Canada-U.S. free trade

Press, 9 October 1987, Page 12

Canada-U.S. free trade

The/free trade agreement that has been negotiated between the United States and Canada, like the Closer Economic Relations AgfijieTnent between New Zealand and Australia, aims at the removal of all tariff and quantitative restrictions between the two countries. In the Canada-United States agreement-the complete removal will stretch over 10 years; automatic reductions in tariffs will be made during the period. If the United States Congress and the Canadian Parliament accept the agreement which has been negotiated, the North American continent will become a huge free trade area. This is bound to have an effect internationally, not just on Canada and the United States. Nothing agreed about such a move? as a common external tariff. If that were to happen, and it would seem inevitable, this would , mean the Siment of a very significant trade bloc; nt both Canada and the Unitied States Ing their efforts into: the new trade round and would not at the same time want ’« to be seen to be establishing an exclusive trade bloc. - a About 80 per cent of the trade between trie United States and Canada is already free ot duty. What has occurred recently is that the Unites States has imposed some fierce tariffs Canadian; exports and both the United and Canada have engaged in bouts of retaliatory countervailing duties. Considerable anger was created in Canada by a 30 per cent United States tariff that was put on plywoods early this year. The United States Was acting in response to domestic pressures. Accusations were riiade that Canada was able to export softwoods to the Uniteto ; Stetw/af gutto low cost that the United aateslf beiieyed;? that ; the Canadian Governmentwas subsidising the production, tbe iarijuinent the fee paid/toAthe Government fqr the milling of trees on Crown lands. The United. States believed that the stumpage fee was too low. /'W; ' ' : '■{ ■ The outcome pf these arguments was a drive towards the/establishment of a free trade: area. President Reagan and the Canadian Prime Minister, Mr MUlroney, negotiated much of the deal, under some pressure from the United States Congress, in effect, the two were given 90 days to come up with an agreement, counting back from the . time that the United States Congress Would go into recess at the beginning ofOtfbber. The deadline was; met,. although one issue threatened to hold up final agreement; This was the setting up of aWody to rule on disputes, •• -■ , • =, r The, United States wahHof prepared, to accept any tribunal which jvould overrule United’ States law. The result was a compromise. If . disputes cannot be settled by consultation, they will be referred to

£•', . : ■■ '■ arbitration panels composed of neutral, independent experts. The two countries have agreed that in all blit the most exceptional circumstances, they will accept settlements based on the panel’s recommendations. Canada had wanted, and eventually got, greater Canadian participation in any disputes committee. .............. ... Most of the 80 per cent of the trade which is duty free is in non-manufactured goods. So the main effect of the free trade agreement, if it is adopted as it is expected to be, will be in manufactured goods. The chief attraction for Canada is that it will give Canadian manufacturers access to the huge and affluent United States market. Canada < already sends about 70 per cent of its total j ' ■ /exports to the United States. This amounts to about, one-fifth of Canada’s gross domestic By contrast, the United States ; A' experts only about 1 per cent of its gross domestic product to Canada. No pther t l.wo/ countries trade with one another aW much as | Canada and the United States. ; v"'/'.' V / Some fears are held within Canada that i the establishment of a free trade area will mean that Canada’S markets will be swamped evermore than tliey are now with United, States products. This is a /matter of; considerable sensitivity in Canada because of its employment problems, and because Canada always worries, lest its cultural identity be overpowered by its big neighbour. ; To a certain extent. Canada has only? limited options and //W doing what is necessary., .-For instance; '-when the United States deregulated its /airlines, Canadians ■ went south to take advantage of the lower fares. SO: Canada, was also forced into deregulation. When/the United States revised its tax system QanadawasfOjced to revise its j ■ system pr risk/toping jwie very ' larges businesses. The same effilsf came from the; United'States tightening ofits immigration laws to reduce the number of Latin Americans working illegally in the United States. Many of these immigrants headed for the Canadian border, thereby forcing Canada to act Canada cannot fail to be conscious of occupying the same bed as ah elephant. If, the new agreement has. the: result of making trade between the United States and Canada freer and there are no restrictions placed pn New Zealand trade, this country, as always; will welcome Phy; moves to free trade. The United States has long beeh one of ; ; htew Zealand’s four most ■important export markets. More than that: although the United t , States subsidise some of its agriculture and this has an impact on New Zealand’s exports, the United States is strongly committed to fair and free international trade and this would benefit New Zealand. If the CanadaUnited States free trade area is a move towards implementing the principles of free trade, it is a step in the right direction.