The warning was candid and to the point. Speaking to university students in Brandon, Man., last week, Prime Minister Brian Mulroney said that “a poisoned political atmosphere” in the United States was threatening one of his Conservative government’s most important initiatives: free trade talks with Washington. “If you were a betting man,” Mulroney declared, “you’d have to say that there is going to be no deal —the Americans are going to shoot it down.” But later in the week, after a meeting on the issue with 10 provincial premiers in Ottawa, Mulroney denied that he was pessimistic about reaching agreement. His Brandon remarks, he said later, merely took account of rising protectionist sentiment south of the border as U.S. congressmen campaign for re-election in November. Those pressures could ebb after the polls, he said, adding, “I have every reason to believe that there will be a solution.”
Mulroney also had good reason to be cautious about the future of the talks. A series of pending U.S. protectionist measures has threatened thousands of Canadian jobs—raising doubts about whether Washington is serious about making a trade deal. Last week Republican Senator John Heinz of Pennsylvania added to the mountain of protectionist legislation, introducing a bill that could impose severe quotas on imports of steel from Canada and other countries. Although the bill has little chance of passing before the end of the current congressional session, it illustrated again how many barriers the trade talks still face. After last week’s four-hour meeting with Mulroney, which included briefings by International Trade Minister Pat Carney and chief Canadian trade negotiator Simon Reisman, Ontario’s David Peterson said the negotiations were “working reasonably well, stumbling along in a typically Canadian way. But the really tough discussions will come months from now, when we know what’s on the table.”
Indeed, Canadian and U.S. negotiating teams will complete the exploratory first phase of the trade talks— which began on May 20 and are expected to conclude before the end of 1987—in Washington this week. The summer discussions identified broad areas of agreement, but did not deal
with specific products, industries or economic sectors. In areas where they reached general understanding, the two sides have ordered specialists to prepare detailed discussion papers for the next round of talks.
Meanwhile, the Canadian side is bracing for a U.S. decision next month on whether to apply tariffs to Canadian softwood lumber imports. The U.S. International Trade Administration must decide by mid-October whether to apply the 32-per-cent tariff demanded by U.S. lumbermen, who argue that Canada unfairly subsidizes its industry through low stumpage fees, the price paid by Canadian companies to cut timber on Crown land. Canadian officials say they hope that the U.S. agency will rule against the subsidy, as it did against a similar complaint in 1983. But one U.S. official said that such a finding “would result in drastic action” from Congress.
In an apparent attempt to avert new tariffs, British Columbia Premier William Vander Zalm agreed earlier this
month to review the stumpage fees charged in his province, which last year produced 65 per cent of the $3.5 billion in softwood lumber that Canada exported to the United States. Last week, Alan Wolff, the senior lawyer representing the U.S. lumber lobby, said that his clients may ask the U.S.
government to forgo any tariff if they are convinced that new measures would offset the price advantage that Canadian producers enjoy. And in Ottawa, a Mulroney staff member said that although any measure acceptable to the U.S. industry would penalize Canadian producers, it might be wise to settle for “three-quarters of a loaf rather than lose the whole loaf.”
In Washington, a senior Reagan administration official cautioned Canadians against hoping that protectionist fever would diminish after the November midterm elections. Said the spokesman: “There are no hopeful signs on Capitol Hill, and if the Democrats do well this year they will see trade as a great issue for [the 1988 election year] and will continue to push the President on it.” That forecast, if accurate, means more rough sledding for free trade proponents on both sides of the border.
-MARC CLARK with HILARY MACKENZIE in Ottawa, MARK BUDGEN in Vancouver and IAN AUSTEN in Washington
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