KEN MACQUEEN June 2 1986


KEN MACQUEEN June 2 1986



There were strained smiles, the obligatory handshake for the cameras and a lame joke about whether the walnut negotiating table was made from Canadian lumber. Then, on the morning of May 21, after months of political preparations, Canadian free trade negotiator Simon Reisman curtly ordered journalists out of the 17th-floor boardroom of his Ottawa offices. Peter Murphy, his U.S. counterpart, joined the eight members of his American team at the long oval table and formal negotiations to remove barriers inhibiting the annual $170-billion trade between the two countries began in earnest.

But after the preliminary sessions had concluded on an upbeat note on Thursday an announcement from Washington deflated official Ottawa’s optimism. President Ronald Reagan’s imposition of severe duties on imports of Canadian cedar shingle and siding products undercut the free trade momentum developed during the previous 18 months. Reagan’s startling decision also led to opposition demands in Parliament that Prime Minister Brian

Mulroney suspend the free trade negotiations. But while the Conservative Prime Minister joined with Liberal Leader John Turner and New Democratic Party Leader Ed Broadbent in an all-party Commons resolution calling for the reversal of Reagan’s ruling, he said that the trade talks should still proceed. Breaking off negotiations, Mulroney said, “would be an action inspired by petulance and this is too serious a matter to respond in that kind of way.”

Angry: In contrast to the angry reactions in Parliament, the preliminary trade talks were a model of decorum. Little time was wasted on lofty rhetoric as both sides outlined basic positions. On the second day the 66-yearold Reisman arranged a lesson on Canadian affairs for the 38-year-old Murphy and his colleagues. The lecture, delivered with graphs by Reisman’s assistant Alan Nymark, was designed, said Reisman, to explain why “we are different.” Commented Murphy later, with a wry smile: “I always gain insights from Mr. Reisman.”

Otherwise, the Canadian negotiator

revealed little—either of the lecture or of the broad policy discussions. At what he insisted was “not a press conference,” Reisman told a roomful of reporters that negotiations will encompass “all those things that deal with trade and commerce between the two countries.” The substantive negotiations will begin in Washington in midJune as the two teams race to get an agreement within 18 months, before the political influence of Reagan, nearing the end of his term, wanes. Said Reisman: “That’s lots of time.”

Impact: Meanwhile, 26 federal trade studies released last week by the external affairs department assessed the probable impact of removing trade barriers. Most of the assessments outlined long-term economic benefits. But several concluded that thousands of jobs could be lost in the short term as Canadian industries adjusted to operating in an open North American market.

As negotiations began, reporters saw little on the table but plates of doughnuts and bottles of Perrier water. And after the first round of talks there was still little indication of what issues the talks will eventually encompass. A week before the start of negotiations Murphy created a controversy in Canada when he told reporters at a briefing in Washington that every-

thing from Canadian social programs to cultural industries should be subject to negotiations if necessary. Canadian cultural sovereignty, he said, might be used as a means of justifying protectionism. Government-directed social programs such as medicare and jobmaking projects are regarded by some Americans as providing production subsidies that generate a competitive advantage for Canadian industries.

Table: Murphy last week attempted to clarify his position. “Either side has to be completely free to bring anything to the negotiating table it wants to,” he said. It is unlikely that most Canadian social programs would reach the table, he added. “But I am concerned in terms of what the effects would be of these social programs. If they have a trade impact, of course then I will want to look at them.” Asked whether medicare was on the negotiating agenda, Reisman replied, “Unequivocably, no.” And on Friday Mulroney told the Commons, “The social programs of this country are not on the table, Murphy or no Murphy.”

In manner and appearance at least, the negotiators are as different as their views. Reisman, a wirehaired terrier of a man, barely comes to the shoulders of the lanky, red-haired

Murphy. Blunt and often abrasive, Reisman, the son of poor Jewish immigrants to Montreal, joined the Canadian public service in 1946 after the Second World War. A year later he was part of the Canadian team involved in negotiations leading to the establishment of the General Agreement on Tariffs and Trade (GATT). Reisman was the chief Canadian negotiator for the 1965 Canada-U.S. auto pact. Murphy is expected to pay close attention to that accord. It currently contributes significantly to Canada’s strong $20-billion annual trade surplus with the United States, and it could be renegotiated to bring more balance into bilateral trade accounts.

Challenge: Last November, Mulroney hired Reisman away from his lucrative business as a private consultant with the attraction of a $l,000-aday salary and the challenge of attempting to reach a historic trade agreement.

In Murphy’s case, his assignment to the talks is considered to be a prize job. A buttoned-down native of Providence, R.I., Murphy’s rise in the U.S. civil service has been as impressive as Reisman’s ascent in the Canadian bureaucracy more than three decades earlier. A former chief U.S. textile ne-

gotiator, Murphy had been posted in Geneva since 1983, in charge of all U.S. multilateral trade negotiations under GATT. He suffers from an inoperable brain tumor, which an American Embassy official said is controlled by medication.

Despite the contrasts between the negotiators, Murphy says that he sees few differences between himself and the blunt-mannered Reisman. Said Murphy last week: “I am not the most shy and retiring person myself. Neither of us are up for any election. We’re just the poor working stiffs trying to put together a package.”

Jeopardy: But as negotiations began, that package was already in jeopardy. In a week when members of the Mulroney government had hoped for what they call a “clean launch” to the trade talks, Washington intervened. On Tuesday U.S. Treasury Secretary James Baker said that Canada should raise the value of its dollar in relation to the American currency, a move that many Canadian financial analysts said would cause a damaging rise in interest rates. Although Baker’s comments were made on the eve of negotiations, Reisman and Murphy agreed that exchange rates are off limits.

More damaging for Canada was the flare-up of a longer running trade dispute between the two countries. At the beginning of last week a coalition of U.S. lumber companies asked the U.S. International Trade Commission to impose more than $1 billion in trade penalties against Canadian lumber imports. If the request were granted, it would be a major blow for British Columbia, which supplies the largest share of the $3.5 billion in lumber Canada ships south annually. As the reaction to last week’s ruling against shingles and shakes demonstrated, Canada is concerned that the lumber dispute could threaten the larger trade negotiations.

Domestic support for Mulroney’s trade initiative is limited. Hampered by attempts to find a compromise with the provinces over their role in the negotiations, Mulroney agreed last Thursday to hold a conference with the premiers to resolve the issue. They will meet at 24 Sussex Drive on June 2. He also talked by telephone last week with Alberta Premier Don Getty, the acting spokesman for the premiers. But they were unable to agree on provincial demands for a limited presence at the negotiating table. In the end, an agreement will depend not only on two tough bargainers but on an elusive degree of political and public will on both sides of the border.