BUSINESS WATCH

Adventures in the pizza trade

Peter C. Newman June 6 1988
BUSINESS WATCH

Adventures in the pizza trade

Peter C. Newman June 6 1988

Adventures in the pizza trade

BUSINESS WATCH

Peter C. Newman

As John Crosbie kicked off the Great Free Trade Debate in Parliament last week, Canadian businessmen began to review the practical—as opposed to the theoretical—effects of the proposed pact. If approved, it will create the world’s first $5-trillion bilateral economy—the most ambitious trading arrangement since the European Community was formed in 1957.

Harrison McCain of Florenceville, N.B., seemed a logical choice to interview about free trade, because no Canadian has been more successful in spreading his business around the world. Three-quarters of McCain’s revenues from food processing and nearly two-thirds of his firm’s total sales are now outside Canada. I finally located McCain in an industrial suburb of Brussels, negotiating yet another of the expansions that have propelled his family empire to an annual turnover of $1.7 billion. “We’re free traders by nature,” he told me. “If the government were to just come out and say, ‘Hey, McCain, do you favor lowering tariffs in every case that’s practical?’ I’d of course say ‘Yes.’ ”

But, McCain continued, “in the case of this particular deal, I’d have to say, ‘Don’t dupe us in the food industry.’ The problem is that we have to buy our mozzarella cheese for the pizzas we make in Canada through marketing boards. That means it costs 39 per cent more than it would in the United States. At the moment, the Americans are not allowed to ship their cheese into Canada, but with free trade, they’ll be selling their pizzas here duty-free. How do we buy cheese in Canada at 39 per cent more and still be competitive? We can’t be. And we have exactly the same problem with our frozen dinners because of chicken marketing boards, and so on.”

What would be the company’s future inside a free trade area? Harrison McCain didn’t want to be that specific, but he recently sent a private letter to New Brunswick Premier Frank McKenna in which he pointedly explained that, if economic factors were to make his plant’s continued presence in the province untenable, “we’re a multinational and have other options—unfortunately our employees and growers don’t.”

McCain accuses Brian Mulroney of not playing his trump cards effectively by doing away with both the National Energy Program and an effective Foreign Investment Review Agency before the trade deal was negotiated. Charged McCain: “The Prime Minister threw them in for a serenade by the United States Marine Band on the White House lawn.”

McCain says that he is also angry with chief trade negotiator Simon Reisman, who, in a recent speech in Saint John, N.B., was reported to have said: “McCain takes advantage of a

protected market here and jacks up his prices accordingly. Then he hops the border to the U.S., Australia, France or wherever and enjoys protection under those markets. A fellow as wily as my old pal Harrison should learn to live in a fully competitive environment.”

“Simon doesn’t know what the hell he’s talking about!” McCain shouted across the Atlantic in a voice that would almost carry without a telephone. “We export a third of our french fries from Tokyo to Saudi Arabia and points in between. I don’t give a damn what Reisman thinks. Under free trade, Canada’s food industry will do a hell of a lot less business than it does now.”

Then McCain got really wound up: “What about all these fellows who were heroes at a 69-cent dollar? When we get the quantity of our gas and electricity flowing into the U.S. we can expect under free trade, the Canadian dollar won’t be at 82 cents, it’ll be a lot, lot higher. How damn heroic will they be at 93 cents or more, three or five years from now ?”

Marketing vice-presidents of Canadian companies who savor the prospect of grabbing access to 243 million cashhappy consumers instead of being limited to 25 million penny-pinching Canadians should make sure that their basic manufacturing facilities can afford to remain on this side of the border. The McCain dilemma is not unique.

“What I’d really like to hear,” came McCain’s parting shot, “is somebody standing up in Vancouver, or Halifax, or Toronto right now and declaring: ‘Free trade is such a great deal, I’m going to start building a factory tomorrow. I’ll double my capacity! I’ll build a whole new industry! My God, just let me at it!’ Why aren’t we hearing that? I wonder . . . . ”

So do we all.

Trade pacts between nations have acquired their own bewildering jargon, and the current debate on the issue often confuses the five distinctive arrangements that can exist between economic partners:

1. A Free Trade Area, which is now being debated in the House of Commons, is a plan to eliminate, over a predetermined but lengthy period, tariff restrictions between two nations.

2. A Customs Union is a free trade area plus the adoption of common external tariffs against third countries.

3. A Common Market is a customs union plus an agreement for the free movement of labor and capital among member nations.

4. An Economic Union is a common market plus a pledge by member countries to co-ordinate all of their economic (not just trade) policies.

5. Economic Integration is an economic union plus the unification of monetary, fiscal and social policies— just a step away from political union.