US-Canada relations snag on pollution, energy policies

Relations between Canada and the United States are in something of a quandary. The good news is that top-level governmental communications are excellent. President Reagan and Canadian Prime Minister Pierre Trudeau have hit it off extremely well in three official meetings since March.

The bad news is that on several major matters of bilateral policy, the two countries seem to be going at right angles to one another.

That is the view of senior Canadian and US diplomats and industry spokesmen interviewed here and in the United States recently.

On the positive side, the two countries sharing the world's longest friendly border still remain each other's largest supplier and customer. They still exchange 30 million visitors each year, and they have recently renewed the 1958 North American Aerospace Defense Command agreement for another five years.

President Reagan's visit to Ottawa in March -- the first by a US president since President Nixon's trip in 1972 -- followed his campaign pledge to strengthen ties with Canada and Mexico, and was described by one Canadian diplomat as "flattering and helpful."

Since then, he and Mr. Trudeau have met at the seven-nation summit in Ottawa in April (where their aides had difficulty keeping their tete-a-tetes from running overtime) and at Mr. Trudeau's visit to Washington July 10.

But there are several major bones of contention -- with each country taking a different view of which is most important.

To the Canadians, the pressing problem is "acid rain" -- the airborne pollution from automobile and industrial omissions that sometimes travels hundreds of miles before precipitating with damaging effect on lakes, rivers, and (new studies suggest) forests.

Both countries inadvertently export the pollutants. But Canada bears the brunt of the effects. This is because of prevailing winds, the importance of Canada's tourist and lumbering economies, and the heavy industrialization of the Ohio River Valley.

Although joint committees have been established to study the problem in more detail, Canadians worry that the Reagan administration will gut the Clean Air Act.

They worry that as the US shifts from oil to coal for electricity production, the administration will bow to pressure to return to the less stringent 1971 air pollution standards -- which they say would increase acid rain.

To US diplomats, however, the most pressing problem is Canada's new National Energy Program (NEP), put forward last October and aimed at oil self-sufficiency by 1990.

Along with cutting imports and increasing production, the NEP seeks the "Canadianization" of the nation's oil and gas industry, which in 1979 sent 72 percent of its revenue to foreign owners. The NEP calls for 50 percent Canadian ownership by 1990 -- a move that troubles American oil companies deeply involved in Canadian exploration.

The NEP also raises US fears of broader policies of economic nationalism yet to come. The US has over $52 billion Canadian in direct and portfolio investments in Canada -- with some unpleasant side effects. As former US Ambassador to Canada Kenneth Curtis says, "Frequently we go up there as though they were the 51st state and say, 'We're paying for all this stuff -- what more do you want?'"

The result is what one US diplomat describes as "apparent hostility toward foreign investment in Canada." He sees the NEP as "just a beginning."

Canada's minister of external affairs, Mark MacGuigan, has said it is not the government's intention to "drop another shoe" and draw up NEP-like programs for other sectors. But as one Canadian diplomat notes, "Governments change."

Other bilateral problems also remain:

* Fisheries. After the US Senate refused to ratify a 1979 treaty linking fishing rights and offshore boundary settlements, President Reagan "delinked" the issues on the eve of his March visit -- to the dismay of the Canadians. The boundary will now be settled by the International Court of Justice, but the fishing-rights question (centered largely on Canada's $75 million Canadian scallop-fishing industry on George's Bank) is in abeyance.

* Automobiles. Both countries enjoy free trade in automobiles under the 1965 Auto Pact. The result has been a serious balance-of-payments problem for Canada , which incurred a $3 billion Canadian deficit in automotive trade with the US in 1979.

* The weakened Canadian dollar. With Americans paying only 83 cents for every Canadian dollar, US businessmen are hardpressed to compete with imports from Canada. Maine lumbermen and potato growers, for example, point out that Canadian suppliers can cut their prices by 10 percent and still make nearly a 10 percent profit over their American competitors.

Diplomats on both sides stress, however, that the channels for resolving such problems now work well at all levels -- in contrast to the more troubled days of the Vietnam war.