CANADA

Carney’s warning to Washington

MARY JANIGAN November 3 1986
CANADA

Carney’s warning to Washington

MARY JANIGAN November 3 1986

Carney’s warning to Washington

The audience—and the words— were carefully chosen for maximum impact. In a speech to influential American businessmen last week, International Trade Minister Pat Carney stated flatly that Canada-U.S. relations would suffer unless Washington curbs what she called its protectionist “fever.” A recent $550-million U.S. duty slapped on Canadian softwood lumber imports, she told the New England-Canada Business Council in Boston, had undermined support among Canadians for the free trade talks—and unless it was amended, Ottawa would take strong action. The decision to impose the duty, she added, “raises questions in the minds of Canadians about the feasibility of seeking better relations with the United States.”

The minister made her tough speech amid a flood of protectionist measures passed in Washington. Two weeks ago the U.S. commerce department imposed a preliminary 15-per-cent countervailing duty on $3.8 billion in Canadian softwood lumber exports, charging that Canada unfairly subsidized its lumber industry. Ottawa, the provinces and the forest industry last week pledged to fight that tariff, but the commerce department may still uphold the ruling when it announces its findings by Dec. 30. Meanwhile, President Ronald Reagan last week signed a law that will clamp a $200-million customs surtax on all Canadian exports to the United States. And a panel of the U.S. International Trade Commission prepared to open an inquiry into the impact on the U.S. market of Canada’s $500-million annual trade in cattle and beef.

Despite those trends, officials in Prime Minister Brian Mulroney’s office remained optimistic that they can curb the protectionist pressures with a strong presentation to the commerce department. The softwood lumber duty “is a dumb judgment,” declared a PMO official.

The determination to overturn the softwood lumber duty preoccupied the Mulroney government last week. Carney said that the judgment was both “artificial and contrived.” And she forged a united front with provincial, industry and labor representatives at a meeting in Toronto. The minister vowed to use all legal and diplomatic channels to fight the duty—and she insisted that Canada will not try to negotiate a compromise until those avenues are exhausted. Advisers to Carney told Maclean ’s that she hopes to reverse the tariff, or at least drive it down to between nine and 12 per cent. As Carney

said to the New England businessmen, “We view it as an unacceptable attempt to impose U.S. views on how other governments should manage their natural resources. This is an attack on our sovereignty.”

Despite that resolution, representatives of the U.S. lumber industry maintained last week that the commerce department will probably increase the 15per-cent tariff to 32 per cent in its final ruling. And they added that Canada

hurt its own case when it voluntarily offered to raise its lumber prices in the United States by about 10 per cent last month. Alan Wolff, the Washington trade lawyer who represents the U.S. softwood lumber coalition, said that Canadians do not realize that the subsidy problem is real—and not an election-year gimmick. Added Wolff: “The Canadian position now seems to be: we’ll take our chances with fighting this out instead of trying to resolve a problem.” PMO officials said that Carney offered to in-

crease the lumber price because both the British Columbia government and the industry suddenly realized late last summer that the commerce ruling might well go

£ against them, and they i decided they should sue

§ for peace. Now that the

adverse ruling is in, Carney has decided that Canada should do all it can to win the next round.

But while Carney marshalled her forces, she had to confront yet another disturbing U.S. trade measure. Last week Reagan signed the customs surtax into law. The measure imposes a 0.22per-cent user fee on the value of all imports in 1987 and a maximum fee of 0.17 per cent over the following two years. Based on current Canadian exports of $95 billion, it will force Canadian shippers to pay a surtax of more than $200 million next year. U.S. trade officials pointed out that Reagan could not veto the surtax because it was part of an omnibus bill that included vital budget measures. But Carney has pledged to take “appropriate action,” including a formal complaint this week to the Geneva-based General Agreement on Tariffs and Trade. The impact of the measures could go beyond damage to the delicate trade talks. As Ontario Premier David Peterson put it last week, the ongoing trade feud “has clearly put our relationship with the United States in pretty rocky shape.”

MARY JANIGAN

IAN AUSTEN

HILARY MACKENZIE

SHERRI AIKENHEAD