Politics and Free Trade

The United States and Canada are each other’s best customers. But to hear opposition politicians in Canada talk, one would think the two nations were major adversaries rather than major trading partners. If it were just talk, it could pass unnoted, but Liberal Party maneuvers in Canada threaten an important trade agreement.

About 75% to 80% of the goods that cross the border today are duty-free. The agreement signed in January by President Reagan and Canadian Prime Minister Brian Mulroney would eliminate the remaining tariffs, which average about 4% for American imports of Canadian goods and 9% to 10% on American goods going into Canada. Among the products from which tariffs would be removed immediately are telecommunications and data-processing equipment, whiskey, leathers and furs. Tariffs would be lowered more slowly over the next decade in industries sensitive to imports, such as wood products, textiles, footwear, and most agricultural and fish products.

Each country has also agreed to treat the other’s investors as favorably as its own investors in establishing, buying and selling businesses. The agreement exempts American bank subsidiaries from Canadian restrictions on market share, and it guarantees Canadian banks the right to retain their branches in several states in the United States.

If American and Canadian negotiators went along with all these changes, what is the holdup? Why are Mulroney’s opponents against the measure if not simply to oppose Mulroney? In theUnited States, the House has approved the agreement and the Senate clearly will do so before it adjourns for the election campaign.

But the Canadian senate, whose members are appointed and not elected, says it wants the people to have the opportunity to speak. It won’t vote until Mulroney calls an election. This is strictly political gamesmanship because the senate is controlled by holdovers named by the opposition Liberal Party, which is looking for an issue to boost its flagging electoral support. Besides, the people in Canada already can speak through their elected representatives in the House of Commons.

John Turner, the Liberal Party leader, told McLean’s, a Canadian weekly newsmagazine, that for the last 20% of tariff reduction: “Mulroney sold the shop. He gave away control of energy, investment, capital markets, agricultural strategy, our future cultural initiatives and our social programs.” Turner said the issue will be “the fundamental issue of nationhood and sovereignty and independence.”

Those are sweeping words that can be designed only to intensify Canadians’ long-felt sensitivity about American domination in everything from automobiles to movies. But this trade agreement will benefit people on both sides of the border, and many Canadians know that. Turner probably will succeed in forcing an election. Then it will be up to Mulroney to provide Canadian voters with a realistic look at the benefits of the trade agreement instead of the rhetoric they are hearing now.