Globe and Mail
Thursday June 3rd 2004
By Drew Fagan
Ottawa Bureau Chief
The Conservative Party is expected to propose that Canada and the United States deepen their ties by moving toward a European-style economic relationship.
A version of the Conservative platform, which is to be released on Saturday, states that Canada should "enhance our NAFTA relationship with the United States."
It specifies that the two countries should pursue common trading rules, going beyond tariff elimination under Canada-U.S. free trade. Such measures would essentially prepare for a customs union: a North American trading bloc with the rest of the world.
The document goes further, stating that closer ties with Washington should also include "enhanced common labour, environmental and security standards."
This would put Canada well on the way to much closer integration with Washington, trade experts suggested yesterday, and would mirror some steps taken in Europe in recent decades (although a common currency is not mentioned).
"It's gutsy, that's for sure," said Michael Hart, a professor at Carleton University. "I'd also argue that it is responsive to the challenges facing the Canadian economy."
But it may bring sharp ripostes from the Liberal Party and the NDP.
Liberal Leader Paul Martin has accused the Conservatives of wanting to mimic U.S. policy in areas such as taxation and international relations, causing some concern in Washington about his bilateral intentions. The Conservative platform, although it never actually uses the term "customs union," may well give Mr. Martin more ammunition in what could amount to a mini-replay of the 1988 free-trade election campaign.
Conservatives emphasized, however, that some Liberals advocate the steps they are suggesting.
MP Scott Brison, now the Liberal parliamentary secretary for Canada-U.S. relations, suggested something similar when he ran for the leadership of the Progressive Conservative Party last year. His viewpoint didn't change after he switched to the Liberals. But Mr. Martin, despite speaking repeatedly about the need to improve Canada-U.S. relations, has apparently not accepted an agenda of deeper economic relations.
"There's some general stuff [in the Liberal platform] but its nebulous," Mr. Brison acknowledged. "It is a hard initiative to put on a bumper sticker."
The Liberal foreign-policy platform to be released today is expected to focus on three broad themes: peace and nation-building; strengthening military preparedness and fighting the global AIDS pandemic.
A customs union entails a level of economic integration beyond what is involved in a free-trade agreement such as the trilateral NAFTA.
Free-trade pacts eliminate tariffs between countries, but allow them to pursue unco-ordinated trade policies with the rest of the world. Almost all tariffs between Canada and the United States were eliminated within 10 years of the 1988 free-trade pact.
A customs union builds on free trade through the co-ordination of policy on trade with the rest of the world. Tariffs imposed on worldwide imports into the trading bloc are harmonized over time.
This eliminates the need for so-called rules of origin, which set out how much of a good must be produced domestically to qualify for duty-free trade. Essentially, all products -- those produced inside the trade zone and those imported from outside -- circulate freely.
The core countries of what is now the European Union took this step in 1957.
The primary benefit for a country such as Canada, trade experts say, would be to simplify border enforcement. Studies have found that these procedures can cost as much as 3 per cent of gross domestic product. This translates into billions of dollars, particularly since the Canadian economy exports to the United States roughly one-third of everything it produces.
Canada and the United States already impose similar tariffs on most products from abroad, though there also are some significant differences.
The drawback for Canada, experts say, is that a customs union would likely make it more difficult to pursue an independent trade policy with those countries where Canadian and U.S. policies diverge -- such as Cuba.
The federal bureaucracy has been studying the impact of a Canada-U.S. customs union for some time. A recent roundtable organized by the Policy Research Initiative -- essentially the federal government's internal think
tank -- concludes that negotiation of a full customs union might not be practicable immediately, but that steps toward this end would likely make economic sense.
The leaked Conservative platform also calls for the Canadian ambassador to Washington to have cabinet status, and argues that anti-American comments from some Liberals last year have complicated resolution of cross-border disputes such as softwood lumber.
"The Canadian government must learn to disagree without being disagreeable," it states, paraphrasing a comment coined by John Manley, the Liberal cabinet minister who quarterbacked bilateral relations after the Sept. 11, 2001 terrorist attacks.