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Free trade? It still comes with a price tag

  • October 3, 2006 9:02 pm

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Most politicians are keen to take credit for the Canada-U.S. free-trade agreement. So why am I still regularly paying duties on purchases when I cross the border?

My initial reaction to free trade back in the ’80s, when the project was being debated, was banal glee at the notion that I could now order duty-free from American mail-order catalogues.

Well, things didn’t turn out that way. And not just with mail orders.

Recently, when I was returning from New York, a stern looking woman in a customs uniform eyed me dubiously when I told her I’d kept to the $200 spending limit for Canadians visiting the U.S. for less than a week: “What exactly did you buy?”

“Well, a few T-shirts … oh, and a pair of shoes …”

What I felt like saying was: “Hey, I’m not a terrorist; that’s all that should concern you. Haven’t you heard about free trade between Canada and the U.S.?”

The fact is, Ottawa, despite free trade, retains authority to impose quotas on purchases residents bring back into the country duty-free, and does.

Beyond which, “free trade is not free trade on literally everything,” explains Andre Lemay, of the International Trade Department in Ottawa.

“Countries can carve out or put exceptions or exemptions for certain areas, and sectors or subsectors. Some tariffs are still in place.”

And on procurement, any level of government on either side of the border has no obligation to accept tenders from the other country.

Canadian businesses also complain of unofficial trade barriers — cumbersome customs clearance and inspection procedures.

They point to discriminatory regulations that make it difficult to operate in the U.S. market. For example, the introduction of labelling or packaging requirements, new health and safety, or environmental regulations the Americans might suddenly impose.

The softwood lumber dispute, which began in 2001, is cited as a perfect example of a discriminatory regulation — the Americans unilaterally deciding our forestry practices don’t meet their standard of free enterprise and imposing anti-dumping and countervailing duties.

Free trade between Canada and the U.S. did wipe out duties on many categories of goods and certainly has had its upside. At the launch of the 1989 agreement, 75 per cent of Canada’s exports went south. Today more than 87 per cent are U.S. bound.

So, we do have a readier market closer to home. That sounds positive though it does have a downside. We’ve become so reliant on U.S. trade, Canada is all too vulnerable to the whims of the elephant.

Many, for example, have been wondering if Canada’s refusal to participate in the Iraq war and a recent spat between the Chretien Liberals and the Bush Republicans would hurt trade relations.

According to a new survey by the Fraser Institute, this is precisely what has happened.

The study of 107 firms of varying size, operating in various sectors, across Canada, reveals 72 per cent of exporters feel deteriorating relations between the two countries have indeed damaged their ability to export to the U.S.

This compares to 45 per cent in a similar survey a year ago who said they had encountered unofficial trade barriers.

That increase is “shocking and disturbing,” says Fred McMahon, of the institute who conducted the survey. “This could develop into a serious economic problem for Canada. A third of everything produced in Canada is exported to the U.S.”

TitledThe Unseen Wall, Mr. McMahon’s publication says a spike in customs delays and unofficial trade barriers was anticipated right after 9/11 but would’ve been expected to diminish thereafter. This hasn’t happened. If anything, the situation is worsening over time.

The Fraser Institute is arguing for a more comprehensive trade agreement with the U.S. — for freer trade — and more aggressive Canadian action on the security file to ease American border concerns.

Personally, I’ll know we have a true free trade system when I can order a few L.L. Bean turtlenecks each winter and be dinged exclusively for the currency difference and postage.