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Free trade agreement mustn't ignore Canada.

THE NORTH AMERICAN Free Trade Agreement (NAFTA) is intended to expand commercial and investment opportunities among its signatories--Canada, Mexico, and the US. Volumes have been written, both before and after the signing of the agreement in the fall of 1992, mostly in the form of op-ed columns. The majority have focused on Mexico. This is primarily a reflection of the fears that American environmentalists and labor unions have with regard to the inclusion of Mexico, still perceived as an underdeveloped, even "backward," country. Canada is not regarded as a threat or a likely major contributor to the expansion that theoretically could occur. On both counts, these perceptions probably are mistaken. In either case, Canada's participation and role in NAFTA is understated widely.

It is helpful to make some comparisons with the European Community, especially since part of the American (and Canadian) motivation behind the NAFTA concept has to do with the rapid rise of the EEC and its successful progression toward a regional free market. Population figures and Gross Domestic Product are significant because they reflect market size and capability. In 1991, the EEC had a population of 343,000,000 and a GDP of 6.5 trillion dollars. The NAFTA countries had a population of 360,000,000 and a GDP of 6.55 trillion dollars. This would make the markets approximately equal.

Without Mexico, the NAFTA side would have a much smaller, although relatively wealthier, market. The amount of consumers is critical. It is far easier to saturate a less populous, richer market than one with larger numbers with great potential for expanded spending power. Without Canada, which has a Gross National Product more than twice the size of Mexico's ($591,000,000,000 to $283,000,000,000 in 1991) and a per capita income considerably higher than that of the U.S. ($24,657 to $20,902), a major producer of goods and services not only would be absent from the configuration, but, in effect, it would be some kind of competitor. Since Canada also is the U.S.'s largest trading partner, the success and basic operation of NAFTA are inconceivable without it.

The sociopolitical developments that could result from NAFTA might be as important as the economic ones. As with most of the agreement, this applies to both Mexico and Canada. The Mexican changes, as usual, have received more attention. Ed Williams of the University of Arizona, a specialist in Mexican and border politics, argues that NAFTA is signaling more prestige and acceptance for both Mexicans and Mexican-Americans. Recent political and legal reforms can be consolidated under the agreement, while there might be retrogression were NAFTA not put in place by legislative approval. As with Spain, Portugal, and Greece in Europe, Mexico is likely to see considerable social benefit from the increased financial activity in a set of economies operating under a consolidated trade and investment agreement.

However, Canada's way of life may change as well, of which Canadians are well aware and because of which many do not support the NAFTA concept. Social policy in Canada probably will have to undergo some changes in order to accommodate NAFTA and the free-trade concepts that are its cornerstone. For example, attorney Robert Tancer, a specialist on intellectual property rights at The American Graduate School of International Management, notes that, in the U.S., where most research and development are conducted, patents for pharmaceuticals extend for 10 years beyond patent life in Canada. If patent life for US. companies is reduced and profits thereby are cut, the development of new pharmaceuticals will be curtailed. If the Americans pervail, the cost in Canada will be driven up and the quality of health care, under a socialized system of medicine, could suffer. Either way, because of the NAFTA inclusion of intellectual property rights, one or the other of the two systems could be forced to change its system dramatically. Since health policy in Canada has been a great strength in that vigorous nation, its entire social dynamic could be altered by the need to find common denominators under NAFTA.

Much has been made of the environmental issue. Recently, that concern has been focused on Mexico. This is deserved, of course, since there already are serious pollution and various ecological problems there, and more could arise out of the expansion of the Maquiladora and other industries in Mexico. However, potential environmental difficulties with Canada possibly are even greater and more troubling in some respects. For instance, prevailing winds carry American pollution into Canada in the Great Lakes area and Canadian pollution into the US. Acid rain in Ontario and New York continue to be of concern.

There are two essential points that should be evident in this exploration of the NAFTA issue. One is that the U.S. shouldn't be distracted from the problems and prospects of Canadian participation in NAFTA by those who exaggerate or exclusively focus on the Mexican element of a much larger picture. Canada deserves attention and only can be ignored to Americans' peril. The second is that focusing only on the potential problems on the Mexican side does an injustice to both the Mexican contribution and the over-all benefits that could be derived from NAFTA by all of the parties involved. Inclusion of Canada in observations on the free trade agreement relatively will lessen the level of fear connected to Mexican inclusion while, at the same time, demonstrating that the strengths brought by the tripartite joining are far greater than any set of weaknesses that might be reflected in bilateral comparisons.

Dr. Howell, International Affairs Editor of USA Today, is Chairman, Department of international Studies, American Graduate School of International Management, Glendale, Ariz.
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Author:Howell, Llewellyn D.
Publication:USA Today (Magazine)
Article Type:Column
Date:May 1, 1993
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