Just before Parliament recessed for its holiday break last Christmas, Justice Minister John Crosbie tabled a bill to prevent the extension of United States law into Canada. By way of illustration at the time, Crosbie said that under his bill, which became law last Feb. 14 as the Foreign Extraterritorial Measures Act, an American company would no longer be able to prevent a Canadian subsidiary from trading with a country like Nicaragua if the United States declared a trade embargo against that nation. Last week, after President Ronald Reagan made Crosbie’s hypothetical case a reality by im-
posing a U.S. trade embargo on socialist Nicaragua, External Affairs Minister Joe Clark hinted that the Canadian law would be used if necessary to ensure that the U.S. embargo does not “limit in any way at all Canadian exports.”
In fact, Washington has exempted foreign subsidiaries of U.S. companies from the embargo, which took effect last week after Congress rejected Reagan’s request for $14 million in military aid for the U.S.-backed and funded contras in Nicaragua. But a Treasury department official in Washington said that U.S.-owned subsidiaries in Canada would be monitored to make sure that U.S. parent companies did not simply reroute trade through their Canadian branch plants. Clark responded that if the United States monitored Canadian firms, “I can tell you that there’ll be a whole lot of monitoring going on.” In a reference to the Foreign Extraterritorial Measures Act, under which Ottawa could order a Canadian
subsidiary to ignore instructions from its U.S. parent to halt exports to a third country such as Nicaragua, Clark noted, “There is some basis for Canadian action if we need it.”
In the meantime, Nicaragua, which will lose the benefits of relations with its number 1 trading partner—last year U.S. imports totalled $111.5 million, and exports were $57 million—informed Ottawa that the Nicaraguan World Commerce Corp. might close its office in Miami and relocate it in Toronto. Last year Canada imported $44 million worth of goods—mostly frozen beef and gold —from Nicaragua and sold $22 million
worth of goods, including wheat, dairy products and pharmaceuticals. But the U.S. embargo is expected to create shortages in Nicaragua of industrial equipment, spare parts for cars and trucks and fertilizers. Said Pastore Valle-Garay, Nicaragua’s consul general in Toronto: “There might be an increase in business for Canada, but on a limited basis.”
There is already a long-standing precedent for Canadian trade with countries that encounter Washington’s disapproval. Since the United States clamped a 1960 embargo on trade with Cuba, Canada has developed a flourishing $335-million annual export trade with the Caribbean nation. But Prime Minister Brian Mulroney rejected suggestions that Ottawa should actively encourage expanded Canadian-Nicaraguan trade.“There may be deals as time goes on,” declared Mulroney. But he added that, so far, “there is no package
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