CLAYTON K. YEUTTER, the US trade representative, has his lips sealed these days on the free-trade agreement (FTA) with Canada. He doesn't want to appear to be interfering in Canada's Nov. 21 election. The two leaders of the opposition parties, John Turner of the Liberals and Ed Broadbent of the New Democratic Party, have said they would tear up the deal signed by President Reagan and Prime Minister Brian Mulroney last Jan. 2, should they win the election. During the campaign, they have made strong charges against the pact.
But Mr. Yeutter and his colleagues who negotiated the deal believe they can't come to its defense. They fear that the Canadian opposition would portray their words as an invasion of Canadian sovereignty.
Julius Katz, however, is a private trade consultant under no such restraint. Now chairman of Government Research Corporation, he was for 25 years an official involved in US trade policy and negotiations. He has studied carefully this agreement, considered by the Reagan administration as potentially one of its greatest foreign policy achievements.
Here are the opposition charges and his rebuttal:
The deal is a ``sellout'' that would eventually destroy Canadian independence.
Mr. Katz: ``I don't think this has anything to do with political independence or sovereignty. The countries of the European Community haven't lost their independence. This is an economic cooperation agreement.''
Canada's social programs, including its pension system, unemployment insurance, and universal medicare plan, would be endangered under the FTA. American business would say these programs subsidize their Canadian competition.
Katz: ``It is astounding that this has been raised as an issue. There is nothing in the FTA, or the general practice of the United States or other governments, or in the GATT [the General Agreement on Tariffs and Trade, the body regulating world trade], which would hold that social programs are subject to countervailing duties. There has never been a case where generally applicable social programs have been treated as subsidies.''
Canada would have to export water to the US.
Katz: ``It is a canard. There is no requirement ... there be large-scale exports of Canadian water. That was made clear in the negotiations.''
During a visit to Ottawa earlier this month, Katz was surprised to see so little discussion of the Mulroney government's purposes in proposing the FTA. One goal was to make Canada competitive in a world market that is coalescing into trading blocs. Canada's own market of 26 million people is regarded as too small for efficient production of many goods. A second aim was to avoid growing US protectionism.
Katz doubts that American trade barriers are as great as Canadians fear. Nonetheless, he warns that cancellation of the FTA would present the prospect of ``rough times ahead.'' This would not arise from a spirit of retribution, he says, but because some existing trade problems would no longer be neutralized by the deal. For instance, a complaint by the governor of Michigan will automatically bring up for review the 1965 agreement on tariff-free trade in motor vehicles and parts. The FTA deals with his complaint.
And Canada will lose the ``dispute settlement mechanism'' provided in the FTA, which Katz regards as a ``distinct improvement'' for Canada over the existing American system.