After 16 months of negotiations between the world's busiest trading partners, the last-minute agreement to liberalize trade between the United States and Canada was nearly aborted for one reason: Canada does not trust the U.S. Congress.
Can Canada be blamed? In the last few years, several hundred protectionist bills were introduced in the House and Senate; this year is no exception. At this moment, there is pending in the Congress a major piece of protectionist legislation that includes the notorious Gephardt amendment, which would mandate retaliation against countries that have large trade surpluses with the United States. (That is, the dollar calue of what they buy from us is smaller than the dollar value of what they sell to us.) Canada is one of those countries. Canadians also feel their products, such as lumber, hogs, and fish, have been discriminated against under existing American "fair trade" laws, which penalize foreign producers for low prices and alleged subsidies by their governments. So Canadian jitters about Congress' antitrade mentality is understandable.
Ironically, the method devised to calm the Canadians may itself prove to be a major barrier to congressional approval of the pact. The agreement is the product of compromise; it has something to offend almost everyone. Although it is called a "free trade agreement," there are too many exceptions for it to truly qualify for that term. Nevertheless, read provision by provision, there is something to cheer about. The agreement significantly reduces or eliminates barriers to trade in agriculture, investment, energy, and other products and services over ten years. Its consequences, if ratified by Congress, will be wide-ranging and dramatic. Increased trading opportunities will stimulate capital investment and the creation of jobs on both sides of the border. Also, since trade barriers between the United States and Canada will be removed or reduced, some trading activity is likely to shift to the new North American "freer trade zone" and away from other markets, such as Europe and the Pacific. This in turn could stimulate interest in similar agreements between the United States and other countries. If things work out that way, the economic effects worldwide will be salutary. But this is by no means assured.
The agreement would eliminate all tariffs on U.S.-Canadian trade within ten years, with some ending in five years and others immediately. Canada's tariffs are higher than America's but already some 70 percent of American exports enter Canada duty-free and 85 percent of Canada's exports enter the United States duty-free. Other non-tariff barriers, such as quotas, would also expire under the agreement. But many of the more subtle barriers, such as regulations and subsidies, would be left in place.
Access for farmers
One of the biggest areas affected will be agricultural and horticultural products. American farmers and producers of plants and flowers will have greater access to the Canadian market, according to a summary of the agreement issued by the U.S. trade representative's office. The agreement will conditionally scrap Canada's restrictive import-licensing system for U.S. wheat, barley, oats, and grain products. It will also ease Canadian import quotas on poultry and eggs. Further, Canada's transportation subsidies for products moving through Canadian ports to U.S. markets will be eliminated, and each country will exempt the other from
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