With the United States, Mexico and Canada poised to negotiate a North American free-trade deal, a majority of Canadians oppose such a pact and fear it will hurt their nation.
Most Americans and Mexicans believe their countries would profit from a continental free-trade zone stretching from the Arctic to the Yucatan, but polls suggest more than half of all Canadians do not.
Moreover, they appear to have unprecedented doubts about the original U.S.-Canada Free Trade Agreement (FTA), now in its third year of a 10-year phased implementation period.
That pact was ”a bad deal for Canada,” charged Audrey McLaughlin, leader of the opposition New Democratic Party in Parliament. She warned that the proposed trilateral accord would ”make a bad deal worse.”
Despite figures showing that Canada`s trade balance with the U.S. has been improving of late, some blame free trade for plant closings, production shifts to the U.S. and the loss of more than 260,000 Canadian jobs. They claim a three-way deal with Mexico would further harm Canadian labor markets unable to compete with Mexican wage rates that can average one-seventh the rates further north.
”We don`t want to suffer anymore like we have suffered with the Americans,” said Shirley Carr, president of the Canadian Labor Congress, representing 2.2 million workers. ”We don`t want to be dragged down to the lowest common denominator sort of market.”
But FTA proponents argue the recession has claimed 150,000 jobs or more, clouding clear analysis of the effects of free trade, while expanded trade eventually will bring more investment, opportunities and a higher standard of living.
Progressive Conservative Prime Minister Brian Mulroney is expected to push any new trade deal through Parliament with the overwhelming backing of the business and banking communities.
”The government of Canada believes that a Canada-U.S.-Mexico free-trade agreement can prove to be in the best interests of all concerned,” Mulroney said in welcoming Mexican President Carlos Salinas de Gortari to Ottawa last month to promote the pact.
President Bush is hoping to get permission from a reluctant Congress in the coming weeks to negotiate the deal quickly. It would create a North American market of more than 360 million people with a gross product topping $6 trillion (U.S.), dwarfing even the 320 million consumers of the European Economic Community.
Mulroney, who won re-election in 1988 by making the contentious issue of free trade the centerpiece of the campaign, is determined to preserve the benefits his government won in the FTA and to keep Canada a part of an expanding continental market.
But polls released in the last six months have registered a complete reversal of support for the FTA since it became effective in January 1989.
A poll taken late last year by the Angus Reid Group of Winnipeg showed 57 percent of Canadians felt it was hurting the country. A survey taken by Gallup Canada Inc., of Toronto, showed that 52 percent of the public opposed it.
As for the proposed trilateral pact, Gallup found last month that 53 percent of the adult public polled felt a continental free-trade zone would be counter to Canada`s best interests. At the same time, 72 percent of Americans and 66 percent of Mexicans polled judged such a deal would benefit their respective nations.
”A lot of people contend that every job loss you see can be laid at the feet of the FTA, or that companies are moving south of the border because of the FTA,” said Lloyd Atkinson, chief economist with the Bank of Montreal.
But he blamed the job flight at least in part on Canada`s deep recession, highly concentrated in the manufacturing sector. He also pointed out that the U.S., with 10 times Canada`s population of 26 million, had suffered a loss of about 1.8 million jobs in the manufacturing sector in recent years.
Atkinson said Canada has suffered a huge loss of competitive advantage vis-a-vis the U.S. because of interest rates and increases in manufacturing wages in Canada that have far outpaced U.S. equivalents. He said unit labor costs were up 25 percent in Canada, compared with the U.S., while the Canadian dollar had appreciated 20 percent against the U.S. dollar in recent years.
Last month, Mulroney said Canada`s ”fundamental illness” was its declining productivity and competitiveness. He put special emphasis on the problem in a major cabinet shuffle he made to address renewed threats of separation by French-speaking Quebec.
Michael Wilson, who took over as minister of both industry and international trade, said deals like the FTA will form ”the core of our strategy for building prosperity at home through trade abroad.”
Wilson brushed aside concerns that the Americans would use the trilateral negotiations to reopen or dilute provisions of the FTA, such as Canada`s special measures protecting its cultural industries. He also vowed a new deal with Mexico would not erode Canada`s high environmental, labor or safety standards.
Many Canadians doubt Canada`s ability to compete in a huge continental market where cheap Mexican labor, particularly in the automobile industry, could undermine the economic engine that drives Canadian industry.
But Wilson insisted a North American pact would help make Canadian companies who move some production to Mexico, for example, more competitive on this continent and abroad. It would also open the Mexican market to Canadian industry.
A recent study by the Bank of Montreal on a potential North American free-trade zone, backed up the government`s position.
Acknowledging that low wages gave Mexico a competitive advantage, the study said that there are many other potential sources of comparative advantage, and this was about Mexico`s only one.
Canada and the United States, the study said, would find little competition from Mexico when it comes to such areas as labor skills, product quality, technology, marketing and management ability.
Another recent study on free trade, this one by the Royal Bank of Canada, concluded that ”for most industries experiencing difficulties, the FTA has not been a major contributor to those problems. The FTA may even have moderated the impact of the recession on most industries.”
The study found large adjustments made in manufacturing industries like furniture, textiles and clothing-where tariff barriers have been traditionally highest.
Still, it concluded, ”While some companies have moved (away), others have come to Canada. There is no clear proof as yet that Canada is, on balance, losing manufacturing jobs and investment because of free trade.”
Robert Miller, managing director of the State of Illinois Canadian office in Toronto, said that ”Ontario is about to go through a type of recession that Illinois went through in the mid 1980s (with) a very painful
restructuring of its manufacturing sector.”
”Most people in the business community still support the FTA. There`s no doubt about that,” said Laurent Thibault, president of the Canadian Manufacturers` Association. But he said ”the jury is still out” on the long- term effects of free trade, still eight years away from full implementation.
