COVER

Trade update

JULIE CAZZIN November 29 1993
COVER

Trade update

JULIE CAZZIN November 29 1993

Trade update

Canada’s commerce with the United States, its principal trade partner, is governed by the Free Trade Agreement, which came into force on Jan. 1, 1989. But NAFTA will have some bearing on key Canadian sectors.

Agriculture

The three countries have concluded a series of bilateral agreements in which domestic marketing boards have been preserved. The boards set price and production levels for dairy, poultry and egg products. Tariffs on other agricultural products will be phased out over a period of up to 15 years. Complaints by American grain growers that durum wheat from Canada is subsidized and sold at unfairly low prices prompted the promise of an inquiry from President Bill ClinJon to five members of the U.S. House of Representatives whose pro-NAFTA votes he sought. U.S. Agriculture Secretary Mike Espy and Canadian Agriculture Minister Ralph Goodale will try to resolve the dispute within two months. If they fail, the U.S. International Trade Commission will investigate the allegations.

Automobiles and parts

NAFTA preserves the 1965 Canada-U.S. Auto Pact, which provides free trade between manufacturers of motor vehicles and parts as long as at least half the components of cars and light trucks are made in North America. NAFTA raises that components requirement to 62.5 per cent. That works against overseas automakers assembling vehicles in North America. Canadian-based automakers say that they are confident that the pact will lead to increased trade with Mexico and, ultimately, more Canadian jobs.

Energy

NAFTA, like the FTA, includes a proportional sharing clause that states that, in times of^— shortage, Canadian energy supplies must be provided to the United States in the same proportion as they were supplied in the three years immediately preceeding the shortage. Mexico has been exempted from the so-called “proportionality clause” and it retains the right to limit Mexican exports. Prime Minister Jean Chrétien has proposed reopening the energy clauses in the FTA but trade experts say that it is doubtful that the United States will do so.

Water

The controversy over water exports centres on the fact that the FTA and NAFTA do not contain specific exemptions on bulk fresh water exports. It is therefore open to interpretation whether or not Canada could be forced to divert fresh water from rivers and lakes to the United States in times of shortage. U.S. Trade Representative Mickey Kantor said last month that water is a “good” like any other covered in the trade pacts. But Canadian Trade Minister Roy MacLaren insisted that NAFTA only governs shipments of bottled water, and Kantor then agreed.

JULIE CAZZIN in Toronto