COVER

THE BIGGEST DEAL INISTORY

Marci McDonald,MARCI MCDONALD April 6 1987
COVER

THE BIGGEST DEAL INISTORY

Marci McDonald,MARCI MCDONALD April 6 1987

THE BIGGEST DEAL INISTORY

COVER

Marci McDonald

It was the ultimate symbol of the personal chemistry on which Brian Mulroney had based his political fortunes: regular telephone chats with Ronald Reagan. But last fall, just when negotiations over Canadian softwood lumber imports to the United States erupted in mutual recriminations, the Canadian timber industry was stunned by a confidential report from Parliament Hill.

The Prime Minister was unwilling to risk any political capital in exercising his direct-dial diplomacy with Reagan on the issue. And the lumbermen were told that the President’s then-White House chief

of staff, Donald Regan, was so jealously guarding access to the Oval Office that Mulroney’s aides could not guarantee his call would be put through.

The Prime Minister’s Office denies that Mulroney ever had trouble getting Reagan on the line. But that disputed report underlines the problems Mulroney now faces over his controversial foreign policy with Washington. Indeed, as the Prime Minister prepares to welcome Reagan to Ottawa next week for their third summit in three years, an increasss ing number of critics are asko ing just what Mulroney has to | show for his much-vaunted £ closeness with the President.

Said Stephen Clarkson, author of Canada and the Reagan Challenge: “A good relationship with the President doesn’t assure a good relationship with the United States. In the Trudeau period, when the relationship was supposed to be terri-

ble, Canada didn’t suffer all these assaults on its interests.” Slap: The growing skepticism about Mulroney’s reluctance to lob verbal hand grenades at Washington, as he put it recently, has its roots in the 1985 summit in Quebec City, where the two leaders toasted a new dawning of goodneighborliness in a wave of euphoric rhetoric and joint choruses of When Irish Eyes Are Smiling. But their meeting last year in Washington was upstaged by what The Washington Post dubbed the Slap Flap—the headline-grabbing smack that Sondra Gotlieb, the Canadian ambassador’s wife, delivered to her social secretary at the Prime Minister’s final official dinner.

Ever since, Canadians have been left reeling by a series of unneighborly counterblows from the American capital. Among them: stiff tariffs on fresh fish and cedar shakes and shingles, prompting Mulroney to question the wisdom of friendship with the Americans; the bitterly negotiated saw-off of a 15-per-cent export tax on softwood lumber; insensitive swipes at Ottawa’s environmental policies by U.S. Interior Secretary Donald Hodel; and Washington’s clear neglect of its own promises of action on acid rain.

Pussycat: In fact, only two months ago Mulroney was provoked into summoning Vice-President George Bush to Ottawa for a theatrical scolding, noting, “Canadians don’t want to be on anybody’s back burner or taken for granted at any time.” Said former U.S. undersecretary of state Myer Rashish: “What your government has realized is that

it has been identified as a pussycat for the United States without getting any strokes in return.”

That realization has cast shadows over a summit that both Reagan and Mulroney badly want to be a public relations success. Politically, both are wounded—their popularity only beginning to inch up in the polls from record lows, their credibility severely tarnished by scandal. For Reagan, the state visit is the first opportunity since the Iranian arms scandal broke last November to show that he can still command respect abroad. For Mulroney, it is a test of his ability to confront the President on key issues without abandoning his call for closer ties with Washington, a linchpin of his foreign policy. Said Charles Doran, director of Canadian Studies at Johns Hopkins University’s School for Advanced International Studies in Washington: “Each needs the other at this point. The nice thing about the symbolism of foreign policy is that it can rescue you from your domestic political troubles.” But both leaders are also wary of raising expectations. In contrast to the celebrations that surrounded the Quebec City encounter, aides have studiously played this down as a “business-as-usual summit.” Said one Canadian official: “We’re low-bridging it.”

Meanwhile, a 60-member White House advance team has been scouting Parliament Hill for security pitfalls and flattering camera angles from which to photograph the highlight of the trip: Reagan’s address to the House of Com-

mons on April 6. The speech, billed as a pivotal plug for the Canada-U.S. free trade talks will help lay foundations for selling the agreement to Congress next fall (page 17). But the President is also expected to promote his own new “competitiveness” package—the administration’s code word for limited trade concessions designed to stave off a protectionist bill from Congress.

Technology: To ensure that Reagan did not suffer the same fate Bush had in Ottawa, his aides moved swiftly two weeks ago to defuse the chief complaint on which the vice-president said Mulroney had given him an earfulacid rain. On March 18 the administration earmarked $3.3 billion over the next five years to subsidize further studies of clean-coal technology. Explained one White House official: “The President was going to be put on the spot. Why let him arrive in Ottawa and have it look like a showdown where he caved in? This was not a time we could afford to see him embarrassed.”

But those concessions fell far short of what Mulroney wanted—and of what the U.S. state department had lobbied for within the administration—on the issue that has become the litmus test for Canada-U.S. relations. And the public outcry in Canada highlighted the fact that Mulroney has much more at stake in the summit than Reagan. Said one former U.S. official: “Reagan just has to walk through without making any blunders. This is Mulroney’s summit to win or lose.”

As a result, the Prime Minister’s aides have said pointedly that Mulroney will deliver some tough talk to the President on acid rain —and on other issues. Privately, they concede that the remonstrances will be intended mainly for home consumption. Acknowledged one: “There certainly would be votes in it to stand up to the President a bit more.” But Mulroney’s need to distance himself from Reagan has made U.S. officials apprehensive. Said one: “Mulroney is going through a difficult period, and he has to show that he is standing up to the big guys. The situation is fraught with political land mines because everybody in Canada is so sensitive.”

Both sides are counting on stepped-up negotiations on the explosive issue of Arctic sovereignty to produce an agreement in time for Reagan to sign in Ottawa. An Arctic accord would demonstrate that Mulroney’s cozy approach to the United States can deliver on an issue where then-prime minister Pierre Trudeau failed. In fact, one Canadian official last week said that such an agreement could become the “centrepiece” of the summit.

Furore: It is also shaping up as the meeting’s cliff-hanger. The pact—being hammered out by the Prime Minister’s new chief of staff, Derek Burney, and the state department’s Edward Derwinski—is designed to avoid a repetition of the Polar Sea incident. In August, 1985, a furore erupted when the U.S. Coast Guard’s icebreaker Polar Sea plowed through Arctic waters—and Canadian sensibilities, by allegedly not notifying Ottawa in advance of its voyage. But the

voyage. But the issues involved are so complex that an agreement may not be concluded in time for the summit.

According to officials, Washington would be prepared to recognize Canadian sovereignty—reversing its position that the Arctic straits are international waters. In return, the United States wants unrestricted rights of passage, above all for its fleet of nuclear submarines spying on the Soviets from under the Arctic ice cap. That conclusion could mean a victory for Canada’s economic claims to vast undersea energy resources. But to critics, such a scheme also seems like a contradiction in terms. Said Clarkson: “It sounds like both a recognition and a denial.” For Ottawa, the minimum demand is for advance notification of all American voyages in the region. But Washington is concerned that recognizing Canada’s sovereignty claims to Arctic waterways would set a dangerous precedent. At stake: its right of passage in more contentious sea-lanes in the Far East and the Mediterranean, particularly in Libya’s Gulf of Sidra. In response, External Affairs Minister Joe Clark has argued that the Arctic straits, frozen nine months a year and impassable by regular shipping traffic, are unique. As Clark told Secretary of State George Shultz: “You can’t walk across the Gulf of Sidra.”

In an attempt to assert its sovereignty claims in the Far North, Ottawa has ordered construction of what has been billed as the world’s largest icebreaker. It is a $320-million gesture that the joint parliamentary committee on foreign affairs said had “little security value.” And one of the most

controversial points in the new federal White Paper on defence currently being prepared is another project aimed at safeguarding the country’s Arctic sovereignty: the acquisition of four to 12 nuclearpowered hunter-killer submarines at a cost of at least $400 million each. To some defence critics, that proposal is economically unsound and ominous in its long-term military implications. As David Cox, research director of the federally sponsored Canadian International Institute for Peace and Security, points out, if Canadian nuclear submarines shared patrol duties with the U.S. atomic underwater fleet, they could find themselves during a conventional conflict participating in U.S. military strategy.

Astonishment: In fact, even the Penta-

gon-while declining to comment on the proposal—has not been enthusiastic. Some U.S. defence experts would rather not have a middle power dabbling in the high-risk atomic submarine game. And Pentagon officials privately express astonishment that the Canadian government should be considering a billion-dollar investment in a submarine fleet when it is among the lowest per-capita contributors to defence in the North Atlantic Treaty Organization.

Indeed, Pentagon officials have again seized the summit to underline their impatience with Canada’s defence spending. Although in 1984 the Mulroney government had promised real growth of six per cent a year in Canada’s defence budget—forecast to rise by 4.5 per cent in the 1987-1988 fiscal year to $10.2 billion—that goal has not been achieved.

U.S. officials have been quick to deny reports that they are bartering—making concessions on acid rain in return for boosts in Canadian defence spending or recognizing sovereignty in the Arctic for Ottawa’s capitulations on thorny trade issues. But privately some have expressed frustration at a relationship which they say has become a one-way street. To the constant accusations of not catering to Canadian sensitivities, one administration veteran replied with evident impatience, “We are sensitive to a fault to Canadian sensitivities.” That remark only underlines the gap in perceptions about the relationship. To many Canadians, it is at times like looking through a one-way mirror: nobody on the other side can see back. The impression was reinforced in the past year when—after the retaliatory trade measures on shakes and shingles and softwood lumber—the administration’s new budget in January contained no provisions to honor the President’s acid rain commitments. That led to Bush’s visit to Ottawa. Without that, senior Canadian officials say, the Canadian-American file—including both the summit agenda and the trade talks—would have continued to stagnate.

Still, the administration left the key directorship of the Canada desk at the state department vacant for the past two months during the summit’s planning period. And the political appointee the White House finally selected as deputy assistant secretary of state for European and Canadian affairs may be controversial. He is Fred Jones Hall, 35, a prominent fund-raiser for right-wing conservative causes, including aid for the Nicaraguan rebels, and head of an Oklahoma auto-parts dynasty—an industry affected by the Auto Pact, one of the most contentious elements of the free trade negotiations. Still awaiting his security clearance, Hall will assume a discreet unofficial presence at the summit. But in an interview with Maclean's, he voiced enthu-

siasm for his new job. “So many things are in place that can lead to a great relationship,” he said. “It’s not like you’re trying to establish relationships with Iran.”

Late: Still, redefining the ties that bind the White House and 24 Sussex Drive will be Mulroney’s most difficult task next week. Some analysts charge that—with Reagan’s influence seriously weakened by the Iran arms scandal—the Prime Minister may already be too late. Said Nicholas Stethem, a Canadian strategic analyst with the Americas Society in New York: “We had this historic opportunity to build something out of a great relationship between the President and the Prime Minister, and what have we done with it? Nothing. We’ve blown it.” But others caution that Mulroney may only now be mastering the technique that will bring him payoffs: yelling loudly enough to get U.S. action while not alienating the White House. But whatever distance Mulroney is likely to take from Reagan in public, it is certain that in their private sessions the two leaders will be exchanging mutual commiserations on their domestic political wounds. Said Doran: “To some extent, each will be propping the other up.”

MARCI MCDONALD

in Washington with

HILARY MACKENZIE

in Ottawa