US-Canadian trade barriers are coming down
Without any fanfare, Canada and the United States are moving toward something close to free trade. This is startling. It has important economic and political implications for both nations, but particularly for Canada.
When a group of businessmen and provincial officials from Quebec, New Brunswick, Nova Scotia, and Newfoundland, plus a sprinkling of academics, met here earlier this week with their counterparts from New England, most of the Canadians welcomed the lowering of trade walls with the US now under way.
Partly this reflects longstanding regional differences. Businessmen in the Atlantic provinces of Canada have long felt that high tariffs hurt their economies to the benefit of Ontario and Quebec, where most of Canada's manufacturers are. The French-Canadians from Quebec figure Ontario's ''branch-plant economy'' will suffer most from the reduction in tariffs. Quebec manufacturers tend to be more involved in heavy manufacturing or activities dependent on cheap energy, which would be less likely to be hit by American competition.
From its very founding in 1867, Canada has attempted to separate itself economically to a considerable degree from its powerful southern neighbor. Economic separatism, as it might be called, has always been considered essential if Canada was to maintain its political independence. One of the conditions in the Articles of Confederation was construction of an east-west railway, the Intercolonial Railway, to unite the four provinces that then made up Canada - Quebec, Ontario, New Brunswick, and Nova Scotia. British Columbia entered the confederation in 1870 only with a pledge of the construction of a railway to the west coast within 10 years. Canada still subsidizes freight tariffs on its railways as a means of encouraging east-west commerce - vs. north-south trade - although these subsidies are now once more under study in Ottawa.
Because politics was added to economics, Canada's tariff structure with the United States has often been a hot issue, especially in Canada. Soon after confederation, in 1887, an Ohio congressman introduced a bill in the US House of Representatives to grant free admittance to all Canadian goods whenever Canada should adopt a similar measure for products of the United States. Nothing ever came of it, but it prompted a sharp debate in Canada. A small but enthusiastic group, known as the ''Canada First'' group, preached the gospel of unwavering faith in Canadian nationhood and regarded the free-trade idea as a threat to the nation's unity.
Today there has been no such hot debate in Canada. Rather, at least in the minds of many Canadian businessmen, free trade is gradually arriving on tiptoe as a result of the ''Tokyo round'' of tariff cuts. Canadian tariffs will be progressively cut from an average of about 10 percent on manufactured products to around 5 percent by 1987.
Of course, 5 percent is an average that will disguise some higher tariff peaks. Nonetheless, in many areas, tariffs will be so low as to be of little protectionist import for Canadian businessmen. Other factors - quality, delivery time, slimmer profit margins, or whatever - can easily permit goods to flow past such low barriers.
Harald Malmgren, a Washington trade consultant and former US trade official, predicts that ''there will be a gradual slide into further integration of the two economies without the Canadian government ever admitting it for political reasons.''
Canada's Liberal government, under Prime Minister Pierre Trudeau, is strongly nationalistic, believing in maintaining the ''difference'' between Canada and the US. In fact, most Canadians would agree on the need for Canada's retaining its political independence and not being drawn into the American melting pot.
The businessmen attending the conference, sponsored by the Greater Boston Fund for International Affairs, did not share the concern of the ''Canada First'' group, or its counterparts throughout Canada's history, that free trade would result in a sort of centrifugal force which would spin off various provinces at the eastern or western Canadian extremities into some sort of union with the US. They believe that politics need not follow economics to such an extent.
Whatever, Canadian businessmen are already starting to act on the premise of a free-trade area. Some Canadian companies have established major operations in the United States - Genstar in San Francisco, Seagram in New York, and Dominion Bridge in northern New England. Northern Telecom has located sizable production facilities in the US. To some degree this move to the US is also a desire to avoid what many Canadian businessmen see as an antibusiness environment created by a left-of-center Trudeau government.
Further, at least in the tri-regional area of Quebec, the Atlantic provinces, and New England, trade across the border is more dynamic for Canadian businessmen than is trade with the rest of Canada. Noted a background conference paper: ''For New Englanders, raw material and energy supplies are increasingly being derived from neighboring areas in Canada which are closest to this American processing market.''
Canada is a nation built in defiance of geography. Although the map shows Canada extending far north into the Arctic, most of the nation's population and economic activity are concentrated in a 200-mile-wide belt along the border with the United States. That belt stretches some 5,000 miles from the Atlantic to the Pacific, giving Canada something in common geographically with another ''thin'' nation, Chile. Trade and commerce, if left to the natural forces of economics, would tend to flow largely north and south across the Canadian-American border, rather than east and west across Canada.
Now North American geography is asserting itself more forcefully over politics.