(FORTUNE Magazine) – Canada's Prime Minister Brian Mulroney looked fit and relaxed in January after a holiday in Quebec with his family. Mulroney, who quit smoking ten / months ago, parked his Nicorette gum in an ashtray and talked freely with writer Rod McQueen. Excerpts: On how President Reagan should view Canada: He should get up in the morning and say to himself, ''Thank God for Canada. What can I do for Canada today?'' Canada is the best friend and neighbor that the United States of America can ever conceive of having around the world . . . This great trading partner, friend. Reliable, honorable, decent people. He's got to be saying to himself, ''By Jesus, did I get lucky when I had these guys as neighbors, I better do something for them.''

On the charge by political opponents that Mulroney ''has put Canada up for sale'': Who wants to buy it? What is there so compellingly attractive about Canada that causes us to think that anybody is going to rush in simply because somebody says, ''I'd like to do business with you.'' We do not have a very good track record. Our products have not been of the highest quality. Our deliveries have been lacking in reliability. Our expertise has been in large measure borrowed. Our technology has been purchased. What the hell makes us so special? If somebody wants to buy some oil, somebody wants to buy some wheat, hell, we're in the business. That's what it's all about. Forest products, mining--God, we'd love it if somebody wanted to joint-venture with us in mining development, taking our products at competitive prices. Damn right we would. On coming changes in oil and gas policies: There are negotiations right now, both in Newfoundland and with the oil-producing provinces, oriented to the concept of taxation after one makes a profit, as opposed to taxation of anticipated profits (as is done today through excise levies). On acid rain: There is the old argument about the lake or the job, what do you want? I don't think it's that brutal. I think we can make substantial progress on acid rain, and we can continue to attract the kinds of dollars that create the jobs.