COLUMN

Nothing to fear but the fearful

Diane Francis October 19 1987
COLUMN

Nothing to fear but the fearful

Diane Francis October 19 1987

Nothing to fear but the fearful

COLUMN

Diane Francis

Back in the 1950s Samuel Reichmann sent his sons out from the family home in Tangier to live in several countries. Ralph Reichmann went to Canada and Paul Reichmann landed in the United States. After a few years the whole family reunited in Toronto and the rest is history. In just three decades they have built a great Canadian multinational, Olympia & York—a vast empire of resources and real estate. More meaningfully, the Reichmanns were already rich when they emigrated and could have moved to more prosperous Los Angeles or Manhattan. But they chose Canada. And for good reason.

The “Reichmann choice” is critical to the debate that will ensue over the next few months concerning the comprehensive freer trade deal signed with the Americans. Once Canadians fully understand the tremendous opportunities that have been negotiated by the Tories, the degree of acceptance will simply be a measure of self-confidence. And we deserve to be confident—if not downright cocky. Canada may have roughly 10 per cent of North America’s population, but we have more than our fair share of resources, both human and physical. “Canada is a wonderful country,” Paul Reichmann told me a few months ago. “It hasn’t got 10 per cent of this continent’s brains. It’s got 13 or 15 per cent of them. Americans work hard, but Canadians work better. We will prosper in a free trade deal.”

Reichmann is right. Of course, he has more to lose than most if he is wrong. Opening the border means more competition for his companies—but most are world-class winners. The losers will be those crouched behind tariff walls. Ontario Premier David Peterson has expressed public concern about Ontario wine makers, who critics say cannot compete in terms of price, or quality, against some California wines now to be allowed in. But the Ontario government hobbles local wine makers by forcing them to buy local grapes, which can be three times as expensive as California grapes. By forcing consumers to keep bailing out grape growers, the provincial government—and not the free trade deal—threatens to destroy our vintners.

Overall, Ottawa has pulled off a good deal. It has met its three objectives of getting an independent dispute mechanism, free access to the U.S. market and the removal of tariffs between 1989 and

1999. Canada’s cultural, social and regional development policies remain almost completely intact, as does Peterson’s precious Auto Pact. Still, some bleat against the agreement to keep energy exports flowing to the United States (except for national security reasons), particularly the section stating that if shortages exist in both countries the two must share “proportional access to the diminished supply.” But this is not new, because Canada and the United States have signed a similar deal with 19 other countries to ration oil through the International Energy Agency.

Others complain that the independent dispute mechanism will not replace U.S. trade laws and only acts as a binding, bilateral appeal court. But the mechanism will not replace Canadian laws, either, that allow us to protect ourselves from a sudden, unfair onslaught of Yankee traders, as will the Tories’ Competition Act that would allow the govern-

When we understand the benefits of freer trade, the degree of acceptance will simply be a measure of our self-confidence

ment to block any wholesale buy-out of an industry or product line. Still others moan about the removal of some foreign ownership restrictions—viewed as a sellout of sovereignty. But no one is forced to sell, and besides, there is not much left: 374 of Canada’s 400 largest public companies are already majoritycontrolled by foreign firms.

Despite huge benefits, it is premature to count the blessings because this is far from being a final treaty. The deal faces tough scrutiny on both sides of the border. Besides that, there are some fundamental misunderstandings. This is not so much a freer trade deal as a continental protectionist deal. In essence, both countries have agreed to bestow advantages on one another and to discriminate against the rest of the world, at least until more general worldwide trade liberalization is negotiated under the General Agreement on Tariffs and Trade. This is why both countries win. The United States may get an estimated 700,000 new jobs, and Canada—with an economy one-tenth the size—350,000. The deal means a German maker of forestry equipment will pay a tariff when

selling to Ontario, but his U.S. rival will not. It means Swedish pulp will face a U.S. tariff, but B.C. pulp will not.

The only way to get around the tariff shield, unless worldwide trade barriers are lowered, will be to get behind it and set up shop in North America. That is where the new jobs and the Reichmann choice comes in. In effect, New Zealand conglomerate Fletcher Challenge Ltd. has gained back-door entry to the United States by buying chunks of British Columbia’s forestry business since 1983. And its head, Sir Ronald Trotter, is an unabashed supporter of free trade, who has also suggested that Australia and New Zealand try to join the new North American trading block.

Like the Reichmanns, one of Hong Kong’s richest men, Li Ka-shing, sent his sons afield to the United States and Canada—and settled on Canada. The Lis have already begun using Canada as the base for their North American real estate and resource forays because of stability and, as Li himself hinted to me in an interview last spring, Canadian social tolerance. “We have been treated like ordinary Canadians,” he said.

Is it any wonder we are the chosen nation—and will be even more so under a free trade deal? Who can deny that Canada has more livable cities, more tolerance, more sophistication, fewer socioeconomic problems and less corruption? That it has a kinder system that looks after the old, poor and sick, creating more social and political stability? Naïve commentators tend to regard capitalists’ decisions as being made strictly on the basis of bottom-line considerations. Economics are fundamental, but people who make things happen economically are human too and want the best lifestyle for their families. That is the essence of the Reichmann choice.

Added to that is the fact of Canada’s fundamental economic advantages. For instance, automakers pay Canadian car workers about 35 per cent less—a difference of about $9 an hour—than they pay U.S. car workers, due to our lower dollar and government-subsidized fringe benefits such as medical care. This is why 18 per cent of auto jobs are in Canada— exceeding the 11 per cent minimum number required by the Auto Pact. This country will always have a great deal going for itself. Our labor costs are considerably lower, our resources readier. Our society is happier and more secure. About the only thing Canadians have to fear, as a result of this deal, is the fearful themselves who may scuttle it.