Canada-U.S. pact suits Fletcher

Press, 7 October 1987, Page 37

Canada-U.S. pact suits Fletcher

By

NZPA correspondent

TOM BRIDGMAN

Washington A new United States and Canada free-trade pact should provide greater security to New Zealand forestry interests in Canada and appears to cause little harm to primary exports. But others, such as beer exports, will face greater competition in an alreadytough Canadian market. The main beneficiary in New Zealand of the draft agreement reached during the week-end appears to be Fletcher Challenge’s giant Canadian pulp, lumber, and newsprint interests.

“Generally, we have been very supportive of the free trade initiative,” said Mr lan Donald, chief executive of British Columbia Forest Products and Fletcher Challenge’s head man in Canada.

Fletcher Challenge has a controlling 47.7 per cent stake in BCFP and owns Crown Forest Industries. “We see it as fundamental to stopping the arbitrary protectionism which has been flowing out of the United States and which our industry has been affected by quite severely,” he said from Vancouver. Last year the United States indirectly had im-

posed a 15 per cent penalty on Canadian softwood lumber exports to the United States which over all cost the Fletcher Challenge group about sCanl6 million (SNZIB.6BM) before tax and $CanBM (5NZ9.3M) after tax. Under that December agreement a 15 per cent penalty on imports into the United States was replaced by a Canadian 15 per cent export tax on shipments of pine, spruce and Douglas fir and other woods used in home construction. In British Columbia, base for Fletcher Challenge’s Canadian operations, that export tax has recently been replaced by a higher stumpage fee, which has the same effect.

United States lumber industry representatives have said their support for the free trade agreement is contingent on. the agreement that increased tariffs on softwood timber remaining in place. “If all our rights under the memorandum of understanding are intact, we have nothing to object to,” said Mr Stanley Dennison, chairman of the Coalition of Fair Lumber Imports, an industry group. Mr Donald said that over all he expected the Canadian economy to

benefit from the free trade pact, just as New Zealand had from the bigger market created through the CER agreement with Australia. Under the CanadaUnited States trade agreement, which has yet to be approved by the United States Congress and Canadian Parliament, the two countries which in 1986 had combined two-way trade of SUSI 24 billion (1NZ189.458) have agreed eventually to eliminate all tariff and non-tariff barriers within 10 years. In agriculture, which accounts for only 3 per cent, or SUS3.SB (5NZ5.3478) of two-way trade, they have reached a comprehensive agreement that will end all farm trade barriers in that period. They will exempt each other from their respective meat import laws, which are a barrier to unrestricted exports by third countries to both markets. New Zealand trade officials said that although they had not seen all the details, it did not appear that there would be any harm to New Zealand beef and other meat exports.

The same view came from Mr Bany Saunders, North American director for the Meat Board.

“It probably will not have any effect, but we will have to see all the details,” he said from New York. One official said that if Canada sent more beef to the United States because it was free of restriction that would just create more demand for imports in Canada, which was equally beneficial to New Zealand.

However, while there were no apparent problems for major industry or export commodities, some smaller sectors could face greatly increased competition. Brewers hoping to crack the difficult and tightly controlled Canadian beer and wine market will face more competition from the United States.

New Zealand exported about sCan4oo,ooo ($NZ467,000) worth of beer and wine to Canada in 1986. Under the free trade agreement United States producers will be able to compete on a more equal footing with Canadian brewers through Canada’s discriminatory pricing system being phased out to eliminate its protectionist aspect and American brewers being given increased access to distribution and marketing networks.