In the flurry of outrage over the U.S. refusal to comply with the
latest NAFTA ruling on lumber, something is missing. Editorials
abound, former negotiators and promoters of NAFTA are talking tough,
calling the Americans names. Others suggest ill-conceived threats or
demand that the Prime Minister "talk" to President George W. Bush.

Nowhere in these responses is there a concrete plan of how
Canada should respond.

Lost in the cacophony of bluster is the fact that Canada is
already part of a coherent rules-based trade agreement with the
United States. It is called the World Trade Organization, formerly
the General Agreement on Tariffs and Trade and it has the mechanisms
already in place to enable Canada to emerge a clear winner from the
current situation.

Founded in the late 1940s, the GATT/WTO was for almost 40
years the primary trade contract between Canada and the U.S.

In all of that time, the United States was never able to levy
a countervailing or anti-dumping duty on our exports of lumber.
During those four decades, Canada traded profitably, our standard of
living rose, Canada won almost all its trade disputes with the U.S.
- and Washington abided by the rulings.

By the mid-1980s, 90 per cent of Canadian lumber entered the
U.S. tariff free and the duties on the remaining 10 per cent were
negligible.

It was only when Canada decided to turn away from the
multilateral framework of trade rules with the U.S. and enter into a
bilateral one-on-one "free trade" agreement with the U.S. in the
mid-1980s, that U.S. industry saw its opportunity and used it. It
has been using it ever since.

Under the FTA and NAFTA, it is U.S. law which now applies to
all of Canada's exports in countervailing, anti-dumping and related
disputes with America. The dispute panels are limited to deciding if
the U.S. has applied its own law correctly.

Furthermore, the U.S. can at any time amend its trade law
without Canada's agreement and, on lumber alone, it has done so
three times to Canada's great disadvantage.

In other words, the FTA and NAFTA, instead of giving us more
secure U.S. market access, unleashed the full force of U.S.
protectionism to be used against Canada in a way that was not
possible under GATT/WTO.

As for the dispute settlement mechanism, touted repeatedly as
"the crown jewel" of the FTA, it bears repeating that all agreements
end when the negotiated means of resolution are discarded by either
player.

The answer is not to shake our fists or shout meaningless
threats at America. The answer is to simply return to the safer,
more effective, already existing multilateral WTO framework of which
Canada and the U.S. are both still members.

Under the WTO, we have all the levers to get back the $5
billion the U.S. has taken in lumber tariffs and to make sure it
doesn't happen again.

When Washington not long ago threatened hefty steel duties
against Europe, Japan and a number of other steel exporters, Europe
triggered the WTO retaliatory process and the Bush administration
backed down.

The same defences are available to Canada under the WTO.

Since signing the FTA and NAFTA, the United States has taken
10 trade actions against the Canadian Wheat Board, Canada's largest
net earner of foreign currency, and we now have U.S. tariffs against
our wheat exports.

In all the years of trading with the U.S. under GATT, the
Americans never launched a single formal action against the wheat
board, because they knew they could not win.

The essence of the FTA and NAFTA is that they cede vital
government powers to the U.S. and the private sector that were used
to build an independent Canada.

What the U.S. wants out of the repeated challenges against
Canadian lumber exports is to wear Canada down until it agrees to
privatize its crown-owned forests, opening them to direct U.S.
ownership.

In grain, Washington wants an end to the wheat board. This
would see the Canadian grain trade move virtually overnight into U.S.
hands.

There is a simple way out, without bluster or insults. Canada
does not have to give up ownership of its forests, its industries
and its institutions.

With a simple letter to the U.S., under FTA Article 2106,
NAFTA Article 2205, Canada can, with six months notice, withdraw
from these agreements without penalty and without conditions.

Our trading relations with the U.S. will then automatically
revert back to the GATT/WTO framework of international law, which
will enable us to both maintain our institutions and trade
profitably with the U.S.

All of the intolerable NAFTA rights U.S. companies now have
over Canada - to sue the Canadian government, to overturn Canadian
laws, to control our exports and energy prices - would disappear.
Canada would regain its status as a sovereign nation.

Chasing the dream of a "special relationship" and some kind of
shortcut to "secure access" to the U.S. market is a dangerous
delusion which has cost Canada dearly.

Superpowers do not have friends or "special relationships,"
they have interests and they pursue them. Canada must learn to do
the same.

--------------------------------------------------------------------
------ Mel G. Clark is a senior international trade negotiator.
He was deputy chief negotiator for Canada at the Tokyo Round of GATT
and Canada's chief negotiator for the International Grains Agreement.
Retired and living in Ottawa, he is currently writing a book on
NAFTA's impact on Canada.

-David Orchard is the author of The Fight for Canada -
Four Centuries of Resistance to American Expansionism, and ran for
the leadership of the federal Progressive Conservative party in 1998
and 2003.

-Published in the Toronto Star, Aug. 23, 2005

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