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significant surpluses of coal, natural gas, uranium and electricity.
It is not yet self-sufficient in oil (though it has the capability),
importing about a third of its requirements. It is the UK's largest market outside the EEC, Saudi Arabia and Japan with trade roughly in
balance at £2 bn a year in each direction and substantial two way
investment.
7.
However, the Canadian economy is going through, a rough patch.
GDP in 1989 was 2.6%. Projected GDP growth for 1990 is only 1.3%, although an upturn is expected in 1991. Despite domestic criticism, the Government has stuck with high interest rates currently 12.3%
to control inflation. Main feature of the February Federal
budget was
-
a two year expenditure control programme which, together
with the C$1.4 billion cut in expenditure over three years already
announced in December, would save C$3 billion in the first year and
$4 billion in the second. There are to be no new taxes or tax
increases. Further privatisations were announced.
FUTURE ECONOMIC RELATIONS BETWEEN EC AND CANADA
8. Looking ahead, once an enlarged Single European market has
settled down, the trend towards more integrated trade with North
America is almost certain to gain impetus. The Canadians already
have their Free Trade Agreement with the Americans. The Mexicans are seeking a similar arrangement with the US. This could happen
within the next five years. Canada (which in October joined the
Organisation of American States) has strong doubts about how the
low-wage economy of Mexico would affect her, but Canada is looking
into increased trade with Mexico, and indeed the rest of Latin
America. Five Mexican Cabinet Ministers made a successful visit to
Ottawa earlier this year; and Canadian trade with, and economic
assistance to, the region has increased significantly in recent
years. Some form of free trade agreement between Mexico, the US and
Canada by the year 2000 is conceivable.
FOREIGN POLICY
9. Though preoccupied with domestic problems (see above), Mulroney
has been quite active internationally eg his visits to Moscow
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