Canada and U.S Relations
In the second of two articles on Canada’s troubles over its relations with the United States, John Best reports from Ottawa on fears about trade.
Living next to a big, wealthy, obsessively consumption-oriented country has its advantages. Last year Canada sold Can dollars 85 billion (pounds 45 billion) worth of goods to the United States while buying Can dollars 65 billion worth from the Americans.
This year the totals, including the favourable balance for Canada, promise to be even greater. In the first six months of 1985 sales across what orators like to call the world’s longest undefended border totalled Can dollars 47 billion from Canada to the US and Can dollars 36 billion in the other direction.
No other two states even approach such huge trade volumes. Canadians should be laughing over these economic relations. But many are deeply troubled because the trans-border trade has left Canada exceptionally and perhaps unhealthily dependent on the US.
Whereas 75 per cent of Canada’s foreign trade is now with the US, only about 20 per cent of US trade is with Canada. Twenty per cent of all economic activity in this country depends on the American market.
This vulnerability has been relentlessly driven home in recent years with a shower of protectionist trade bills in the US Congress, some aimed at Canada, many more aimed at other countries, Japan for example, or the world generally, but capable of catching Canada in the undertow.
So far Canada has been relatively undamaged by the protectionist tide, partly through the repeated intercession of the White House, but for how long it can escape retribution for its trade surplus?
A special parliamentary committee is trying to come up with a strategy for securing access to the American market. It is considering a whole series of options, but the main question is whether Canada should throw caution to the wind and jump into a free-trade arrangement with Washington.
Before long, all but about 20 per cent of Canada-US commerce will be unencumbered by tariffs anyway, and duty on the remainder will be negligible.
But it is Washington’s increasing use of non-tariff barriers – quotas, special surcharges, countervailing duties and the like – to bring down the huge US trade deficit that frightens Canadian policy-makers. Just in the last year there have been threats against Canadian lumber, steel, fish, pork, cement and other export products.
Exponents of free trade point to the figures and argue that Canada is sliding inexorably into the economic embrace of the US without the safeguards – against non-tariff barriers, notably – that a negotiated bilateral arrangement would confer.
Opponents of free trade say it would undermine Canada’s political independence and lead willy-nilly its absorption by the US.
For the Conservative Prime Minister, Mr Brian Mulroney, the issue poses a serious dilemma. He was elected last year partly on a pledge of closer economic association with the US to stimulate job-creation in Canada.
At a summit in Quebec City last March, he and President Reagan called on their respective trade ministers to produce a report within six months – that is, by next month – on ‘all possible ways to reduce and eliminate existing barriers to trade’.
Mr Mulroney is being careful, however, not to commit himself too far. He eschews the expression ‘free trade’ and talks about enhanced trade. One reason for his caution is regional disagreement on the issue: heavily industrialized Ontario is anxious to maintain protection for its manufactured products; the rest of the country favours free trade.
Further, it is the kind of emotional political issue that could quickly engulf an unsuspecting Prime Minister.
While Canadians argue, it is far from clear that the US wants free trade with Canada, although a trend towards bilateral free-trade arrangements has been running in Washington alongside the protectionist pressures.
Rightly or wrongly, Canadians tend to take it for granted that if the proposition were put to the Americans they would not turn their backs on a special trade arrangement.
