Canada's Future Under Free Trade

Sonja Sinclair

Some people love it, others hate it, and many others are withholding judgment: "It" being, of course, the deal that Canadian and American negotiators hammered out in Washington a couple of weeks ago. But there is one thing about which everybody seems to be unanimous-with the possible exception of Clayton Yeutter: Canada couldn't have had a better negotiator than Simon Reisman.

As a matter of fact, I could never understand why some Canadians got so uptight when Mr. Yeutter said that there would have been a deal six months ago if it hadn't been for Simon Reisman. Surely he was paying our man a compliment-by admitting that he held out for a much better deal than anything he could have got six months ago.

But then Simon Reisman has had a lot of experience negotiating free trade agreements. Exactly 40 years ago, as a 28-year-old newcomer to the Department of Finance, he participated in negotiations that came amazingly close to producing a common market with the United States. Then in 1964, as we all know, he spearheaded the Canadian team that negotiated the Auto Pact. At one point during those negotiations, a leading member of the U.S. negotiating team said to one of his staff: "Who the hell is this guy, and why don't we have him on our side?"

Canadians are fortunate to have had Simon Reisman on their side throughout his distinguished public service career. I won't go into details about that career except to say that it culminated in a five-year stint as Deputy Minister of Finance, which is about as high as you can go in government without running for elected office.

But Simon Reisman is more than a distinguished public servant and master negotiator. He is in acute danger of becoming a living legend. Ottawa is awash with anecdotes about Simon Reisman-about how tough he is, how shrewd, how pugnacious, how softhearted when the occasion calls for it.

There are stories about his feud with a certain cabinet minister, though my spies tell me that Mr. Reisman and Pat Carney got along so well during the final stages of the negotiations that staff members began to wonder if they should chaperon the pair during an unscheduled stopover on the way back from Washington.

And then there is the story about an incident in a fishing club where the Reismans were spending a holiday a few years ago. A colleague offered Mr. Reisman a gin and tonic which he turned down. "What's the matter, Simon," said the colleague, "are you getting ulcers?" "Oh no," said his wife, Connie, "Simon doesn't get ulcers; Simon gives ulcers."

Ladies and gentlemen, it is indeed a pleasure and an honour to present to you Mr. Simon Reisman, Canada's negotiator extraordinaire.

Simon Reisman

It is a great pleasure for me to be here today. The Empire Club or The Canadian Club alone presents a formidable challenge. Their combined forces are awesome. And at the Royal York to boot. It is also a great pleasure to address you on a subject that is close to my heart and to yours: Canada's future under free trade.

Ten days ago we reached agreement on the essential elements of a Canada-U.S. free trade agreement. What was agreed will set the stage for securing Canada's future as a strong, sovereign and prosperous nation. Within the next several weeks we will flesh out and put in legal form the agreed elements of the accord. The agreement reached October 3, however, captures the essence of the accord.

Let me assure you in the strongest possible terms that what we achieved is a good deal for Canada. And nothing, not even letting the lawyers translate it into their own special language, will change that.

Reaching agreement was an historic occasion: historic in terms of Canada-United States relations; historic in the development of international trade relations; and historic in its unprecedented achievement of stability and the rule of law in trade relations between sovereign states.

What we achieved will stand as the largest trade deal ever negotiated between two countries. That is only fitting. Canada and the United States are after all the world's largest trading partners. Based on current trends, Canada and the United States will exchange more than $200 billion in goods and services this year. And that is without an agreement. Think what it will be in the future.

What we have achieved is a good deal for both countries. That is important. For the deal to last, both countries must be satisfied they have met their national interest. Both countries must benefit and be able to say they have made things better. I believe we did. This is a win-win agreement.

The agreement will make us richer and more able to pursue the finer things in life. It will lead to a richer Canada, a Canada more able to maintain a strong safety net of social programs, vigorous regional and economic development programs and a vibrant Canadian culture. Those things the scaremongers insisted were at risk in these negotiations were not only never at risk, but fully protected. We fully safeguarded those areas most sensitive to Canadians.

More than three years ago, long before I took on the challenge of negotiating this agreement, I told a conference at the Brookings Institution in Washington:

If the United States and Canada were able to work out a free trade agreement, it would be a good thing for both countries and a good example to the world. It would make both countries richer. It would also make us better neighbours, because it would remove many of the issues about which we have squabbling for many years.

A free trade arrangement would not weaken Canadian sovereignty or Canadian resolve to remain independent. Indeed, by enriching Canada and by raising its confidence, the agreement would strengthen Canada's purpose and its ability to survive as a strong free nation.

I believed that then, and I believe it more today. At that time, I did not believe it possible for this dream to come true during my lifetime, let alone that I would be asked to negotiate it.

But it did and I can tell you that I am a partisan and passionate believer in free trade. I reject the pessimism and fear of the proponents of a little Canada who wish to hide behind protectionist walls. I am a proud Canadian and confident in my belief that Canadians can compete with the best. But not with one hand tied behind their backs. What this agreement will do is cut the shackles of protectionism and fear. It will allow Canadian entrepreneurs to roll up their sleeves and take on the world as never before.

We entered these negotiations to achieve two broad objectives: we sought a bigger market and a more secure market. The government sought to give Canadian manufacturers secure access to a market of some 250 million so that they could plan and invest with confidence. We achieved those goals.

I think that this agreement, if it's approved by Congress and by the Parliament of Canada, will create a whole new environment in which Canadians work and live. It will affect their opportunities for jobs. It will affect the kind of work they do. It will affect the income they earn. It will affect the size of our population in a positive way. It will create a positive, constructive kind of environment with new opportunities for expansion and growth.

By the time this agreement takes full effect a decade from now, the average Canadian is going to find he has more money in his pocket and a wide choice of competitively priced goods and services on which to spend that money. He will find he has a better job and a more interesting job and is getting paid more to do it. That is no mean achievement.

This agreement is particularly significant for the younger people, for our children and grandchildren. I don't know if it will affect me very much at my age other than that I know I had a part to play in getting it. But it will certainly affect my children and my grandchildren: what they will work at, what incomes they will earn, how they will spend it and their willingness to stay in Canada and make their careers here. All will be affected positively.

Over the next few months, debate will rage in Canada based on two visions of our country. One is of an open Canada and a competent Canada where our people can stand up and compete with the best. The other is of a country that tries to shelter behind a wall of protection, that looks to the past rather than to the future. It is a matter of whether you have confidence in the country and its people, its prospects and its ability, or whether you are frightened, insecure and afraid to get out and compete.

Freeing up trade means loosening shackles. It means removing impediments and giving individuals an opportunity to express themselves fully to show their initiative and to be entrepreneurs. It means creating jobs. I can only say that those who oppose the agreement must think Canadians aren't good enough to compete in a bigger world. The Canadian people will confirm that they are wrong.

Having said this agreement is good for Canada and meets the main objectives set by the Government, what does it do and how will it do it?

Quite apart from the size of markets and volumes of trade affected, this agreement is precedent-setting in the range of issues covered.

We have agreed to eliminate all tariffs between us. This will be phased in, as many of you know, in stages based on close consultation with Canadian industry.

I know it is conventional wisdom to say that the tariff matters little today. Well, don't you believe it. By removing the tariff on both sides of the border on thousands of items traded between Canada and the United States, we will give Canadian industry new opportunities. It will increase the competitiveness of Canadian exports ranging from petrochemicals to furniture. It will lower costs to Canadian consumers of everything from food and wine to machinery and computers.

We will establish improved conditions for trade in agriculture. All tariffs are eliminated. There will be new opportunities for exporters of beef, veal and pork-a major priority in Western Canada. We have secured undertakings from the U.S. not to intensify quota restrictions affecting Canadian exports of sugar-containing products and not to introduce any restrictions on grains. Canada has, meanwhile, maintained intact its marketing board system for dairy, poultry and eggs.

On trade in energy, we have agreed to reciprocal concessions to remove barriers to trade in oil, gas, electricity and uranium. Our objective was to assure the freest possible bilateral trade in energy. With this agreement, we will have secured our access to the U.S. market for Canadian energy exports.

At the same time, we have maintained our ability, should we judge there to be a real need, to take measures to prevent the overexploitation of Canada's nonrenewable energy resource.

It stands to reason, if we want free and secure access for our energy products, that we agree not to abuse our best customer in a real shortage situation. This has been criticized. Let me remind you that we already have similar commitments under the International Energy Agency. That is what good trading partners do for one another.

We have also agreed to reduce and remove barriers to trade and investment in services. We have established for the first time ever a contractual code of rules to cover trade in services. Any new measures taken by either government will in future have to conform to the reciprocal undertaking to extend national treatment to each other. Additionally, we have made some progress in rolling back existing barriers in financial services, enhanced telecommunications and architectural services. More such sectoral accords may be reached in future.

We have agreed to provide for a more certain and open investment regime, while preserving our right to review significant takeovers and maintain important Canadian ownership requirements now in place.

We have a specific agreement which facilitates travel by business and service personnel between the two countries. Canadians will be able to sell and service their sales as never before.

We did not get the big procurement deal we sought. The Americans were not ready. But we made a start. Federal procurement rules will be eased. This will open about $650 million in Canadian contracts to U.S. bids, and almost $4 billion in U.S. contracts to Canadian bids. The two countries have also committed themselves to further easing of procurement rules in the future.

All these commitments will lead to a more open exchange of goods and services between us and a more rational pattern of investment. By eliminating barriers at both borders, we will both emerge winners. In both countries, industry will be able to specialize and increase productivity.

But Canada also wanted secure access. Canadians wanted to be sure that when they invested to serve the North American market, they would not be subject to the whims of American courts and regulators. They wanted a fair deal. They complained that U.S. trade laws were being used capriciously to harass them. They had lost confidence in the fairness of these laws. Without such security, investors will inevitably be attracted to the safety of the larger market.

The United States is on a protectionist tide. That is not going to be reversed soon. The new omnibus trade bill, when it comes out, will be in a protectionist direction. The choice for Canadians is to be on the inside of that protectionist wall or on the outside.

Most Americans believe Canadians are fair traders. We're not the main target of their complaints of being treated unfairly. But their anger has sideswiped us and given many opportunities to those who have a bone to pick with Canada.

In general, trade law and practice, both national and international, afford far greater rights and protection to domestic producers than to exporters or consumers. What we have now achieved is a significant step toward correcting this imbalance.

The two governments have agreed to a unique dispute settlement procedure that guarantees fair interpretation and impartial application of their respective antidumping and countervailing duty laws. It provides an insurance policy and introduces accountability to U.S. regulators and investigators. In effect, we have established a watchdog to ensure that the laws are interpreted fairly and applied properly.

New limits are also placed on the use of emergency trade laws against import surges, with binding arbitration, if necessary.

Either government may seek a review of an antidumping or countervailing duty determination by a bilateral panel with binding powers. Disputes with the United States will be assessed on the basis of U.S. law, those with Canada on the basis of Canadian law. Since this joint review will replace existing rights of appeal to our respective federal courts, this procedure will not add another level of litigation to the already complex, costly system of trade remedy law. Moreover, such a panel will be oriented toward practical, commercial policy considerations rather than fine points of law.

The success of this review procedure will not be counted in the number of times it is invoked, but in the number of petitions it discourages and the number of politically inspired decisions it halts. That is the essence of a successful watchdog.

This system constitutes a very strong beginning. But we have also agreed that in the next several years, Canada and the United States will develop "a substitute system of laws in both countries for antidumping and countervailing duties." It is intended that, by 1996 at the latest, U.S. and Canadian trade laws respecting each other will be replaced by mutually developed North American trade rules. In sum, within 10 years of entering trade negotiations, the existing system of unilateral laws, unilaterally interpreted and enforced, would be replaced by jointly formulated rules, jointly enforced within North America.

A Canada-U.S. Trade Commission will manage the agreement. No new laws affecting bilateral trade between the countries may be passed without consultation and joint review, if necessary, after January 1, 1989.

For the period between now and when the agreement enters into force, we have agreed to a standstill. We have agreed, to the fullest extent possible, to behave as if the agreement is already in force.

Americans will see this agreement as mutually beneficial. There are many Americans, including congressmen and senators, who will want to complete this deal with Canada.

But some will have to swallow hard on the question of the apparatus we put in place to settle disputes. For the first time ever in history, the Americans have accepted the idea that a binational institution with a neutral chairman or a neutral judge will be the ultimate appeal against actions by them under their law. That is very big. They will see this as a major step. I am confident that when they see it in its proper perspective, they will accept it as eminently fair and reasonable.

Canadians will come to realize that it is a major step for this great power, the United States of America, 10 times the size of Canada in population, 11 or 12 times the size of our economy, a major world power, to agree with its neighbour that in the end, in the last analysis, if a dispute develops between them, that dispute will be resolved by the two countries jointly and with a neutral chairman if we need one.

And what of the naysayers and the scaremongers? Did they have a point? They said we would bargain away our culture; that we would put our social programs at risk; that we would give away the right to promote regional development; that we would destroy Canada's farm marketing systems; and, unkindest cut of all, that I would gut the Auto Pact. They turned out to be wrong, misinformed and mischievous. The agreement safeguards areas sensitive to Canadians. And have they recanted? No, they continue to whine and shilly-shally.

The agreement does not threaten Canada's social programs. Indeed, social programs were never at issue. What "~,

we have achieved, however, will make Canada more able to afford quality social programs for all Canadians.

The agreement will not in any way limit the capacity of the government to nurture Canada's cultural industries and policies. We have safeguarded our right in Canada to pursue unique cultural objectives. Again, there was never any question that the agreement would undermine Canada's cultural identity. And again, the wealth which this agreement will generate will benefit Canadian support for the arts and for our cultural industries.

On the issue of regional development, and the question of subsidies, we shall continue to be able to pursue and promote our programs of regional development in Atlantic Canada and the West, regions of the country that have unique problems and possibilities. We have safeguarded our right in Canada to combat regional disparities. This is such a fundamental part of the essence of Canada that one has to question the motives of people who cried wolf about this one. What did they hope to achieve?

The agreement does not threaten the automotive industry. In fact, the essential feature of the Auto Pact-duty-free access to the United States-will be more secure in a comprehensive deal that also stiffens North American content requirements. The Auto Pact is preserved and we have agreed on rules of origin which will provide new opportunities for employment and production in North America in this vital sector. Both domestic and offshore assemblers and producers of parts can prosper under the new arrangement. We honoured our pledge to retain the Auto Pact and only entertain suggestions which would make things better.

The agreement exempts Canada's brewers. This is a mixed blessing. I am aware of the higher cost structure faced by the Canadian brewing industry. But I would hope that once interprovincial barriers to trade in beer have been removed, Canadians will want to see the benefits of open trade and competition extended to this industry.

The agreement does not threaten agricultural marketing boards or the supply management system. But it does give Canada's farmers better and more secure access to the richest market in the world. I am referring particularly to livestock and red meats, so vital to our Western economy.

The Prime Minister made it clear from the outset that we did not want a deal for the sake of a deal. We wanted an agreement that reflected a clear Canadian bottom line-in terms of what we needed and what we were not prepared to negotiate. We met that bottom line.

That led to some agonizing decisions but, in the end, the government made the right choices. We got a good deal, a balanced deal and a fair deal. The process is not over but we have dealt with the major elements and the results are overwhelmingly positive.

May I interject a personal note here. I considered the Prime Minister's confidence in me a great honour. For someone who worked for 40 years to open markets and reduce barriers, it is a singular distinction to be allowed to crown my career with this agreement. I want to say that it was a great team effort. Throughout the piece, I had the support of a first-class group of dedicated Canadians who shared my dream. But the real honour should go to Brian Mulroney, a Prime Minister who had the vision and the courage to see this challenge through to its conclusion. This is his agreement.

But it is not just an agreement for Canada and the United States. It is an agreement which strikes out against protectionism worldwide. It is an example to the world and a catalyst to the Uruguay Round of multilateral trade negotiations. What we achieved together bilaterally, we will seek to carry forward with all of our trading partners at the GATT table in Geneva.

Protectionist and inward-looking forces in both countries will now try to mobilize to defeat this historic agreement. They will not succeed. It is a political fact that the forces of protectionism are generally more focused, more vocal and better organized than interests that benefit from free trade. But their fears will not withstand the dedication and vision of those who see a great future for Canada.

On two occasions over the last century, similar initiatives have been defeated by the forces of protectionism and negativism. This time the hard work and determination of those who prefer competition and challenge to protection and restriction will ensure that this historic initiative comes to fruition.

The rest of the world is not standing still. We cannot afford to rest on our laurels if we wish to survive and prosper in the 21st century.

Our country faces an historic challenge. Let us take it up and move forward together.

Ronald Goodall

Your service to this country, Mr. Reisman, outlined by Sonja, as a junior and senior member of trade negotiating teams, as a deputy finance and industry minister and in many other governmental capacities, has spanned a number of years and is indeed well known and recognized.

The recent result of the free trade negotiations, although awaiting various approvals, has given you a certain amount of personal satisfaction at this stage of your career. I do not believe this is the end of your career as you stated.

You seem to have had a fair share of difficulties in these negotiations, least of all, I suppose, making sure that your opposite number really understood what was being negotiated! Indeed, I believe you were described as "abrasive and negative:'

The dictionary seems to define abrasive as "capable of rubbing or grinding down" and negative as "refusal to accept or countenance." I am glad you were abrasive and negative and not smooth and positive!

I chose Canada for my home. When I return to Canada from abroad I sense a certain unique difference between Canada and other countries. A difference created by a culture, a history, and a product of trade patterns. You have assured me that my perceived difference has been suitably protected.

It has been said by Benjamin Franklin, the American statesman and philosopher: "No nation was ever ruined by trade."

Media opinion to date seems to be supportive of free trade. But the selling of and the debate on the trade agreement has just begun. Your address today has been most helpful in assisting us to understand and decide upon the merits of the agreement. In fact, l believe both Sonja and I will be experts on free trade by the time our presidencies expire.

On behalf of The Empire Club of Canada and The Canadian Club of Toronto, I wish you well in your future endeavours and thank you generally for your years of service to this country and specifically for your presentation today.