Experts Say U.S.-Canada Trade Pact May Benefit State

The free-trade agreement negotiated between the United States and Canada could more than double California’s agricultural exports to Canada--which include wines and a wide range of fresh fruits and vegetables--according to trade experts in the state.

“The agreement could conceivably increase export of California agricultural products to Canada from the 1985 level of $420 million to $1 billion, once all barriers are removed,” said trade consultant Scott D. Morse of Morse Merchant Agribusiness in San Francisco.

California exported $2.8 billion in farm goods last year, unchanged from 1985, ending five years of declines from the record $4.2 billion shipped abroad in 1981.

Morse based his estimate on computerized data he compiled on Canadian trade and trade barriers for the California State World Trade Commission, which published it last summer in the final volume of its three-part study, “Barriers to Trade.”

The successful end last weekend to 16 months of sometimes rancorous bargaining came as global trade negotiations--the so-called Uruguay Round--are getting started under the auspices of the General Agreement on Tariffs and Trade in Geneva.

The pact must still be approved by Congress, however.

“It’s one much-needed step in freeing up international trade,” said Anne Chadwick, agricultural trade specialist with the State World Trade Commission. “It could open some market opportunities, and we think it would be beneficial to California in the long run.”

More significantly, she said, the fact that Canada and the United States were able to negotiate a free-trade agreement “sends a strong signal” to other U.S. trade partners “that we are serious about liberalizing trade on a global basis.”

Depends on Negotiations

Canada clearly stands to gain the most from the pact since it sells more than 75% of its exports to the United States, which ships only about 22% of its goods north. Trade between the two countries amounted to nearly $125 billion last year, but the United States ran a $13-billion trade deficit.

Maria Sampanis, trade specialist with the California Farm Bureau Federation, the state’s largest organization of ranchers and farmers, also welcomed the successful end to negotiations and stressed the significance in terms of the Uruguay Round negotiations, which for the first time in decades is to take up agricultural trade.

But Sampanis noted that effectiveness of the free-trade pact will depend on subsequent negotiations designed to eliminate non-economic and technical barriers that can masquerade behind such otherwise legitimate concerns as keeping out farm pests.

According to consultant Morse, however, the positive effects far outweigh the negatives.

Phasing out tariffs will “significantly ease” sale of many kinds of fresh produce, ranging from asparagus, snap beans, broccoli and cauliflower to garlic, radishes, tomatoes, cherries, table grapes, peaches, plums and strawberries.

These commodities are subject to prohibitive seasonal duties that can be imposed at the discretion of Canadian commodity groups to protect domestic production at the peak of California’s production, he said.

“That blanks out trade during those critical months,” Morse said.

In addition, Canadian subsidies for transporting grain to U.S. ports virtually wiped out California’s alfalfa exports in recent years, leading to closure of a number of processing mills in the state, he said.

But the greatest potential beneficiary of the treaty would likely be California’s wine industry, Morse said.

The Canadian market is regulated by the provincial governments, whose liquor control boards have broad authority in selecting and displaying brands and imposing price markups on imported wines and spirits.

“If things work out as planned, it should really open up the market and mean some sizable gains for the wine industry,” said Sam Folsom, spokesman for the Wine Institute, which represents California’s wine industry. “It’s already our biggest export market.”

The U.S. shipped 2.6 million gallons of wine valued at $7.2 million to Canada last year, Folsom said, and about 95% of it came from California.

AGRICULTURE AND THE FREE-TRADE PACTThough details of the treaty--which must still win congressional approval--have yet to be disclosed, the broad points are known. If approved next year, the pact would take effect on Jan. 1, 1989. The first tariff reductions would be made a year later and continue until a true free-trade area is estabished by 2000. It provides for:

Elimination of all agricultural tariffs.

Ending Canadian transportation subsidies for grains shipped to the United States.

Phasing out of Canada’s present surcharge imposed on imported alcoholic beverages.

Exempting both countries from meat-import quotas.

California’s agricultural export markets, based on 1986 total value of $2.8 billion.

CANADA 16% EUROPE 26.5% TAIWAN 3% HONG KONG 6% S. KOREA 8% JAPAN 33% OTHER 7.5% Source: Morse Merchant Agribusiness, San Francisco; Calif. Dept. of Food and Agriculture

Los Angeles Times