Prime Minister Brian Mulroney said tonight that Canada will suspend immediately government subsidies and insurance for Canadian business operations in Libya, but the restrictions he outlined fell far short of the kind of economic sanctions sought by President Reagan.
Mulroney said his government had no legal powers to force the roughly 1,300 Canadians in Libya to leave and had decided that it would not act to stop the flow of "exports of humanitarian and food products" from Canada to Libya.
The polite refusal of Mulroney to impose tougher economic sanctions, despite a personal appeal from Reagan, was announced in a statement released in Ottawa that was filled with denunciations of terrorism and Libya's support of Palestinian guerrilla groups.
"The government of Canada has been deeply concerned about the support that the Libyan regime has given to extremists," Mulroney said, adding that some restrictions against Libya had been imposed by Canada before the Dec. 27 attack on the Rome and Vienna airports.
Mulroney gave no explanation of why he and his senior Cabinet members who met today to discuss the issue had not taken stronger action. Historically Canadians, whose economy is heavily dependent on international trade, have been wary of imposing economic sanctions and never have cut economic ties with another country formally, although from time to time they have ordered some limited restrictions in trade.
Mulroney often refers to his personal ties with Reagan and his support of the U.S. administration's policies. But it would appear that Canada's protracted economic problems may have been a factor in his decision.
Although trade between Libya and Canada is small, totaling slightly more than $100 million in 1984, a significant portion of it involves wheat sales by hard-pressed western Canadian farmers.
Mulroney promised to ensure that U.S. firms that have done business with Libya would not be allowed to get around Reagan's sanctions by transshipping their products through Canada, and he called on Canadian firms to refrain from rushing to fill the void left by the Americans. He also said the government would stop any new contracts for the export of oil-drilling equipment "containing unique western technology."