CANADA

Tough talk on a thorny trade dispute

MICHAEL ROSE October 20 1986
CANADA

Tough talk on a thorny trade dispute

MICHAEL ROSE October 20 1986

Tough talk on a thorny trade dispute

CANADA

It was the strongest statement yet of what was at stake in the bitter and long-standing dispute over $3.8 billion in Canadian lumber sales to the United States. Speaking to a group of American journalists in her Ottawa office last week, International Trade Minister Pat Carney said that the current free trade talks between the two countries would be “imperilled” if the United States proceeded with a proposed tariff on Canadian softwood. Washington, she warned, should expect “a strong response” from Canada if the dispute were not settled amicably. Carney reminded the reporters that Ottawa had supported the U.S. government when it staged its controversial bombing raid on Libya last April, and she added, “Canadians feel that any time you do anything helpful to the United States, they turn around and kick you in the face.”

But despite intense activity on both sides of the border, there were few signs last week that the dispute would be settled before Oct. 16.

On that date the U.S. commerce department was scheduled to rule on an application by American lumbermen for a countervailing tariff of up to 32 per cent on Canadian softwood. U.S.

Commerce Secretary Malcolm Baldrige did persuade a coalition of lumber producers to reconsider a “once only” compromise offer made by Carney on Sept. 30. But 40 protectionist-minded congressmen quickly announced that they would press for formal countervailing legislation against Canadian lumber unless the U.S. case were upheld. And bilateral relations—as well as the Conservative government’s fragile free trade initiative—were further threatened last week by a new congressional bill that included a stiff customs user fee on all imports. In fact, The Washington Post last week urged both governments to scrap their goal of a comprehensive trade agreement and settle for step-by-step accords. Otherwise, said the Post editorial, the free trade talks were “headed for disaster.”

The most significant development in the softwood affair came early last

week. Baldrige telephoned American lumber industry representatives to ask if they would wait until Oct. 16 before the commerce department issued its preliminary ruling on their complaint that the Canadian lumber industry was receiving unfair government subsidies. Baldrige, sources said, acted without Ottawa’s prompting, an apparent effort to avert an ugly confrontation, like the one that followed President Ronald Reagan’s approval of a bruising 35-percent tariff on Canadian cedar shakes and shingles last May. Indeed, Maclean's has learned that Secretary of State George Shultz telephoned External Affairs Minister Joe Clark Wednes-

gotiations—the affair was now “an American problem.” Added the minister in an interview: “The United States is on the spot here. They have to show to the rest of the world that their trade law is fair.” To that end, Canadian officials raised the dispute before a GATT (General Agreement on Tariffs and Trade) tribunal in Geneva, arguing that a countervailing tariff would constitute trade harassment.

As anxious Canadian lumber producers scrambled last week to ship as much of their product as possible across the border before the Oct. 16 deadline, a potentially more damaging prospect loomed on the horizon. Con-

day night to assure him that everything possible was being done to avoid a crisis. But a U.S. lumber representative said that the industry accepted Baldrige’s request “to show we have made every attempt to solve the problem. We don’t believe there is going to be any movement.” Still, Carney contended that the U.S. industry had never formally rejected her compromise proposal for an increase—reported to be about 10 per cent—in stumpage fees, the money paid by lumber companies to harvest timber on Crown land.

Carney dismissed reports that the delay had been prompted by a new offer made privately to the Americans. While there might be “technical adjustments,” she said, there would be no further ne-

gress was poised to pass a money bill that included a 0.22-per-cent customs charge on all foreign goods entering the U.S. market. With Canadian exports to the United States worth almost $100 billion last year, the increased cost of the levy to Canadian exporters would exceed $200 million. Such a measure could only aggravate the already troubled Canada-U.S. trading relationship. Said one senior Canadian official: “That’s why the free trade talks are so important—maybe one day we’ll be able to take some of those nasty little toys away.”

MICHAEL ROSE

MARCI McDONALD

BRUCE WALLACE

MARK BUDGEN