In Canada, The Free Trade Deal Is Hardly Home Free

In his Aug. 20 acceptance speech to the Republican convention, President Bush patted himself on the back for creating a free-trade area stretching "from Manitoba to Mexico." Perhaps he should have added, "or at least from Minnesota to Mexico." For the newly minted North American Free Trade Agreement (NAFTA) faces much more bitter opposition in Canada than it does in the U.S. or Mexico. And the anti-NAFTA sentiment is growing.

Both the Liberal Party and the other main opposition party, the New Democratic Party, are against the treaty as it now stands. So is a broad coalition of Canadian organized labor, environmental, and nationalist groups. Even more worrisome, many of these critics are using NAFTA as a vehicle for attacking the existing U.S.-Canada Free Trade Agreement, signed in 1988. "The real debate will be on the fta, which has been a disaster for Canada," says Bob White, the President of the Canadian Labor Congress, the main labor group.

Many Canadians blame the trade agreement with the U.S. for the economic ills of the ongoing recession, which has meant the loss of 350,000 manufacturing jobs. A recent Gallup Poll shows that only 4% of the Canadian public supports the current free-trade deal with the U.S. as it stands. Sentiment is running 2 to 1 against the broader NAFTA agreement.

LOST TO AMERICA. To many observers, Canadians seem on the verge of shooting themselves in the foot. NAFTA has major sweeteners for Canada on local content and other issues. If Canada rejects it, the U.S. and Mexico will likely go ahead with their deal. Because only the U.S. would be able to ship Sony televisions or Toyotas duty-free to both Canada and Mexico, it would have a huge edge over Canada in attracting foreign transplants. "We would be left up here in the cold north when hemispheric trade expands," warns Thomas d'Aquino, head of the Business Council on National Issues.

An attempt to roll back free trade with the U.S. would threaten $175 billion in cross-border business. By contrast, Canada's trade with Mexico is only $2.5 billion a year.

Prime Minister Brian Mulroney has the votes to push NAFTA through Parliament. But to do so might be suicidal for his Progressive Conservative Party's chances in the general election, which he must hold by the end of next year. With a pitiful 16% approval rating, Mulroney is already in deep trouble. If he is defeated before getting NAFTA approved, the deal is "dead as far as Canada is concerned," says Gordon Ritchie, a former Canadian trade negotiator.

BUSINESS PUSH. While Mulroney won a come-from-behind campaign in 1988, many political analysts predict he will lose in 1993, producing either a Liberal government or an New Democrat-Liberal coalition. Such a bloc could be especially bad for free trade since the New Democrats want to rip up the U.S.-Canada deal--as well as block NAFTA. Even the less militant Liberals "would seek to renegotiate," vows Member of Parliament Herb Gray, the Liberals' finance expert.

Still, it is too early to count Canada out. If Mulroney loses, Canadian business will push to join NAFTA and fight attacks on the fta. Junking the fta "would be enormously damaging," warns International Trade Minister Michael Wilson. In the end, Canadians may figure out that they have no choice but to sign on. But there's a bruising battle ahead.

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