Martin's U.S. speech draws fire
Liberals backpedal on PM's message

Saturday, October 8, 2005 Page A4

OTTAWA -- A day after Prime Minister Paul Martin explicitly linked the softwood lumber dispute with U.S. access to Canadian energy, two Liberal cabinet ministers insisted he hadn't and the opposition parties decried the move as a political stunt.

In a speech in New York Wednesday night and in an interview on CNN, Mr. Martin warned Americans that their government's refusal to accept a NAFTA panel's ruling in Canada's favour on softwood could jeopardize energy flows.

"Yes, I did a tough speech," Mr. Martin told reporters yesterday in Montreal. "But it had to be said, it had to be done. We [and the United States] are close friends and you've got to be able to tell your close friends the truth."

The extent to which Mr. Martin's government is treading a delicate line became immediately apparent in Question Period. In response to a question from B.C. New Democrat Libby Davies, Finance Minister Ralph Goodale denied any linkage had been made.

"The Prime Minister did not make a linkage between softwood and energy, but he did make the point that NAFTA itself is drawn into question when NAFTA's rules are obviously ignored," Mr. Goodale said. Revenue Minister John McCallum said virtually the same thing in an interview outside the House of Commons.

Elsewhere, the speech was broadly interpreted as constituting both linkage and a threat. Reaction from business leaders was swift and negative.

"It's nonsensical," said Jack Mintz, head of the right-leaning C. D. Howe Institute. "It's right for Canada in its own interest to maximize the price at which we can sell our energy. But to settle the softwood lumber dispute, does that mean we undersell energy products?"

Anne Golden, president of the Conference Board of Canada, was equally dismissive. "The bottom line is a trade war would hurt both partners, but we're the smaller contender and we would be the biggest loser," she said. "We need NAFTA, we've done very well under NAFTA. It's not in Canada's interest to abandon it."

Experts on North American trade said Mr. Martin's speech should be viewed as an attention-getter only, because the North American free-trade agreement explicitly guarantees free trade in energy, and particularly in times of shortage.

"In many ways you could argue that [Mr. Martin's speech] is exactly the opposite of the one portion of the trade agreement that deals with energy," said Robert Pastor, director of the Center for North American Studies at American University in Washington. "Instead of opening up at a moment of global energy shortage, Canada is threatening to restrict access."

John Manley, who headed the Canada-U.S. file during his time as deputy prime minister in Jean Chrétien's government, strongly supported the Prime Minister's New York foray.

"I think we needed to get the attention of the U.S. government at the highest levels, to the degree of frustration that exists in Canada about this," Mr. Manley said, "and that many of us who believe that improved relations are important, can't stand by and say this doesn't matter, because it does."

NAFTA's highest panel ruled in August that imposing tariffs on Canadian lumber violates U.S. trade law. Under the treaty, the panel is intended to be the arbiter of last resort in any dispute. The United States has said it will ignore the ruling, and points to a more recent World Trade Organization ruling in its favour.

The Opposition sent mixed messages. Conservative Leader Stephen Harper called Mr. Martin's speech a "watered-down" version of one Mr. Harper gave in Halifax a month ago. In that talk, Mr. Harper raised questions about the future of NAFTA, deviating from traditional Conservative policy.

Peter MacKay, Mr. Harper's deputy, decried the linkage of softwood and energy yesterday as "a very dangerous thing to do." Mr. MacKay urged the government to "get back to diplomacy at the highest levels."