nationalism, many nationalists
will switch to the new PQ-supported Parti Nationa-
liste, reluctantly support the Liberals, or simply not
vote in the next election. Any of these results almost
certainly would preserve the Liberal hegemony in
Quebec.
Even if the Tories make an effort to attract the
nationalists in Quebec, however, they will face further
difficulties because of their belief in decentralization
and desire to disengage Ottawa from intimate involve-
ment in the economy. In contrast, polls show Quebec-
ers want federal political parties to be power brokers,
able to reconcile conflicting regional interests; they
therefore expect the central government to be power-
ful and interventionist. In addition, Quebecers tend to
vote pragmatically in federal elections after ascertain-
ing what each party will provide in terms of roads,
schools, airports, and the protection of minority
rights. Since 1949, Quebecers have perceived the
Liberals as offering more than the Tories (see table 1),
and we think that this perception will endure at least
through the next election and probably will prevent
the Tories from winning more than 10 to 15 seats. In
our opinion, the lack of a considerable Quebec repre-
sentation in the Conservative parliamentary contin-
gent and cabinet after a victory would be disastrous
for the party and threatening to Canadian unity.
Table 1
Federal Election Results in Quebec,
1949-80
(Percent of Vote a and Number of Seats)
Election
Year
Federal
Seats
Liberal Party
Conservative Party
Available
Share of
the vote
(percent)
Number
of Seats
Share of
the Vote
(percent)
Number of
Seats
1949
73
60
68
25
2
1953
75
61
66
20
4
1957
75
58
62
31
9
1958
75
46
25
50
50
1962
75
40
35
30
14
1963
75
46
47
20
8
1965
75
46
56
21
8
1968
74
53
56
21
4
1972
74
49
56
17
2
1974
74
54
60
21
3
1979
75
62
67
14
2
1980
75
68
74
13
1
a All percentages are rounded to the nearest whole number, and
totals do not account for votes cast for third parties.
Ontario: Key to Victory
Ontario is Canada's most populous and industralized
province, and its voters, in our opinion, are likely to
determine the outcome of the next federal election.
Ontario contains the largest number of federal parlia-
mentary constituencies (95), more than one-third of
the total. Because of Ontario's concentration of indus-
try and population, its voters probably are more
sensitive to changes in federal economic and energy
policies than those in other provinces. The Tories can
usually rely on the province's rural voters, but an
election is won or lost in urban southern Ontario. In
particular, a party must appeal to the electorate in
metropolitan Toronto-an area of more than 3 million
inhabitants-where there are sizable low income and
ethnic communities.
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Ontario's Pivotal Role
in Federal Elections
Ralph Hedlin, columnist for the Alberta Report, on
the historic importance of Ontario's votes in deter-
mining the outcome of federal elections, the conse-
quent tendency of federal political parties to tailor
their policies to appeal to voters in that province, and
the West's despair over the situation:
On the record of Canadian elections, parties that
win a majority of the Ontario federal ridings will
probably form the national government. Certainly
a party that fails to win in Ontario is most unlikely
to get a majority of seats in Canada. In the final
analysis Ontario voters give or withhold national
power. The fact that Ontario is relatively benign is
the only factor that enables the public administra-
tion of Canada to limp along as well as it does.
The voters of Ontario and Quebec electorally
determine the economic destiny of residents of the
provinces of Outer Canada .... This becomes
dangerous when there is a real conflict between
regions. Is there a political party so foolish as to
take up the Alberta cause in a federal election and
accept the risk of offending voters who control 95
(the number of federal seats in Ontario)-some 34
percent-of the 282 seats in the House of
Commons?
The Tories, however, are perceived by many Ontari-
ans to favor Western interests. The Tory budget in
December 1979, which called for moving domestic
energy prices closer to world levels, stung Ontario's
consumers, enhancing the Liberals' election promise
to shelter Canadians from the full impact of escalat-
ing world energy prices. The budget, according to the
Toronto Globe and Mail, also alienated the province's
Conservative government and caused its powerful
election machine to remain largely on the sidelines
during the ensuing election. In addition, the Tories
lost votes in metropolitan Toronto because of proposed
reductions in social spending. The combination was
devastating: the Tories lost eight of their 12 seats in
Toronto and 19 of their 57 seats province wide (see
National political campaign plans are always and
inevitably built around a best estimate as to the
programs and policies most likely to appeal to the
voters of Ontario. The practice works. Prime Min-
ister Trudeau's advisers demonstrated this beyond
dispute when the voting on February 18, 1980
confirmed that they had converted the promise of a
brutal raid on Alberta's oil and gas resources into
victory in 75 percent of the constituencies in
Ontario and Quebec. There was never any doubt
that the promises would be kept: 86 percent of the
147 members of the Liberal caucus that brought in
the National Energy Program were elected in the
two central provinces. In the election of 1980 the
resources of the western provinces were simply a
currency of political trade.
Ottawa refuses to acknowledge, when it buys votes
in Central Canada with oil and gas from the
producing provinces, that it is bidding with irre-
placeable western assets. This is morally unaccept-
able nationally, economically disastrous regionally.
Politically, as 1980 demonstrated, it can win an
election. It can also concurrently dismember a
nation.
Because of the Ontario factor, we believe Mulroney's
Tories will not adopt policies significantly different
from those implemented by the Liberals since 1963.
To win back Ontario seats lost to the Liberals in 1980,
the Tories probably will need to keep most of the NEP
and maintain federal social spending at present levels.
These guidelines probably will permit the Tories to
recapture some Ontario seats, gains which are essen-
tial if the party is to elect a majority government.
table 2).
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Table 2
Federal Election Results in Ontario
and Metropolitan Toronto, 1979 and 1980
Liberal
Conservative
New Democrat
Toronto b
Conservative
New Democrat
Vote
Share of Total
Vote (percent)
Number of Seats
1,509,926
36.4
32
1,732,717
41.8
57
873,182
21.1
6
390,196
38.8
10
394,505
39.2
12
208,174
20.7
1
a There were 95 federal seats in Ontario in both elections.
b There were 23 federal seats in Metropolitan Toronto in both
elections.
The Liberals: On the Upswing?
The Liberals, at least according to the Gallup Poll,
have erased the 39-percentage point advantage in the
polls enjoyed by the Tories last September and now
have a six-point lead. Moreover, the government's
control of the timing of the next election gives it an
important advantage over the Tories. The present
Parliament's five-year term does not expire until
February 1985, but the government can call an
election at its discretion simply by giving a 50-day
notice.'
The Liberals also are attempting to stymie Tory
policy initiatives. The government's legislative pro-
gram announced.last December, for example, includ-
ed several measures aimed at undercutting the
Conservatives:
? The government created a Ministry of Youth to
promote employment opportunities for young peo-
ple; Mulroney had earlier established a task force to
address this question.
' Most media commentators and US Embassy officials have been
predicting a late fall election since it would give the new Liberal
leader-Trudeau will retire in late June-time to create an image
for the voters. In addition, in British parliamentary systems,
governments that run out their full five-year term are usually seen
by the electorate as being afraid and are frequently defeated in the
next election. The current Liberal advantage in the polls, however,
may induce the new leader to call a snap election as early as this
Vote
Share of Total
Vote (percent)
Number of Seats
1,675,519
41.9
52
1,420,436
35.5
38
874,229
21.9
5
429,482
44.8
17
325,833
34.0
4
191,044
19.9
2
? The government pledged to maintain its average
annual growth commitment to NATO of 3 percent,
in real terms, in Canada's defense budget thus
blunting Tory criticism of inadequate support for
the Alliance.
Most recently, the Liberals introduced legislation to
make federally owned corporations more accountable
to Parliament, thereby depriving the Tories of a
reform they intended to promote in the election.
In addition, the Liberal government apparently is
about to take action that will make it difficult for
Mulroney to fulfill his pledge to abrogate the NEP's
25-percent government share, or "back-in," on all oil
and gas production on federal lands. According to US
Embassy officials, Ottawa will soon introduce legisla-
tion to activate the Canada-Nova Scotia Offshore
Energy Agreement of 1982; the government of Nova
Scotia will introduce parallel enabling legislation si-
multaneously. The Agreement gives the province 50
percent of Ottawa's back-in share in gasfields and 25
percent of that share in oilfields. Thereafter, eliminat-
ing the "back-in" would require new legislation at
both levels of government and renegotiation of the
Canada-Nova Scotia Agreement-virtually an im-
possibility.
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Conservative Positions on
Key Economic Issues
Some points of economic policy endorsed by the
Progressive Conservatives since Brian Mulroney as-
sumed the party's leadership in June 1983 include:
? Federal Budget Deficits-The Tories promise to
eliminate the current US $24 billion deficit within
five years of gaining power but have avoided prom-
ising any immediate tax increases or spending cuts
that could upset interest groups.
? Inflation-The Tories believe the causes of Canadi-
an inflation lie in the prices charged by government-
regulated industries, the cost of government serv-
ices, and the high rates of federal excise and sales
taxes on various commodities. In power, the Tories
probably would seek to control inflation by re-
straining federal spending and tightening monetary
supply policy significantly.
? Productivity-Mulroney says the Tories are pre-
pared to make an "all-out effort" to improve
productivity by establishing tax incentives for in-
dustries undertaking on-the-job training programs
and introducing high technology in the workplace.
? Foreign Investment-Mulroney has said that he
will "send a clear signal around the world that
Canada is a good and honorable place to do
business again." The Tories have not said how they
would achieve this except to say they would revise
the NEP and Foreign Investment Review Agency
(FIRA) once they assume power.
? Economic Nationalism-Shadow finance minister
John Crosbie has said that Canadians must realize
that economic nationalism is a reactionary and
negative approach in the age of international inter-
dependence. Nevertheless, Mulroney has said that
in today's protectionist environment Canada would
have to "work in the world as it is and cannot
afford to play Boy Scout. "
? Crown Corporations-During the Tory leadership
race most of the candidates promised to reduce
radically the number of central government-owned
firms or Crown corporations. According to the
Ottawa Citizen, at the end of 1982 there were 186
federal Crown corporations employing 263,000 peo-
ple, about one out of every 40 workers. Since he
became leader, Mulroney has concentrated onfnd-
ing ways to "reform " rather than eliminate the
"Crowns, " advocating measures such as greater
financial accountability to Parliament and sunset
laws to allow Parliament to reconsider each corpo-
ration's mandate every five years. Underscoring
Mulroney's apparent backsliding on the issue is his
appointment of Sinclair Stevens as External Af-
fairs Critic rather than to one of the shadow
cabinet's economic posts. As president of the Trea-
sury Board in the Clark government, Stevens was
dubbed the "slasher" because of his plan to sell or
dismantle 10 major Crown corporations, including
Petro-Canada. The Tories also intend to use sever-
al of the state firms to rebuild Canada's economic
infrastructure; they plan, for example, to continue
the Liberal policy of modernizing Canada's rail
system and will use Canadian National to spear-
head the process.
? Research and Development-Mulroney has decried
the "pathetic" state of research and development
activities in Canada. He has urged Ottawa to
subsidize an increase in the share of GNP devoted
to research and development from the 1.1 percent
spent in 1982 to 2.5 percent by 1985. He has also
pledged to increase by 20 percent the budget of the
National Research Council, the federal govern-
ment's research and development organization, im-
mediately after his election. In the private sector,
the Tories have said that they will allow a 100-
percent tax writeoff plus a 30 percent tax credit for
investments made by Canada's high-technology in-
dustries. In addition, the Tories will not tax capital
gains derived from the stocks of Canadian high-
technology companies that are heldforfive years or
more.
? Foreign Trade Policy-The Tories intend to pro-
mote thefurther development of Canada's resource-
based economy in an attempt to expand the more
than 30 percent of Canadian GNP that is already
attributable to trade. Both Mulroney and External
Affairs Critic Stevens have indicated that thefeder-
al government will use the Department of External
Affairs' newly enhanced and expanded trade orga-
nization to assist the private sector in securing "a
greater and freer access to world markets and
higher levels of trade. "
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Another potent card in the Liberals' deck is the
Tories' desire to associate themselves with US foreign
policy. Trudeau's peace initiative 8 has focused public
attention on international affairs, and polls cited by
the Toronto Globe and Mail suggest that Canadians
are increasingly dubious of Washington's ability to
handle world affairs peacefully.
Finally, the Liberal leadership contest probably will
bump the Tories out of the media's spotlight between
now and the convention in June. The race will allow
the Liberals to spruce up their public image and elect
a new leader-John Turner, a prominent Toronto
corporate lawyer and a former Finance Minister,
currently is the favorite. The Tories had been concen-
trating their criticisms on Trudeau's personality and
uneven economic record but now, with his retirement,
have lost the focus of their attack. In addition, polls
have consistently shown the public more discontented
with Trudeau than with the Liberals. Faced with their
chief antagonist's sudden departure, and the prospect
of a refreshed Liberal Party under a leader as market-
able to the media as its own, the Tories, who had been
expecting a coronation, must now prepare to fight an
election that increasingly looks too close to call. F_
Between October 1983 and March, Trudeau traveled the world in
an attempt to reinvigorate disarmament discussions between the
United States and the USSR. Trudeau's major recommendations
were a conference of the five nuclear powers, a new Western
proposal for the Mutual and Balanced Force Reduction talks, and
such confidence-building measures as limits on the mobility of
ICBMs and a ban on high-altitude antisatellite systems. Trudeau's
peace campaign, which may have been, in part, motivated by
domestic political considerations, drew rave reviews in Canada but
elicited an apathetic response internationally.
Prospects: Victory or Defeat?
Tories already resentful of his power.
leadership race plays itself out. In the interim, he 25X6
probably will have to use a strong hand to coerce his
factions into line-particularly regarding minority
language rights. In the process of keeping order,
Mulroney may deepen intraparty rifts by alienating
We believe time is working against the Conservatives.
Trailing in the polls and faced with increasing inter-
nal discord, the Tories apparently peaked too soon in
the runup to the election campaign. Certain of victory
if an election had been held this spring, a frustrated
Mulroney can now only mark time until the Liberal
The Tories also have bungled badly, in our estimation,
by failing to detail their policies publicly. Mulroney
frittered away the nine months between his election
and Trudeau's decision to retire, a period in which the
national media were focused on him, in making
vacuous speeches and damning the Liberals. As a
result, media attention has now shifted to the policy-
oriented Liberal leadership race, and it is doubtful, in
our opinion, whether Mulroney can wrest the spot-
light back even with dramatic policy pronouncements.
We believe the Liberals have stolen a march on
Mulroney, forcing him henceforth to react to Liberal
policy initiatives.
The Conservatives also will be kept somewhat off
balance by the uncertain date of the next election.
Although we continue to believe that a November
election is most likely, a steady or widening Liberal
lead in upcoming polls would increase the likelihood
of an early election. The Canadian press recently has
discussed a variety of alternative dates:
? Late June-to capitalize on the momentum built by
the leadership campaign and its culmination.
? Mid-August-just after the three-province tour of
Britain's Queen Elizabeth II.
? Late September-following Pope John Paul II's
visit.
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Confidential
Timing is up to the Liberals, and none of these dates
can be ruled out. As a result, we believe the Tories
will be able to do little besides keeping their campaign
machinery in constant readiness in the weeks after the
Liberal convention)
In sum, we believe that Mulroney and his party have
squandered what should have been an insurmountable
advantage. Forgoing opportunities to take the lead in
policy innovation and treating the public to yet anoth-
er round of intraparty warfare, the Tories must now
base their hopes on Mulroney's personality and elo-
quence, a shaky economic recovery, and the elector-
ate's weariness with 21 years of nearly unbroken
Liberal rule. In our opinion, Tory fortunes are declin-
ing in the face of an incipient Liberal resurgence, and,
by the time the election is held, Mulroney's party may
have, at best, a 50-50 chance of forming a majority
government.
In our opinion, the policies of a Conservative majority
government. would produce few changes in the sub-
stance of the Canadian-US relationship. Under the
Tories, Ottawa probably would adopt economic poli-
cies more favorable to the private sector and would be
more circumspect in intervening in the domestic
economy. On such contentious bilateral issues as the
NEP and FIRA, however, we would expect only
cosmetic changes. Both programs are popular with a
majority of the electorate; indeed, FIRA currently is
under widespread criticism from the still-influential
economic nationalists for being too permissive in
allowing foreign direct investment into Canada-in
1983 FIRA approved 97 percent of the investment
applications submitted to it.
We believe Ottawa's foreign policy under the Tories
probably would be rhetorically more supportive of the
United States. Mulroney frequently has said that the
United States is Canada's "greatest friend and ally"
and should be given the "benefit of the doubt" by
Ottawa in the international sphere. Nevertheless,
budgetary constraints probably would preclude a Tory
government from increasing defense spending signifi-
cantly, although the Tories probably would spend
more on fulfilling Canada's NATO responsibilities.
We do not believe that a Tory Ottawa could survive
politically if,it came to be seen as adhering too closely
to foreign policy made in Washington. As a result, a
Conservative government probably would quickly as-
sume an international outlook more in general harmo-
ny with that of its Liberal predecessors.
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