CANADA

REDRAWING THE NATION

MADELAINE DROHAN October 19 1987
CANADA

REDRAWING THE NATION

MADELAINE DROHAN October 19 1987

REDRAWING THE NATION

CANADA

COVER

As most of Ottawa’s federal civil servants arrived for work on Monday, Oct. 5, a weary band of External Affairs staffers had just ended a marathon 24-hour shift. In all, the 20 writers, editors, translators and word processors had been asked to produce Canada’s summary of the free trade agreement. With negotiators still working out the final details in Washington, the Ottawa group dealt with sections of the pact as they were approved and sent north by facsimile transmitter throughout Sunday. Fuelled by sandwiches, coffee and the occasional cigarette—officially banned by government decree—they worked through the night to a 9:30 a.m. Monday deadline. They beat it by 15 minutes. At 9:15 a.m. their mission was accomplished: 10,000 copies of a glossy four-booklet blue-covered trade package were ready for distribution. That was the opening shot in the Mulroney government’s campaign to sell the controversial accord to the country. Declared pollster Angus Reid in Winnipeg: “The battle for the hearts and minds of Canadians has begun.”

In fact, the battle for a free trade deal—the pivotal plank in the government’s agenda—began in March, 1985, when Prime Minister Brian Mulroney and President Ronald Reagan agreed at a Quebec City summit meeting to seek “a more secure climate for bilateral trade.” The trade talks began officially in Ottawa on May 22, 1986. But last week the issues—and the arguments— became more sharply focused, as outlines of the agreement and some details of the negotiations became public for the first time. Both the proponents and the opponents of the deal agreed that it could fundamentally alter the shape of Canada in the next decade (page 20). Their dispute centred on whether the changes would be for better or for worse.

Law: The Washington agreement, which requires ratification by the U.S. Congress to become law and will be debated in Parliament, proposes to:

• Eliminate all tariffs on cross-border trade within 10 years in a new Free Trade Area (FTA).

• Establish a five-member binational panel to review trade decisions that

give rise to disputes between Canada and the United States. The panel would have the power to decide whether rulings by either country complied with its trade laws and with the multinational General Agreement on Tariffs and Trade (GATT).

• Restrict Ottawa’s power to screen foreign investment only to direct takeovers of Canadian companies with assets of more than $150 million rather than the present threshold of $5 million.

• Remove restrictions on the operations of U.S. banks in Canada and lift the limits on U.S. ownership of Canadian financial institutions.

• Establish a common energy market in petroleum, gas, uranium and hydroelectricity.

Supporters of the agreement portrayed the debate as a clash between two fundamentally different views of the country. Chief Canadian trade negotiator Simon Reisman, for one, said that critics are espousing the view of “a small Canada, little Canada, Canada behind the wall, a protected Canada.” But both federal opposition parties, at

I least three provincial premiers and a wide range of cultural and labor groups lined up to fight the agreement. Their principal fear: that Canada will lose politically, economically and culturally if the deal is ratified. Liberal Leader John Turner denounced the pact as a “sellout” and began a national tour designed to arouse opposition to the deal. Said NDP Leader Ed Broadbent, warning that Canada could become part of the United States: “In my judgment, within a quarter century, we could be absorbed totally, lock, stock and barrel, if this is not stopped.”

Critics: Indeed, the free trade deal faced serious opposition. After months of unanimous, if qualified, support for the negotiations, the 10 provincial premiers emerged from an eight-hour meeting with Mulroney on Oct. 6 divided into three distinct camps—for, against and undecided. Ontario’s David Peterson, Manitoba’s Howard Pawley and Prince Edward Island’s Joe Ghiz opposed the deal. Newfoundland’s Brian Peckford and Nova Scotia’s John Buchanan were not fully committed either way last week. The five other premiers, led by Quebec’s Robert Bourassa, endorsed the terms. Asked about the

opposition from three of the provincial leaders, Mulroney stated bluntly, “I wasn’t asking for anyone’s approval.” In response to prodding from critics, the Prime Minister hinted that he was ready to fight an election on the deal.

The rift in Canada raised concerns in the United States, where Congress is scheduled to review the package before Jan. 2 and to cast a deciding vote on it some time next spring. Federal authorities say that only a small part of the deal—less than 10 per cent—requires provincial co-operation. But last week U.S. trade representative Clayton Yeutter told a Toronto audience that Congress will not approve the deal unless the provinces do too.

Anger: In Ottawa, meanwhile, the Liberals and New Democrats expressed anger in Parliament about documents showing that Washington had insisted on changes in Canadian law governing medical drug patents as one price for signing a trade deal. Government ministers have repeatedly denied the linkage between the trade agreement and the legislation before Parliament that would provide greater protection against producing generic copies of pharmaceuticals patented by multina-

tional drug companies.

There was other evidence of confusion in the government as Mulroney and his ministers began their promotion campaign. In a speech to an exporters’ convention in Ottawa, the Prime Minister mentioned a “massive program” for workers dislocated by the agreement. But Finance Minister Michael Wilson said in the House of Commons that no such compensation would be needed. Earlier in the week International Trade Minister Pat Carney, who joined the Canadian contingent in Washington for the final negotiating sessions, claimed that the deal would offer Canada insurance against a protectionist trade bill now before the U.S. Congress. But embarrassed officials later explained that the U.S.-Canada deal would not, in fact, cover U.S. legislation passed before Jan. 1, 1989, when the trade pact comes into effect. And Employment Minister Benoît Bouchard ignited a storm of protest when he speculated that as many as 500,000 people could lose their jobs as a result of free trade.

A much calmer atmosphere prevailed in Washington as U.S. Treasury Secretary James Baker, trade representative Yeutter and American chief negotiator Peter Murphy began their selling job on Capitol Hill. Initial reaction was mixed, with most senators and congressmen reserving opinion until they had seen more. Republican Senator Robert Packwood of Oregon was among those who said that he liked the agreement. Said Packwood, who was a leader in a fight to limit Canadian lumber imports: “I’d like to see it fleshed out, but I’m presuming I’m going to support it.”

U.S. proponents of the free trade accord will have to make a major effort to obtain approval on a tight schedule. Under U.S. rules governing the trade agreement, Congress has until Jan. 2 to review the deal. After that, Congress has 60 sitting days to vote for or against enacting legislation. But there are few openings on the congressional timetable for the review. Said one House of Representatives aide who deals with trade issues: “It’s going to

be hard to set aside time for Canada.”

In Ottawa, Mulroney has promised public hearings, debate in the Commons and a vote on the trade proposals. Last week he met the premiers around the boardroom table in the Langevin Block, across the street from Parliament. Mulroney described the session—the group’s ninth on free trade—as “cordial.” Insiders told Maclean's, however, that there were many heated moments as details of the document were discussed. Newfoundland’s Peckford, for one, was unhappy that a provision in the trade deal meant that his province could no longer insist that fish be processed locally before export. Peckford also expressed concern that the accord’s establishment of a continental energy market might limit Newfoundland’s access to hydroelectricity resources on the Labrador-Quebec border because Quebec would be encouraged to export more power.

Those same energy provisions, however, delighted Bourassa. Indeed, the Quebec premier was so happy with the agreement that he offered to help

Mulroney sell it in Quebec and across Canada. With improved prospects for export of his province’s surplus electricity, Bourassa predicted that the agreement would mean “dozens of billions of dollars” in extra revenue—and jobs. Alberta Premier Donald Getty and British Columbia’s William Vander Zalm were also quick to declare support. Said Getty: “It is definitely better than what we have now.” But Manitoba’s Pawley was opposed, mainly because the deal would permit greater foreign ownership of Canadian resources. Said Pawley: “I will be seeking to promote a different direction.”

Legal: At the first ministers’ meeting, Ontario’s Peterson produced two legal opinions—one Canadian, one American—which coneluded that the proposed new trade disputes review procedure would bring little improvement. Peterson also maintained that by eliminating all tariffs, Ottawa would remove the possibility of applying them as penalties against any of the Big Three U.S. automakers who failed to abide by the

1965 Auto Pact’s Canadian-content reI quirements. Declared Peterson last week: “My mind is made up. I don’t believe this deal is good for the country.”

One potential loser is Canada’s protected wine industry (1986 revenues: $250 million). Ontario wine makers expressed concern about provisions in the proposed agreement to eliminate provincial programs that give domestic wines pricing and marketing advantages over imports in government liquor stores. Said Jan Westcott, executive director of the Canadian Wine Institute: “Today I feel like a poker chip.”

Wine: Giving up protection for wine was one of what Mulroney described as “the agonizing decisions” made at the bargaining table. But both opponents and supporters of the deal said that the most difficult decision of all—whether to abolish regional development incentives—has been delayed, perhaps indefinitely, by the negotiators’ decision to attempt to draft a new code for subsidies over the next seven years.

Canada maintains that government support is needed to promote development in such hard-pressed regions as Cape Breton. The United States, although it operates industrial and trade incentives of its own, has criticized Canada’s regional grants and subsidies as unfair aid that helps Canadian exporters to produce goods at prices

Americans cannot match. In the end, the two sides found the industrial incentives gap between them too wide and left the subsidy code for future negotiation.

Meanwhile, Mulroney and other free trade proponents will attempt to focus

the battle for public opinion on the national benefits that they say will result from the accord. A federal official told Maclean’s that the strategy is to stress the prospects for increased job opportunities, cheaper products and a healthy economy. In Toronto, Decima Research

Ltd., the regular Tory party pollster, began canvassing for reaction to the agreement last week, and there are plans for Mulroney and key ministers to cross the country promoting the deal.

In addition, Reisman has put his own staff on what he calls “crusade footing.”

In the weeks and months to come, they plan to issue a series of studies on the deal. Said Reisman: “I want this national debate to be well informed.” Indeed, Conservative government insiders are confident that they can sell the deal on its merits. While the Prime Minister

has had credibility problems in the past, they believe the strength of his conviction in this accord will come through.

Still, free trade advocates faced a determined and organized opposition. According to pollster Ian McKinnon, vicepresident of Decima, it may be easier to attack the deal than defend it. Said McKinnon: “The costs are tangible. The benefits are not.” Maude Barlow, cochairman of the anti-free trade ProCanada Network, said that her group has a “technical analysis” of the pact showing that Canada has lost more than it has gained. Armed with this information, the group will lobby the premiers, presenting a petition that Barlow said has been signed “by hundreds of thousands of people” who believe Mulroney should call a federal election before signing the pact.

Deal: With Trade Minister Carney predicting that the deal will not be finalized until next July, Canadians face months of argument about free trade. The debate, both sides concede, will go beyond the merits of the detailed provisions in the agreement itself to address a more fundamental question: what kind of nation do Canadians want?

MADELAINE DROHAN

HILARY MACKENZIE

PAUL GESSELL

IAN AUSTEN

SHERRI AIKENHEAD

LISA VAN DUSEN