By MATT CARLSON

Illinois' stake in Canada's issues: aicid rain and trade

This article summarizes two of the key topics at a symposium on "Canada/United States Relations "held in Chicago in October. The symposium was sponsored, in cooperation with the Canadian Consulate General, Chicago, by the following: the Canadian Club of Chicago, Canada Committee of the Chicago Association of Commerce and Industry, Chicago Council on Foreign Relations, Executives' Club of Chicago, Illinois Department of Commerce and Community Affairs and Illinois Humanities Council. For more information contact the Canadian Consulate General, 310 S. Michigan Avenue, Chicago 60604 (312) 427-1031.

ACID rain and free trade between the United States and Canada may seem insignificant issues to many Americans, but on the northern side of the border, they make front-page news nearly every day and are viewed as the two biggest problems in the relationship between the North American neighbors.

In Canada, the quality of the environment is believed by most citizens to be far more critical to national survival than in the United States. While many Americans view their economy and environment as two separate entities, to many Canadians the two are inexorably linked. Environment is not viewed as something that gets in the way of industry; it is instead a source of industry. Logging, fishing and tourism are the livelihood of many Canadians. Acid rain threatens not only the environment but creates the specter of putting many persons on the dole. Freer trade with the U.S. promises growth in Canada's gross national product, and the currents of protectionism for certain sectors of the U.S. economy worry Canadian business and government officials.

"There are no negative feelings in our country that acid rain needs to be restricted," said former Ontario Premier William Davis, who is Canada's special envoy to the U.S. on the matter. "The sentiment is widespread and not based on regionalism. It's not a right wing or left wing issue. It's not a question of the corporate sector versus environmental groups. It's one of the most important issues to us as a people and a nation."

Davis' presentation on acid rain capped an all-day October seminar on Canadian-U.S. relations in Chicago that was sponsored in part by the Chicago Canadian Consulate General for Illinois residents — many of whom have business and government ties in Canada. One of the other major topics was trade between the two nations.

From the tone of Davis' presentation, Canadian patience with the lack of U.S. action on acid rain is wearing thin. Officially, the Reagan administration has said that "more research" is needed on the phenomenon before action can take place.

"But, if U.S. technology can manage to shoot down satellites in space, it certainly has the capability of finding a way to burn high sulfur coal and limiting the emissions," added Davis. "If we can make progress on issues like water quality in the Great Lakes, we can make progress on acid rain. When you see lakes and rivers dying, you have an obligation to do something about it. We all have a collective responsibility for the environment of Canada for generations to come."

Much of the acid rain falling in Canada and parts of the U.S. has its genesis in U.S. coal-fired industry, including electricity-producing utilities. Some of the culprit industries — not to mention the high sulfur coal mines — are located in Illinois. When high sulfur coal is burned, it produces sulfur dioxide which, when released into the air, blows downwind into Ontario, Quebec, upstate New York and New England. Nitrogen oxide emissions also contribute to the problem. These emissions mix in the atmosphere and fall to earth with rain in a highly acidic form — hence the name, acid rain.

. . . the currents of protectionism
for certain sectors of the U.S. economy worry
Canadian business and
government officials

Acid rain literally kills lakes and waterways by killing the plant life in them. As the plant life dies, so do the fish. Although the water remains clear and apparently unpolluted, it can no longer harbor any life. Evidence from Europe, where acid rain is also a problem, shows that acid rain can kill forests and plant life on the ground. The same phenomenon is starting to happen in Canada and the northeastern United States.

Davis, who was appointed to his position by Prime Minister Brian Mulroney, has been leading the Canadian lobby for U.S. action to solve the acid rain problem. To date, Washington has not responded with an action plan either through traditional diplomatic channels or as a result of "public diplomacy" — efforts on the part of the Canadian federal government to sway the opinion of U.S. influentials and legislators. The Canadian federal government feels it is being "wronged" by the United States on the acid rain issues, and Ottawa is firmly demanding a solution.

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In the area of liberalized trade with the United States, however, Ottawa is not demanding action. It is trying to "sweet-talk" Washington in order to get what it wants.

Mulroney's Progressive Conservative Government sees free or freer trade with the United States as a necessary pre-condition to an improved economy. Like the United States, Canada was hit with a severe recession at the start of the decade. Unlike the United States, but very much like Illinois, its recovery has been sluggish. Canada's unemployment is hovering around 10 percent in many areas; in some areas, the figure is far worse.

Canada and the United States are each other's largest trading partners, but the flow from North to South is far greater than from South to North. While Canada receives 21 percent of all U.S. exports, the United States receives 75 percent of all Canadian exports. One in five members of the Canadian work force, about two million persons, works in areas directly related to trade. According to U.S. statistics, about two million American jobs depend directly on exports to Canada. Illinois, particularly in the areas of semi-finished and finished manufactured goods, trades heavily in Canada. Most of Illinois' Canadian business is with Ontario and Quebec, which have industrial bases very similar to the state's.

Some goods — especially in the automotive industries — currently move between the two countries tariff-free. What worries Canadian business and government officials are sectoral and overall protectionist sentiments evident in the U.S. Congress, including some members of the Illinois delegation.

In the long term freer trade between Canada and the United States may result from the "special, close" relationship enjoyed by the two nations, but a panel of Canadian and American economic and political experts gathered at the Chicago seminar cautioned that the U.S. government probably will not move aggressively on the issue; it simply isn't as significant an issue in the United States as it is in Canada. The panelists included Thomas K. Shoyama, former vice chairman of Canada's MacDonald Royal Commission on the nation's economy; Paul H. Robinson, former U.S. ambassador to Canada; Adlai E. Stevenson III, Illinois gubernatorial candidate and former U.S. senator; Paul Heinbecker, minister for political affairs of the Canadian embassy in Washington; Bruce W. Wilkinson, author and professor of economics at the University of Alberta; and Charles Levy, a Washington-based attorney who specializes in trade negotiation.

Despite the fact that the two nations exchanged $155 billion (U.S.) worth of goods last year and despite overtures for freer trade from Canada's ruling Progressive Conservative Party, the panel concluded that Washington will act slowly on Ottawa's desire for trade liberalization. The reasons:

• There is no pressure from the U.S. business community for liberalized trade with Canada.

• A relatively strong U.S. dollar still cripples the U.S. ability to compete in foreign markets.

• The U.S. traditionally prefers multilateral, not bilateral trade pacts, and the U.S. Congress — not the president — has most recently taken the initiative on U.S. trade policy. To make headway on freer trade Ottawa must attract President Reagan's attention and spur him to act.

• A new agreement won't have a big effect on the U.S. economy, and thus is low in priority to the U.S. Congress faced with more pressing concerns including the budget deficit, trade deficits, the too strong dollar, unfair trade practices of other nations hurting specific U.S. products, and demands by some industries for special protection.

"We certainly don't want a common market situation with Canada," said Stevenson. "But I think we do want to remove some tariff barriers and have some sectoral free trade [which already exists for some goods]. And I do think the president is strongly against protectionism and will come out strongly against it."

The Mulroney government wants a more specific response. Most of the Tories want broad-based freer trade with the United States with some "experts" in Ottawa claiming that such an agreement would lead to a 9 percent growth in the Canadian gross national product.

Not everyone swallows that. "In Canada there is an overestimation of what a U. S.-Canadian agreement would do for Canada," said Wilkinson. "We may be prepared to give too much away. A problem in Canada is to look for quick answers to serious problems. Unemployment is the biggest problem we face today, and free trade [with the U.S.] is the new quick fix." He said that the "numbers that are trundled out regarding increases in Canada's gross national product [as a result of a freer trade agreement] are at the high end." Wilkinson argued that the real problem is that Canadian productivity is lower than American.

Shoyama, currently a public administration professor at the University of Victoria, predicted that a 3-to-8 percent growth in Canada's GNP is realistic if a U.S.-Canada trade agreement is made. "If you're searching for new relationships, you have to go a little out on a limb."

Canada is more willing to go farther — and faster — out on a limb than the United States on both the issues of acid rain and trade liberalization. The airing of the Canadian viewpoints in Chicago may not directly sway the president, but the Illinois business and government leaders may at least see more clearly the economic connections between the state and the Canadian nation.

Matt Carlson is the Chicago correspondent for the Canadian Press, Canada's national news service.

14/January 1986/Illinois Issues