Congress OKs Free Trade Pact With Canada

The Senate gave final congressional approval Monday to the U.S.-Canada free trade agreement, a massive compact that would eliminate all tariffs between the United States and its largest trading partner and create the biggest free trade zone in the world.

The agreement, approved 83 to 9, is the centerpiece of the Reagan Administration’s efforts to promote free trade around the world. The Administration portrays it as a model that could persuade other countries to remove trade barriers.

However, approval is still pending in Canada, where the issue has stirred a political crisis that probably will lead to new parliamentary elections later this year. The Canadian House of Commons has endorsed the accord, but Liberal Party opponents in the appointed Canadian Senate have delayed action in hope of forcing Canadian Prime Minister Brian Mulroney to call elections to resolve the issue.

Major Victory Seen

U.S. supporters of the agreement hailed the landslide passage as a major victory in a decades-long effort to improve trade between the neighbor nations.

“We see access to a Canadian market we didn’t see before,” said Sen. Bob Packwood (R-Ore.), a chief sponsor of the pact.

Sen. Daniel J. Evans (R-Wash.) called it “the most important and historical trade bill we are considering this session.”

However, opponents argued that the agreement gives Canada the better of the deal and complained that it does not remove restrictions against imports of American cars, films, potatoes and other products.

“Most trade problems between the two nations are not addressed in this agreement--they just have been put off for later,” said Sen. George J. Mitchell (D-Me.), who voted against the legislation.

Negotiated by Reagan

The agreement was negotiated by President Reagan and Mulroney last January and endorsed last month in the House by a lopsided vote of 366 to 40. It would phase out tariffs over a 10-year period beginning Jan. 1.

Sponsors said that the pact eventually would lead to a 1% increase in the U.S. gross national product, create 500,000 new jobs and lower prices for consumers in both countries on a wide variety of products.

Transactions between the two countries totaled $166 billion in 1986. One-fourth of U.S. exports go to Canada, and that nation sends three-fourths of its exports to its southern neighbor. Major U.S. exports to Canada include aerospace and telecommunications equipment, computers, fruits, vegetables and wine.

Tariffs to Be Waived

Under the agreement, Canadian tariffs averaging 9.9% and U.S. tariffs averaging 3.3% would be waived for each other’s goods by the end of 1998. It would also give U.S. firms greater opportunities to invest in Canada’s booming energy industry.

However, Sen. Carl Levin (D-Mich.) said that the agreement reaffirmed a 1965 auto pact between the two countries that gave Canada an unfair advantage in the automotive industry. That agreement, he said, requires U.S. auto makers to build one car in Canada for every car sold there and discriminates against U.S. auto parts manufacturers.

“The problem with the agreement is that it doesn’t level the playing field,” Levin contended. “We lost more than we gain by approving the agreement.”

No Help for Movies, TV

California Sens. Alan Cranston and Pete Wilson, although they voted for the agreement, expressed concern that it will not benefit the state’s film and television industry. The pact does not remove restrictions on imports of entertainment products on grounds that the barriers are necessary to protect culture.

But Sen. Lloyd Bentsen (D-Tex.), the Democratic nominee for vice president and chairman of the Senate Finance Committee, said that the real significance of the agreement is not the size of Canada’s market but movement toward realizing the potential of the world economy.

“The rest of the world assumes it can be as protectionist as it wants and still sell to the biggest market in the world--the United States,” said Bentsen, who opened the floor debate on the bill. Under trade legislation passed this session, “that sort of thing is going to stop. Now, other countries are going to open up their markets to our competitive exports. And this Canada agreement shows them how we are going to do it.”

Notes Canadian Impasse

Bentsen took note of the impasse in Canada over the trade agreement, saying: “Obviously, the government of Canada has encountered some problems. That is their domestic concern and we cannot interfere.”

Mulroney’s opponents in the Liberal Party and New Democratic Party contend that the agreement would allow giant American firms to dominate the Canadian economy.