Economics Update (October-December 1997)

Featuring A Strong Economy,
Canada Looks to Expand Trade

"It should come as no surprise that, in the interests of making the global pie even bigger, we enthusiastically support NAFTA expansion..."
— Robert Wright
A rmed with a strong economy and abundant natural resources, Canada is looking to expand — its international trade program, that is — by creating new trade relationships with other countries in the Americas to help the nation's economy continue to grow.
Robert Wright, Canada's minister for trade
"Canadians know firsthand that freer trade supports the healthy economy that we are enjoying, so we enthusiastically support NAFTA (North American Free Trade Agreement) expansion and are working to liberalize trade throughout the Americas," said Robert G. Wright, Canada's minister for trade, speaking recently to a business group at the Federal Reserve Bank of Atlanta.

New Policies Lead to Freer Trade

This free trade scenario has not always been the case for Canada. In fact, until recently Canada found itself having to spend too much time on economic matters within its own borders to concentrate on expanding into other markets or opening its markets to others, according to Wright.

In the early 1990s, Canada's economy was weighted down by high interest rates and an escalating government deficit. Those conditions changed during the last several years, and today Canada has a very strong economy. In Wright's view, the change was created principally by three actions: a strong private sector, deficit reduction and sound government policies.

These policy developments included a comprehensive review of public services looking for ways to improve efficiency. The public sector's share of the economy is now the lowest in 50 years. At the same time, steps were taken to ensure adequate resources were committed to education and research. Canada, he said, has the highest rate of post-secondary enrollment in the world. Wright emphasized, however, that domestic policy changes convey only half the story.

The other half is the positive impact of openness and free trade — much of that trade with the United States. Canada initiated a free trade agreement with the United States in 1989. As a result, trade has grown considerably between the two countries.

But Canada has expanded its trade relationships beyond the United States. In 1994, Canada implemented NAFTA, opening a free trade zone with Mexico and the United States. According to Wright, however, Canada does not plan to stop with NAFTA.

"It should come as no surprise that, in the interests of making the global pie even bigger, we enthusiastically support NAFTA expansion and are working to liberalize trade throughout the Americas," he said.

One way Canada is looking to expand trade is by working with the United States to foster a free trade area of the Americas (FTAA), which was discussed at the Miami Summit in 1994. As a first step to a hemispheric agreement, Canada recently implemented a free trade agreement with Chile. Wright said that he hopes this agreement serves as a stepping stone to Chile's accession to NAFTA.

"Because Canada and Chile moved quickly and decisively, many firms are already enjoying the advantage of Canada's preferential access to the Chilean market," he said.

Overcoming Free Trade Challenges

While Canada and the United States support free trade initiatives, Wright indicated that more must be accomplished to overcome some free trade challenges.

If both countries are to truly achieve the gains of NAFTA, businesses on both sides of the border should make decisions based upon North America being a single economic area, Wright said. Particularly, the countries in NAFTA should remove the anti-dumping laws and countervailing duties within free trade areas.

Secondly, he said that all countries within a free trade zone should eliminate and not enact laws, such as the Helms-Burton Act, that have an extraterritorial application and are inconsistent with international law. This act, named for its co-authors Sen. Jesse Helms, R-N.C., and Rep. Dan Burton, R-Ind., imposes economic sanctions against Cuba and countries aiding Cuba.

"Suffice it to say that while Canada and the United States share the same goals of promoting human rights, democratic governance and economic reform in Cuba, we differ on the means," Wright said. "But despite disagreements by our governments, I am confident that the strength of our long-standing ties will enable us to work through our differences."

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