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Cool Down Trade Friction With Canada



Trade relations between the U.S. and Canada have reached an acrimonious pitch just three years after their border opened to free trade. Ottawa accuses Washington of "harassment" and "hypocrisy" as a result of U.S. moves to slap stiff duties on Canadian imports, from autos to lumber to magnesium.

It's easy to understand Canada's reaction. A big part of the problem is the high-handedness of U.S. unilateral actions on trade issues when the rights and wrongs are far from clear-cut. Low-key negotiation and accommodation would better serve the interests of both countries. In the case of autos, for example, the Customs Service has ruled that cars imported from Honda Canada's Ontario plant don't meet the 50% North American content requirement for duty-free entry into the U.S. under the trade pact. But this is surely an issue to be worked out in discussions with Ottawa, not by U.S. ukase, since the trade pact does not spell out how North American content should be measured.

In the lumber and magnesium disputes, the U.S. argues that exports of these products are indirectly subsidized by policies such as British Columbia's ban on log exports and Quebec's cheap electricity rates. These are legitimate concerns, but the issues are deeply enmeshed in Canadian provincial economic-development policies. Here, too, negotiation seems a surer way to a satisfactory solution than confrontation. If the U.S. can't ease trade frictions with Canada, it may be hard-pressed to convince skeptics that an even broader free trade pact including Mexico is feasible.

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