Exeltor Inc. is one of those companies that needs to sell abroad in order to survive. The Bedford, Que., firm, 80 km south of Montreal, employs 350 workers making industrial knitting needles. Other manufacturers, in turn, use those needles to make the knitted fabrics for underwear, pantyhose and sweaters. Because of the limited demand for such a highly specialized product in Canada,
Exeltor exports 95 per cent of the 100 million steel needles it makes each year to more than 50 countries. Despite the company’s reliance on global trade, vice-president of operations Joseph Cavalancia says that the agreement reach-ed last week at the Group of Seven (G-7) summit in Tokyo to cut tariffs on a broad range of manufactured products would have little impact on Exeltor. But the reduced tariffs, he explains, might eventually alter where some textiles are made. “The demand [for needles] will still be out there,” Cavalancia says,
“though we might have to focus our marketing efforts on different countries.”
This week, the focus of global trade talks shifts to Geneva, where representatives from the 111 signatories to the General Agreement on Tariffs and Trade (GATT) will try once again to settle a number of outstanding issues. Some trade analysts say that the agreement that the world’s seven major industrial countries reached in Tokyo could now provide an important kick start to the long-stalled Uruguay Round of GATT trade talks, which began in 1986. Other experts, however, are less convinced that the agreement among the G-7 nations— Canada, the United States, Japan, Germany, France, Britain and Italy—could provide the needed boost to the GATT' talks. Sylvia Ostry, chairman of the Centre for International Studies at the University of Toronto, for one, says that the agreement to reduce or eliminate tariff and nontariff barriers on 18 different manufacturing sectors was a positive development—as far as it went. “They left some of the most contentious issues to be resolved before the Dec. 15 deadline for completing this round of talks,” says Ostry. “The agricultural issue is still outstanding, as is trade in
services. Nor did they do anything about antidumping provisions, probably the most important and contentious issue of them all.” Considering the troubled history of the GATT talks, few observers are willing to predict whether those thorny issues can be resolved before the latest in a series of self-imposed deadlines. On repeated occasions,
negotiators in the Uruguay Round have announced a breakthrough. Each time, however, talks have stalled, primarily because the United States and the European Community have clashed on the issue of reducing farm subsidies.
Still, Ostry and other trade experts say that last week’s G-7 accord, which the other GATT signatories must still approve, represents progress because of what it accomplished symbolically rather than for its actual terms. (The seven countries did agree to eliminate tariffs in several areas, including pharmaceuticals, construction equipment, medical equipment and beer. In a second category that includes glass and ceramics, they will cut tariffs in half. For a third category, the ne-
gotiators agreed to cuts of about 33 per cent in tariffs. This includes scientific equipment, wood, paper, aluminum and other nonferrous metals and electronics.) Declared Ostry: “All the delays in the GATT negotiations were getting to be a serious political embarrassment. So what could the G-7 leaders do to give a positive signal? They chose what was most feasible, most workable and most politically sexy—improving market access.”
For his part, Jayson Myers, chief economist for the Canadian Manufacturers’ Association, says that the G-7 leaders’ message that they are open for business is particularly important in light of recent developments—and disputes—on the international trade front. Instead of focusing on multilateral trade initiatives, the United States has increasingly directed its attention to bilateral, and even unilateral, trade issues. U.S. trade representatives have been pushing Japan hard to reduce its balance of trade and open its doors to more Americanmade products. The United States also angered its trading partners late last month when it slapped duties, some ranging as high as 109 per cent of the selling price, on steel from 19 countries, including Canada. But now, Myers says, the Clinton administration has also signalled that it wants a successful conclusion to the GATT talks. “The G-7 accord sends an important psychological and political message that the priority of the world’s industrial leaders is more open trade,” he added.
Despite the renewed emphasis on concluding a GATT agreement, some trade experts say that even more is required to increase global trade. Geraldine Kenney-Wallace, president of McMaster University in Hamilton, Ont., says that once the Uruguay Round is completed, the world’s trading nations should establish a new multilateral trading organization. “Part of its mandate,” she explained, “would be a fair and timely dispute resolution mechanism.”
With many of the world’s economies still mired in recession, or, like Canada, stuck in a slow recovery, and with unemployment rising globally, there is clearly much at stake. According to a study by three southern Ontario university professors that is expected to be published this fall, liberalizing GATT’s trading rules to cover, among other things, services, textiles and agriculture could add more than $250 billion to the annual global income. Randy Wigle, an economist at Wilfrid Laurier
University in Waterloo, Ont., who is one of the study’s authors, predicts that even a partial GATT agreement could boost the world economy. In fact, the study will show that the global trade in textiles could increase by more than $100 billion, he says.
Canada, in particular, has much to gain from more open markets and an increase in global trade. Among the G-7 nations, only Germany exports a higher percentage of its gross domestic product than Canada. Domestically, strong exports have also helped to counter the effects of the recession. According to Myers, Canada will export 46 per cent of its manufacturing output this year, up from 33 per cent in 1989. “That’s at a time when the Canadian economy only grew by less than one per cent,” he says.
However, Kenney-Wallace adds that if Canada wants to participate more fully in the emerging global economy, exporters must look beyond their traditional markets. About 75 per cent of all Canada’s exports go the United States. But she noted that the nation must now look to the Asia-Pacific region and Europe for new opportunities. “In the new economy, somebody can have an idea in one country, fund it in another, manufacture it in several other countries and market it around the world,” she says. “Canada has to participate fully in that new global trading market.”
Another manufacturer who is starting to realize the benefits of such exporting is Larry Dyck, president of Decor Cabinets Ltd., in Morden, Man., about 120 km southwest of Winnipeg. For most of the company’s 16-year history, Dyck says that it sold custom-made kitchen cabinets to the domestic market only. But two years ago, he says, representatives from the Manitoba government and the Japan External Trade Organization asked him to participate in a Tokyo trade show. There, he met a dealer who wanted to import Decor’s custom designs to take advantage of the fact that many Japanese are switching to North American-style home construction.
As a result, Dyck and the company’s 50 employees have spent the past two years adapting the product line to meet Japanese standards and tastes. They shipped the first small supply of cabinets in May, but Dyck says that he expects orders to pick up substantially within the next six months. He has other expectations as well. ‘This is a longterm investment for us,” Dyck explained. “We hope to develop a good broad base of customers, so we are not tied just to the domestic market if we go into a recession here again.” He added: “In Japan, there are 1.2 million houses built a year.” Still, like Exeltor’s Cavalancia, Dyck says that he expects to see little direct benefit from the G-7 agreement in Tokyo last week. But he adds that he hopes it will eventually lead to increased global trade. “That’s the only way to provide true wealth to our country,” he says. That is clearly everybody’s aim in increasing global trade.
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.