U.S., Canada Sign Pact for Free Trade : Accord Would End All Import, Export Curbs, Reagan Says

Times Staff Writer

President Reagan, near here in the California desert, and Canadian Prime Minister Brian Mulroney, in Ottawa, signed a far-reaching trade agreement Saturday that will remove all tariffs from commerce between the United States and Canada within 10 years.

The agreement "is a win-win situation for both countries," Reagan said during his weekly radio address, adding that it was "an example of the market-opening steps the entire world should be pursuing."

In a telephone call with Mulroney before signing the document, Reagan told the Canadian leader:

"In the face of rising protectionism, we have forged an agreement that eliminates tariffs, opens markets and will create jobs on both sides of the border."

Becomes a Symbol

As a model for Reagan's goal of removing all barriers to global trade--despite political pressure to protect U.S. jobs by restricting imports--the agreement takes on greater importance than even that afforded by its significant impact on U.S. and Canadian trade: It becomes a symbol for freer trade worldwide during a period of increased protectionist efforts.

The pact, known as the U.S.-Canada Free Trade Agreement, was hammered out in dozens of negotiating sessions held in Washington and Canada since the spring of 1986.

It is hoped by its proponents that the agreement, which must be approved by the U.S. Congress and the Canadian Parliament, will stimulate jobs by dropping trade barriers and thus boosting purchases and production.

Sees Millions in Savings

In a written statement, Reagan said that by removing tariffs, the measure would save consumers "millions of dollars while also improving our export opportunities."

"It will secure access to Canada's market for American manufacturing, agriculture, financial services and high technology; improve national security through energy sharing and provide important investment opportunities," he said, while it would also increase Canada's access to U.S. markets.

The importance of the two-way trade can barely be overestimated. The two nations are the world's largest trading partners, conducting about $150 billion in trade annually. Canada is the largest single market for U.S. goods, purchasing approximately one-quarter of U.S. exports. In addition, 78% of Canada's exports go to the United States, and the United States provides 70% of Canada's imports.

The agreement would eliminate all tariffs and virtually all other import and export restrictions between the two neighbors by Jan. 1, 1998. Barriers to trade in such areas as agriculture, automobiles, investment, services and most other areas of commerce would fall in a phased program that would begin Jan. 1, 1989, if legislative approval is granted.

The agreement stems from the "Shamrock Summit" held by Reagan and Mulroney in Quebec City on March 17-18, 1985, when they pledged to seek a comprehensive approach to achieving reduction in trade barriers.

Unlike a treaty, which requires only Senate approval, the trade agreement will take the form of legislation that must be approved by both houses of Congress. Under an accelerated process, Congress would have 90 working days to approve or disapprove the legislation once it is formally submitted, with no amendments allowed.

White House officials said that despite congressional support for some trade measures considered protectionist, they do not anticipate serious difficulties in winning approval of the agreement.

In Canada, the pact has reopened old divisions in a nation historically fearful of domination by the United States. Both opposition parties, the Liberals and the socialist New Democrats, have threatened to scrap the deal if they win the next general election, due by mid-1989 but anticipated in September.

Until then, Mulroney's majority in the House of Commons should ensure passage of the implementing legislation. But the Liberal-dominated Senate could delay final approval for months, and three of Canada's 10 provincial governments oppose the deal and might refuse to accept its provisions.

Opinion polls indicate that the Canadian public is split almost evenly on the accord. However, it sparked vocal opposition Saturday when a crowd estimated at between 1,500 and 3,000 demonstrated in Windsor at the Ambassador Bridge to Detroit. About 300 of the protesters marched across the bridge to the U.S. side but were turned back by Detroit police.

Bilateral Investment Rules

The agreement establishes a mechanism, in the form of a U.S.-Canada trade commission, to resolve disputes and sets up rules for conduct of bilateral investment.

The agreement was reached on Dec. 7, after tense last-minute negotiations conducted under a congressionally imposed deadline.

Despite the two nations' extensive cross-border commerce, their most recent efforts to reach a trade pact collapsed in 1911.

Under current law, about 65% of the U.S. goods shipped to Canada enter duty-free, and 80% of Canada's exports to the United States are duty-free.

California trade experts have said the agreement could more than double California's agricultural exports to Canada. Major beneficiaries would be growers of a variety of fresh fruits and vegetables and wine producers. Canada is the greatest single market for California wines.

In an estimate based on computerized data compiled last summer for the California State World Trade Commission, trade consultant Scott D. Morse of Morse Merchant Agribusiness in San Francisco figured that the agreement could mean an increase of California agricultural exports to Canada from the $420 million in business conducted in 1985 to $1 billion.

In other areas, the agreement would:

--Prohibit restrictions on imports or exports of energy supplies. Canada is virtually the United States' only foreign supplier of natural gas and electricity, and the leading supplier of oil and uranium, according to the office of the U.S. Special Trade Representative.

U.S. Financial Institutions

--Remove limits placed on U.S. financial institutions from operating in Canada.

--Open the way to greater cross-border investment.

Reagan signed the measure in the study of the Rancho Mirage estate of Walter H. Annenberg, where he has spent the New Year's holiday. The President returns to Washington today.

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