Canadians Still Divided Over Pact With U.S. : Trade: The economic effects of the year-old Free Trade Agreement may be imperceptible. But the impact on the Canadian psyche is glaring.

International Trade Minister John C. Crosbie was waving a statistical report in the glare of television lights here one recent morning, trying to make a controversial point to a group of unsympathetic reporters. Canada’s free-trade agreement with the United States was helping Canada, he insisted. And not only that, “it was the only rational, sensible approach for Canada to take.”

A two-hour drive away, Ontario dairy farmer Ronald Visser was brandishing a statistical report of his own at his kitchen table, offering it as evidence that just the opposite was true: The trade pact was hurting Canada.

“As soon as free trade took place, the price of quotas started to drop,” he said. “I’ve lost $200,000 on paper.”

(Canadian dairy farmers must buy “quotas,” or rights to produce milk, from the government. The quotas have paper values, like shares of stock.)

All over Canada, the argument is playing itself out: Some sing the praises of the year-old U.S.-Canadian Free Trade Agreement; others say Canada has been sold down the river.

“Everything is either the land of milk and honey, or else we’re about to be raped by the American imperialists,” complained Joe Buckley, director of the International Trade Advisory Service of the management consulting firm of Ernst & Young in Toronto. “There is no in-between.”

It was just a year ago Jan. 1 that Prime Minister Brian Mulroney and President Ronald Reagan signed the pact. Canada’s debate was passionate then; now, with the agreement having passed its first anniversary, it has grown clamorous again as think tanks, labor unions, business councils and others issue their one-year report cards.

For all the commentary, though, objective conclusions are still hard to find. Many of the free-trade agreement’s provisions haven’t been implemented, and in some cases, they haven’t even been written. So their effects are impossible to measure.

The accord will strip away the tariff walls between the United States and Canada, for instance, but only over 10 years. The two countries still have six years to agree on a legal definition of unfair subsidies. No one can say for sure how the governments and private businessmen in each country will react once those things happen.

Nor is it easy to sort out the impact of the free-trade agreement from all the other forces shaping the Canadian economy: exchange-rate fluctuations, interest-rate differentials between the two countries, the ups and downs of international business cycles.

“It’s as if you were standing on the side of the ocean with all these big waves coming in, and you threw a little rock into one of those waves and then tried to measure how much of the ripple inside of the wave was from the rock and how much was just the wave,” said economist Carl Sonnen of Informetrica Ltd., an Ottawa economic research group that has been trying to find ways to measure the accord’s impact.

Perhaps most confusing of all is the tendency of free trade’s partisans and opponents to attribute all manner of unrelated goods and evils to the pact. The effects of the agreement on the Canadian economy may still be imperceptible, but the effects on the Canadian psyche are glaring.

The Canadian Labor Congress, which monitors plant closings, says 72,000 Canadians lost their jobs during the first year of the free-trade agreement; it holds the pact at least indirectly responsible for most of the losses.

On Canada’s west coast, salmon and herring processors say their bosses are using the free-trade agreement to break their union.

“They are using free trade as a convenient excuse for rolling back wages,” said David Lane, a writer for the union newspaper, noting that U.S. fish packers make less money than their Canadian counterparts and that Canadian managements are now calling for a “level playing field.”

Opposition politicians say that since Canada’s economy is just one-tenth the size of the United States’, U.S. goods, services and attitudes will now wash in over the border, overwhelming Canadian counterparts.

“Within a quarter of a century, we could be absorbed totally, lock, stock and barrel,” Edward Broadbent, former head of Canada’s opposition New Democratic Party, has warned.

The Pro-Canada Network, a coalition of unionists, literary figures and others, says the free-trade agreement, combined with budget cuts, is threatening Canada’s state-run health insurance system. If health care is contracted out to private providers, the organization warns, U.S. entrepreneurs may muscle in. The group also says the pact encourages Canada to sell off the country’s water and natural gas to the Yankees. It even says the pact has something to do with the demise of Canada’s passenger trains.

“Now, what the hell has that got to do with the free-trade agreement?” grumbled Trade Minister Crosbie, who recently addressed the media in Ottawa in hopes of getting some good press for the pact.

Contrary to the unionists’ allegations, Crosbie claimed, Canada is richer by 193,000 new jobs since the agreement was put into force, though he was quick to admit that the pact cannot take credit for all of them. He added that Canada has had a higher job-creation rate for the past 18 months than has any other member country of the Organization for Economic Cooperation and Development, an association of 25 industrialized nations that includes the United States. Again, though, he would not say how much of this might be the result of freer trade with the United States.

Sonnen’s research group, Informetrica, recently issued a forecast estimating that prices of goods sold in Canada would be “permanently reduced” by 2% to 6%, thanks to the accord. Sonnen himself recently sat down with a list of plant closings in Canada and a free-trade agreement tariff-reduction schedule, compared the two, and concluded that very few of the plant shutdowns could be blamed squarely on the accord.

Canadian trade officials say they are so pleased with the way the accord is working that they have speeded up the tariff cuts.

If all of this seems hopelessly contradictory, it may be because economist and non-economist Canadians tend to analyze the situation in different ways. The economists tend to study the agreement by itself, while the non-economists are likelier to blend the pact with a generalized “free-trade climate” that they perceive in Canada today. And Canadians are historically wary of any “free” interactions with their giant neighbor to the south.

“Since the beginning of time, Canadians have had to deal with how close their ties with the Americans should be,” says Peter Morici, professor of economics and Canadian studies at the University of Maine.

Consider dairy farmer Visser, who lives on a tidy, 1,000-acre farm outside Smith’s Falls, Ontario. Visser concedes that the free-trade agreement has not had a direct effect on his livelihood yet, but he still distrusts free trade as a concept.

Canadian dairy farmers like Visser have been a prosperous lot since the 1970s, when Canada began controlling the national supply of milk. A Canadian dairy farmer today buys a quota--the right to produce a certain amount of milk--from a milk marketing board, and the board pays an above-market price for that amount. If he produces more than his quota, however, he’ll get only the market price for the excess.

As a result, few Canadian dairy farmers produce more milk than their quota. Since there is no glut, Ottawa does not have to pay huge amounts of money to store surplus cheese, as Washington does.

“Sure, you may pay more for your milk here,” Visser said. “But you either pay it at the breakfast table, or you pay it in taxes.”

When the free-trade agreement was signed, Visser was happy to see that Canada would go on managing milk supplies and stopping American milk at the border. But then came a blow: An American ice cream producer decided that he wanted to do business in Canada. He went to Washington and won a ruling that Canada’s milk import ban did not cover ice cream. His ice cream has not arrived in Canada, but once it does, Visser figures that butter, yogurt and cheese won’t be far behind.

“The whole door is going to be opened up,” he says. Frightened farmers are selling off their quotas in light of the ruling, he said, and the value of his paper assets has dropped.

It matters little to Visser--or other dairy farmers, for that matter--that the hurtful ice cream ruling was made under the General Agreement on Tariffs and Trade, a multilateral system, and not the U.S.-Canadian Free Trade Agreement. “One is the camouflage for the other,” he insisted.

Canadian farmers in other supply-managed sectors--eggs, chickens, turkeys--reach much the same conclusion.

“Canada has let its guard down through the free-trade agreement only to be punched in the face by the United States at the GATT,” the Pro-Canada Network said.

As it happens, the free-trade agreement was never really intended to create jobs by the thousands, lower consumer prices, bust unions, bankrupt farmers or result in any other blessings or evils being ascribed to it. Canada entered into the accord for other reasons.

In the early 1980s, Canada began to worry about its trade relations with the United States. Canada ships about three-fourths of its exports to its southern neighbor and depends heavily on a smooth trading relationship. But in the 1980s, Washington began uttering protectionist growls. In 1986, for instance, more than $4 billion of Canada’s exports to the United States were affected by unfair-trade actions.

Without a systematic bilateral trading framework, Canadian businessmen found themselves fighting off the U.S. actions in costly, piecemeal fashion. They came to feel that they couldn’t get a fair shake from the U.S. International Trade Commission and Department of Commerce, the bodies entrusted to handle the cases south of the border.

Canadian officials figured that they could improve things if they sat down with U.S. negotiators and worked out an orderly set of rules. That was the impetus behind the free-trade agreement.

The negotiators tried to codify “subsidies” and failed. But they did succeed in setting up panels, composed of equal numbers of Canadians and Americans, to resolve trade disputes. So, to see whether the free-trade agreement is succeeding in its most basic mission, trade experts are watching the panels.

So far, though, the panels have issued only two rulings. One was a compromise that set no precedent. The other did, indeed, benefit Canada.

The ruling came out of charges that Canadian raspberry growers were dumping their crop on the U.S. market. The International Trade Commission and Department of Commerce had agreed that the American raspberry growers were injured and imposed a duty on the Canadian fruit. In pre-free-trade days, the Canadians’ only route of appeal would have been to a special trade court in New York--and Canadians feel that the American judges there have tended to defer to the Commerce Department and the International Trade Commission. This time, however, with the free-trade agreement in place, the raspberry case went to a binational panel. The panel ruled that the Commerce Department had erred.

“It sets an important precedent,” said Alan Rugman, research director of the Ontario Centre for International Business. “Canada’s finally winning the day. The raspberries aren’t such a big thing. But watch out for pork and steel rails,” two more disputes now being studied by free-trade agreement panels.