CANADA

Bawdy trade-offs

Free trade’s first year gets mixed reviews

GREG W. TAYLOR January 29 1990
CANADA

Bawdy trade-offs

Free trade’s first year gets mixed reviews

GREG W. TAYLOR January 29 1990

Bawdy trade-offs

Free trade’s first year gets mixed reviews

The contrast was remarkable. International Trade Minister John Crosbie, who had delivered fiery—often witty—speeches extolling the merits of the Canada-U.S. Free Trade Agreement during the 1988 election campaign, was markedly subdued last week as he met reporters in Ottawa’s National Press Theatre to counter criticism of the FTA. Free trade opponents had marked the first anniversary of the agreement on Jan. 1 by claiming that it has cost Canada more than it has benefited the country. Canadian Labour Congress president Shirley Carr, for one, declared that the accord had cost Canadians 70,000 jobs during its first year. Crosbie disputed that claim last week. But he offered few assurances that the arrangement has produced any marked benefits. “We cannot just point our finger and say the FTA has had this or that effect,” Crosbie said. Indeed, he added, “We won’t know the overall impact of the FTA for four or five years, at least.”

Still, Crosbie was optimistic about the current state of the Canadian economy. Contradicting Carr’s assessment of FTA-related job losses, Crosbie asserted that 193,000 more jobs were created in 1989 than were lost. He noted as well that business investment in the country rose by 12 per cent last year and he underscored the $679-million positive balance of trade recorded in November after the net value of Canadian exports and imports had briefly dipped into the red during October. Declared Crosbie: “There hasn’t been the kind of economic disaster that the CLC, the Liberal party and other alarmists were predicting.”

Crosbie also urged border cities to increase their promotional activities to attract U.S. shoppers and tourists, noting that large numbers of Canadians now travel to Buffalo and other nearby American cities to buy many of their goods. Asked if he had ever visited Buffalo himself, the minister replied that he had only done so once, adding, to snickers and red faces, “But that was for other purposes when I was young and vigorous.”

For her part, Carr and other critics of the agreement said that they were unconvinced by Crosbie’s defence of the FTA. Declared the CLC leader: “I think it has been devastating to our country. It has been four times as bad as we expected.” Echoing Carr’s condemnation of the agreement, Robert White, nationalist president of the 160,000-member Canadian Auto Workers union said that Canadian companies have invested heavily in the United States in the wake of free trade, creating jobs there. But he added, “I don’t see it coming the other way.” And Donald Knoerr, president of the Canadian Federation of Agriculture—which

represents most Canadian farmers—claimed that the United States has actively increased its export subsidies to farmers while using the FTA to attack benefits paid to their Canadian counterparts. Observed Knoerr: “The trade war mentality is still there.”

Liberal trade critic Lloyd Axworthy, who followed Crosbie to the podium, said that the

agreement threatens Canadian social and agricultural programs. And he impatiently dismissed Crosbie’s claim that it was too early to judge the arrangement’s benefits. Said Axworthy: “The grand promises of salvation have turned into a kind of purgatory that Canadians will have to suffer through for years to see if they can eventually get the keys to heaven.” Referring to Crosbie’s bawdy comment on Buffalo, Axworthy commented: “Mr. Crosbie spent too much time in Buffalo 20 years ago and lost all his vim and vigor there.” Meanwhile, NDP trade critic Steven Langdon noted the change in the government’s apparent enthusiasm over the year. “This was supposed to

be the best thing since sliced bread,” he said. “It is hard to believe the halting, careful, defensive tone of government spokesmen a year later.”

Still, only a day before Crosbie’s appearance, the Royal Bank of Canada, which strongly supported the FTA during the public debate over its adoption, issued its own, cautiously optimistic report card on the agreement. Acknowledging that it was difficult to isolate the FTA’s effect on the economy, the bank reported in its monthly newsletter Econoscope that “early evidence indicates that many Canadian firms have responded well to the opportunities and challenges of free trade.” Noting that some layoffs, especially in the textile and tobacco industries, could be traced to the agreement, the bank added, “We conclude that job losses in some vulnerable areas were offset by job gains elsewhere.” But it offered no figures to buttress that assertion.

At the same time, other observers said that the effects of the FTA in its first year were largely eclipsed by other economic influences. Gordon Ritchie, for one, who as deputy chief negotiator for Canada helped to draft the trade agreement and who is now an Ottawa-based management consultant, observed that the rise in the value of the Canadian dollar had a dampening effect on Canadian exports that far outweighed any benefits of the FTA. Declared Ritchie: “The effect of the dollar has been about 20 times the effect of the Free Trade Agreement.”

But, like Crosbie, Ritchie said that the full benefits of the FTA, which will not be fully phased-in for another nine years, will only become clear after more time has elapsed. “Ten years out,” Ritchie said, “the Free Trade Agreement will have significantly benefited Canada.” For the moment, that kind of optimism apears to have the support of only a minority of Canadians. In a Maclean's/Decima poll released on Dec. 26, 52 per cent of respondents said that they believed the FTA had been a “bad or very bad idea” for Canada—compared with 43 per cent who called it a “good or very good” idea. And Crosbie’s low-key defence of the pact last week seemed unlikely to change the minds of Canadians who are convinced that free trade has failed to deliver its promised benefits.

GREG W. TAYLOR

MARC CLARK