After World War II, American foreign direct investment into Canada exploded such that half of Canadian industry was American-owned by the early 1960s. Despite generally amicable relations between the two countries, this issue inspired a Canadian nationalist backlash that complicated bilateral comity. Championed by Prime Minister John Diefenbaker, whose “Canada First” rhetoric transformed Canadian politics, American ownership of Canada-based firms became an important national security issue in the late 1950s. At the same time, the United States similarly worried that American foreign investment would undercut its efforts to wage the Cold War, allowing American firms to shift business abroad to circumvent its economic statecraft efforts, especially toward China and Cuba. With both sides recognizing that American foreign investment conveyed benefits, they also acknowledged the necessity of making accommodations to keep the relationship on track.
This paper considers the pivotal role played by Canadian Conservative Prime Minister John Diefenbaker in elevating economic nationalism—a theme that would be picked up by subsequent prime ministers irrespective of party. It will discuss how this nationalism circumscribed American Cold War economic statecraft in spite of the significant and unfavorable economic and power asymmetries between the two countries—a subject plumbed in the transatlantic context by the European revisionist school of Cold War history, but under-developed in the North American context. And it will consider what impact economic nationalism had on American firms seeking to invest in Canada.