SPECIAL REPORT

TEST OF WILLS

FREE TRADE’S TAXING DETAILS

MARY NEMETH July 3 1989
SPECIAL REPORT

TEST OF WILLS

FREE TRADE’S TAXING DETAILS

MARY NEMETH July 3 1989

TEST OF WILLS

SPECIAL REPORT

FREE TRADE’S TAXING DETAILS

He keeps a bull’s head over his fireplace. She keeps a crowbar in her office. For sheer determination and toughness, Canadian International Trade Minister John Crosbie and U.S. Trade Representative Carla Hills are equally matched. But as they begin to hammer out the finer details of the CanadaU.S. Free Trade Agreement, they bring very different skills to the negotiating table. Crosbie, after 24 years in politics, more than five of them as a federal cabinet minister, is a clever, seasoned politician. Hills—a successful lawyer who specialized in antitrust legislation—has less direct government experience, but is a formidable negotiator, familiar with contractual negotiations. Said Crosbie: “I can tell already that she is not going to be a pushover, but I think we will get on well.”

Although the FTA took effect on Jan. 1, some important issues have not been settled. Over the next several years, Canada and the United States will enter into more than a dozen separate negotiations and studies of trade areas, including the future of the automotive industry and the definition of subsidies. Already, Ottawa has announced that it will seek a settlement through FTA dispute-settlement panels of two

longtime disputes: Canada’s refusal to allow imports of low-grade U.S. plywood because of claims of weakness caused by its large knotholes; and differences in how the two countries measure the amount of wool in garments for tariff purposes. At the same time, U.S. steel producers have been pressing Washington to initiate a voluntary restraint program for steel imported from Canada. Businesses in both countries have also submitted hundreds of requests to speed up tariff reductions and extend the accord into new areas of products.

Crosbie, 58, is a traditional supporter of free trade. The scion of one of Newfoundland’s wealthiest families, which made its fortune in construction, airlines and fish, he has favored closer economic ties with the United States since he was a teenager in St. John’s. In ,1949, his father, Chesley Crosbie, opposed l Newfoundland’s decision to join Canada-Wter about 350 years as a British colony—campaigning instead for economic union with the United States. And among the major contenders in the 1983 Tory leadership race, John Crosbie was alone in urging Canadians to embrace free trade. His rivals, including Brian Mulroney, rejected the proposal as a grave

threat to Canadian sovereignty. Prime Minister Mulroney later changed his mind and opened talks with Washington in 1985.

For Crosbie, the trade portfolio may be an opportunity to create a political legacy. As finance minister in 1979, Crosbie introduced an unpopular budget that led to the Tories’ defeat after nine months in office. Four years later, he lost the race for the Tory leadership. And, although cabinet colleagues say that he has the most agile mind in Mulroney’s inner circle, outside he is better known for his irreverent humor. Crosbie is also still smarting from the controversy he caused last year when he acknowledged that he had not read the entire 315-page FTA text. He made the remark at a time when the Tories were spending millions on a public relations campaign de-

On the Canadian trade agenda

• To speed up the removal of tariffs on a wide range of manufactured goods and raw materials e To persuade offshore investors—principally Japanese and West Germans—to build manufacturing plants in Canada. The attraction: access to the U.S. market under the FTA eTo defuse the American argument that numerous government assistance programs—such as rail transportation subsidies—give Canada an unfair advantage in the U.S. market e To motivate Canadian companies by such means as federally sponsored seminars to become more aggressive in pursuing U.S. opportunities

On the American trade agenda

eTo press for greater access to the $450-million Canadi* an plywood market

eTo negotiate on behalf of American television programmers who object to Ottawa’s domestic-content requirements for Canadian TV stations eTo resolve complaints over steel: the U.S. steel industry objects to the volume of cheaper imports from Canada’s more efficient plants

• To gain freer access to Canada’s natural resources— energy, metals, water and timber

signed to offset criticism that they were desperate for a deal.

Crosbie now says that he cannot understand why many Canadian nationalists fought so hard to defeat the bill in last year’s emotional election campaign. “I have not met a single person yet but who thought we would have been completely mentally unhinged to vote against the Free Trade Agreement,” he said. “It has nothing to do with whether you like Americans. I would support a free trade agreement with the devil if that appeared to be a good thing.” But the minister clearly admires the free enterprise ethic that fuels the U.S. economy. Said Crosbie: “In many parts of the United States, they have a very highly developed sense of their own

worth and what the value of hard work is.”

In Washington, Crosbie will deal with a woman generally known as a “very lawyerly lawyer”—one who pores over details of agreements and then sticks to the text when she is negotiating. Hills, 55, has a very keen sense of U.S. interests and she argues for them forcefully. As she told senators at her confirmation hearings earlier this year: “We have to have our agreements enforced. And where our partners are violating our agreements, we must take action—with a crowbar if necessary.” The Senate confirmed her appointment unanimously after she demonstrated her clear knowledge of major world trade issues.

Growing up in Los Angeles, Hills was a tomboy, nicknamed Butch. When she was 12, she decided that she wanted to be a lawyer. But

her father, who had turned a salesman’s job into a multimilhon-dollar building supplies business, wanted her eventually to participate in the family firm. Although he tried to discourage her, refusing to pay her tuition when she attended Yale law school, she persisted.

Hills, who has four grown children, became involved in government work almost inadvertently. In 1973, then-Defence Secretary Elliot Richardson flew to Los Angeles to ask Hills’s husband, Roderick, a merchant banker, to become an assistant secretary of defence in Washington. He refused, but Richardson was impressed with Carla Hills, and later in the year, after becoming attorney general, he offered her a job as an assistant attorney general. She accepted, and quickly came to the atten-

tion of President Gerald Ford, who in 1975 appointed her secretary of housing and urban development, making her only the third woman to hold a U.S. cabinet post. Critics claimed that Hills knew very little about housing.

Officials who have worked with Hills since she became trade representative last January say that she is an intense, demanding woman who is sensitive to media criticism. Said one: “She likes to win.” But they add that she treats her employees fairly and is capable of great charm. She routinely begins work at 7 a.m. and ends the day with a round of functions late in the evening. Said one official who knows her well but asked not to be identified: “It is not all work, she is not a dull girl. She is tough-minded but she is very feminine.”

Crosbie and Hills first met during President George Bush’s brief visit to Ottawa in February. A month later, Crosbie visited Washington for the first of what both sides said would likely evolve into twice-yearly, high-level FTA meetings, alternating between the two capitals. Observed one Canadian diplomat in Washington who attended the meeting: “You had a skilled and highly able politician from the Canadian side facing a highly skilled and able cabinet secretary who is not a politician.” Their decisions will almost certainly decide the future of Canada-U.S. trade relations well into the 21st century.

MARY NEMETH with ROSS LAVER in Ottawa and HILARY MACKENZIE in Washington