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BRITISH COLUMBIA

Ottawa bowed to ‘economic blackmail’

By MAURICE RUSH

The Mulroney government bowed to
U.S. economic blackmail when it agreed to
impose a 15 per cent export tax on softwood
lumber going to the U.S. market. After ear-
lier promising to fight the threat of a U.S.
countervailing duty “by every means possi-
ble,” the Tory government made a complete
turnabout and surrendered to U.S.
demands.

The U.S. government gave Canada the
choice of putting a noose around its own
neck or doing it for us. The Mulroney
government chose the first option and cap-
itulated without fighting to protect Canadian
interests. The main architects of this sellout
deal are Premier Bill Vander Zalm and fed-
eral International Trade Minister Pat Car-
ney.

Surrender to U.S. demands has become
the pattern of Canadian trade relations with
the U.S. In its drive to achieve a bilateral
free trade deal with the USS., the federal
government has made one concession after
another to the U.S. government. The latest
Victim is the softwood lumber industry.
What will be next?

Faced with a growing economic crisis at
home asa result of Reaganomics, the U.S. is
attempting to solve its economic difficulties
by transferring them to other countries.
Canada, which is one of the largest U.S.
trading partners, has been chosen as a
Major victim of the Reagan economic
offensive against all its trading partners in
the capitalist world.

The 15 per cent export tax on softwood

lumber going to the U.S. is a severe blow to
Canada’s economy. It will mean the loss of
thousands of jobs, as well as the loss of
SOvereignty and control over our own
Tesources. It will lead to higher prices for
lumber in Canada as the forest monopolies
attempt to pass on the additional costs to
the consumers, pushing up housing costs. It
will also seriously affect Canada’s trade
with other countries since under the rules of
the General Agreement on Tariffs and
Trade (GATT), the export tax would have
to be applied to all countries with which
Canada trades.
_ The agreement with the U.S. was entered
into without debate in parliament and
without the agreement of the provinces
which, under Canada’s constitution, have
jurisdiction over resources. The federal Lib-
erals and NDP national leader Ed Broad-
bent have condemned the deal. Ontario has
denounced the export tax and the premier
of Alberta has severely criticized the federal
government for having entered into the
agreement without a_federal-provincial
agreement.

The federal and provincial governments
were to meet this week to attempt to work
out how the 15 per cent duty will be applied,
whether through increases in stumpage
and/or other forestry taxes. The federal
government must the meet with representa-
tives of the U.S. to submit their plan for U.S.
approval before submitting the export tax
agreement to parliament when it recon-
venes on Jan. 19. :

Under the agreement with the U.S. Can-
ada is required to get U.S. approval before
any plan is put into affect. This latter provi-
sion effectively gives the U.S. power to
determine any measures introduced by the
federal government affecting Canada’s
forest industry. It is one of the most far-
reaching infringements on Canadian sover-.
eignty ever entered into by a sovereign state.
It is the kind of arrangement imposed in the
past on colonial countries.

A letter by U.S. Secretary of Commerce

“Malcolm Baldridge said that the U.S. gov-

€rnment would have to approve any changes
in the export charge and would monitor
actions by Canada that would be considered
(by the U.S.) to offset the export duty, inclu-
ding stumpage prices, and awards of con-
tracts for silviculture, road building,
Tecreational and other foresting activities.

In short, the U.S. government will now
be the overseer of Canada’s forests with the
power to approve or reject any activity of
which it does not approve. Is it any wonder
that the Vancouver Sun commented editor-
ially Jan. 2: “This is sovereignty? . .. No. It is
not a great a day for any Canadian who
now knows that his natural resources are all
at the mercy of the blustering of the United
States.”

Premier Bill Vander Zalm and federal
cabinet ministers are attempting to sell the
deal to Canadians on the grounds that the
export tax will provide a cash bononza for
the provinces. Vander Zalm has claimed
that B.C. will receive $365 million annually
and that money could be used for silvicul-
ture and reforestation and to meet provin-
cial needs.

But in the first place, the U.S. may have
something to say about the money being
used in the forest indutry. It is not altogether
clear that U.S. trade officials will approve of
that. Furthermore, the Vander Zalm calcu-
lations are completely dishonest and paint a
false picture.

The calculation is based on the present
level of exports to the U.S. These will drasti-
cally decline because the aim of the U.S.
action is to force down the amount of
lumber exports to the U.S. market. That’s
what the U.S. action is all about. Moreover,
it does not take into account the loss of
forest revenues and taxes derived from the
forest industry as a result of reduced pro-
duction and exports. Nor does it include the
losses in income tax as a result of mass

layoffs and the consequently higher bill for
- unemployment insurance. It is estimated

that the deal with the U.S. will result in the
loss of 10,000 to-15,000 Canadian jobs and
from 3,500 to 5,000 jobs in B.C.

One forest research company has come
up with a set of figures which claims that
taking everything into consideration, the
net revenues nationally from the tax will be
in the neighborhood of $60 million. The
deal was entered into so quickly that no
adequate studies were made of the conse-
quences of the new tax, but the above fig-
ures are probably closer to the mark than
those bandied about by Vander Zalm.

Unfortunately, some people who should
know better have been taken in by the
Vander Zalm-Pat Carney defence of the
export tax. B.C. NDP resource critic Bob
Williams immediately went to TV to sup-
port the deal and publicly disagreed with
national leader Ed Broadbent. The IWA
research director, Douglas Smyth, in a
three-page letter to Pat Carney, supports
the lumber deal even though, as he admits,
it would mean a loss of jobs. In his defence
of the export tax, he claims that Canadian
sawmills are considerably more efficient

LOADING LUM

BER AT TERMINAL DOCK ... export tax a surrender to U.S.

than those in the U.S. and “even a full 15 per
cent shift in duty costs to the Canadian
‘producers will be insufficient to make those
U.S. mills competitive.”

It’s generally agreed that Canadian mills
are more efficient, but Smyth misses the
main point: the U.S. is out to sharply reduce
the flow of Canadian softwood lumber to
the U.S. market. The U.S. has made it clear
that if the 15 per cent duty will not accomp-
lish that, further countervailing duties will
be sought. And if it becomes. necessary to
achieve its aim, the U.S. will cancel that
15 percent Canadian duty on 30 days notice
as provided in the agreement, and impose
its own duties.

What Canada is faced with is the loss of a
large part of the U.S. market for Canadian
lumber. A free trade agreement offers no
hope the U.S. market will ever be restored.
The U.S. forest industry has also moder-
nized and is faced with the problem of over-
production resulting in the closure of many
mills and large layoffs of U.S. wood-
workers. The Canadian government’s aim
to enter into a bilateral free trade agreement
with the U.S. which would tie Canada’s
economic future to the U.S. and make us
more dependent on the U.S. market offers
no future for the Canadian forest industry.

In fact, the lumber deal is a clear indica-
tion of what Canadians could expect in a
free trade pact. An agreement could only
reached at the price of major Canadian
concessions which would severely restrict
the market for Canadian products in the
US.

A different direction is needed in Cana-
dian economic policies. Instead of bilateral
trade Canada should be seeking to broaden
its world markets for wood products, fol-
lowing a multilateral trade policy. This
requires more manfuacturng and process-

ing of wood products and the diversification

of production. It also requires that Canada
take steps to strengthen the Canadian
market for wood products. One measure
which should be undertaken immediately to
provide thousands of new jobs and stimu-
late the forest and construction industry is a
large scale national housing program.

However, the first step must be rejection
of the present sellout deal with the U.S. The
public should support the demand of the
Communist Party that MPs reject that deal
at the upcoming sessions of parliament. In
B.C. the strongest protest should be
directed to Premier Vander Zalm and the
provincial government for their support of
the sellout agreement with the U.S.

PACIFIC TRIBUNE, JANUARY 14, 1987 e 3

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