Canadian Nationalists Challenge Trilateral Free-Trade Talks

CANADIANS, with some notable exceptions, seem reluctant to negotiate a new free-trade pact that includes Mexico as well as the United States. Canada's multinational corporations are clearly interested in making use of Mexico's low-wage work force. But many Canadian cultural, environmental, and nationalist organizations have declared their opposition to a deal.

Trade officials from Canada, the US, and Mexico are set to begin talking June 12 in Toronto. The path to a North American Free Trade Agreement was smoothed when US President Bush announced Feb. 5 that Canada would be a part of the talks.

"Trilateral negotiations with Mexico will primarily serve those US and Canadian corporations that want guaranteed access to cheap Mexican labor," says a report for Action-Canada Network, a nationalist organization.

Many voices point out that trade between Canada and Mexico, worth US$2.3 billion annually, pales in comparison with the US$200 billion in trade between Canada and the US. (See related story, p.7) Canada already has a free-trade deal with the US that began Jan. 1, 1989. The government says Canada could lose trading privileges with the US if it chooses to be an outsider. "Do we want in - with the balanced benefits and phase-in that involves - or do we want to stay out - deprived of all benefits and expose d

to all the downside risks?" asks Michael Wilson, Canada's minister of external affairs and international trade.

Canadian opponents to the pact contend that, by involving Canada, the US moves toward its true objective of gaining concessions that Canada did not grant in the US-Canada pact.

"These trilateral negotiations are really an extension of the existing Free Trade Act," says Tony Clarke, chairman of the Action-Canada Network. "The US has a hit list of concessions they didn't get in the first round."

One crucial item on the "hit list" is auto manufacturing. Canada's 170,000 auto workers worry the US will change rules of origin regulating exports to the US. Mexico has hinted it would consider such restrictions on Canadian carmakers. Mexico's other trump card in the auto sector is the maquiladoras, a 12-mile-deep special-trading zone along the US border. The maquiladoras count 1,800 companies in electronics and auto manufacturing, including 65 Japanese companies. Canadians feel that Mexican and Japane s

e companies in the maquiladoras could swamp the US and Canadian markets with cheap auto parts.

The protection of cultural industries, which the Canadian government fought hard to keep in previous negotiations, may also be the target of US negotiators. Under Canada's Bill C-58, for example, a company may claim a tax deduction for advertising only when booking with a Canadian television or radio station.

Canadian opposition to the continental trade deal overlooks two important issues, analysts say. First, that Canada's real economic woes stem from domestic policies, not international trade. Second, that Mexico, with or without a trade deal, will become increasingly competitive in the US import market.

"The world is moving toward regional integration, and the Mexican government's liberalization policies are aimed at integrating Mexico in the North American economy," says Charles Barrett, an official at the Conference Board of Canada.

Canada's most acute handicap is its labor cost. The hourly wage for Canadian manufacturing workers is C$9.30 (US$8.10), compared with less than US$4 for maquiladora workers.

High labor rates undermining Canadian productivity could lead to an exodus of manufacturing companies to Mexico, in the same way the free-trade pact with the US led hundreds of Canadian plants to close, analysts say. The Canadian Labor Congress estimates 226,000 Canadian jobs have been lost as a result.

Former Canadian trade representative Gordon Ritchie says Canada "has no right to prevent Mexico from having free trade with the US." But how Canada handles itself during the talks will have a definite impact on its relationship with the US, he says.