BUSINESS

TROUBLE FOR A TRADE DEAL

WILL CANADA PAY THE PRICE FOR CLINTON’S DEAL-MAKING?

WILLIAM LOWTHER November 8 1993
BUSINESS

TROUBLE FOR A TRADE DEAL

WILL CANADA PAY THE PRICE FOR CLINTON’S DEAL-MAKING?

WILLIAM LOWTHER November 8 1993

TROUBLE FOR A TRADE DEAL

WILL CANADA PAY THE PRICE FOR CLINTON’S DEAL-MAKING?

BUSINESS

For the first time in his 26-year political career, Democratic congressman Benjamin L. Cardin can pick up the phone and get right through to the President of the United States. Members of President Bill Clinton’s cabinet also call the bespectacled congressman from Baltimore two or three times a day. Cardin says that, lately, his every care is receiving priority treatment. When Cardin told the White House in September that a firm in his district, Vista Chemical Company, was worried that the Canadian government might unfairly subsidize the construction of a plant in Montreal by the provincially owned Société générale de financement du Québec, one of Vista’s Canadian competitors, he got immediate action. U.S. Trade Representative Mickey Kantor ordered his staff to “vigorously monitor” the situation—even though the Société has made no final decision to build the plant in question. Said Cardin: “It’s wonderful.”

Cardin is suddenly powerful because he is one of a dwindling group of Democrats who remain undecided on the proposed North American Free Trade Agreement between Canada, the United States and Mexico. Clinton desperately requires support if NAFTA is to clear its next major hurdle: a vote in the

U.S. House of Representatives scheduled for Nov. 17. Clinton needs 218 votes to get NAFTA through the 435seat House. But at the end of last week he was still 41 votes short, with only 67 members of his own party behind him. To win over more Democrats, Clinton was promising to soften the impact of NAFTA with additional provisions in the legislation needed to enact it into U.S. law. But Clinton’s wheeling and dealing has provoked protest from Canadian business leaders and trade officials. Declared Gordon Ritchie, Canada’s deputy chief negotiator during the Canada-U.S. free trade talks and now an Ottawa trade consultant: “Clinton is saying, in effect, ‘We’ll buy your vote with a Canadian scalp. Which one would you like?” Meanwhile, the new Liberal prime minister, Jean Chrétien, cast another cloud over the deal last week by declaring that he would delay the implementation of the NAFTA legislation, passed by the Conservative-dominated Commons last May, until he is satisfied with the deal. Insisted Chrétien: “We still have that option.” However, he stopped short of making a firm promise to kill the deal. At his first postelection news conference last week, Chrétien said that he could accept the continental trade pact if it addresses five specific concerns listed in his so-called Red Book of campaign promises. The first two, stronger labor and environmental standards, appear to have been met by separate side deals hammered out by trade negotiators from the three countries in August. Of the other three, Chrétien objects to NAFTA provisions that require Canada, but not Mexico, to guarantee oil and gas exports to the United States even in times of shortage. He said that he also wants to re-open talks on government subsidies and the use of countervailing trade sanctions—negotiations that were called for in the 1989 Canada-U.S. Free Trade Agreement (FTA).

One of the chief concerns surrounding the issue of subsidies is that if NAFTA is ratified, it could supersede the FTA, effectively eliminating a clause that jointly commits Canada and the United States to define what constitutes a subsidy. “If NAFTA was approved, that commitment would be lost,” Ritchie said. “It would be an important loss.” After the FTA was enacted in 1989, Ottawa set up a committee to negotiate the issue of subsidies with the United States. But in the end, both sides agreed to postpone a resolution, until the General Agreement on Tariffs and Trade (GATT) officially defined subsidies.

Chrétien apparently plans to await the vote in Congress before taking a stand on such detailed issues. But last week, he said he would raise several key points about NAFTA with Clinton at a bilateral meeting on Nov. 19 during the summit of Pacific Rim country leaders in Seattle. But with Clinton struggling to win support for the Nov. 17 vote in Washington, some analysts say that Chrétien’s best stance would be silence. Said Alan Rugman, a professor of international business with the University of Toronto: “On a strategic level, I think the best thing the Liberals could do right now is just keep their mouths shut for the next three weeks until the vote takes place in Congress.”

Still, others argue that Chrétien should continue to complain loudly and publicly about objectionable provisions in the legislation required to enact the agreement into U.S. law in an effort to win over protectionist Democrats and other NAFTA opponents. Said Ritchie: “It is very important for Chrétien not to lay low.”

Certainly Clinton is having difficulty rallying support, even though his Democrats hold 258 seats in the House. The traditionally pro-business Republican party, which holds 175 seats, is philosophically inclined to back NAFTA, which was spearheaded by Clinton’s Republican predecessor, George Bush. But the threat of lost jobs in their districts has made even Republican congressmen cautious. As a result, Deputy Republican leader Newt Gingrich of Georgia, has told the White House that he will provide no more than 110 Republican votes for NAFTA. And he insists that the Democratic leadership must provide an equal number. But the Democrats are under pressure from their traditional supporters in unions to vote against NAFTA. And if Clinton wins in the Democratic-dominated House of Representatives first, congressmen say that NAFTA will likely be approved in the Senate, where the Democrats hold 56 seats and the Republicans 44.

With his own party so deeply divided on the issue, Clinton last week was personally telephoning at least three wavering House members like Cardin each day, and holding twice-daily meetings with small groups of undecided congressmen. The White House NAFTA push even includes studying the campaign-contribution lists of anti-NAFTA Democrats and asking donors who support the accord to lobby the congressmen directly. As a result, some members could lose financial backing next year if they vote against NAFTA.

Clinton is also using some questionable rhetoric to argue in favor of the deal. Last week in meetings with Congressmen, he suggested that Japan, America’s favorite trade villain, may negotiate its own trade deal with Mexico if Congress defeats NAFTA. “Then we would have to deal with the products coming through the back door from Mexico,” he warned. Seiichiro Noboru, economics minister at Japan’s Washington em-

bassy, dismissed that allegation as “absolutely ridiculous.” Other U.S. economists agreed

that Clinton’s assertion is groundless, and that he was clearly trying to tap into widespread resentment of Japan in Congress.

On another front, Clinton is raising the spectre of hordes of illegal Mexican immigrants crossing the Rio Grande into Texas, California and other states if NAFTA is defeated. Clinton has warned repeatedly that the defeat of NAFTA will “be terribly bad news” for the Mexican economy, and will increase the pressure on unemployed Mexi-

cans to move north. But this particular scare tactic does not seem to be working. A poll published by The Wall Street Journal on Sept. 15 reported that just 39 percent of Americans agree that “serious political problems would be created in Mexico” by a defeat of the deal. As well, 59 per cent said that immigration from Mexico will stay about the same if NAFTA is defeated.

The threats implied by the White House are also being offset by promises. On Oct. 25, government officials told reporters at a briefing that the administration will review NAFTA

in three years to assess its impact on U.S. jobs, the environment and immigration. At the same time, in a bid to win the support of politicians from a group of grain-growing western states, for instance, Clinton promised on Oct. 15 to consider putting trade quotas on Canadian durum wheat, used to make pasta. A group of eight senators and 12 House members, led by Senator Max Baucus of Montana and Representative Tim Johnson of South Dakota, have complained to the President that Canadian farmers benefit from government transportation subsidies

that enable them to underprice the U.S. product. Jonathan Lemco, a research analyst with the Canadian-American committee at the national planning association, says that Clinton’s promise “is just Washington politics.” But Ottawa loudly denies there is any unfair subsidy on durum wheat and the issue could develop into the new Liberal government’s first quarrel with the White House.

Clinton is using threats and promises to win allies for the deal

Even Canadian business leaders, who have been strong supporters of NAFTA, are becoming alarmed by Clinton’s promises to congressmen. Last week, Thomas d’Aquino, president of the Business Council on National Issues, said that several technical provisions in Clinton’s legislation, including a proposal to allow U.S. courts to review, and possibly overturn, verdicts by binational trade dispute settlement panels set up under the FTA, would open the door for American continued trade harassment.

Other analysts say that Canadian busi-

nessmen will shed few tears if Congress votes down Clinton’s NAFTA legislation. Ottawa entered into the three-way trade talks in 1990 largely for defensive reasons—fearing that Mexico might secure better access to U.S. markets than Canada had under the FTA. But even if NAFTA is defeated, Canadian exporters would still have guarantees of access under the Canada-U.S. agreement. As a result, Ritchie noted that, “You could easily fit in a phone booth the number of Canadian business leaders who support the U.S. implementing legislation as it now stands.”

Mexican officials and business leaders, however, are still hungry for NAFTA at almost any price. And in the final few

days before the vote, Clinton is pressuring Mexican President Carlos Salinas to make further concessions to help him sell the deal in Congress. Last

week, Clinton was conducting talks with Salinas about concessions that Mexico might make to appease U.S. sugar producers. Congressman Dan Rostenkowski, the Illinois Democrat who chairs the House ways and means committee, last week polled representatives from sugar industry states, and told the White House that promises from Salinas to curb cane-sugar imports to the United States could ensure another 17 votes, most of them from Democrats.

In the United States, anti-NAFTA forces re main confident and are at least as active and aggressive as the President. In St. Louis, the Catholic archdiocese’s commission on human rights condemned NAFTA, saying the deal failed to reflect the “Gospel teachings of the primacy of love, the call to justice and human unity.” One union group, United We Stand, hanged NAFTA supporters in effigy at a series of rallies in California last month. Other labor leaders warn that NAFTA could make Mexico the dominant manufacturing center for North America and that it could cost tens of thousands of jobs. David Salz, a lobbyist for the AFL-CIO, which is leading the union movement’s fight against NAFTA, said that, “We have yet to see a big change in the numbers signifying a vote shift. There’s a lot of talk about deals, but we don’t see the results.”

Despite Clinton’s full-court press in Congress, even White House officials conceded late last week that he was still short of the votes he needs. “We need a new tactic to bring in about 20 more Democratic votes in the House,” one official told Maclean’s. But with only a few days remaining until the vote, Clinton appeared to have few options left other than crossing his fingers.

WILLIAM LOWTHER

BRENDA DALGLISH