CANADA

Countdown on free trade

MARK CLARK April 28 1986
CANADA

Countdown on free trade

MARK CLARK April 28 1986

Countdown on free trade

CANADA

International Trade Minister James Kelleher, a softspoken labor lawyer from Sault Ste. Marie, Ont., the week began with an urgent 8 a.m. telephone call from Washington. The caller was U.S. Trade Representa-

tive Clayton Yeutter, Washington’s chief trade negotiator. Yeutter assured Kelleher that the Reagan administration would “pull out all the stops” to sway an obstinate U.S. Senate finance committee. Only days earlier the panel had warned that it would vote to deny President Ronald Reagan the authority to negotiate a Canada-U.S. trade pact with a minimum of congressional interference. That move had stunned Ottawa and Washington — and threatened a policy centrepiece of Prime Minister Brian Mulroney’s 19month-old government.

But last week supporters of free trade quickly rallied. Lobbyists and officials of the Canadian and U.S. governments—and Reagan himself—urged the 20 Senate committee members to support the talks. By week’s end, the pressure was beginning to tell. Said Gary Holmes, an aide to Yeutter: “Momentum seems to be swinging our way, but whether it’s swinging fast

enough I can’t say. It will come down to three or four votes.” Canadian officials were not ready to declare the battle won. Kelleher, for one, was clearly concerned that Ottawa’s cherished goal of a Canada-U.S. free trade pact had been caught in a power struggle between the Senate and the administration over control of American trade policy. Said Kelleher: “This is something more than a difference of opinion. It is a classic confrontation.”

At issue was the Senate’s threat to deny the administration the right to conduct trade talks with Canada on the so-called “fast track.” Under such an arrangement, Yeutter would have a free hand in negotiating and simply present the pact to Congress

for ratification. Without the fast-track sanction, Congress would be able to stymie any agreement with an endless series of amendments. Said Holmes: “If there’s no fast track, there probably won’t be negotiations at all.”

In Ottawa, Kelleher and his aides decided on an aggressive defence in Washington. “We are not taking the hands-off approach that Canada has practised in the past,” said the minister. “We are letting the senators know

our feelings.” In Washington, Ambassador Allan Gotlieb and his staff contacted several members of the committee either by telephone or in person. But despite the Canadian effort, the future of the talks clearly rested in American hands. Said Prime Minister Brian Mul-

roney: “It is between the Senate and President Reagan and his colleagues, and I think they’ll carry the ball very well.”

Still, Mulroney’s highly publicized “special relationship” with the President seemed to be paying dividends. Even at the height of the international pressures last week over the U.S. attack on Libya, Reagan telephoned five key Senate committee members and urged them to support the proposal.

Reagan talked to each senator for about 10 minutes. On one of those calls, he persuaded Oregon Senator Robert Packwood, the finance committee chairman, to put off the panel’s scheduled April 17 vote until this week, giving the administration more time to lobby. The panel must decide the issue by late April. If it fails to vote, the talks could proceed as planned.

That concession may yet prove the key to saving the talks. As the week progressed, the administration rallied support from allies in Congress and the business community. Senator Richard Lugar, chairman of the Senate Foreign Relations Committee, sent

Packwood a letter pointing out that the Mulroney government was following policies “highly compatible with U.S. interests.” Added Lugar: “A rejection of the administration’s request for negotiating authority could, indeed would, lead to a rethinking of U.S.-Canada co-operation across the board.” By midweek some of the leading voices of American business had joined the chorus favoring the fast-track approach. On Wednesday the National Association of Manufacturers hand-delivered to each committee member a II/2-page letter urging them not to vote against the proposal. The letter was endorsed by 13 prominent business groups ranging from the Rubber Manufacturers’ Association to the U.S. Chamber of Commerce. Influential corporations also entered the fray. “A lot of individual companies that had not been lobbying are now reacting,” said Robert Morris, the association’s

director of international trade. “The delay should work.”

But other observers were not so sanguine. Despite mounting pressure, there were persistent signs that many senators were determined to vote against Reagan’s request. In fact, an informal Maclean ’s poll last week indicated that only four of the 20 committee members were willing to vote for the talks, while three were undecided or failed to voice an opinion. On Wednesday, 12 senators wrote to the White House asking Reagan to

withdraw the fast-track proposal.

Holmes and Morris divided the opposition into two camps: those senators with specific complaints about Canadian trading practices, such as lowpriced lumber exports, and those irritated by the Reagan administration’s trade policy. It is this latter group that Canadian officials describe as the heart of the opposition. Canada was “sideswiped,” according to Kelleher, “in a spontaneous outburst of senatorial frustration at a variety of administration policies.”

Reagan has repeatedly frustrated congressional efforts to bolster hardpressed U.S. industries by opposing protectionist legislation. Last Decem-

ber he vetoed a bill that would have limited imports of foreign textiles. And in defence of presidential prerogatives, the President has also refused to discuss proposals for a wide-ranging trade bill that would allow Congress to address a host of grievances with America’s trading partners.

Some legislators also have serious reservations about the fast-track process itself. Since that option was written into law in a 1984 trade bill, it has been used only once—during negotiations of a free trade agreement with Israel last year.

Eight of the 12 senators opposing

the fast-track method are objecting primarily to Reagan’s liberal trade policies. The President’s request for approval of talks with Canada provided a “convenient opportunity to express that frustration,” said an aide to Pennsylvania Senator John Heinz, whose state has suffered from imports of steel and other industrial products. But he added: “I don’t know what they could do to change the Senator’s mind. He is very wary of giving a green light to negotiations without a trade policy being in place.”

Gotlieb found Heinz and his colleagues particularly difficult to sway. But as the week wore on, the Canadian ambassador found that senators concerned about specific bilateral trade irritants were more flexible. According to John Fieldhouse, the embassy’s spokesman, Gotlieb argued: “You senators are giving thumbs down to negotiations that would deal with the very issues you’re unhappy about. It’s perverse and absurd.”

The Reagan administration also decided to focus pressure on single-issue opponents, particularly five senators influenced by the lumber lobby. The five: Oregon’s Packwood, Max Baucas (Montana), Steve Symms (Idaho), David Pryor (Arkansas) and George Mitchell (Maine). The key target was Packwood, who faces a re-election campaign in November in a state whose once-powerful logging industry is reeling under pressure from cheaper softwood lumber imports from British Columbia. U.S. critics argue that provinces are subsidizing Canadian lumber companies by charging them artificially low fees for cutting wood on Crown land. If the White House swayed Packwood, he could bring several others with him, said Len Santos, an international trade lawyer with the Senate committee.

In Ottawa, Mulroney restated his refusal to make concessions on the softwood lumber issue—or any other trade problem —before the talks begin. Such a concession might help swing the committee. But the Prime Minister, already subject to criticism of his close relationship with Reagan, is clearly concerned that any concessions would be seen as caving in to American pressure. “To say the least, it would be politically damaging,” said one senior government official. The Senate challenge has clearly become a test of Mulroney’s relationship with the Reagan administration—and of the President’s commitment to freer trade with Canada.

MARK CLARK

IAN AUSTEN

WILLIAM LOWTHER

HILARY MACKENZIE