WHOEVER SUCCEEDS MULRONEY IS ALREADY IN TROUBLE ON TRADE
Public anger over North American free trade has helped claim its first political victim--Canada's Brian Mulroney. After more than eight years as Prime Minister, Mulroney has accepted the inevitable: He doesn't have a chance of being reelected. For months, his popularity has languished under 20%, the lowest of any Western leader. So, on Feb. 24, he told his Progressive Conservative Party that he will resign once it chooses a new leader in June.
Mulroney's demise was foced by opposition to Convervative economic policiies, most notably the 1989 U.S.-Canada Free Trade Agreement. THe pact set off a sweeping economic restructuring. Unfortunately, just as trade barriers dropped, Canada slid into a deep recession from which it is only now emerging. Unemployment has reached a sky-high 11%.
NEW DEAL. The same public anger will now be directed at another trade pact, the North American Free Trade Agreement among Canada, the U.S., and Mexico. NAFTA is now certain to be one of the hottest issues in the runup to national elections scheduled for this fall. The Conservative government wants to push NAFTA through Parliament before the election, and they have the votes today to do so. But the opposition Liberal Party, which is expected to win in the fall race, vows that it will renegotiate the 1989 trade pact to get terms more favorable to Canada. Meanwhile, Canada's other national party, the New Democratic Party (NDP), is calling for ripping up the U.S.-Canada free trade pact entirely.
Few believe the Liberals would pull out of free trade, a step that would have a disastrous impact on Canada's trade relations. But a Liberal government would be under enormous public pressure to take a harder line on trade with the U.S. Tensions have been mounting even under Mulroney. In the past year, the U.S. and Canada have fought over trade in everything from steel to limber, beer, and Hondas assembled in Ontario. The Liberals would demand better treatment. "Whoever becomes Prime Minister will be forced to take a harder line with the U.S.," said Peter G. Morici, international economist at the Unviversity of Maine.
That would almost certainly increase friction with the Clinton Administration, which itself is taking a tougher line on trade. If Canada tries to redraw the trade pact and hits the U.S. with more trade restrictions, Washington is likely to react in turn. That would give powerful ammunition to anti-NAFTA forces such as American labor unions.
Mulroney' political demise could also have big implications for Canada's longrunning struggle to remain one nation. His biggest setback at home has been his failure to resolve the long-festering grievances in French-speaking Quebec. Last October, Canadians overwhelmingly rejected a sweeping overhaul of the constitution that Mulroney proposed to keep the nation united.
Since then, Quebec Premier Robert Bourassa, a staunch federalist, has fallen ill with malignant melanoma and is unlikely to seek reelection next year. That boosts the chances that the nationalist Parti Quebecois will take power in the province. If they do, they'll hold a vote on sovereignty within a year.
To deal with all the challenges, the Convervatives must now select a new leader, who will then become Prime Minister. Candidates include Trade Minister Michael H. Wilson, an architect of free trade, and Defense Minister Kim Campbell. But the odds are that Canadians will elect a different party this fall. "We are heading for fundamental political change," says Preston Manning, leader of the Ablerta-based Reform Party.
Its a change that's bound to have a huge impact on the world's biggest trading relationship.Edited by Stanley Reed William C. Symonds