Kevin Wilson: Free trade comes at a price

It is generally considered bad form for a guest to lecture hosts on how they interact with friends and neighbours, particularly when the guest has been here for a short time, and the hosts have been as friendly and gracious as just about every Kiwi I have met since arriving in Auckland last week.

That said, the papers and the airwaves have been crackling since that arrival, with talk of an impending election, relations with the United States, and New Zealand's cherished nuclear-free policy.

Somehow, all these things have managed to get linked together as Kiwis head to the polls in less than three weeks. Add to that the recent visit by US Agriculture Secretary Mike Johanns and the fires welding together nuclear-free with free trade are only getting hotter.

Nuclear-free NZ is clearly a cherished component of the body politic here. No less a figure than National's Don Brash acknowledged in the midst of last week's leaders' debate that it was indeed, "iconic".

Free trade with the United States, on the other hand, is something with which my country, Canada, has more than passing experience over the past two decades.

Our proximity to the Americans, coupled with our long history of being hewers of wood and drawers of water to one superpower or another over our 138-year history, has meant the free trade debate has been one of our country's constants.

At no time has that been clearer than since 1989, when Canada first signed a free trade agreement with the United States. The agreement, which subsequently expanded to include Mexico in the North American Free Trade Agreement, has a number of important lessons to those seeking similar trading status with the US.

The most telling lesson is that no matter how ironclad the language, no matter how good the intentions, an agreement is a piece of paper, subject to interpretation by both parties.

Canadians have learned that to their everlasting dismay over the past 16 years, as successive US Administrations and Congresses have continually flouted the spirit and letters of the agreements, particularly with respect to Canada's softwood lumber industries.

Time and again, the powerful US lumber lobby has secured punishing tariffs on Canadian softwood. The average duty sits at about 27 per cent, despite successive Nafta dispute resolution panels ruling in Canada's favour. The American response has been simply to ignore the rulings.

Last week, Nafta's Extraordinary Challenges Committee, the agreement's court of last resort and, ironically, an adjudication panel insisted on by the Americans when the first free trade agreement was being negotiated, ruled again in Canada's favour.

The Americans' response to what was supposed to be the final ruling has been telling. Rather than abide by what is supposed to be a binding decision, they have decided to ignore it, and press the Canadian Government for a negotiated settlement.

In the past five years, the US has collected more than $6 billion in duties on softwood entering the United States. More than 15,000 Canadian jobs have been lost in the province of British Columbia. Millions of dollars have been spent by successive Canadian federal and provincial governments on the legal challenges.

Lumber is by no means the only trade dispute that free trade and Nafta was supposed to eliminate.

Wheat, beef, milk, and many other products have felt the wrath of a Congress and Administrations eager to curry favour with powerful US lobby groups with a vested interest in protectionist policies.

While for many Canadians these ongoing trade disputes have put the lie to the idea that you can have something approximating free trade with a neighbour 10 times bigger than you, other provisions in these agreements have been even more ominous, and cut to the quick of what it is to be Canadian.

By and large, Canada is a nation with an inferiority complex. The late Pierre Trudeau, our longest-serving Prime Minister, once famously remarked that living so close to the United States was akin to being a mouse lying in bed with an elephant.

"No matter how friendly or even-tempered the beast," Trudeau said, "one is affected by every twitch and grunt."

More often than not, America is a wonderful, albeit dysfunctional, neighbour, but one with its own priorities and agendas.

Those priorities are generally determined by domestic political considerations, and their interpretations of the free trade agreement reflect that.

All well and good, but provisions within the agreement regarding the rights of governments to legislate in the public interest should give any nation seeking similar agreements pause.

During the mid 1990s, the Government of then-Prime Minister Jean Chretien attempted to ban MMT, a fuel additive thought to be toxic. Citing provisions of the agreement, a chemicals manufacturer sued the Government, which was forced to back down.

Our public healthcare system, cherished by many Canadians, is often perceived as being threatened by the agreement's provision that once goods or services are commoditised, they fall under the purview of commerce.

There are also provisions in the free trade agreement that guarantee American access to our energy supplies, possibly at the expense of Canadians' energy needs.

Nothing is wrong with seeking favourable trading agreements with other nations, but it is also wise to consider the implications of such an agreement, and the potential impact beyond mere trade in goods and services.

Granted, New Zealanders have the luxury of considerably more distance between themselves and the prospective trading partner. But that distance matters nothing when unfair tariffs are imposed on goods and services.

If to secure such an arrangement New Zealand has to lay down nuclear-free, its strongest trump card, what is the benefit if America chooses subsequently to ignore the agreement, as they have repeatedly with Canada?

The potential benefits are just that - benefits that can be realised only if the bigger trading partner interprets the terms in the same manner as the smaller partner.

Powerful and entrenched American domestic lobbies exist in the textiles, meatpacking and agricultural sectors. It would be naive in the extreme to think that a free trade agreement would hold these lobbies and their push for protectionist policies at home.

So take this little history lesson in the context it is offered: an opportunity to learn from the experience of a close friend.

Simply ask yourself what price you are prepared to pay for the "potential" of improved trade with the United States?

Is it worth a piece of your soul?

* Kevin Wilson is a Canadian journalist who has moved to Auckland.