TNAG-1313-FCO40-1688-Future-of-Hong-Kong-views-and-involvement-of-Australia--Cana-1984 — Page 7

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matter of fact.

CONFIDENTIAL

Relations with the United States

12. Mr Clark said that the Government had considered it necessary to move quickly to establish a more amicable and constructive relationship with the United States, both to correct the unfortunate relationship of the last few years and in recognition of economic realities. He had been Prime Minister when US hostages sought sanctuary in the Canadian Embassy and had been taken aback by the extent of the emotional response to Canadian support from the US; he felt that the Americans perceived themselves to have few friends and therefore gave disproportionate weight to the advice of those whom they considered friendly. It was in Canadian interests that she should be so regarded. It was a fact of life that 76% of Canadian exports went to the US, and there was a growing protectionist mood there which would need careful countering. was therefore a priority to preserve and if possible enhance access for Canadian exports to US; he was aware of the political costs, which he thought the Government could handle, and the economic factors. There was a discussion paper before Cabinet with a number of options including sectoral free trade; this would be published for public debate and further consideration and the outcome would be reflected in the budget next spring. He emphasised that Canada's actions would be considered in the light of her relations with other friendly countries and would be within GATT. Canada shared Britain's vulnerability to international developments and interest in trade liberalisation.

13. The US Administration needed to demonstrate leadership and consistency. The window of opportunity for action was very small; he considered that proposals should be ready within 8-9 months if they were to have a chance of succeeding.

14. Mr Clark noted that some of the measures which were being seen in Canada primarily in the US context would also be of interest to the UK and Europe. Although he was aware that the Investment Canada bill would be difficult to sell in Parliament, he had refrained from introducing it in a more limited form; he thought it offered real opportunities for increased commercial and investment relations between UK and Canada and noted that only 10% of proposals previously investigated under FIRA would be subject to review under Investment Canada.

CONFIDENTIAL