Silent but powerful, a Gulf Stream of Canadian cash is wending its way eastward across the Atlantic to take advantage of European bargains.
For Canadian exporters, the European market has been languishing behind the eruption of interest in a new trade deal with the United States and the tantalizing potentials of the Far East.
But importers have not missed the sharp slide in the value of European currencies against both the U.S. and Canadian dollars, and have been snapping up bargains at a record pace.
In 1984, exports to Canada from the member-states of the European Community jumped 38 per cent over those of a year earlier, an increase of $2.3-billion.
Although Canadian exports rose slightly, they remained below their 1982 levels, pushing Canada into a $1.3-billion trade deficit, the first time Canada has failed to report a surplus in its trade with Europe since the Second World War.
Such a dramatic turnaround has not been without its problems. The past year has seen well-publicized disputes over trade in major products including newsprint, footwear, beef, fish and liquor.
Diplomats on both sides insist that with $15-billion in two-way trade, such irritants are inevitable and what is important is that they be resolved.
And that indeed is what has been happening. The squabble over newsprint, created when the EC changed its quotas after Scandinavian countries gained duty-free access to its market, was resolved in December when Canada agreed to a new duty-free quota of 600,000 tonnes a year.
That month, Canada kicked off a new controversy when it responded to surging imports of beef by slapping on quotas that squeezed European exporters hardest, knocking them back to a small fraction of total imports.
The Europeans were already upset by Canada’s extension of footwear quotas until November, 1985, and decided to retaliate by raising duties on $170-million worth of Canadian exports unless a deal was worked out.
At the last minute, Canadian and European negotiators agreed to a deal under which Canada could keep its footwear quotas in place, but lower its import duties on $150- million worth of other European goods, a concession expected to cost the Canadian Treasury about $7.7-million this year.
Similarly, with the threat of retaliatory duties on another $70-million worth of Canadian exports hanging over their heads, the diplomats eventually struck a deal on the beef issue by raising the European quota substantially.
Before that dust had settled, the EC had demanded international arbitration over the pricing practices of provincial liquor boards, which add much higher mark-ups to imported wine and liquor than they do to domestic brands.
That one is stalled over the selection of members and the terms of reference for the arbitration panel, partly because it raises the interesting but touchy issue of whether provinces can be bound to follow international agreements signed by the federal Government on matters solely within provincial jurisdiction.
Then came the stories of overfishing by European vessels and the use of bribes to get Canadianfisheries officers to look the other way. Fish has been a particularly touchy subject ever since Europe banned the import of Canadian seal pelts.
Specialists may handle the negotiations for each dispute, but there is plenty of work for the 20 people in the EC’s Ottawa delegation and the 14 foreign service officers who look after Canadian interests at EC headquarters in Brussels.
Even the beef and footwear issues have only been resolved for 1985. “What happens next year remains to be seen,” said one Canadian official. “There won’t be any shortage of issues, but the mechanisms and the will are there to try and resolve them.” In the meantime, Prime Minister Brian Mulroney, Trade Minister James Kelleher, Industry Minister Sinclair Stevens and Treasury Board president Robert Rene de Cotret have all been to Europe, pushing the message that Canada will eagerly welcome European investors even if it has doubts about some of the community’s goods.
That welcome mat is already being put to the test, with the proposed purchase by British Telecommunications PLC of a 51 per cent interest in Mitel Corp. of Kanata, Ont.
But if nationalists are worried about the fate of domestic jobs and technology, Canadian companies are out shopping for European technology, and Canadian trade officials are putting an increased emphasis on industrial co-operation. “Europe is one of the few sources of high technology that is reasonably accessible,” said one official.
On the other side of the Atlantic, one of the biggest concerns of European officials is Canada’s relationship with the United States. They are watching carefully as Canada ponders a major bilateral trade deal, and their worries go beyond the basic fear that such a pact might create a North American trade fortress, with barriers raised high against all outsiders.
Dietrich Hammer, head of the permanent EC delegation in Ottawa, said he thinks Canada might lose interest in pushing for more liberal international trade rules if it can solve most of its own trade problems with a single deal with the United States.
Trade with the United States makes up three-quarters of Canada’s total. “There is at least a danger that if you go bilateral, the multilateral approach will lose its attractiveness.” The EC’s top trading partners include such diverse countries as the United States, the Soviet Union, Saudi Arabia andJapan, and as a result, it is more interested in reaching a multilateral trade deal.