BUSINESS/ECONOMY

Caught between promises

D'ARCY JENISH June 6 1988
BUSINESS/ECONOMY

Caught between promises

D'ARCY JENISH June 6 1988

Caught between promises

The responses were swift and diverse. Robert Lamond, president of Calgary-based Czar Resources Ltd., said that he hopes to sell more natural gas in the United States. Charles Gracey, executive vice-president of the Canadian Cattlemen’s Association, said that domestic cattle producers should face less harassment from American meat inspectors. And Hugo Powell, president of Langley, B.C.-based McGavin Foods Ltd., said that B.C. bakeries should be able to recapture business lost to American competitors in recent years. Those were some of the reactions from the Canadian business community last week after federal International Trade Minister John Crosbie introduced a massive legislative package to implement the Canada-U.S. free trade agreement. If passed by Parliament, the five-part bill will amend a total of 27 statutes and provide for the elimination of hundreds of tariffs on imported American products.

The bill immediately triggered a political uproar among the federal opposition members, who evidently sensed that it may be their last chance—aside from a possible election—to derail the process. And at least three premiers publicly expressed concern that the bill would give Ottawa new powers to enforce compliance over provincial objections. Adding impetus to the federal government’s push, last week Congress scrapped provisions calling for provincial approval of the free trade deal, leaving the U.S. administration free to draft a final agreement.

Still, some sectors found themselves caught between promises made by the Ontario government and legislative changes proposed by Ottawa. Various provincial regulations have traditionally shielded Canadian wineries, which are primarily located in Ontario, Quebec and British Columbia, from foreign competition. Ramona Marlin, project manager for the Toronto-based Canadian Wine Institute, said that the Liquor Control Board of Ontario marks up the price of imported wines by 66 per cent, compared to a one-per-cent markup on domestic wines. The free trade deal stipulated that the protective measures have to be cut in half within two years and that remaining protection has to be phased out over the following five years. But last November the Ontario government signed an agreement with the grape growers and wine producers providing for a 12-year phase-out period, said Marlin.

Crosbie’s bill also caused dismay among Canada’s printing companies, which employ 65,000 people and generate revenues of $5 billion annually. Massimo Bergamini, director of government relations for the Canadian Printing Industries Association, said that tariffs on printed goods coming in from the United States average 14 per cent but can run as high as 24.3 per cent on advertising inserts and 28.6 per cent on department store catalogues. The tariffs will be eliminated over a five-year period, and a study sponsored by the association has concluded that at least 3,000 jobs could disappear as a result.

And the government has pledged to end the long-established twoprice wheat system.

Wheat farmers have

been receiving a minimum of $7 per bushel on wheat sold domestically, while the world price re-

ceived for exports has been as low as $3 per bushel in recent years. As a result, Canadian bakers, particularly in the Vancouver area, have lost up to 15 per cent of their market to American competitors who pay the lower world price for their wheat. Said McGavin’s Powell: “Our prices and margins have been cut to the point where it is a very unhealthy business.”

But most sectors of the business community remain solid supporters of free trade. William Neil, director of international affairs for the Torontobased Canadian Manufacturers’ Association, said that a survey of the group’s 3,000 members in March revealed that 80 per cent were satisfied with the transition period specified for their particular industry. Czar’s Lamond said that potential U.S. buyers of Canadian natural gas will be able to sign long-term contracts without fear of future political intervention. Lawrence Buganto, immediate past-chairman of the Auto Parts Manufacturers’ Association of Canada, said that the association supports the trade deal, even though it wanted a 60-per-cent North American content rule for vehicles assembled on the continent, but the free trade agreement only specifies a 50-per-cent rule. But although the deal is being well received in most boardrooms, question marks remain. Simmering political opposition and escalating objections from some protected industries may yet derail free trade.

D'ARCY JENISH