Canada keeps focus on trade

From the heart of western Canada, the global marketplace looks a little different.

This region, just north of Washington, Idaho, Montana and North Dakota, includes the prairie provinces of Manitoba, Saskatchewan and Alberta, and the coastal province of British Columbia.

These four provinces contain about 30% of Canada's 26 million people. Unlike the rest of Canada, they have strong links to the Pacific Rim.

Two of these western provinces - British Columbia and Alberta - are, together with Ontario, the wealthiest in Canada. These are the provinces that produce the wealth to support subsidies received by other provinces as part of the central government's "equalization" program.

For decades, the western provinces have wanted freer access to markets in the western U.S., especially for products like plastics made from their oil & gas.

In Canada, a great deal of attention is being given to the Free Trade Agreement signed with the U.S. on Jan 1, 1989. Yet it hardly has hit the radar screen of most Americans. In 1988, the agreement was the key issue in an emotional national election in Canada.

Similarly, the implementation of the agreement continues to be a subject of intense interest here. So far, after two years experience with the agreement, it appears that U.S.-Canada commercial relations are best described as "business as usual". Canada has not become a hewer of wood and provider of water, as many Canadians feared.

In fact, it appears that during the first two years of the agreement, Canada's value-added exports to the U.S. have slightly increased, despite the economic slowdown on both sides of the border.

Canada has watched the proposed free trade agreement developing between the U.S. and Mexico, and asked to join the negotiations.

This trilateral approach to a North American free trade agreement is especially important for Canada. Reason: if the U.S. signs a series of purely bilateral trade agreements - creating what the Canadians call a "hub and spoke" system - the U.S. would be the hub while Canada, Mexico, Israel and others become spokes.

In this system, the U.S. would be the only country with tariff-free access to the markets of each participating country.

Under this kind of system, spoke countries would suffer because third countries would locate manufacturing or service facilities in the U.S. to get tariff-free access to all the spokes. There would be no incentive for third countries to invest in the spoke countries.

Canada's participation should help negotiations. It has experience negotiating a trade agreement with the U.S., and is in good position to play a moderating role between the U.S. and Mexico.

Canada has a large stake in the successful expansion of a North American market. It needs access to larger markets for its industries, especially in view of renewed concern that Quebec may withdraw from the Canadian federation.