Canada Is Furious, Bush Is Silent : Huge row with Ottawa over lumber and Hondas imperils North American free trade

President Bush talks a good game when it comes to trade. But why is his Administration waffling on an important free-trade issue with Canada?

Bush is a big advocate of a three-way free-trade pact with Canada and Mexico. Yet recent punitive trade actions against Ottawa defy that justified commitment and play into the hands of protectionists. Canadians are up in arms over U.S. rulings against two of their exports: Honda Civic automobiles and lumber.

U.S. Customs ruled two weeks ago that Civics manufactured in Alliston in Ontario in 1989 and 1990 lacked the necessary 50% North American content to qualify for duty-free import into the United States under the free-trade agreement.

A few days later, the U.S. Commerce Department issued a preliminary decision declaring that Canada is subsidizing softwood lumber exports to the United States--and slapped a 14.48% duty on them.

It’s time for the Administration to be consistent in its trade policy. U.S. credibility--and much more--is at stake.

Free-market champions are accusing the Bush Administration of violating the spirit and the letter of the 1989 U.S.-Canada free-trade agreement. The bilateral pact is considered to be the foundation for expanding free trade to include Mexico under a broader North American Free Trade Agreement (NAFTA).

Narrow-minded U.S. trade retaliation against Canada could jeopardize the talks now under way to draft the three-way agreement, which would vastly expand economic opportunities for all three nations.

Prime Minister Brian Mulroney, a free-trade supporter and usually a Bush ally, was unusually harsh in his comments. Mulroney called the trade decisions something he would expect from “some tin-pot dictator.”

He has even met with his Cabinet to discuss possible retaliation, although that appears unlikely. But Mulroney gave the President a possible out from the embarrassing situation by saying the U.S. measures must be the work of “low-level functionaries.”

Bush’s relative silence on this issue hints of a drift toward managed trade, which sends a contradictory signal as he simultaneously works toward opening up trade worldwide through multilateral negotiations. The President needs to take the initiative to defuse the flap with our biggest trading partner. Leadership on his part will prevent the issue from becoming easy political fodder for his opponents in this volatile election year.

North of the border, there is mounting support for scrapping the free-trade agreement. That surely would spell death for a free-trade pact with Mexico. This is no time for Bush to go slack on trade.