Canada-U.S. trade winds may chill - softwood-style disputes more likely, say experts

Canadian trade negotiators may find they will be getting a frostier reception in the United States in the wake of Ottawa's refusal to sign on to the U.S.-led war against Iraq, trade experts on both sides of the border said yesterday. Trade relations are already rocky because of disputes over Canadian softwood lumber and wheat. Even if the war ends quickly, trade experts are worried Canada's position on Iraq may be used by a handful of U.S. politicians who already have issues with Canada. "It certainly doesn't help," said Bill Merkin, a former U.S. trade negotiator and now a trade consultant.

"There was already an undercurrent of frustration over Canada's security and this may just play into their hands," Mr. Merkin said. Mr. Merkin said he did not believe the administration of George W. Bush, the President, would try to punish Canadian trade negotiators because Jean Chretien, the Prime Minister, did not endorse Mr. Bush's Iraq campaign. "But you have to remember all trade issues are local issues for politicians," he said. "And the way Canada's position on Iraq was portrayed here doesn't look good." Talks aimed at ending the long-running softwood lumber dispute have stalled and sources in the U.S. Commerce Department said no new negotiations were planned.

In addition, the United States has launched a formal complaint against Ottawa over what it says are illegally low-priced wheat exports to the United States. Canadian trade experts said any damage to individual businesses is probably short-term but the overall relationship could suffer when Canada has an issue on which it wants action. "As businesspeople in the United States decide who to do business with, unfortunately some are probably making that decision based on who is with them," said Jay Myers, chief economist at the Canadian Manufacturers and Exporters Association. "So much business depends on trust and so much of that depends on day-to-day contact between people." Mr. Myers is confident such feelings will pass with time, but expressed concern the longer-term special relationship between the countries may be frayed by Canada's decision not to join the United States. "We've always counted on a special relationship with the United States to overcome some of the trade and business problems we've experienced," he said. "The absence of a special relationship at the top between the President and the Prime Minister will have an impact." His concerns were echoed by Michael Hart, distinguished fellow at the Centre for Trade Policy and Law in Ottawa. Canada relies on U.S. goodwill to engage seriously in solving longer-term problems such as tie-ups at the border, he said.

"The level of trade we have now is more than the border can manage but we're not creating the kind of atmosphere where the Americans want to work with us. If Mr. Chretien calls the White House now, do you think the receptionist will put him through?" Mr. Hart said. "It's resolving problems in the long run that is being compromised by Mr. Chretien's short-term thinking," he added. So far, Canada - and Mexico - have not been swept up in the anti-French sentiment sweeping the country where Americans have launched boycotts of high-profile French products such as wine because of France's opposition to the U.S.-led invasion of Iraq. Vincente Fox, the President of Mexico, also refused to support the U.S. war on Iraq. About the only major incident so far has been an Englewood, Fla., talk radio station, WENG, pulling a popular "Canada calling" program of news because of Ottawa's opposition to the U.S. position. U.S. manufacturers that rely on goods from Canada mostly said they doubted there would be fallout from the Canadian position. "The economies are so incredibly linked that it would have to take something drastic to severe those trade relations," said one U.S. manufacturing lobbyist. "Canada is in our DNA."