Reagan Backs Mulroney on Trade; 2 Issues Not Settled

President Reagan on Monday endorsed Prime Minister Brian Mulroney’s efforts to promote freer trade between the United States and Canada, but two of the most contentious issues between the two nations remain unsettled.

Reagan told a joint session of Parliament that Mulroney’s proposal, establishing “the largest free trade area in the world,” would set “an example of cooperation to all nations that now wrestle against the siren temptation of protectionism.”

“We shall commit ourselves and the resources of our Administration to good faith negotiations that will make this visionary proposal a reality,” he said.

The speech climaxed a 24-hour, overnight Reagan visit here, where he also met for more than three hours with Mulroney in what was a politically important event for both men.

And while Reagan appeared to endorse the concept of an earlier Mulroney proposal for a bilateral agreement to reduce acid rain pollution emissions on both sides of the border, the President stopped far short of meeting the major Canadian demand--that the United States agree to a specific schedule that would cut acid rain-causing emissions 50% by 1994.

The second area where Canadians’ hopes were not met dealt with Canada’s contention that it has unqualified sovereignty over the Northwest Passage, a militarily important Arctic waterway that connects the Atlantic and Pacific oceans.

While Canadian officials expressed pleasure that Reagan acknowledged Canada’s concern and even mentioned it in his speech, it was clear the President had not backed down from the U.S. position that the waterway is an international strait and is open to American shipping without control.

A senior Canadian official who sat in on the meetings between Reagan and Mulroney said, “I must emphasize we have not resolved our difficulties on this issue.”

But in spite of these disappointments, both sides chose to stress the progress that was made in creating an optimistic mood about the possibility of a free trade agreement.

Mulroney, battling sagging popularity, has made the question of free trade a central element in U.S.-Canadian relations and in his talks with Reagan on Sunday and Monday.

Tariff Elimination

Under his proposal, put forth two years ago, the two nations would gradually eliminate the tariffs that still are imposed on 30% of goods and services at the border.

Most important, Mulroney also demands an exemption from legislation and other regulations that impose penalties on imported Canadian goods that take large shares of the U.S. market and involve government subsidies and other perceived unfair competitive practices.

Mulroney made clear in his meetings, according to senior Canadian officials, that a free trade agreement must include “new rules, new definitions and a binding dispute mechanism” that would not permit Congress and government agencies to unilaterally penalize Canada.

Reagan also indirectly indicated his concern for Canada’s small-scale contribution to the defense of Western Europe and North America.

Responsibilities Felt

In the face of an anticipated scaling back in what a Pentagon official described as Canada’s “damn small” commitment to the North Atlantic Treaty Organization, Reagan reminded his audience in the wood-paneled chamber of the House of Commons at the end of a 24-hour visit to Ottawa that, “throughout our history, our two nations have keenly felt our international responsibilities.”

The Pentagon official, speaking on the condition of anonymity, said that Canada’s NATO contribution is “viewed as less than it should be and indications are that a white paper (being prepared by the Canadian government on defense issues) is going to amount to a further reduction.”

As it stands, Canada spends only 2 1/2% of its gross national product on defense, second lowest to Luxembourg among NATO members.

Disapproval Voiced

Reagan was interrupted only briefly by shouts of disapproval--directed at his defense of the “Star Wars” anti-missile program and his criticism of Soviet support for Nicaragua--while he spoke to Parliament, where heckling is common practice. The most strenuous heckling came from Sven Robinson, a member of the Socialist New Democratic Party.

Even though no substantive progress was made over acid rain and Arctic sovereignty, Reagan added to his prepared text that he and Mulroney had agreed to consider, as Mulroney proposed, an accord on limiting acid rain and that they agreed “to inject new impetus into the discussions already under way” on the Northwest Passage.

But White House spokesman Marlin Fitzwater said later that questions about “the exact nature of an agreement or mechanism” for carrying forward the acid rain talks remain to be resolved.

Reagan’s repeated and strongly expressed backing of Mulroney as the creator of the free-trade negotiating process was a response to the prime minister’s desire for an endorsement that would overcome perceptions that Reagan had neither the will nor the desire to offset protectionist sentiment in Congress.