COVER

WHAT THE DEAL REALLY SAYS

SOMETIMES THE RHETORIC IS HOLLOW

MARY JANIGAN,D’ARCY JENISH November 14 1988
COVER

WHAT THE DEAL REALLY SAYS

SOMETIMES THE RHETORIC IS HOLLOW

MARY JANIGAN,D’ARCY JENISH November 14 1988

WHAT THE DEAL REALLY SAYS

COVER

SOMETIMES THE RHETORIC IS HOLLOW

Even at the beginning of the federal election campaign, it was the major issue. However, by last week, as the leaders of the three major parties brawled publicly on the national stage, the U.S.-Canada free trade agreement had become virtually the only issue under debate. But often lost sight of was the agreement itself and what it specifically says about the issues—in contrast to what opponents and supporters claim that it says. Some of those areas:

WATER

The only reference to water in the fourvolume free trade deal is a clause governing the classification of tariffs on goods. Those tariffs are the duties that governments impose on either imports or exports to protect specific products. Item 22-01 says: “Waters, including natural or artificial mineral water and aerated waters, not containing added sugar or other sweetening matter not flavored; ice and snow.” The section says, in addition, that over a 10year period, the United States will remove a customs duty of four-tenths of a cent on each litre of Canadian beverage water and that Canada will abolish a 10.2-per-cent duty on similar U.S. water products.

Free trade opponents claim that the classification refers to all Canadian water—in bottles or on the ground. In that case, all water would become what the accord refers to as a “good.” And the agreement says that the two parties cannot restrict the export of a “good” by less than the average amount of the preceding 36 months—unless they cut domestic use as well. At the same time, the agreement says that neither government can impose a higher price on an exported “good” than the price that applies domestically.

But supporters of the deal say that water on the ground is not considered to be a “good” under any trade law in the world. Said Gordon Ritchie, the former deputy chief negotiator of the agreement:

“We are talking about water in cans and bottles. [The law]

sory Council on Adjustment to determine the additional help that labor and business would need to adjust to free trade. The federal finance department estimated last January that, when the number of lost jobs and new jobs are combined, free trade would create a net benefit of 120,000 jobs over the next five years. Those jobs would be in addition to the jobs that the economy now creates—300,000 per year over the past three years. But those statistics do not convince workers who would lose their jobs. John Alleruzzo, Canadian director of the Amalgamated Clothing and Textile Workers Union, estimated that 40 per cent of the 100,000 textile jobs in Quebec would disappear under free trade. Most of the workers are women, he

has never been applied, and never could be applied, to flowing water.”

Both sides in the debate agree that certain sectors of the economy, including the textile and wine industries, would be hurt by free trade, but they disagree over what would

_ happen to workers who lose

their jobs.

Supporters argue that the unemployed would find new jobs. Prime Minister Brian Mulroney cites the $1.4-billion Canadian Jobs Strategy, the federal employment package that includes programs to help workers learn how to use new technologies. As well, the government recently committed $125 milo_ lion to supplement the in= comes of laid-off older people 5 who cannot find work. As I well, it has appointed an Advi-

said, and many are immigrants. “For an immigrant, it is not easy to find another job, particularly for those over 45,” he said. “The government feels we are expendable.”

THE AUTO PACT

Finance Minister Michael Wilson declared last week that if Canada rips up the free trade deal, the United States may do the same with the Auto Pact. Adopted in 1965 to regulate the manufacture and sale of vehicles in North America, the pact is fully incorporated into the free trade agreement, including its safeguards to protect Canadian auto production and jobs. It stipulates that the Big Three automakers, General Motors Corp., Ford Motor Co. and Chrysler Corp., must produce one vehicle in Canada for every one that they sell here. As well, 60 per cent of each vehicle's parts and labor sold domestically must be Canadian. If those safeguards are met, the Big Three can ship vehicles and parts into Canada dutyfree.

Opponents of the free trade agreement, including Ontario Premier David Peterson and

THE TWO SIDES DISAGREE ABOUT HOW TARIFFS WILL AFFECT AUTOS

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Canadian Auto Workers president Robert White, have said that the safeguards would gradually become meaningless because the deal would eliminate all tariffs over a 10-year period. By contrast, supporters of the accord contend that the Auto Pact safeguards will still have strength.

ENERGY

The free trade provisions regulating energy have created grave concern, especially in Central Canada, which is a major user. Those provisions cover oil, natural gas, coal, electric-

to be unfairly subsidized. They would also still be entitled to impose antidumping duties on foreign imports priced below their cost of production. But the agreement also provides a fiveto seven-year period during which Canada and the United States will try to agree to eliminate those countervail and antidumping duties.

Until then, the agreement provides for the creation of five-member panels, composed of two Canadians and two Americans and a chairman who would have to be acceptable to the governments of both nations, to review coun-

ity and uranium. They state that Canada cannot reduce exports to the United States below the average of the preceding 36 months unless it cuts domestic shipments by a similar proportion. As well, Canada cannot charge Americans more for oil than the domestic price. Free trade opponents say that those commitments would rob Canada of control over its energy resources by binding it to the United States in continental energy-sharing. Supporters say that the provisions simply ensure that if the National Energy Board in Canada is satisfied that a surplus in energy exists, U.S. companies would be free to compete with Canadian companies to buy Canadian energy products.

DISPUTE SETTLEMENT

Under the agreement, both Canada and the United States would still be allowed to impose duties on the other’s products that they believe

tervail or antidumping duties imposed by one nation on the products of the other. According to Canadian and American trade lawyers, those panels would have the power to increase, reduce or eliminate duties. As well, their decisions would be binding on both governments. Said Gary Horlick, a Washington trade lawyer with O’Mellveny and Myers: “Panels can overturn government tribunal decisions, which is rather striking: the U.S. has never allowed that before.”

Opponents of the agreement say that the dispute settlement mechanism is unacceptable because Canada did not obtain an exemption from U.S. trade law. As Philip Slayton, an international trade lawyer with Toronto-based Blake Cassels & Graydon, said, “The agreement does not change U.S. trade remedy law at all: the same old law applies to us.” Still, advocates argue that it is the only trade treaty

SOCIAL PROGRAMS

or alliance in the world that includes a binding dispute settlement mechanism. Said Michael Robinson of Toronto, a trade lawyer with Fasken, Martineau, Walker: “The Americans have never before agreed to remove, as the final court of appeal, their Federal Courts and Supreme Court.”

In fact, the dispute settlement provisions earned the respect of one Liberal candidate in the current election. William Graham, a professor of international law at the University of Toronto who is running in the Toronto riding of Rosedale, wrote a highly favorable assessment of the trade agreement’s dispute settlement mechanisms last March. In a 59-page document written for the Ottawa-based Institute for Research on Public Policy, Graham declared, “It is clear that the procedures specified under the free trade agreement are superior to those under the GATT [General Agreement on Tariffs and Trade] in several respects.”

The debate over social programs has perhaps generated the most anxiety—and the most heat. It hinges on a clause in Chapter 19 that says that the two countries will attempt to negotiate new rules on acceptable government subsidies over the next seven years. Although that clause does not use the term social program or mention any specific program by name, opponents say that the provision would allow the g United States to classify such I programs as medicare and

0 unemployment insurance as ~ subsidies to Canadian manu-

1 facturers—and impose heavy £ penalties if they continue in 5 their present form.

5 Some experts in trade law x disagree. Jean Castel, a professor of international business law at Osgoode Hall law

school in Toronto, said that in 1979 GATT defined a subsidy as a specific benefit for an individual company or an industry. Both Canada and the United States have incorporated that definition into their trade laws.

INVESTMENT

Under free trade, U.S. investors in a new business in Canada would receive the same treatment as Canadian investors. A similar “national treatment” provision would apply to a new Canadian business in the United States. Still, the agreement preserves all existing exemptions to national treatment such as restrictions on foreign ownership in the energy, communications and transportation industries.

MARY JANIGAN

D’ARCY JENISH

Toronto