A rchive Date
[ 23-05-2005 ]
Category
[ International Relations ]
sub-Categoy
[ Canada ]
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[http://www.canoe.ca/TimeCanada0011/27_time15.html
ELECTION 2000
When the Counting Is Over
 Whoever wins in Florida, Canada could face a rougher ride on trade policy
By STEPHEN HANDELMAN
NOVEMBER 27, 2000, VOL. 156 NO. 22
To figure out what difference the hairsplitting outcome of the U.S. election makes to Canada, a good place to be last week was Murray Weidenbaum's office in Washington. Weidenbaum, a Republican who led Ronald Reagan's Council of Economic Advisers in the 1980s, chairs the U.S. Trade Deficit Review Commission. For the past 17 months, that obscure body has been quietly examining the most sensitive aspect of the U.S. economy: the enormous trade imbalance with the rest of the world. Last Tuesday, while the rest of the world had its eyes on Florida, Weidenbaum invited members of Congress to his North Capitol Street headquarters for a preview of the commission's 293-page report on the problem. The partisan tussle over what is enshrined in its pages made the thundering vote wars in Florida look like a sleep-away camp. Said a weary Weidenbaum: "They all took this very seriously."
So should Canadians. The U.S. current-account deficit, which measures overseas financial transactions as well as trade in goods and services, has soared from a relatively puny $29.5 billion in 1991 to an unheard-of $450 billion this year. Canada was responsible for about 10% of the U.S. deficit last year, or $32.1 billion, in an overall trade relationship worth an estimated $365 billion. And few countries have as much to lose as Canada if the U.S. gets heavy-handed about turning those numbers around.
Deficits are a mixed blessing, according to the Weidenbaum commission report. They have fueled the U.S. role as the main engine of the global economy during the past decade; yet, as the 12 commissioners noted, they have also cemented Washington's awkward position as the "world's largest debtor." Running continued deficits, which have to be financed by investment from abroad, could gradually undermine the U.S. economy - and pull the rest of the world down with it. "It would not be prudent," the group concluded dryly, "to dismiss the possibility of a 'hard landing' and the danger that the consequences [of growing deficits] could be severe."
It is very much in Ottawa's interest for the U.S. to avoid this fate. The Canadian economy depends so heavily on south-of-the-border trade - more than 80% of exports go to the U.S. - that the effects of a U.S. slowdown would be disastrous. But some of the remedies offered by the commission would be almost as bad as a slump. One is a toughening of Washington's stance against trading partners that pursue policies that make U.S. products uncompetitive and allegedly distort the open market - policies ranging from government subsidies to the encouragement of cheap labor. Japan, which accounts for $73 billion of the U.S. deficit, is a proposed target. Canada could be too.
The six Democrats on the commission singled out a particularly touchy issue - the so-called runaway film production of Hollywood studios that take advantage of a cheaper Canadian dollar and provincial and federal incentives to shoot big-budget films up north. That put $758 million into Canadian pockets last year and left U.S. unions simmering over the loss of an estimated 20,000 film jobs. In a separate statement included in the report, the Democrats called this a "classic example of an unfair trade practice" and proposed legislation to penalize U.S. filmmakers who shoot abroad. Said the statement: "Such behavior will only be curtailed when foreign governments begin to believe the U.S. is willing to take strong action to curtail predatory practices toward American industries."
Ouch! The Weidenbaum report revealed a split between Democrats and Republicans over just how tough to be on Washington's trade partners, with Democrats usually taking the tougher line. Republicans claimed that many of their opponents' ideas, such as linking future trade negotiations to labor and environmental guarantees, would undercut the U.S. goal of broadening the global economy. But George W. Bush's strategists have mapped out a "hemisphere energy policy" that involves building an oil pipeline from the Alaska Arctic Wildlife Refuge south across the Yukon to U.S. markets, a prospect that gives Ottawa environmental fits.
The post-election debate in Weidenbaum's office made clear that tougher Washington trade policies of several varieties could be on the horizon, propelled by the U.S. electorate's mounting economic insecurities. Canada will be "cut less slack" in trade negotiations with the U.S. regardless of which party controls the White House or Congress, predicts David Rudd, director of the Canadian Institute of Strategic Studies in Toronto. Weidenbaum agrees. "Even if there's no mandate for bold initiatives, we reached a consensus on doing a better job with trade enforcement," he says, "and that means making sure other countries take it seriously."
Trade policy is barely on the radar screen of politicians wrapping up the Canadian election campaign. But when all the voting - and counting - is over, they'd better be ready for some chilly trade winds blowing up from the south.
 World Fact Book (CIA)]
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