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Canada, Europe and the Soviet Union: a new era in foreign trade on horizon?

Canada, Europe and the Soviet Union: A New Era in Foreign Trade on Horizon?

Is a new golden age of international trade at hand? Certainly there are "great economic changes" coming in Canada, Europe and the Soviet Union, according to Rozanne L. Ridgway, U.S. assistant secretary of state for European and Canadian affairs.

So far, history hasn't made her a liar. Canadian voters have kept Prime Minister Brian Mulroney in power, assuring ratification of the Free Trade Agreement with the United States. Perestroika continues in the U.S.S.R., and economic integration in the European Community.

Still, she didn't want to go too far out on a limb in remarks to the International Seafood Conference in Amsterdam. "Gorbachev's economic reforms, which began on familiar waters, are now entering uncharted Soviet seas, " she cautioned. "So the direction and speed of perestroika are likely to be influenced by discoveries yet to be made."

But the economic integration of Europe, and the evolution of free trade between the U.S. and Canada, seem inevitable, she said: "As surely as the Industrial Revolution demanded the transformation from local to national markets in 18th and 19th century Europe, so the requirements of the Information Age are leading to greater integration of the advanced national economies."

Bilateral trade between the U.S. and Canada totaled $166 billions in 1987, Ridgway said; Americans had $56.7 billion invested in Canada and Canadians $32.7 billion in the U.S. The Free Trade Agreement (FTA) will eliminate all tariffs -- some immediately, the rest over a period of five to 10 years. It will also eliminate most other trade barriers, such as import and export quotas.

"The FTA is designed to increase economic growth in both countries, lower prices, expand employment and enhance competitiveness in world markets," she observed. "While the FTA will not eliminate all trade problems between the U.S. and Canada, it does provide a consultative framework for managing these problems before they create serious economic and political frictions."

With Europe, the question is how the United States is to react to the creation of a single market by 1992. "The question is not whether the Europeans will integrate their economies, but how far and how soon," in terms of mergers, capital flow controls, financial services liberalization, even creation of a European central bank. Integration is in the U.S. interest, she said, because a strong Europe means a stronger free world, and a strong Europe can better contribute to Western defense.

"Developing our own American relationship to the Single Market is a key challenge now facing us," Ridgway advised her audience. "It should represent a great opportunity for increased trade and prosperity for both of us. Some proposals could harm U.S. interests, however, and move the world away from a multilateral trading system. As the Single Market evolves, we will work to ensure that new barriers to U.S. trade and investment are not created."

U.S. exports to the Soviet Union are only about $1.5 billion, and the U.S.S.R.'s own hard currency earnings from foreign trade are only $25 billion a year. Still, things are loosening up. "Over 70 ministries and enterprises now have the right to trade directly with foreign firms," Ridgway noted. "And foreign firms are permitted joint ventures with Soviet cooperatives, not just ministries and state enterprises." But there are still hitches: only 49% ownership in joint ventures is permitted, and it is hard to match the Western joint venture structure into the "incompletely-reformed Soviet economic system."

At a meeting of the U.S.-Soviet Joint Commercial Commission last April, one of the agreements was to set up working groups to deal with five key economic sectors. One of these, Ridgway pointed out, is food processing. "While it is too early to predict where this will lead -- the first session just took place [as of October] in Moscow -- American food industry firms should keep tabs on its progress." A bilateral agreement with the Soviet signed last May "will provide opportunities for the fishermen from each country to pursue their livelihood in the other country's waters," and "should facilitate efforts to establish joint ventures for catching, processing and marketing shrimp, crab and various fish" from both their waters.

As Europe approaches the Dec. 31, 1992, deadline for elimination of internal trade barriers, she said, other aspects of integration are proceeding apace. Trucking has been deregulated, and conflicting standards are being dropped -- the French now have to accept German Edam cheese, even though it has a lower fat content than allowed in French Edam cheese (it took a court ruling, but it happened). Before long, "goods which are safe for sale in one EEC country will be fine for sale anywhere in the Community ...a member country is required to accept another member's goods, so long as they meet minimal EEC-wide standards."

Still, Ridgway isn't all starry-eyed about the meaning of European integration. "I am not of the school that the Single Market is a way for the Europeans to 'pull a fast one' on the Americans and the Japanese," as by local -content rules, etc. "I do think that there are areas where Euro-protectionism might carry the day, if we don't keep our eyes opened. Thus we have to be diligent and vigilant, working with the EEC Commission officials and member states, to ensure an open and outward-looking Europe in 1993."
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Publication:Quick Frozen Foods International
Date:Jan 1, 1989
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