(00:00:00) Live broadcast of the Minnesota meeting are sponsored by the Twin Cities based law firm of Oppenheimer wolf and Donnelly in recognition of its 100th anniversary. (00:00:12) Good afternoon. Good afternoon. Ladies and gentlemen, I'm Don Connolly vice president of public affairs at Honeywell and a member of the Minnesota meeting steering committee. And it's my pleasure to welcome all of you to the Minnesota meeting today. We also extend a special Welcome to our radio audience throughout the Upper Midwest who are listening to this program on Minnesota Public Radio. The broadcast is sponsored by the Oppenheimer wolf Donnelly Law Firm. Today's speaker Thomas Niles is the United States ambassador to Canada. Tom is a career Diplomat and joined the Foreign Service in 1962 and has served in overseas posts in Belgrade Moscow and Brussels. Mr. Niles was nominated as ambassador to Canada by President Reagan on July 9th 1985. Ambassador Niles is here today to discuss United States Canadian trade relations. He is a strong advocate of free trade and of improving u.s. Canadian relations. We look forward today to a stimulating discussion of America's relationship with our largest trading partner. During Ambassador Niles talk. Please jot down questions that you have on the white index cards at your table. And then after his remarks hold him up during the question and answer session. Jean King president of communicating and Jane were a sec who was executive director of Minnesota meeting will then move through the audience with a microphone and approach those of you with raised cards. It is my pleasure to present to you Ambassador Thomas Niles. Thanks very much. When you write those questions down don't feel restricted to US Canada relations. Although that is the subject I know best or at least I hope I know best if you want to ask other questions on other foreign policy issues that we could discuss here here this afternoon. I'd be pleased to have a go at least please listen to the question. If not give you an answer. I thought my remarks which I want to keep brief. I talk more generally about the relationship between the United States and Canada focusing as Don suggested on the trade relationship, which is the single most important component particularly now given the negotiations that we're conducting with can on a free trade agreement, but there are other issues that some of them of obvious concern to you living here in the Minneapolis area that do play an important role in determining the overall. Environment the overall atmosphere of the relationship between the United States and Canada. So I thought I'd talk a bit the bit about some of those those issues as well. Let me turn first though to the to the trade trade negotiations to the trade relationship and make it make a few points there. The the trade relationship is the largest bilateral such relationship in the world not perhaps fully understood in the United States in terms of its importance for for us in terms of levels of economic activity. Canada is our major trading partner by a substantial margin and we send at least in 1986. We sent over 23% of our merchandise exports to Canada by Far and Away the largest single Market we of course for Canada or an even more important Market in that Canada sent somewhere in the neighborhood of 77 percent of its merchandise exports to the Knighted states a very high degree of dependence in the case of our Canadian friends and neighbors and I think that goes far to explain why Canadians are perhaps as concerned as anybody else about what's happening in this country today on trade issues as Canadians watch for example, the discussion which I guess begins today in the Senate of the Omnibus trade legislation. They see some very important Canadian equities some very important Canadian interests at stake as well as course of interest of the United States. The trade relationship is one which has developed very well in the in the post-war period the United States and Canada began the process of crawling back from the hole that we got ourselves into in the 1930s with smoot-hawley 4D Macomber before that. We began our negotiations on tariff reduction with Canada in 1935 the first negotiation conducted Under the reciprocal trade agreements act and we had to negotiations before the war and then of course multilateral eyes the process and Gat in the post-war period and also carried on some important bilateral negotiations with Canada notably, but not exclusively the automobile packed of 1964, which has been somewhat in the news of late the relationship has as I say develop satisfactorily as a result of tariff cutting and removal of barriers when the Tokyo round tariff concessions are fully implemented at the end of this year roughly 80 percent of Canada's exports to the United States will be either tariff-free or Tariff of 5% less 5% or less the same figure for the US exports to Canada would be somewhere in the 6570 percent range. There are however is still some important tariff barriers there on both sides and even more important non-tariff barriers and this is what the trade negotiation is about the trade. She Asian that we began roughly 14 months ago and are quite far advanced in today. I remain confident that despite some important issues that remain to be resolved that we will succeed in this in this very important Association that we will have by approximately the first of October a US Canada Free Trade Agreement that we will be able to submit on our side to the to Committees of the Congress Ways and Means and finance. The Canadians will be able to handle in their own way in terms of approval. This is not to say that we're not a have an easy time of it because there are some important issues there issues that that will require some difficult negotiation but nonetheless, I do remain remain confident that that we will find find a solution from the Canadian Port of view. Of course, they've made their objectives. A clear their major concern is access and they like to have guaranteed access to the United States Market obviously, very important to them given the degree to which Canada's economic future Economic Development depends upon the flow of goods and services from Canada to the United States at 75% 77 percent figure that I mentioned to you before would I think explain better than any other other single figure any other single fact why Canada attributes so much importance to its access to the to the United States Market we of course are very concerned about other aspects of the problem. The other aspects of the negotiation some of the issues under discussion today include questions of domestic subsidies, and the impact that they have on trade flows non-tariff barriers such as the activities of some of the Canadian Provincial liquor boards and problems that we have say in selling United States wine and beer in Canada. Financial Services, we're United States Banks and insurance and brokerage Investment Banking companies have what we would consider to be less access to the Canadian Market than the analogous Canadian companies have in the United States. These are some of the issues that we believe can and will be resolved in these negotiations. Another important area of Us Canada. Interchange, of course is the Environmental area. This is one where I'm sure there are some some interest involved in this part of the United States. I know at one point. Canadians were very concerned about the possibility that we might introduce some through the Garrison diversion project in South Dakota some fish into the Red River, which is your western boundary here in Minnesota that would flow into Canada and we had a bit of a lengthy discussion there which terminated recently when it became clear that we were not going to be able for financial reasons. If nothing else to do some of the things that the Canadians were particularly concerned about in the case of the Garrison Garrison project, but this was a long-standing irritant in US Canada relations and one which I'm sure both sides are very pleased to put behind us. We have issues such as acid rain on the agenda there too. I'd say we've made significant progress in recent years, but considerable work remains to be remains to be done Canada welcomed the president's announcement of his support for the Clean Coal Technology Program. But as prime minister Mulroney made clear during the president's visit to Ottawa and April. They remain of the view that we should negotiate a bilateral agreement on acid rain and are continuing to press for such an agreement the president announced in April in Ottawa. You may recall that he would consider whether we would be able to negotiate such an agreement and that process is continuing today. We have other other issues on the bilateral front which I might just mention briefly one that's gotten a great deal of attention is the issue of the status of the Northwest Passage so called Arctic sovereignty there. The issue is one of whether the straight known as a Northwest Passage is an international Waterway or whether it is is Canada insists internal Canadian Waters. We've been discussing this with them for some time literally since time. I arrived there in September of 1985 shortly after the Voyage of the USS. Icebreaker polar sea tended to push this issue up to the top of the agenda. I personally think we'll find a solution to this problem before too long. We've made a great deal of progress in our discussions with the Canadians for the United States. The issue is not the Northwest Passage per se but rather what happens in international law terms if you recognize Canadian the Canadian position regarding the status of that waterway, in other parts of the world would would that create a precedent in international law which could be quite damaging for us. And in other areas, we have a very productive and important relationship with Canada in the security area. We are Partners in NORAD North American Air Defense command, and of course members together in NATO NORAD is a unique for us and I think for Canada uniquely successful undertaking in which we are able together to preserve the security of the airspace in North America something which becomes increasingly important in the years ahead as we see greater Soviet capabilities in the cruise missile area. And as for example, we make progress in the reduction of ballistic missiles as we hope to do the cruise missile threat could become more important so u.s. Canadian cooperation as members of NORAD is is important today and could and perhaps probably will become more important in the future. We are as I mentioned members together in NATO and their Canada makes a significant contribution through its troop stationing in the Federal Republic of Germany a contribution, which under the newly announced Canadian defense white paper is likely to be increased something which we certainly Certainly, if welcomed. We also have an active consultative relationship with Canada on other issues. So called multilateral issues ranging from Central America to South Africa southern Africa the Middle East Afghanistan southeast Asia in most of these instances though, not all us and Canadian positions are quite close. We have a productive and Cooperative exchange of views. Canada has played an extremely important role in the post-war period and a number of un peacekeeping operations. Where as a permanent member of the security Council. The United States really is not in a position to be involved two recent examples or current examples. There are Cyprus where the Canadians are a participant in the force along the line between the Greek and Turkish communities there and UND off on the Golan Heights where there's an important Canadian contribution to the UN force their Canada also contributes to the multilateral. Observers set up under the final disengagement agreement on the Sinai so all in all you see an active Canadian role in the in peacekeeping operations around the world something which I think we welcome in something which in in Canada is very popular something that I think Canadians support and an activity that on the part of their government that Canadian citizens support very very strongly very actively. So basically that is the the u.s. Canadian relationship in terms of the the sort of the key issues that I is the ambassador and Alan Gottlieb is a Canadian Ambassador in Washington have have to worry about there are all sorts of other problems that come up from time to time on the on the agenda. We have a number of unresolved boundary issues in the in the west and the north the Beaufort sea the Dixon entrance Straits of Juan de Fuca. Resolved the major unresolved previously unresolved issue of in the East the status of the Gulf of Maine after a couple of unsuccessful bilateral negotiations. We went to the international court of justice and the court drew the line which both the sides were committed in advance to accept we have other environmental issues from time to time. But basically I have I think described those issues which at this moment are of particular concern to the to the two governments to the two countries might just say a little bit about Canadian attitudes toward the United States you of course here in Minnesota probably have close contacts with people on the other side of the border and close to the Border you tend to focus more on Canada than do many of our fellow citizens further to the South one of the things that I find so much as I travel around Canada is a sense that well the United States doesn't care about Canada's and know about Canada and the Canadian. I know all there is to know about the United States. Both of those attitudes are wrong but both are important and need to be kept in mind the Canadian knowledge of the United States tens largely to come not through formal study but through the media and while television is a great instrument of informing people. It doesn't always give the most balanced approach her balance vision of what a country is like and I don't think people who depend largely upon television for their news and information necessarily going to have the best picture of the United States that is largely the case in Canada. Although of course many Canadians do visit the United States every year in the United States. We do have an increasing interest in Canada. I see all over the country examples of universities colleges that are establishing Canadian studies programs. And this is I think a very encouraging and in a very desirable development in our country we also Today an Administration in Washington, which I think is devoted greater attention to Canada and to the US Canada relationship then has any previous administration certainly in the post-war period all in all contributing to I think to a much better management of this this very very important very very important relationship. But we do have as the United States officials working on US Canada relations that we do have to contend with the impression in Canada that to this day people in the United States either don't know or don't care about their Northern neighbor attended take taken a much too much for granted changing that perception a bit through some of the efforts we've undertaken but it's going to be a long effort to try to make clear to to Canada that we in the United States do a tribute the kind of attention to that country that we should after all if we think about the advantages that we draw from having this large and friendly country to our North both in Of trade security and every other respect we need to we need to pay attention to Canada. We need to we need to be aware of it. We need to appreciate all of the benefits that we as Americans draw from it. Let me stop there and be delighted to respond to questions Gene you want to Go to work. (00:18:02) Well, people are getting their questions together. (00:18:05) Maybe I could ask you (00:18:06) that in the advanced material that was sent out about you. One of the things that was mentioned was that you believe that Business Industrial leaders should give direction to policymakers on our trade issues and I was wondering what sort of process or strategies do you use to get that kind of input from business (00:18:25) books. Well, I think it is important that Business Leaders Community leaders and throughout the country get involved in these important trade issues and make their views known we their variety of ways in which this can happen. The the best way I guess is through the private sector advisory committees that report to the special trade representative Ambassador you iter and there are there is a network of these private sector advisory groups of for various business for various industrial and business sectors, which are very important in this sort of inner change of views between between government and the and the private sector and other groups. We are and negotiating Peter Murphy our negotiators negotiating with Canada try to set up a framework for the future and u.s. Can't Relations which will serve the interests of business. The government is not going to be involved after the negotiations are concluded in making this work aside from solving problems, which will inevitably arise but basically it's up to the business community in this country and the analogous business community in Canada make this trade relationship work and to make the to take advantage of what we think will be the significant New Opportunities created by this Trade Agreement as we remove more more trade barriers, so it's important that we know what's on the mind of business and that government be responsive as much as best it can in these negotiations to the particular concerns of the business Community as the business Community looks at trade with (00:20:11) Cannon Gene. We have a question. Ambassador I even wrote this down. What do you see as the major substantive pieces that will come out of the treaty that will come out of the treaty that you predict for October and what pieces that are now being talked about you think will not make it in the treaty. (00:20:34) Well, I don't want to predict what we're not going to be able to do is what's in well, I recognize that but we'd like we we are negotiating on a comprehensive agreement and we want that agreement to be as all include encompassing all inclusive as as it can be and we don't believe that things should be taken off the table simply because they're difficult or because they're sensitive. We think they certainly deserve to be discussed. Now the end of the day there will probably be issues that for whatever reason the negotiators agree simply too difficult to resolve either because of a lack of time or simply because of the inherent complexity of the issue and we'll have to say OK, we'll we'll put that one aside, but I hope that we're able to keep that area those areas is as limited as and a and as few as possible so that we don't end up with With a rather less comprehensive agreement than we then we shot for now. What is going to be in the agreement? We we clearly will want to remove tariffs. The remaining tariffs seems to me that that would be a reasonable objective phased in over a certain period I don't know whether the phase-in period will be 5 years or 10 years, but that would be for instance that sort of the general time frame within which the remaining tariffs would be would be phased out. I mentioned services. This is an area of particularly Financial Services where we'd like to see some substantial progress. We're both liberalizing the financial services area in Canada. And in the United States moving to a degree in the same direction, what we have to do in these negotiations it seems to me is to find a way to bridge the the the fact that there are some differences here and the way in which the certain the two industries are structured. Way in which jurisdiction is shared in Canada United States between Federal and provincial and federal and state authorities. So I see I see some real possibilities there and then the financial Financial Services area. We do want to remove non-tariff barriers to trade to the greatest extent possible. These are the these are in a way that the the major remaining remaining barriers tariffs have declined in importance. We don't have strictly speaking quotas between the United States and Canada. So it's these non-tariff barriers to trade that have such a inhibiting effect in these are things like government procurement which might be restricted to firms from a certain jurisdiction or say by America by Canada. We'd like to we'd like to open up that procurement on a balanced reciprocal basis. I've mentioned for example a problem that we have on our side and the operations of the provincial Liquor Control Board. In Canada, which we feel restrict the opportunities of the United States Vintners and Brewers to sell their products products in Canada. We have some analogous restrictions in the United States. These are the kinds of things. We'd like to like to see included. Now. The other thing that the Canadians are very keen on is dispute settlement. What happens because we will have trade disputes in the future. Even if we conclude an agreement. There will be points on which the two countries differ and how do you handle this reality that in the future we'll have have problems in the trade area. This this is going to be an important subject for negotiation between now and the end of this end of the summer. What kind of dispute meant dispute settlement mechanism will be enshrined in this agreement and what it's what will its powers being what will its what responsibilities will it have? And what Authority will it have that will be probably the single most important issue to be resolved between now and the end of the summer (00:24:40) Ambassador and Roxton. We have a question here. Ambassador Niles, could you explain what the similarities and the differences are between Canada and the US relative to this idea of national security policies of the US. What's the attitude? Canada has towards the United States. And also if you could explain What mechanisms exist to have further discussions relative to melding a policy that would reflect both Canadian and US interests. (00:25:15) Well as I suggested a moment ago, we I believe we have a fairly broad area of common interests and common views on security policy issues best exemplified by Common membership shared membership in NORAD and and NATO. So the fundament there is one of cooperation and shared interests. We have a an extensive relationship with Canada in the area of military procurement. We buy a lot of military equipment in Canada, Canada buys a substantial amount in the United States and there's a there is a concept of a sort of a North American military industrial supply base, which is important to both countries and both countries benefit from it. There is obviously a difference in the perspective of the two countries on a lot of international issues reflecting the Roles that can to the United States play Canada though. A member of NATO is not involved for example militarily and in some of the same ways that the United States is kind of can is a non-nuclear country. So here alone you you see and just for that reason significant differences between the defense establishment defense capabilities of the two countries and the role that the two countries play in providing or contributing to the overall defensive capabilities of the Western Alliance, but I don't see anything unusual about that each NATO Ally brings a certain set of capabilities to the table. The important thing in NATO is is that each country contributes essentially according to its abilities and that the contributions are roughly commensurate. That you don't have a situation where one country ends up carrying a larger an unnecessarily large share of the burden this whole issue of Burden sharing is one that's been with us for a long time will doubtless be with us in the future. We have encouraged all of our NATO allies. And of course we made the point for ourselves as well that we need to do more on defense particularly in the conventional defense area where forces tend to be very costly as technology advances and each unit cost more than the unit. It replaces airplanes are good example of what's happening in that respect where you compare an F-18 with an F for you're talking about a probably a five times increase in price. Of course, you're also talking about a substantial increase in in in capabilities. So inevitably the United States and Canada approach these issues from somewhat different positions, but on the basis to of shared interests and in a sense of shared responsibility both here in North America, and and in NATO Canada does not see itself playing the kind of world role that it was thrust upon the United States in the immediate post-war period in which we have shouldered since then so you don't see Canada and you wouldn't expect to see Canada for example participating in activities in the Persian Gulf the Canadian Navy is not not equipped nor would the would the Canadian government see itself as playing a role in that particular area, although they do support as a prime minister made clear and in Venice that the at the been a summit the the efforts that the United States is undertaking in that (00:28:56) part of the world. I have another (00:28:58) question. Does that respond to your question sir, Moreland? (00:29:06) Excusing second part of What mechanisms exist to resolve future differences as far as differences in opinion relative to ideas of national security. (00:29:16) Well, we have both bilateral and multilateral mechanisms. Bilaterally. We have close consultations with Canada on security issues that all levels beginning with the secretary of defense and his counterpart the Canadian minister of defense and down through the chief of the Canadian defense staff and the chairman of the Joint Chiefs who will be visiting Canada. Next in the month of July is a matter of fact and various other mechanisms and most importantly perhaps. We have a bilateral US Canada Defense board the permanent joint board on defense which was established as a result of an agreement reached in 1940 between President Roosevelt and then Prime Minister Mackenzie King, which meets three times a year of to discuss a broad range of Us Canada Defense issues. So we do have a very good bilateral consultative mechanism in the defense security area to resolve problems and to plan for the future. Of course. Multilaterally Cannon the United States participating as they do a NATO discuss all of these defense plans on a multilateral basis in the defense Review Committee of NATO and the defense planning committee (00:30:32) Ambassador. Do you have a feel for the (00:30:34) attitude of Canadian are cultural producers toward a u.s. Free trade agreement and could agriculture be an (00:30:40) impediment to develop in a Free Trade Agreement. (00:30:46) Well, it's a Canadian agricultural producers. Particularly. The grain Canadian grain producers are particularly concerned not about the bilateral US Canada relationship as much as they are about the conditions on the international market and the problems that both the United States and Canada have run into as a Out of growing subsidy problems with the European economic Community Canada sees itself as being sort of the innocent bystander in the dispute between the United States and the Europeans and they see the export enhancement program the Eep which we have employed as a tool to bring home the message on subsidies to the Europeans as cutting into potentially Lisa into some Canadian markets at the very least. They see this as reducing if not the volume of sales the value of sales because it pushes pushes prices or tends to push International grain prices prices down we would argue and I think we get Fair support for this in Canada that we in Canada we and Canada as well as other non subsidizing countries traditionally know. Subsidizing countries have a shared interest in trying to bring a bit more rationality and good sense into International agricultural trade particularly by discouraging the European Community from the course. They're on now, which has been one of ever higher prices never greater subsidies. We feel we in Canada we and Canada and a lot of other countries feel that we made some major least philosophical breakthroughs at the oecd ministerial and that the economic Summit when we agreed that we would in the Uruguay trade round break the link between subsidy and production so that if governments choose in the future to subsidize Farmers for social economic or political reasons for whatever reason they would not tie that to production there would be Income Support programs independent of the level of production and production. Be determined by the market now that is an agreement in principle and it's going to be difficult to go from here to there. But that's an objective that we and we in Canada share it will require some fairly significant adjustments in all countries of the domestic agricultural programs. And that goes for Canada as well as the United States they are for I think it is probably unlikely that the US Canada bilateral agreement will get into the area of the domestic agricultural programs, even though those programs we all recognize have a tremendous impact on production and trade flows. So I would not expect that agriculture could be a major stumbling block in the in the negotiations. I think we see our problems in the agricultural area is being less bilateral and more multilateral and therefore susceptible to solution primarily in the context of the GATT and based on the understanding I mentioned (00:34:20) Yes, the 1965 Auto fact that was intended clearly to benefit the Canadian auto manufacturing. It was supposed to be temporary. But over the years the Canadians have not agreed to change even a comet in that pack today. It appears that the foreign manufacturers Japan Korea Etc are intending already and are intending further to import parts from the Far East and to assemble them in Canada. And then to ship and freely into the u.s. Under that pact. Of course the Canadian Auto Workers are broke off from the United Auto Workers and u.s. Partly. I think over this difference of position Canadians obviously want freely to export in this country and the American workers. See this as a way of Getting around quotas and any kind of restraint from importing from the Far East isn't that such a strong point of contention that it may make it virtually impractical if not impossible to resolve the trade act before it expires in January 3rd, and number two. How do you see this Auto packed being resolved. (00:35:45) Now, the the automobile pact was not in my view concluded just as an effort to help Canada. I mean the automobile pact was beneficial to the industry in North America both in Canada and in the United States, and if Canada is done somewhat better under the pack than the United States that may or may not be true. But basically the North American automobile industry as an industry is more competitive better off today. Then it would have been without the automobile pack. I think the the automobile pact has been a big plus for for North America if you look back and what happened in 1964 when The Pact was completed u.s. Canada trade in automobiles and parts amounted to about a billion dollars little bit less than a billion dollars in 1986 that trade had grown largely as a result of the automobile packed of course certain amount of inflation took place during that period to but in nominal terms it had grown to around 45 billion dollars in parts and automobile parts and cars. Now some parts move across that border several times as they go from initial production to the final final product, but that's really an extraordinary success story as a result of the automobile packed and even though our industry here in North America has taken some pretty heavy hits from the Producers and to a degree from Europe. I think we would be an awful lot worse off. We're not not for the automobile packed. Now the industry is changing in 1964 there weren't any Toyota plans are Honda plans are Datsun plants in North America. And the fact of the these changes has to be taken into account as we look at this very important area of trade and that's what basically we're saying. We're not the United States as far as I'm aware is not in any way interested in scrapping or gutting the automobile pack, but we do believe that we need to look at automobile trade as we look at what we hope will be our expect will be a comprehensive Trade Agreement. You can't say we're having a comprehensive trade agreement and then exclude over 30% of the trade, which is what Automobiles and parts represent in the global u.s. Can of trade and trade equation. So we need to talk about these these issues and there are some things there that you mentioned. Presence of the Japanese and other foreign producers in Canada, but also in the United States, let's be fair about it Honda's in was first in Marysville, Ohio before they moved to Cambridge Ontario or wherever they are. So it's both sides of the Border. We see very significant changes going on in the industry as the offshore producers move to North America sometimes or at least initially in the form of assembly operations, and then subsequently more and more domestic content domestic parts and domestic manufacturers brought into the to the cars. So we need to take take this into account and we can't agree in Norwood Canada want to agree to to allow the automobile pack the purposes the automobile pack to be subverted and and used against the interest of the industry in North America, but basically That's that's what we're what we're talking about. I think that should be our our legitimate objective. I don't think that the the issues involved in the split off of the Canadian Auto Workers from the United Auto Workers in 1984-85 were not really Auto packed related. I mean, there were a lots of reasons why that happened and I don't want to get into them, but I don't think that they really had very much as I recall it and look at it today very much to do with it with the automobile packed per se this this it was much more complicated than that. (00:39:55) Ambassador Niles you mentioned that there are a number of trade issues such as Market access which need to be negotiated between Canada and the United States. This is true of number of other countries as well. I suspect that the Public's concern over the lack of progress in resolving these issues as resulted in the more stringent legislation that's being considered. How do we make this process of resolving such issues more timely and more (00:40:29) effective. Good question our problems with Canada. Even I don't want to minimize these problems in the trade area are while significant not of the same magnitude as our problems with some of our other trading partners notably with some of our Asian trading partners or to a degree even with the European Community certainly certainly in the agricultural area. We have relatively free reciprocal access here between the United States and Canada to the market of the other country that said there are barriers and that's what we're negotiating today because shading about today. The trade legislation now under discussion in Congress does have important implications for US Canada trade and one of the reasons that is one of the reasons why the Canadians are so interested in what's going on in Washington in Washington today. My concern would be that this trade legislation which some of which contain some extremely protectionist elements and the Gephardt amendment is but the most most obvious and visible of those protectionist elements would be an adoption of this would be akin to snatching defeat from the jaws of Victory because we are on the way to simply because of other forces under way to we're on the way to resolving large measure our trade problems or at least too much better management of these trade problems. We're going to see this year a significant decline in the United States merchandise trade deficit and that process is going to is going to continue as a All two factors first and most importantly the changes in currency parodies which have taken place since the February of 1985, but more prompt more particularly since the plaza agreement of September 1985 that has had is having now a very profound effect on trade flows and on the competitiveness of the United States products worldwide and the competitiveness of foreign products the United States. So we see the trade problem turning around and it would be a very unfortunate thing at this particular juncture for Congress to Embark upon a protectionist bit of legislation, which would have the effect of closing markets in the United States and having them reciprocally close to to us manufacturers us Farmers us business men overseas. Now, what do we do to resolve these problems more expeditiously, the Administration has started and began in the fall of 1985 more vigorously to First United States trade laws using for the first time section 301 of the trade Bill to self-initiate cases where we saw particularly egregious examples of subsidized ation or markets being closed to the United States and we've been very very strict and very very firm and using that section of the law where we felt there was a good case to do so and we've had some had some good results. I think it's important for our trading partners and it's important for Congress and it's important for business to see that where we have foreign discrimination discriminatory treatment of US exports that the administration will move vigorously and has moved vigorously to deal with it. We need improve dispute settlement mechanism. We have proposals, of course that are going to be discussed between the United States and Canada for a bilateral mechanism, which would have the effect of improving our ability to deal with trade disputes. I think we can improve the dispute settlement mechanism multilateral. two within within Gat the Gat dispute settlement procedure is incredible in some respects because you you have a dispute as we had with the Europeans on pasta and can't think with the other product. Lemons and limes and the dispute settlement process went on for years and years and then at the end of the day the verdict and these dispute settlement cases went in favor the United States and European said, oh gee, we can't do that. That's we can enforce that that finding so there are some problems in the in the Gap dispute settlement procedure, which I think we think need to be addressed in this current Uruguay round of Gat talks to make it one more time lie in the sense that if you file a trade dispute, you don't get your answer 10 years down the road and to give it some some bite so that when you if you do find that the Gap panel rules in your favor, you actually get the kind of response from the trading partner that that you expect. So these are some of the things that that that we that we need to do. I think it's also very very important that people in the United States understand the reasons for the trade problems that we've run into and if you look at this trade deficit this Normos, and ultimately unsustainable merchandise trade deficit which was somewhere around a hundred sixty billion dollars or so in 1986. Why is that trade deficit as large as it was and if you analyze what what caused it and try to break it down according to effects and percentages. We most of though most of the deaths that did not arise because of unfair trading practices by our trading partners. You could probably attribute. I'm not sure 20 30 billion dollars of that or maybe a little less to unfair trading practices on a global basis, but most of the trade deficit that we have to deal with came as a result of the very high value of the United States dollar During the period from 1981 to 1985 plus the collapse virtual collapse of some major United States export markets and so in South America, I mean if you look at what happened to US exports to Brazil Mexico Venezuela, Chile and Argentina from 1980 to 1985. You'll see a substantial fall in our exports and and there lies a substantial part of our trade problem today as a result of the debt crisis those countries were simply not able to continue the level of imports from largely from the United States that they traditionally it made so it's not the to attack our trade Problem by as largely a result of unfair trading practices by our partners. It's the wrong target and if you shoot at the wrong target, you're likely to end up with something that's not going to help you very much. So this this is why I think it's so important that this trade Bill in Congress now under discussion and come out right for us and that we not go off on a tangent here and attack attack really the wrong the wrong target. (00:47:23) Yes, we're hearing on Flipping accounts of the Reagan administration's commitment to free trade with Canada. You're here to build support for negotiations yet. Peter Murphy is working with the staff of five and reportedly has trouble getting an ear of even senior Administration officials his counterpart and Ottawa has a staff of 100 and a direct line to Mulroney. Are we really committed? (00:47:48) Well, let me assure you that this is a venture that has the full support of the president the Secretary of State and the Secretary of Treasury the fact that the that the Canadian negotiator has a separate office with a large staff is irrelevant. Peter Murphy is able to call upon the all of the resources of the executive branch and when he comes up to ottawa's he did on Monday of this week. He brought a full team with it. The only I suppose the only On the size of our negotiating team when we have the meetings outside Washington is the travel budget which you can't afford to send the whole all of Washington to Ottawa. So you have to be a little bit restrictive in that sense, but there's no lack of commitment on the United States side to this the president made it clear when he was in Ottawa and he's repeated this several times. He mentioned it in the State of the Union Address that this is our major foreign economic undertaking during 1987 and the key effort that the United States is undertaking an international trade negotiations. Now, of course the Gap talks are also very important to us, but that's a longer-term undertaking one that will begin to see results in and then the 1989 Beyond so we we I reject totally this idea that the United States is not putting the muscle behind this exercise that it deserves or that the president's uninterested or that the government is not doing what it needs to do. That's that's just simply not true and there's really no. This is for in in fact. I find it just a really an unfortunate unfortunate misconception. (00:49:34) Ambassador Niles. This is a fairly Narrow Gauge question rights to this political stability in Canada. I read a couple of reports recently that suggests that the NDP party is experiencing a substantial Resurgence in popular support particularly in the western half of the country. I guess is a consequence of the Agricultural depression having been around the last time they governed at least a couple three Western provinces. This is troubling and that they had as a leadership view very hostile reaction towards you go s corporate Enterprise. I think they coined some term that related to some of our businesses corporate welfare bums or something equally degrading, whatever. Can you comment on that, please? (00:50:22) That's a pretty sensitive subject for an ambassador to get involved in comments on the political environment in the country to which to which he is accredited. The United States has worked effectively with variety of governments in Canada over the years liberal government's Progressive conservative government's we have had as you suggested NDP provincial governments, never NDP governments and Ottawa. Although there was a minority government of during the Trudeau are I think 72 to 74 which depended in part what dependent upon NDP forbearance in order to pass pass legislation if my memory memory serves me, I think we would want to judge judge parties or judge judge governments on their performance and not on their rhetoric and see See what happens see what happens when the time comes but I wouldn't I wouldn't necessarily assume that anything in particular is going to happen simply on the basis of public opinion polls. They are they are volatile in the United States and then and in Canada, but I think our our position has to be one of Readiness to work with whatever government the people of Canada put in in power and judge that government on the basis of the policies that it adopts toward the United States when it when it becomes a government not before that. (00:52:02) Ambassador I'm a Minnesotan who has many friends in Canada, and I'm embarrassed that our country keeps dragging its heels on the question of acid rain pollution here in Minnesota. We stand to suffer from acid rain and years to come. Do you see a way for the u.s. To face up to this question and do something about it? (00:52:21) Well, if I were you I wouldn't be embarrassed by what we're doing because I don't think there's any basis for embarrassment. The United States has a good record on environmental controls. And under the Clean Air Act. We made a tremendous amount of progress in dealing with the precursor pollutants for acid rain. We've seen SO2 emissions in the United States declined from roughly 33 million tons in 1972 somewhere in the neighborhood of 1920 and 1985 and the line continues down. We've done more than Canada's done and knocks controls in the sense of having mandatory catalytic converters on automobiles. Although the Canadians are will in this model year require catalytic converters on all automobiles sold in Canada. So I don't think we have to apologize to anybody for what for what we've done. We the the Clean Air Act was is a landmark piece of legislation. Not just the United States, but I would say almost worldwide. We've we've come a long way under it and that progress that progress continues. Now, what do we do in the future? Because obviously a technology changes and requirements change and this is the the essence of the program that the president has announced support for This Clean Coal technology technology program involving half a billion dollars a year in federal government money matched by money from the private sector designed to develop better ways to burn coal and we're going to have to not necessarily in Minnesota, but certainly in my part of the country down in Kentucky. We're going to have to continue to burn coal for electric power generation from now I out into as long as far as we can see. So if we're going to do that, we want to do it in a way that's environmentally safe and sound Sounder than what we've been doing. And that's the essence of the president's program two-in-one supported. For example by the majority leader Senator Byrd one that's aimed at trying to find better ways to Burn coal Coal more cleanly it trapped the pollutants that the burner Point instead of trying to trap him in the stack. And this is a program which I think has a tremendous amount of promise for the United States and for Canada. Now the trick will be to ensure that in the out-years say in the end of this decade beginning of the next decade that we we implement this technology, which is coming out now as a result of efforts by the private sector and a certain amount of encouragement from from the government, but I don't think we have any reason in the United States to be embarrassed or ashamed of our record on environmental controls. I think if you look in terms of the balance that has to be drawn between environmental interests and economic interests and social interests. We've done a pretty good job and I think a pretty good job on acid rain acid rain as well and there are political social economic limits to what what can be done in this area and I think We're pressing right up right up against (00:55:24) there lots more questions, but we'll have to turn it back. (00:55:28) And I also thank you very much for would you stay up here for a moment sure for your very enlightened discussion. Obviously, you've demonstrated clearly as you did last night, very comprehensive knowledge for this subject and US Canada relations and we have here a gift. We'd like to present to you if I can get it out. This is a Minnesota meeting peace pipe that was created by a Minnesota artist Robert (00:55:54) Rose bear and (00:55:56) the artist created this to symbolize the human bonds that must be maintained to live in peace in the world and we give it to you today as a symbol of the key role you play in maintaining that strong bond between US and Canada. Thank you very much for joining us today. Thank you very much. (00:56:13) You've been listening to the US ambassador to Canada. Mr. Thomas Niles speaking at Minnesota meeting before the question and answer session. He addressed Minnesota meeting on the topic Canada US trade relations of view from Ottawa live broadcasts of the Minnesota meeting are sponsored by the Twin Cities based law firm of Oppenheimer wolf and Donnelly in recognition of its 100th anniversary.