committed to an extensive social welfare program along the lines of the Great Society model of the United States in the 1960s. While decisionmaking mechanisms are as slow as the Canadian postal system (which is notorious for its inefficiency), sometimes the system is jolted by what happens in the United States, and suddenly things are expedited. For instance, the ink on the 1986 Tax Reform Act had not dried before Canada revised its tax code to reflect changes in the U.S. Tax Act. One motivation was indeed the fact that any delay in the synchronization of the Canadian tax system might have worsened the exchange rate further because the lower corporate tax in the United States could invite a substantial flow of capital from Canada to United States. 8 Additionally, a lack of coordination of the tax system in Canada may exacerbate the Canadian brain drain. Whatever the perceptions, the fact remains that a widening gap in foreign trade with the United States has made Canada richer, and the United States cannot continue indefinitely to be a market for heavily protected Canadian industries.
In the same vein, it may be time to reconsider the Auto Pact signed with Canada in 1965 under President Johnson. The pact has been a centerpiece of economic relations with the United States. It allows the production of auto parts in Canada for Canadian assembly lines of U.S. auto manufacturers and the importation of those parts into the United States almost duty- free. It was written during the 1960s when U.S. labor was becoming too expensive, and Canada provided an opportunity for lower labor costs. This benefited the U.S. auto industry and helped Canadian industrialization, especially in the province of Ontario, and was supposed to be revised in 1968. However, this was not done and it has become a major benefit for Canada, which exported auto parts valued at $3.6 billion to the United States in 1986. Today the pact is so lucrative that it attracts "offshore manufacturers to assemble cars in Canada as a conduit for duty-free importation into the U.S. of finished vehicles originating in Asia." 9 All signs point to the willingness of both sides to create a free trade area, but world economic conditions in general and those of the United States in particular have changed, and there is a need for renewed understanding.
The essence of leadership is to do one's homework and then inform the public about the virtues of a decision about to be taken. An industrial nation like Canada with enormous resources should be able to weather the industrial storms by testing its ability to compete internationally. The best way to do this would be a framework for movement of products and services with minimum inhibition. Canada stands to gain most by this without losing its identity. Luxembourg, for example, has maintained its identity despite membership in the Common Market. The EC, if it can be used as an analogy, has meant higher standards of living for millions of Europeans and none have lost their identity. To all this must be added a sense of