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Playing Chicken

President Reagan warns that it is dangerous “to play a game of chicken with our trading partners” even as he has taken the wheel of a protectionist vehicle aimed at the Canadian timber industry. The President’s puzzling and inconsistent decision to impose a stiff tariff on Canadian cedar shingles and siding to try to help the ailing American lumber industry threatens to set off a trade war with Canada, the United States’ major trading partner. That’s a war that neither country can afford.

For months the Reagan Administration has assiduously promoted free-trade talks with Canada. It had to stave off an attempt in Congress to block those talks, and its trade representatives finally went to Ottawa late last month to hold two days of preliminary sessions. The meetings were described as cordial, although both sides acknowledged significant disagreements on substance.

Canadians want to expand trade between the two countries, which now totals about $150 billion. They are especially concerned about possible congressional protectionist moves against Canadian products such as lumber, fish, potatoes and other food. Americans, facing a $22-billion deficit in trade with Canada, want to reduce tariffs and other barriers that limit U.S. access to northern markets, especially for service industries like banking.

In the meantime, however, the International Trade Commission, a U.S. agency, agreed with the American cedar industry that it had been adversely affected by Canadian control of 75% of the American cedar-shake market. U.S. imports of these cedar products from Canada totaled $182 million last year. American companies say that Canadians can sell their cedar products for less because the Canadian government in effect subsidizes them. As a result of Canadian sales, American companies say, 50 to 100 U.S. sawmills fail each year.

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The trade commission’s decision triggered the White House announcement of a 35% tariff, despite the fact that delicate trade negotiations had just started. The President didn’t have to take the action that he did, and it’s not quite clear why he adopted the protectionist stance that he decries. It could have something to do with needing the vote of a timber-state Republican, Sen. Bob Packwood of Oregon, to keep the Senate from blocking the trade talks altogether.

Canada threatens to retaliate. It could cut off sales of raw cedar or act against products from the Pacific Northwest, the region that benefits most from the U.S. action. There’s even talk of restricting imports of American citrus fruits. Or the Canadians could refuse to change a law to strengthen patent coverage for brand-name drugs from U.S. pharmaceutical companies. At the very least, Reagan’s meddling will send Canada’s trade negotiators to the table in a sour mood when talks are supposed to resume in Washington this month.

The President, who isn’t usually on the side of the protectionists, should reconsider his ill-advised tariff decision. Consistency may be the hobgoblin of small minds, but in this case demonstrating a touch of it would have served the larger interests of free trade with Canada.


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