CANADA

BRAVE NEW WORLD

WITH THE FREE TRADE AGREEMENT NOW IN EFFECT, CANADIANS HAVE TO LEARN HOW TO LIVE WITH IT

MARC CLARK January 9 1989
CANADA

BRAVE NEW WORLD

WITH THE FREE TRADE AGREEMENT NOW IN EFFECT, CANADIANS HAVE TO LEARN HOW TO LIVE WITH IT

MARC CLARK January 9 1989

BRAVE NEW WORLD

CANADA

WITH THE FREE TRADE AGREEMENT NOW IN EFFECT, CANADIANS HAVE TO LEARN HOW TO LIVE WITH IT

Tariff specialist Emile Jurgens simply smiles at suggestions that his job is endangered by free trade. Since 1961, he has worked at Ottawa’s Corporation House Ltd., a business consulting firm, guiding executives through the bewildering web of excise and customs regulations that have characterized trade between the United States and Canada. As the Jan. 1 commencement of the U.S.-Canada Free Trade Agreement approached, friends and acquaintances told Jurgens that his job would quickly become redundant. But, he says, some aspects of tariff regulation have become even more bewildering under the FTA’s new and often complicated trade regulations. Said Jurgens: “In 27 years of consulting, I have never been busier.” Jurgens’s corporate clients are among thousands of Canadians scrambling to adapt to the new Canada-U.S. trade regime. After 2lh years of negotiations and a furious national debate, the free trade deal went into effect on schedule at the beginning of the new year, after it cleared the Senate and received royal assent on Dec. 30. Now, businessmen, bureaucrats and bargain shoppers alike must learn to live

with the agreement—and with the confusion arising from the new regulations. Indeed, as late as last week, officials of Prime Minister Brian Mulroney’s government were still rushing to appoint a roster of trade experts who could be called to the various panels established under the FTA to settle any trade disputes between the two countries. Still, officials expressed satisfaction that the FTA was finally in place. Said Alan Nymark, Canada’s assistant chief negotiator of the deal: “There are still a

huge number of things to do, but everything that had to be done by Jan. 1 has been done.” Still, there was little consolation for Canadians who are worried about possible job losses as a result of the agreement. Although the Mulroney government has promised to help ease any dislocation caused by free trade, it has not announced concrete measures. And two influential officials appearing last week before a Senate committee, hastily examining the agreement, questioned the need for assistance programs aimed solely at victims of free trade. Judith Maxwell, chairman of the Economic Council of Canada, which advises the government on its management of the economy, said that some firms would suffer and jobs would inevitably be lost because of the deal. But, she added, the causes of job losses are complicated and “you will not be able to identify specific groups of workers who have been disadvantaged specifically by the trade agreement.” Both Maxwell and Montreal businessman Jean de Grandpré, chairman of a government committee examining problems related to free trade, said that there should not be assistance programs specifically for people put out of work by the FTA and that the government’s regular unemployment services should apply. De Grandpré, former chairman of Bell Canada Enterprises Inc., said that his committee’s report, due by April, may recommend “finetuning” some of the hundreds of existing assistance programs. But the government is not bound to follow those recommendations. Meanwhile, Liberal Senator Royce Frith, for one, said that the advice astonished him. Said Frith: “All along we have been told by government, ‘Don’t worry, we will set up mechanisms to help people with problems.’ Now we are told that the problems cannot even be identified.”

At the same time, businessmen began to come to terms with the new guidelines regulating trade between the United States and Canada. Under the trade agreement, tariffs disappeared completely on Jan. 1 on only about a sixth of dutiable items, including computers, furs, skis and skates. For another third of dutiable goods, including paint, furniture and petroleum, the duty drops 20 per cent each year. And on the rest of the goods still subject to duty—including clothing and textiles, appliances, drugs and cosmetics—tariffs drop 10 per cent a year.

For many cross-border travellers hoping to bring U.S. goods into Canada duty-free, the

trade agreement will clearly result in some confusion. For one thing, the $300 annual limit on duty exemption after a trip of more than seven days has not changed. As well, the federal sales tax will remain on most goods imported for personal use to Canada. Said Serge Charette, Ottawa-based vice-president of the Customs Excise Union: “A lot of people are going to come back from vacations and expect to bring back everything dutyand taxfree. They can’t.” In fact, Charette, whose

union represents 8,000 customs workers, said that since the general election of Nov. 21, when Mulroney’s Conservatives won re-election on a free trade platform, some travellers returning from trips to the United States have insisted, wrongly, that they did not need to pay duty or taxes any more.

Robert Tait, director of a free trade task force at Revenue Canada, said that the government will launch a nationwide newspaper and radio advertising campaign this week to educate travellers about the new regulations and effects of free trade. Meanwhile, Revenue Canada has already sent packets of free trade information to 25,000 businesses and has set up a toll-free information phone line that has been handling about 60 calls a day. Among the new rules for Canadian businessmen: they must prove within 90 days of their goods crossing the border into the United States that their exports are primarily Canadian-made in order to take advantage of special treatment under the trade agreement.

But last week, Canadian trade officials were diverted from their preoccupation with the FTA by a European Community ban, effective on Jan. 1, of U.S. and Canadian meat treated with growth hormones—and fears that the move could embroil Canada in a larger trade war.

Officials from both countries have denied European claims that the growth hormones threaten the health of consumers. Washington retaliated by halting imports of almost $120 million worth of European products. In Ottawa, trade officials said that the EC ban would affect only $2.5 million out of about $50 million worth of Canadian red-meat exports to Europe and that the government had decided not to retaliate. But trade policy officer Garry Moore said Canada could still suffer if the United States and the EC continued their tit-fortat exchange. “If the Americans decide to block $500 million worth of Danish pork, some of it could end up coming to Canada,” he said. “Our pork producers are worried.”

Such a trade war would only add to the pressures on Canada’s trade officials, already struggling to ensure smooth implementation of the FTA. Under the terms of the agreement, over the next several years Canada and the United States will enter into more than a dozen separate negotiations and studies of trade areas, ranging from the future of the automotive industry and the definition of subsidies to the use of food coloring. And as the rules that regulate trade between the two countries continue to evolve, trade consultants like Emile Jurgens will keep on smiling—and working.

MARC CLARK in Ottawa