US and Canada prepare to talk free trade

By , Staff writer of The Christian Science Monitor

Canada and the United States already form the world's largest market. Some $120 billion (US) of goods crossed the border between these friendly neighbors last year. Next Wednesday negotiators from the two nations will meet here around a modern, walnut conference table to launch a historic undertaking -- the creation of a free-trade area. If successful, the negotiations will result in further integration of the Canadian and American economies, presumably adding to their mutual prosperity.

A modern painting hangs on the wall of the 17th-floor conference room here. The artist, Jack Bush, has entitled it ``Slow Lean.'' For perhaps 18 months negotiators from the two sides will be doing something of a ``slow lean'' on each other as they seek to gain the maximum in trade concessions from the other side.

The talks will not be easy, authorities agree.

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On the American side, the issues will be primarily economic.

That was illustrated when, earlier this month, the Senate Finance Committee nearly derailed the talks. It took some arm-twisting by President Reagan to gain a 10-10 tie in the committee that enabled the negotiations to go ahead on what is called a ``fast track'' basis. Under this procedure, Congress will be able only to approve or disapprove any result of the free-trade talks. It will not be able to amend any such agreement.

Those senators voting against ``fast track'' were objecting to growing imports of Canadian lumber and other trade disputes with Canada. Or they were protesting more generally what they regard as a soft Reagan administration attitude to trade issues.

On the Canadian side, many opponents of free trade are also concerned about the effect of increased competition on industry and jobs. But others also worry about Canadian sovereignty or cultural independence.

Canadian Prime Minister Brian Mulroney stuck his political neck out in proposing a trade deal with the United States last September. An earlier prime minister, Wilfrid Laurier, lost an election in 1911 after suggesting a free-trade area with the US.

But Mr. Mulroney figures a trade agreement could shield Canada from further US protectionism, as well as enlarge the market for Canadian producers shut out or discouraged by existing American trade barriers.

But Martin Goldfarb, a Toronto pollster, speculates that the free-trade question could revive Canadian nationalism. It could become Mulroney's ``Achilles' heel,'' resulting eventually in the defeat of his Progressive Conservative government.

``Canadians are the oldest and most continuous anti-Americans,'' he notes. The confederation of four provinces in 1867 into the nation of Canada was to a large degree a commitment to not becoming American.

Before the 1911 election, various prominent American leaders indicated publicly they considered free trade a first step to political unity. No prominent American leader has made that mistake about Canadian political sovereignty today. Canadians are still concerned, however, about protecting their cultural identity during the forthcoming talks.

At issue are so-called cultural industries. Canada has special laws or regulations to maintain or enlarge Canadian ownership of such businesses as newspapers and magazines, book publishing and distribution, film distribution, cable TV operation, and so on.

So far the US has insisted such restrictions be put on the bargaining table. The chief American negotiator, Peter C. Murphy, has been quoted as saying he doesn't really understand ``this cultural identity thing.''

``He is going to learn,'' comments Bruce Macdonald, a Canadian trade official here.

One former member of Parliament speculates that insistence of the US on keeping the cultural question in the talks may be a bargaining tactic -- something that could be given up in return for concessions elsewhere.

From the Canadian government's standpoint, however, it is a dangerous issue that could destroy public support for free trade with the US.

Mr. Goldfarb, who conducts polls for the opposition Liberal Party, says that roughly 20 percent of Canadians think joining the US would be a good thing. These tend to be business people. The majority of Canadians are sternly opposed to political integration and anxious about further economic unification.

The free-trade talks are opposed by the New Democratic Party, the leftist party that usually wins about 20 percent of the vote in federal elections. Organized labor, that party's ally, is also opposed.

Canada's Liberal Party, the chief opposition party, is split on the issue but has ended up approving the talks as long as the government takes account of trade with other parts of the world.

Supporting the Progressive Conservative government's free-trade proposal are the Chamber of Commerce, the Canadian Manufacturers Association, a small business federation, the agricultural industry (with reservations), and important consumer groups.

Goldfarb suggests that if President Reagan were to make a statement sympathizing with Canadian cultural concern and promising not to bargain on these points, much of the controversy ``would go away.''

At next week's meeting, the talks will be largely procedural. One question will be whether to aim for conclusion of a deal before the Reagan administration loses its ``fast track'' authority at the start of 1988. Alternatively, the Reagan administration will have to ask Congress for an extension of that authority, something the latest Senate Finance Committee vote suggests will be difficult.

The negotiators must also determine whether to deal with all the issues in one round of talks, or postpone agriculture.

They must decide in what order to deal with such key issues as tariffs, countervailing or dumping duties, trade in services, government procurement restrictions, intellectual property, the 1965 Auto Pact between the two nations, and so on.

Goldfarb is concerned that Mr. Mulroney's strong political commitment to the trade negotiations could prompt more trade concessions than the Canadian public will approve of.

At the same time, however, he notes that the US must demonstrate that it can make a deal with Canada for foreign policy reasons. Failure, he says, ``will send a signal'' to other nations.

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