The American Economy
Because of its sheer size and influence, the performance of the American economy is of crucial importance to the world. Here too, the signals are mixed. On the one hand there are some indications of an upsurge in economic activity, including consumer purchasing and house construction. Also, interest rates have come down and the Federal Reserve Board, under the direction of Mr. Paul Volcker, has relaxed its monetary policies. On the other hand, real interest rates are still high at 1%, unemployment stands at 10.4% (in February) and the estimated budgetary deficit for this year is in the 200 billion dollar range. As in Canada, the predictions about recovery are cautious, and forecasts about future unemployment levels are pessimistic.
The Temptation of Protectionism
In the U.S. there is a growing interest in protectionist measures, which should give its trading partners, particularly Canada, cause for profound concern. A recent close call was the threatened application of a substantial import charge on Canadian lumber sold in the United States. Had that tariff been imposed, it would have snuffed out possibilities for a resumption of healthy growth in the forest industry, with especially damaging results for British Columbia.