Free-trade pact gets chains. Even before it's in place, the US-Canadian treaty is being undermined
As officials from the United States and Canada move to get their free-trade pact ratified, both sides have taken protective steps that threaten the broader trade effort. President Reagan and Prime Minister Brian Mulroney signed the US-Canada Free Trade Agreement Jan. 2. It would eliminate most tariffs and many other trade barriers over 10 years.
Since then the US Senate has passed a measure to add new fees on uranium imports. Canada has said it would give its apparelmakers a tariff-rebate program worth about $33 million a year, starting next January. And the Canada Mortgage Housing Corporation refused last month to alter standards that deter some American plywood exports to Canada.
Before the trade treaty comes into effect, Congress and Canada's Parliament must pass legislation to carry out its provisions. Various US lawmakers express concern that the Canadian measures will make it harder to win congressional approval for the pact. No changes can be made in the agreement itself.
``We will work to defeat it now,'' promises Larry Martin, legislative affairs director at the American Apparel Manufacturers Association.
``The US and Canada have been rather careless about supplementary actions,'' says William Niskanen, chairman at the Cato Institute, a conservative think tank. He says their efforts to protect particular industries endanger the entire agreement.
Further, some members of Congress threaten to stymie progress on the bilateral agreement, should the President veto the omnibus trade bill this week. That bill passed the Senate three votes shy of the 66 needed to override a presidential veto.
Richard Weckstein, a professor of international trade and finance at Brandeis University in Massachusetts, notes that one purpose of the Canadian-American pact is ``to lay a framework'' to prevent protective measures from being imposed. ``Unless it permits production to be specialized in the country where the costs are least, it has no benefit,'' he says.
Trade in goods and services between Canada and the US ran about $163 billion last year, greater than any other bilateral trade relationship.
According to a recent study by the Institute for International Economy, the agreement will promote US exports and US investment in Canada and enhance US energy security.
But those in certain industries in the US - including uranium, wheat, plywood, and textiles - are unhappy with the deal.
``The negotiators decided to trade away the uranium industry,'' says Grenville Garside, legislative counsel to the Uranium Producers of America. By exempting Canada from a section of the Atomic Energy Act, he says, the agreement ignores the body of uranium legislation developed over the last three years by the Senate Energy Committee to preserve uranium as a domestic industry. ``Congress has made a policy that the US should not give up an industry that generates 20 percent of our power, and is important to defense.''
Indeed, US production has fallen from 75 percent of US demand to less than 25 percent over the last five years, according to the US Council for Energy Awareness. A consultant to the council, Manuel Gordon, says that although the US has virtually unlimited uranium resources right now, Canada can produce and sell uranium from its richer deposits more cheaply. In addition, the Canadian industry is government owned.
The United Automobile Workers of America also opposes the pact, partly because Canada has a system for remitting duties to automakers there on imports of parts from other nations while the US does not. The UAW says this makes it cheaper for foreign importers to make cars in Canada and then ship them to the US. But American auto companies, which also benefit from the duty remission system, are behind the pact.
``It is a good and solid agreement for this industry and one that advances US national interests as well,'' said Thomas Hanna, president at the Motor Vehicle Manufacturers Association in Detroit.
The National Grange, a conservative farmers' organization, supports the pact. But many American wheat growers oppose the deal, noting it would keep the Canadian market nearly closed to all wheat imports, not just those from the US. A year ago, the US Department of Agriculture estimated that if all Canadian barriers to sales of wheat and barley were lowered, American exports would add up to only $10 million.
Both the AFL-CIO and Canada's labor federation, the Canadian Labour Congress, are opposed to the free-trade agreement as it is written.
A spokeswoman at the AFL-CIO complains that the treaty would give Canada partial tariff protection for 10 more years. Canadian tariffs, she notes, are nearly twice as high as those of the US. (America's nontariff barriers, or quotas, are higher.)