US-Canada Trade Friction on Rise

Canadian ire grows over perceived American unfairness on its exports of lumber, cars

TRADE wars in a free-trade zone and tough protectionist talk in an election year are putting a strain on relations between Canada and the United States.

When normally pro-American Prime Minister Brian Mulroney refers to United States actions as those of a "tin pot dictator" - and when President Bush cancels a three-way phone call with Mulroney and the President of Mexico - it is apparent something is wrong.

The flap over Honda was the issue that pushed Prime Minister Mulroney's rhetorical button. US customs officials ruled recently that Honda Civic cars built at a plant in Alliston, Ontario, had less than 50 percent North American content although the engines were made in Ohio.

The cars have been hit with 2.5 percent duty. Under the 1989 Free Trade Agreement (FTA), and a long-standing US-Canada auto pact, the cars have been entering the US duty free.

Honda has appealed the ruling, but if it loses it will have to pay C$22-million (US$18.5 million) in duty on 90,000 Civics produced at its Canadian plant between 1989-90.

Then came the 15 percent duty on Canadian softwood lumber, that was applied because American officials contend that Canadian provinces subsidize the forest industry by charging low royalties to companies cutting wood on government owned land. The tariff could be increased to 30 percent in May.

"We are getting beat up in what is approaching a trade war," says Michael Aspey, president of the Council of Forest Industries of British Columbia. The prime minister blames the actions on low-level officials in the US government reacting to pressure to politicians spooked by hard times.

"There's a recession in the United States," Mulroney says. "There are protectionists running for office.... I understand what's going on down there. It's politics, not law."

The latest irritant is alleged American bullying over movie distribution rights, which is giving added ammunition to Canadians who would like to scrap the FTA. Documents obtained by the Toronto Globe and Mail newspaper show that Hollywood film distributors asked that the trade deal let them keep the 95 percent share they had, and still have, of the Canadian movie market.

Things were not helped when former US chief negotiator Peter Murphy told a Quebec City audience last week that he had considered Canadian concerns about protecting its culture "a joke."

All of this has economic nationalists seeing red.

"The Free Trade Agreement was supposed to give Canada 'favored nation' status, but the Americans have not given us access to their markets," said Maude Barlow, head of the Council of Canadians, from her home in Ottawa this past weekend.

Canadian nationalists in the Council of Canadians keep picking away at both the deal and the man they say is responsible - Prime Minister Mulroney. His recent American bashing statements are dismissed as pure "posturing," Ms. Barlow says.

Barlow does agree with the prime minister on the issue of the Honda ruling being unfair. But she makes perhaps a more disturbing point: "Even if Honda wins the battle, this has sent a clear message to Asian carmakers that they should locate in the United States and not in Canada."

One of those who negotiated the FTA for Canada says the US is not playing by the rules. And Gordon Ritchie, a former top civil servant who is now a trade consultant, says Canadian companies cannot afford to wait while tariffs are appealed.

He says the companies should be given government help so "our producers aren't forced into bankruptcy while waiting for their days in court.

"That is what the United States is counting on," he says. "They like beating up on the little guy."

And if lumber, cars, and culture are not enough, the proposed three-way trade deal between the US, Canada, and Mexico has the entire anti-free trade movement - including the Council, unions, and the opposition politicians - up in arms.

"Corporate colonialism," is what David Barret the trade critic for the socialist New Democratic Party calls the developing North American Free Trade Agreement. A draft of the proposed deal was leaked by the Council of Canadians after one of their supporters in the government slipped them a copy. The group sees expanding free trade as a kind of economic Monroe Doctrine.

"The United States wants a free-trade zone from Canada to the tip of South America," says Barlow, who contends that she is not anti-American, just anti-American business. "This proposal only serves US industrial interests."

Nonsense says Canada's Minister of Trade Michael Wilson answering his critics in the House of Commons in Ottawa last week.

"There is no giving away the store, the farm, the country," he says. He will, however, have a hard time persuading Maude Barlow.