In a switch, Canada weighs agreements with US to free up trade with its big partner
Canada is considering certain free-trade agreements with the United States, in an apparent reversal of its earlier policies. In the early 1970s Prime Minister Pierre Trudeau used to dream of a Canadian economy less dependent on the US, with fewer Canadian companies controlled by American parents, and more trade with Europe and Asia. He has loosened foreign, if not American, control of the economy, mostly by buying the Canadian assets of foreign oil companies, such as British Petroleum and Fina, at inflated pre-oil-glut prices.
But his great dream of ''The Third Option'' - more trade with the European Community and less with the US - has gone nowhere. Economic reality now has Mr. Trudeau's Liberal government more conscious that the US is Canada's greatest trading partner by far.
Canadians live right on top of the Americans, their country a kind of sideways Chile, with the populated band hardly ever stretching more than a hundred miles from the US border. Canada's biggest cities - and biggest markets for American goods - are all within 100 miles of the border. So are most of the Canadian industries that sell to the US.
The trade between Canada and the US is the largest between any two countries. In 1981 it was worth $110 billion, according to the Canadian government. Trade with the Americans represented 66 percent of Canada's exports and 69 percent of its imports. This leaves little room for Mr. Trudeau's ''Third Option.''
According to a recent study by the Canadian Senate, between 18 and 20 percent of everything produced in Canada is sold to the US. Canada is also important to the US, accounting for 17 percent of American exports and 18 percent of imports.
Ottawa has been looking at the numbers and has done a flip-flop on the old third-option policy. It is now studying the Senate discussion paper on trade policy, which favors more trade with the US.
Canada's minister of external trade, Gerald Regan, forecasts limited free trade with the US in certain ''sectors'' such as urban mass transit (Canada has sold subway cars to New York City), as well as textiles and clothing. Canada already has a free-trade agreement with the US in cars under an auto pact. But Mr. Regan wouldn't go so far as to suggest a North American Common Market. ''The government believes that in the current circumstances there is no conclusive evidence of the need for a radical shift in approach such as pursuing the option of full free trade or customs union.''
The Liberals learned their lesson on that score in 1911, when Prime Minister Wilfrid Laurier (a Pierre Trudeau look-alike) lost an election fought over the issue of free trade with the US. The Liberals were then in favor of it.
George Van Roggen, a liberal member of the Canadian Senate, who is an advocate of free trade with the US, was critical of Mr. Regan's plan, because it deals only with areas in which Canada has a competitive edge. (The Senate is an appointive rather than elected body, with far less power than its American counterpart.)
''From the US perspective where are the benefits?'' Mr. Van Roggen asked.
A Toronto broker was even more critical. ''Of course they want more trade with the US; the banks can't afford to deal with countries such as Romania and Brazil.''
But the American government seems to like the idea.
William Brock, the special trade representative for the US government in Washington, endorsed the policy paper, saying his staff is looking for potential sectors for free trade ''so that, should the Canadian government come forward with it, we will be prepared to enter into substantive discussions.''
In 1981 Canada had a current-account deficit of $5.35 billion. Last year there was a surplus of $2.67 billion, the first surplus since 1973, mainly because the weaker Canadian economy took in fewer imports from the US. Lower oil prices also meant that Americans were buying the gas-guzzlers that Canadian branch auto plants were turning out.
Canada also runs an annual tourist deficit of about $2 billion, mainly because of Canadians skipping to Florida and Hawaii to escape the cold winter. No amount of bargaining on free trade is likely to change that figure.