Cover

WHO’S BEST FOR CANADA?

In the free trade vs. protectionism debate, the choice is as clear as mud, reports STEVE MAICH

November 1 2004
Cover

WHO’S BEST FOR CANADA?

In the free trade vs. protectionism debate, the choice is as clear as mud, reports STEVE MAICH

November 1 2004

WHO’S BEST FOR CANADA?

In the free trade vs. protectionism debate, the choice is as clear as mud, reports STEVE MAICH

IN THE LAST CENTURY, most mainstream politicians knew increased trade offered something for everyone. It’s not like everybody was in favour of free-flowing commerce back then, but at least you could tell the free traders from the protectionists, which made it a relatively easy sport to figure out the implications of U.S. elections for Canada. You could count on the Democrats to sympathize with this country on social and environmental issues, and you could count on the Republicans to co-operate on economic ones.

Alas, those were the simple days of the 1900s, and although the century ended only four

years ago, it seems like a distant memory. While most of the world’s attention has been focused for months on U.S. foreign policy, Canadians ought to be just as concerned with questions closer to home. Namely, which candidate—President George W. Bush or Senator John Kerry—is best suited to repair the fraying edges of the world’s biggest trading partnership? Unfortunately, the rhetoric of the election campaign provides

few clues to the answer. In the new, upsidedown world of American politics, even as both candidates claim to be free market capitalists when it suits them, they cloak themselves in protectionism if there’s a vote to be had in it. The lesson? Nobody ever lost an election by blaming the country’s economic problems on foreigners and promising to protect American jobs.

But while much has been written about the

deepening divide within the United States, the greatest chasm of all may lie between what the candidates say about trade and what they actually do.

During his first campaign for the presidency back in 1999, Bush said he would fight to expand free trade. “The fearful build walls. The confident demolish them,” he said. Well, if the Republican nominee was confident back then, the doppelgänger who took over the White House in 2000 spent most of his first term looking very fearful indeed. The most obvious example of Bush’s protectionist bullying is the ongoing deadlock over Canada’s softwood lumber exports. Since 2001, the U.S. has imposed a crushing levy on Canadian shipments to protest this country’s rules concerning logging on government land. The World Trade Organization ruled in Canada’s favour last May, and yet the tariff wall still stands, with U.S. trade officials threatening to drag the process out for years to come.

Last year, the U.S. launched yet another challenge against Canada’s wheat marketing system, only to see the WTO rule again in Canada’s favour. Still, the issue remains unresolved because nothing shores up support in Bush-loving rural states quite like an attack on foreign agricultural imports. And it’s not just Canada that has been the target of such politically motivated tariffs. In 2002, the U.S. slapped foreign steel imports from many countries with up to 30per-cent tariffs in a crass attempt to win support in the key swing states of the rust belt. After 20 months, the Bush administration lifted the steel duty to avert a trade war after the WTO ruled against the U.S. yet again.

And let’s not forget Washington’s continued ban on importing Alberta beef, which arose from a single case of mad cow disease discovered in May 2003. Almost a year and a half has passed and not a single new case has emerged, yet the border remains closed with no indication of when it might reopen. But more than any other issue, the mad cow debate illustrates why many Canadians see little to choose between Kerry and Bush on economic issues. Kerry was one of 10 Democrats who signed a letter last April, urging the government to leave the ban in place.

Most Canadians seem to like Kerry’s more dovish military stance and his promise of

more multilateral diplomacy, but his economic platform sounds like an early draft of Tariffs for Dummies. He has promised an immediate review of all U.S. trade agreements within months of taking office. He has proposed changes to the tax code to make it more difficult for American companies to create international branch offices and employ foreign workers. And perhaps most worrying, he selected a running mate in John Edwards who has said repeatedly that he’d have voted against NAFTA if he’d been in Congress when it passed.

Kerry has flirted with the same kind of economic meddling as the Republicans when there are votes to be had. Take, for example, his promise to immediately stop shipments of Ontario garbage to landfills in Michigan. That may not seem like a trade issue, but he’s talking about tearing up a legitimate crossborder business agreement for the sake of scoring points in a battleground state.

The good news is, Kerry is almost certainly a trade-loving sheep in wolf’s clothing. He can’t unilaterally follow through on all of his threats, especially if the Republicans hold a majority in Congress as expected, says Sherry Cooper, chief economist at BMO Nesbitt Burns. “They’re pandering to unions and to the unemployed,” Cooper says, adding that U.S. politicians “always seem to need to find a villain to slam the door on. But a lot of this extreme protectionism seems to disappear once they’re in the White House.”

Canadians can also take some comfort in the fact that Kerry has made restoring America’s credibility with its allies a key plank in his platform. He knows well that rebuilding the relationship with this country will require a recommitment to our open trading partnership. And there are signs that Kerry’s heart isn’t really behind his more isolationist ideas. During the Democratic primaries he attacked Howard Dean as a protectionist when he proposed cutting off trade with countries that have weaker labour and environmental laws than the U.S. He also said that cancelling NAFTA would be “disastrous.”

So the choice is clear as mud: a Republican president who talks about supporting trade and really doesn’t, versus a Democratic challenger who talks about restricting trade but probably won’t follow through. With options like this, maybe it’s best the choice will be made for us.