CANADA

Ottawa’s trade offensive

MADELAINE DROHAN January 19 1987
CANADA

Ottawa’s trade offensive

MADELAINE DROHAN January 19 1987

Ottawa’s trade offensive

CANADA

For Pat Carney, the end of the holiday season was more than a little abrupt. One week Canada’s International Trade Minister was soaking up the sun on the Hawaiian island of Maui with her 21year-old son, J.P. The next week she was back in the depths of a Canadian winter, leading a hectic cross-country public relations campaign. Her goal: to persuade Canadians that Ottawa had won a “moral victory” in its months-long trade war with the United States over Canadian softwood lumber exports, when it agreed on Dec. 30 to impose a 15-percent tax on softwood lumber exports to the United States. From Prince George, B.C., where she fielded questions on an open-line radio show, to Montreal, where she met Quebec Trade Minister Pierre MacDonald, Carney’s message was the same: Ottawa had negotiated the best possible deal with the Americans. It had persuaded Washington to accept the 15-per-cent tax—levied and collected in Canada—instead of imposing a punitive duty on Canadian lumber. Indeed, the outcome, Carney insisted in Vancouver, showed that “they blinked—we didn’t.”

Carney’s five-stop four-day public relations blitz was just part of an offensive by the Conservative government to quell a rising tide of criticism of the lumber deal—and of its handling of Canada-U.S. free trade negotiations. During a nine-day period, government officials and ministers defended the deal at seven news conferences—including one in Washington by Canadian Ambassador Allan Gotlieb. Responding to critics who said that the deal threatened Canadian sovereignty, Gotlieb said that a threatened U.S. import duty would have been a much greater intrusion and would have cost Canada about $600 million a year. The out-of-court settlement, added Carney, kept the Americans “out

of our forests, out of our books and out of our hair.”

Carney also confirmed that she had asked the cabinet for $12 million to publicize her trade initiatives during the

next two years. The campaign would involve printing pamphlets, writing speeches and preparing video presentations to sell the government’s free trade policy to Canadians. The New Democratic Party attacked the plan, saying it sounded remarkably similar to one the previous Liberal government conducted in 1980, when it was trying to generate public support for patriating the Constitution. At that time, the Tories— Carney included —attacked the Liberals for using public funds to 1 push their policies, but s Carney said that her o campaign was needed z because Canadians S were seeking more inïï formation about trade issues.

The rationale failed to appease Carney’s critics. Lumber industry spokesman Adam Zimmerman, chairman of MacMillan Bloedel Ltd., joined Liberal and New Democrat MPs in accusing the trade minister of undermining Canadian sovereignty by agreeing to the export tax, which went into effect last week. Ontario Premier David Peterson called Ottawa’s handling of the negotiations “inept” and said that the federal government’s decision to negotiate, rather than fight the proposed U.S. duty, set a “dangerous precedent” that might encourage further American intervention in Canadian affairs. Ontario’s concerns were underlined at week’s end, after the contents of an internal provincial government memo were published. The memo accused federal free trade negotiators of not fighting hard enough to protect the Canada-U.S. Auto Pact, which safeguards an estimated 155,000 jobs, mostly in Ontario. Carney promptly dismissed the charge.

Alberta’s Conservative Premier Donald Getty also voiced reservations on the softwood settlement, saying that his province would not co-operate unless Ottawa and the provinces reached agreement on implementing the export tax.

For their part, federal opposition parties said that they will try to delay the tax legislation when the majority government presents it to the Commons later this month. Said Liberal forestry critic Brian Tobin: “They’re going to have a hell of problem ratifying this.”

Despite Carney’s vigorous response, the continuing controversy over the lumber accord has raised serious questions about her performance in the difficult trade portfolio. Named “Oilman of the Year” by Oilweek magazine last year for her performance as energy minister, Carney was rewarded with the trade job in a cabinet shuffle last June, with responsibility to direct Canada’s strategy in the free trade talks. Said Prime Minister Brian Mulroney at the time: “She’s got the ball, and you just watch her run.” Instead, Carney has been bogged down with bilateral trade disputes. Her staff, government officials told Maclean's, seems overwhelmed by the variety and complexity of challenges in the portfolio, and the minister herself sometimes appears to be reeling.

In addition, Carney’s record of good relations with industry has been damaged by a bitter public debate with Zimmerman, who also heads the Canadian Forest Industries Council. Last week Zimmerman called the lumber deal “bizarre and sickening” and said that Carney’s negotiating team had bungled the deal through inexperience. In addition, he blamed Carney for ignoring the advice of industry veterans. Responded Carney in an interview: “Adam Zimmerman equates consultation with getting his way. And once he didn’t get his way, he maintains he wasn’t consulted.” Associates of both Zimmerman and Carney said that they were astonished by the vindictive tone of the exchange and added that it boded ill for future industry-government co-operation.

Despite the agreement with Washington, the lumber dispute is still far from settled. Federal and provincial officials are to meet this week to negotiate transferring the expected revenue from the new tax to the provinces. That will likely be done by phasing out the export tax and replacing it with higher provincial timber-cutting charges, known as stumpage fees. Then, Ottawa must satisfy Washington that its arrangement with the provinces will raise the cost of Canadian lumber exported to the United States by the same amount as if the 15per-cent duty had been retained—cancelling out what the Americans regarded as an unfair subsidy to Canadian industry. The result is two more sets of tough negotiations for Carney—and more distraction from her main task: overseeing the free trade talks.

MADELAINE DROHAN

MARC CLARK