BUSINESS/ECONOMY

A short step toward a showdown

JOHN DEMONT May 30 1988
BUSINESS/ECONOMY

A short step toward a showdown

JOHN DEMONT May 30 1988

A short step toward a showdown

A goal that has evaded North American leaders from Sir John A. Macdonald and President Grover Cleveland to Mackenzie King and Harry Truman moved a step closer to reality last week. The Canada-U.S. free trade accord cleared a major obstacle when two important congressional committees passed a draft version of the American legislation designed to implement the pact. But in the process, the powerful Senate finance committee also opened the door for Canada’s provinces to kill the agreement.

At issue are proposed Senate amendments to the legislation. One of those would force President Ronald Reagan to withhold final approval of the accord until all provinces agree to binding legislation needed to fully implement the pact. And a provincial consensus still seemed elusive when the premiers of both Ontario and Prince Edward Island again voiced their objections to the deal. At the same time, Western premiers critized On-

tario Premier David Peterson for what they said was an attempt to upset an agreement that will benefit their provinces. Asked whether Peterson’s position is a problem, chief U.S. free trade negotiator Peter Murphy said, “You can count on it.” Meanwhile, International Trade Minister John Crosbie talked with Peterson in Toronto. But following their meeting, Peterson said that there is a “very distinct possibility”

that Ontario will challenge free trade in court. And by week’s end, Peterson appeared to have found an ally in P.E.I. Premier Joe Ghiz, who said that he is concerned by proposed Senate finance committee amendments that would restrict P.E.I. potato and lobster exports to the United States.

In response to those amendments, Ottawa filed an official protest in Washington. And the Canadian Embassy also sent two diplomatic notes to the state department criticizing the proposed restrictions on lobster and the Senate’s refusal to accept the agreement’s terms for settling a dispute over imports of U.S. plywood into Canada.

Meanwhile, Crosbie said that he would invoke Ottawa’s constitutional power to ensure that a free trade agreement is signed, and this week the Mulroney government will introduce legislation to implement the accord. But manoeuvring the trade bill through the Commons will be difficult. Said NDP Leader Ed Broadbent: “We are going to use all the procedural

avenues open to us to stop this legislation.” Added Liberal House Leader Herb Gray: “We will fight the government every step of the way.”

Congress has cleared the way for a potential final vote later this year. But there could still be a congressional backlash if Reagan vetoes a sweeping and restrictive U.S. trade bill, designed to protect U.S. industry from unfair foreign competition. The bill has passed both houses of Congress, and while the Senate appears to lack the necessary two-thirds majority to override a presidential veto, Democratic senators have threatened to retaliate by refusing to approve the Canada-U.S. trade legislation.

The White House has already made concessions in order to gain congressional endorsement of the trade pact. Senators from the western states had expressed concern about competition from Canadian industries involved in the production of lead, zinc, copper, uranium, oil and natural gas. But the senators were reassured when the White House agreed to an amendment that would help U.S. firms who say that they are being hurt by subsidized Canadian firms. The amendment would allow the U.S. trade representative’s office and the commerce department to monitor imports from Canada.

Ottawa may have to show similar flexibility in dealing with the provinces, which have far more power in areas affecting international trade than American states.

For his part, Peterson is refusing to change existing Ontario regulations that make imported American wine and liquor more expensive than Ontario wines. He has also said that the province may launch a court challenge if free trade legislation undercuts provincial powers. “We certainly reserve our right to go to court,” he said, after meeting with Crosbie.

Ghiz says that he is opposed to a provision that authorizes the President to negotiate annual limits on potato imports from Canada. He says that he is also concerned by a further amendment, which would ban the export of Canadian lobsters that are too small to meet minimum-size requirements now imposed on U.S. domestic lobsters. Potato farming and lobster

fishing are two of the Island’s three biggest industries. Said Ghiz: “We will use any means in our power to prevent this blow to the lifeblood of Prince Edward Island’s economy and its people.” The opposition raised by Peterson was high on the agenda as the four western premiers held meetings on Vancouver Island last week. In a communiqué, the four leaders expressed

frustration that the future of Ontario’s wine industry was “being used to delay the free trade agreement’s implementation, and put at risk, for the West, the very significant economic opportunities with free trade.” In Winnipeg, Manitoba Liberal Opposition Leader Sharon Carstairs added to the debate by declaring that her party could bring down the province’s minority Tory government if Premier Gary Filmon continues to support the free trade agreement.

In Washington, the Senate amendments were clearly designed to win domestic support for the accord. Senator George Mitchell of Maine—who

backs Canada’s position on acid rain—successfully argued for the amendment that restricted P.E.I. potato and lobster exports. At the same time, the Senate complicated a longrunning dispute over Canadian standards for plywood used in new home construction. The Senate amendment calls for continuation of punitive U.S. duties on Canadian plywood if the Canadian market is not opened up before the free trade agreement goes into effect in January.

Canadian officials in Washington are trying to make their objections to the amendments widely known. At the same time, embassy spokesman John Fieldhouse said the Canadian government believes that the proposed Senate amendments may disappear as the ratification process continues. He added: “It’s at an early stage; there’s still ample opportunity for these things to be dropped. We know from our contacts on the Hill that there are many people up there who dislike these things as much as we do.” In fact, Senate finance committee chairman Lloyd Bentsen said, “We have strong support for the agreement as it now stands.”

In an attempt to rush free trade legislation through Parliament, Crosbie said that the government may limit debate on the second reading of a free trade bill to just four days. But Broadbent said that such a limitation was “absolutely irresponsible and foolish.” Declared Broadbent: “They can’t pretend that this is very serious legislation and then have the nerve to suggest that we can only have four days of debate.” The NDP leader also demanded that the government release copies of the two diplomatic notes sent to the United States to protest the restrictions on Canadian lobster and plywood exports. “I want to see what the government of Canada is saying,” demanded Broadbent. “I frankly do not believe it was a strong protest.”

In Ottawa, government officials say that they will not let the new developments alter its free trade timetable. The government vows to hold the debate on the trade bill to just four days. It will also likely introduce the initial implementing legislation this week in a single bill that will amend up to 30 different acts to make them comply with the proposed agreement. But the parliamentary opposition will be fierce and it will require skilful handling by the Mulroney government to prevent a rewriting of the timetable.

JOHN DEMONT with

IAN AUSTEN

ROSS LAVER

THERESA TEDESCO

BARBARA MacANDREW

in Charlottetown