by David Orchard and Mel Clark

In the flurry of outrage over the US refusal to comply with the latest NAFTA ruling on lumber, something is missing. Editorials abound, former negotiators and promoters of NAFTA are talking tough. Others suggest ill-conceived threats or demand that the prime minister talk to President 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 US. It is called the World Trade Organization (WTO), formerly the General Agreement on Tariffs and Trade (GATT) 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 US. In all of that time, the US 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, we won almost all our trade disputes with the US – and Washington abided by the rulings. By the mid-1980s, 90 percent of Canadian lumber entered the US tariff free and the duties on the remaining 10 percent were negligible.
It was only when Canada decided to turn away from the multilateral framework of trade rules with the US and enter into a bilateral one-on-one free trade agreement (FTA) in the mid-1980s, that US industry saw its opportunity and used it. It has been using it ever since.
Under the FTA and NAFTA, it is US law which now applies in countervailing, anti-dumping and related disputes with the US. The dispute panels are limited to deciding if the US has applied its own law correctly. Furthermore, the US 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 US market access, unleashed the full force of US 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, 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 the US. The answer is to simply return to the safer, more effective, already existing multilateral WTO framework. Under the WTO we have all the levers to get back the $5 billion the US has taken in lumber tariffs and to make sure it doesn’t happen again.
When the US 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 US has taken 10 trade actions against the Canadian Wheat Board, Canada’s largest net earner of foreign currency, and we now have US tariffs against our wheat exports.
In all the years of trading with the US 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 US and the private sector that were used to build an independent Canada. What the US 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 US ownership. In grain, the US wants an end to the Canadian Wheat Board. This would see the Canadian grain trade move virtually overnight into US 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 US, 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 US 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 US.
All of the intolerable NAFTA rights US companies now have over Canada – to sue the Canadian government, to overturn Canadian laws, to control our exports and energy prices – would disappear. Chasing the dream of a “special relationship” and some kind of shortcut to “secure access” to the US market is a dangerous delusion which has cost Canada dearly.

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. He farms at Borden, SK. davidorchard@sasktel.net
Mel G. Clark 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.