From: msharder@undergrad.math.waterloo.edu (Mathew Harder)
Subject: Free Trade (was Re: US-Canada Beer Dispute) 
Organization: University of Waterloo
Date: Sun, 26 Jul 1992 12:37:05 GMT

In article <1992Jul25.041433.25658@alchemy.chem.utoronto.ca> golchowy@alchemy.chem.utoronto.ca (Gerald Olchowy) writes:
>In article <BrwyCq.zn@undergrad.math.waterloo.edu> msharder@napier.waterloo.edu (Mathew Harder) writes:

>>   I think that it is a stretch to say that the FTA is "working the way it
>>is supposed to".  The FTA allows us to present our case on alleged unfair
>>practices to non-binding arbitration by a bilateral panel.  But is this
>>"recourse to harassment" of any value if the panel's decisions are
>>ignored?  To me, this is the same as having no recourse at all.  I feel
>>that in any NAFTA the dispute-resolution process will have to be much
>>stronger than that in the FTA.  (Is binding arbitration a good idea?)
>>
>
>The binational panel is really a form of binding arbitration and the US
>has to abide by the decisions...the problem is that a lot of the current
>disputes have yet to make it through the binational dispute settlement
>process.  The problem is that in most of the instances, the US is
>bringing pretty bogus cases, and using the dispute resolution process
>to delay fair access to the US market.  In most of the current disputes,
>if the GATT rules, or the FTA dispute settlement mechanism are followed
>through to the bitter time-consuming end, we will win most of the
>current cases.

   If I remember rightly, the dispute-settling mechanism in the FTA is
specifically non-binding.  Which means that even if the panel rules in
Canada's favour, the US congress (or a state legislature) can disregard
that decision and impose a countervailing duty anyway. (Reminiscent of the
"Notwithstanding" clause? :-)  

   Why would they do this?  Well, the various industries (beer, auto,
forestry, farming) have strong influence over politicians through lobbying
(which is much more common - and effective - in the US than in Canada) and
no doubt also through campaign contributions (it costs even more to
finance a campaign for public office in the US than in Canada).

   Does anybody have any ideas how the dispute-settling mechanism can be
improved to prevent the kind of bullying that we are seeing now?


>>   We may have to face the fact that Canada's market is not a sufficiently
>>important fish to entice the States to open thier market to us.  I think
>>it wise to look farther afield, and see what other prospects there are
>>(this applies even if Canada does enter into the NAFTA with the
>>US&Mexico).  Is there a possibility of a mutual openning of markets
>>between Canada and the EEC?  What about Eastern Europe and the CIS?
>>Australia?  Japan, Taiwan and other countries of the far east?  Latin 
>>America?  There are a multitude of economic possibilities out there.  
>>
>
>The problem is not that our market is not important to the US, but
>that they think they can have their cake and eat it too, and are
>trying to bully us...we have to demonstrate a little eventemperedness
>and resolve and show we cannot be bullied.
>
>We should still agressively pursue the GATT, but it is foolish to
>think that the US will not continue to be our most important market.
>
>The Pacific Rim will slowly become more important to us...and the
>rest of the Americas which is why a properly negotiated NAFTA is
>important to Canada, so we don't end up being one of the spokes
>on a US hub and spoke strategy.

   I agree that the US will continue to be the most important market for
our exports in the future - their proximity and size insure that.  But I
question how much time our friends south of the border spend thinking
about our market.  Undoubtedly a few members of congress know that Canada
is their largest trading partner, but the general public doesn't.  The
Japanese bogey-monster looms large on their horizon.  They are much more
concerned with keeping the Japanese (and Koreans etc.) out than with
keeping us in.  After all, for them domestic jobs/corporations come first,
everyone else is secondary in importance.

   Besides, diversity is always good in financial planning.

				Mathew Harder
				msharder@descartes.uwaterloo.ca

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