How the Mulroney-Schreiber Affair Really Matters to Canada

There are many Canadians whose interest in the Mulroney-Schreiber Affair does not extend beyond the delicious anticipation of watching the 18th prime minister of Canada explain to a Parliamentary Committee why he accepted bags of cash which he took some time to declare as income.

The affair does have a much deeper importance, though, which is rooted in the way key decisions were made in Canada during the crucial decade of the 1980s. It was the decade when Canada signed on to the Free Trade Agreement with the United States. The FTA, and is successor NAFTA, drove a stake into the heart of Canadian democracy. Under the terms of these treaties, Canada was required to accord “national treatment” to U.S. firms, meaning that Canada could no longer discriminate in favour of domestic firms in its taxation and subsidy policies. Nor could Canada create new publicly owned firms to compete with U.S. corporations without paying out crippling financial compensation to them.

Moreover, the FTA took much of the control of the Canadian petroleum industry out of Canadian jurisdiction. It stipulated that Canada could not have a two-price system for its petroleum in which Americans would pay the world price for Canadian oil imports while Canadians would pay a lower price. And it committed Canada, at any given time, to sell at least as much petroleum to the U.S. as it had sold on average over the preceding three years, even if this were to mean petroleum shortages for eastern Canadians who were reliant on imported oil.

The Mulroney government made all these concessions to the Americans without gaining unfettered access to the U.S. market in return. American trade law remained in place alongside the FTA, allowing the U.S. to mount countervailing duties against Canadian exporters to protect U.S. producers---as the United States has repeatedly done in the case of softwood lumber.

What has all this to do with Karlheinz Schreiber?

We know that, acting on the instructions of his Bavarian masters, whose leader was Franz Joseph Strauss, Minister President of Bavaria and the dominant voice in the Christian Social Union, the fervently right-wing partner in German politics of the more moderate Christian Democratic Union, Schreiber helped finance the overthrow of Joe Clark as leader of the Progressive Conservative Party.

In 1983, the PCs held a federal convention in Winnipeg and a review of Clark’s leadership was on the agenda. Strauss and his CSU henchmen saw it as their role to support the rise to leadership of conservatives of their ilk in the right-wing parties of the West. In their eyes, Joe Clark was an old-fashioned conservative, a red-tory who was too firmly Canadian for the new era of globalization. As was revealed in 2001, on the CBC program, the Fifth Estate, Mr. Schreiber helped fund the effort to fly delegates to Winnipeg who would vote against the leadership of Joe Clark.

Schreiber explained that he gave money to Walter Wolf, a member of the group that was determined to dump Clark. Schreiber put it pithily: “It’s expensive to travel, right? For this is what Walter Wolf collected the money, and then get the people in which worked for you, and you paid their fare, and perhaps he said to you, they need some money for their wives, they want to go shopping, or whatever, for the hotels.”

When Clark received the support of 66.9 per cent of the delegates, short of the 70 per cent he felt he needed, he called on the party to convene a leadership convention, the convention at which Mulroney succeeded him as leader.

Schreiber and the Bavarians had played a role, quite likely decisive, in nudging the support to dump Clark above the thirty per cent level at Winnipeg. With Mulroney as PC leader and later as prime minister, Schreiber and his associates felt they had a man with whom they could come to understandings.

Franz Joseph Strauss, in addition to being the leader of the most right-wing brand of mainstream German politics in the post-war decades, was involved in the 1970s in the founding of Airbus, the European civilian aircraft manufacturer that challenged American Boeing for the multibillion dollar business involved in selling aircraft to the airlines of the whole world. Strauss became chairman of Airbus in the late 1980s and held that position until his death in 1988.

For the past several decades, the Europeans and the Americans have been fighting a no-holds-barred struggle to sell their respective aircraft to the world. The Europeans have subsidized and bribed their way to success, while the Americans have used Department of Defense contracts to buttress their national champion.

Both sides wanted to sell their planes to Air Canada. In 1988, government owned Air Canada signed a contract to purchase 34 Airbus A330s and A340s. Not only Boeing, but the U.S. government, was heartily annoyed by this victory for the European competitor. And the details of how this came about remain highly controversial.

What matters more than how the deal was or was not lubricated, is that during the 1980s, Canada was being put out of the business of fostering national industrial champions so that it could play in the big leagues. And this benefited both the Europeans and the Americans.

If the Europeans got the Airbus contract, the Americans got the FTA, with all its arrangements that made it impossible for Canada to support its own industries. While neo-con Canadian politicians from Mulroney to Harper sold the line to Canadians that governments should stay out of the marketplace, the Europeans and the Americans spent billions ensuring the success of their industrial champions, with all the employment, technological, strategic and sleazy benefits that went with that.

What mattered when Karlheinz, everyone’s favourite Christmas uncle, helped replace Joe Clark with Brian Mulroney, is that the door was opened to the globalization deals in Canada in the 1980s that helped shove this country down the global ladder to the position we occupy today as suppliers of oil sands oil to the Americans and greenhouse gas emissions to the planet.

What I can’t fathom are the media pundits whose line of analysis is that what went on in the 1980s was the bad old days of influence peddling and that all this has happily been put behind us. Are they kidding?

When Brian Mulroney came to power and made his deals, Canadian democracy was fundamentally weakened. We live today in the nether world of plutocracy, in which those with big money ensure that they get the arrangements that favour them. They twist arms, fight wars, educate economists to peddle their line, and yes, they bribe whenever and wherever it is necessary.