Canada wants Japanese investors to think of maple leaves as well as stars and stripes

By , Staff writer of The Christian Science Monitor

``We feel we are not getting our share,'' says Paul Labb'e, president of Investment Canada. He's talking of Japanese direct investment in Canada, compared with that in the United States. Official figures put the book value of Japanese investment in Canadian plant and equipment at more than $2 billion (Canadian; US$1.54 billion) at the end of 1986. That's well up from the $605 million in 1980 or $257 million in 1975.

But Japanese direct investment in Canada is small compared with the US$39.2 billion Japanese business had invested in the US at the end of 1985 or the US$51.6 billion at the end of 1986.

As a result, Investment Canada, a federal agency, has been attempting to convince the Japanese that Canada is a good place to invest. When Japan's new prime minister, Noburo Takeshita, visited Toronto earlier this month to see Canadian Prime Minister Brian Mulroney, he was told of Canada's welcome for Japanese investment.

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Especially welcome was a Japanese endorsement of the new US-Canada free trade deal: Mr. Takeshita agreed it should also lead to stronger trading and investment ties between Canada and Japan.

The Canadian government is under attack from opposition parties over the US-Canada deal.

Overall, the Japanese-Canadian economic relationship is ``quite warm and friendly,'' says Michael Donnelly, director of the Joint Center for Asia Pacific Studies in Toronto. In general, Canadians have not engaged in the ``Japan-bashing'' that is fairly common in the United States in Congress and the administration.

Some Japanese companies have been worried that the US-Canadian deal might create a North American trade fortress of sorts, hurting Japanese exports. Others see little change for their exports.

The impact of free trade was discussed this month when Honda announced an $80 million (Canadian; US$61.6 million) expansion of its $200 million assembly plant in Alliston, just north of Toronto. After one Honda official was quoted as saying free trade had nothing to do with the expansion decision, Honda issued an official statement saying, contrariwise, that free trade was a ``positive influence'' for the venture.

The Honda plant, opened in 1986, employs 800 workers who produce the Accord model.

Toyota, and Suzuki in combination with General Motors, have assembly plants under construction in Ontario. The Toyota plant in Cambridge is to make 50,000 cars a year. The Suzuki-GM venture will produce 200,000 cars and trucks from a plant in Ingersoll.

(Hyundai, the South Korean automaker, is building an assembly plant in Bromont, Quebec.)

Other important new Japanese investments include a $1 billion joint venture by Japan's Oji Paper with Canfor to produce newsprint in British Columbia; Kao Corporation's opening of a plant at Arnprior, near Ottawa, to manufacture floppy disks for computers; and a plan by Nippon Mining Ltd. and Overseas Petroleum Corporation to join with Ultramar in drilling about 75 oil wells in western Canada.

On the trade side, Japan is Canada's second-largest trading partner after the US. Similarly, Japan is the United States' largest trading partner after Canada.

But Canada has a better balance with Japan than does the United States. In the first three-quarters of 1987, for example, Canada imported $5.4 billion (Canadian; US$4.15 billion) from Japan and exported $4.8 billion to Japan, leaving a deficit of $600 million for the year. That's small compared with the Japanese surplus in its trade with the US of $4.84 billion in the month of November alone.

Canadian imports from Japan are dominated by automobiles and electronic goods, much as with US imports from Japan. But Canada sells proportionately more coal ($1.3 billion in 1986), food and fish ($1 billion), wood products, and other natural resources to Japan than does the US.

Canadian officials raised one long-standing complaint with Takeshita: Canadian kiln-dried spruce, pine, and fir lumber faces a Japanese tariff of 8 percent, while American kiln-dried hemlock lumber gets in duty free. The Japanese promised only to look at the issue again. The Japanese also agreed to push forward with building code changes that will enable Japanese home builders to use more two-by-fours from Canada or the US.

Another area sensitive to Canada is Japan's restrictions on agricultural imports. Both Canada and the US hope to reduce those restraints through negotiations under way within the General Agreement on Tariffs and Trade.

With the Japanese economy once more picking up momentum, Canadian exports should do better, officials here say.

Canadian officials were impressed by the quality of the officials accompanying Takeshita. Moreover, one Canadian noted, Prime Minister Mulroney found it easier to establish a personal rapport with his Japanese counterpart than expected.

The Japanese are investing a great deal of money in Canadian financial paper. The net capital inflow from Japan in the first half of 1987 was $4.7 billion (Canadian; US$3.6 billion), more than half of the total inflow of $8.1 billion. The Japanese have been encouraged to send their money to Canada by interest rates that are higher even than those in the US.

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