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Industry Watch 

Canadian sovereignty is at the core of softwood lumber dispute. 

By John Clarke

rules of engagement may be more appropriate than rules of trade in managing the century-old softwood lumber problems between Canada and the United States. Perhaps even a new Geneva convention to make sure that all prisoners taken are treated fairly and humanely.

Each said claim throughout the dispute that God was on its side (as nations at war often do.) well, perhaps not a real diety in this case but certainly truth with a capital letter.

Here's Rusty Wood, chairman of the U.S. coalition for fair lumber imports, who had sworn to unmask Canada's dirty little secrets, claiming that he and his friends were wearing the white hats the whole time.

When the Washington Post, will be forever remembered for exposing the Watergate affair, suggested the American industry might be a little less than Rusty Wood pure, the chairman wondered whether the newspaper might consider that some nations other than the U.S. might be wrong sometime.

Here's Sen. Max Backus, chairman of the U.S. Senate Finance Committee, saying Canada should drop its Soviet style forest management system.

Little consideration there for the fact that the British North American act made the provinces owners of the forests, giving the people the Constitution that turned Canada into the nation in which classic laissez-faire market economics would be a difficult trick to bring off.

On the other hand, rules of trade weren't robust enough to temper the language of international trade Minister Pierre Pettigrew or B.C. Forest Minister Mike De John, the former calling the duties set by the U.S. Commerce Department "obscene" and the latter calling President George W. Bush a "gutless wonder" for not standing up to the U.S. coalition.

A greater wonder is that anybody most of all Prime Minister Jean Chretien could be so naive as to believe that President Bush was interested enough to do anything more than mouth a few soothing platitudes unconnected to any obligation to the brothers up north.

As for trying the case under the North American Free Trade Agreement and the world trade organization, each side claimed truth there too.

An open and shut case for Canada, said the Montreal-based Canada free trade lumber council. And if you press the U.S. coalition hard enough through litigation, it might fade away, especially when it ran out of support from the few remaining big shot corporations which haven't deserted it already.

Notwithstanding some growing academic opinion to the contrary in Canada, in the free trade council's view of things, you can only have opened and shut assurance if truth is on your side. Therefore, the Americans are wrong. And the same you say, said the Rusty Woods.

These are fighting words. But the rancour has deflected focus from an issue that for Donald McDonald, the father of free trade as the chairman of a royal commission that recommended it, when the long run be more important.

The globalization of trade is spawning continental compacts, not just free trade among nations. The European Union is one example. It is far more integrated than anything in North America. But McDonald believes Canada and the U.S. are being driven closer together by the Internet, improved transportation flows across border points, increasing investment in each other's economies and, in debate at least, by the possibility of a common currency.

Think tanks are devoting more and more time to trade continentalism and Ottawa has been funding studies on the merits of a common market in North America.

The trouble is that all these initiatives will require tremendous harmonization and not just in trade systems, but in national economies.

The softwood lumber dispute has something to say about these things. In North America, harmonization is not really the objective. For Canadian lumber to find free access to the American market it apparently must be managed as the Americans say it should be managed. There is no room, are not much room, for different systems, even when they can be shown to be fair.

With their gargantuan economy, the Americans may indeed be able to dictate terms in a globalizing world. They surely can do that in lumber, where Canada supplies a third of their market.

Globalization is like a runaway train, notwithstanding those big and sometimes bloody anti-global protest demonstrations. Unstoppable even among Third World countries, which expect growing wealth from it. It has left behind even the concepts of equal rights intrinsic in the free trade agreements of North America.

The issue now is whether Ottawa will have a role in shaping a new continental agenda with the U.S. or simply be left to react to events. How much sovereignty can Canada preserve or afford to give up as events unfold?

Sovereignty is at the core of the softwood lumber dispute. The existing free trade agreements have not worked very well to protect Canada's national interests.

In a working paper two years ago professors George Hoberg and Paul Howe of the University of B.C. said: "the dispute resolution process has provided some protection for Canada but is limited by the free trade agreements which continue to apply the subsidy laws of the importing country."

"Canadian sovereignty has been challenged not because of the transfer of authority to supranational institutions but precisely because supranational institutions were not strong enough."

In trade dominated by the U.S., can any supranational institution ever be strong enough? The Americans may be a nation of laws. But sometimes it seems they have to be their laws, especially in a global trading system.

Are there enough Canadians who think it important to preserve some sort of sovereignty in a global market even one contracted to a continental span? As Washington exerts power to insist on its own agenda, we will have to ask how much sovereignty were prepared to cede for a bigger trade balance. Rules of engagement may be more useful than rules of trade in finding the answer.

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