HANDS ACROSS NO RTHEAST BOUNDARY

President Reagan recently may have imposed a heavy tariff on imports of Canadian cedar shakes and shingles, but you wouldn't notice it when shopping for building materials in New England.

Shakes and shingles made in La Belle Province de Quebec are virtually all you can find in northern New England. The product and the price, obviously, continue to be right, as this sometime resident of Vermont can testify.On some beaches in Maine in the summer, there is such a massive invasion of tourists from Quebec that French comes close to emerging for a period as the "first language" of the state's coastline.

These are just a couple examples that illustrate the traditionally strong economic ties between Quebec, the Atlantic Provinces of Canada and New England. They form a key part of the overall Canadian-U.S. trading relationship, biggest in the world with two-way trade exceeding $120 billion.

The economic and other exchanges across the northeast boundary have been important to each of the three regions since the days of European colonization. Today, the boundary falls in a rural zone between the urbanized belt of southern New England and a similar belt along the St. Lawrence River.

With the Washington and Ottawa governments engaged in negotiations for a free trade agreement, it is clear that the provinces and states along the boundary have much at stake.

Trade across the northeast boundary has, in fact, been growing more rapidly in the past few years than east-west trade within Canada and is showing greater diversity.

This regional relationship is examined closely in an excellent book recently published by the Montreal-based Institute for Research on Public Policy. Entitled "Trade & Investment Across the Northeast Boundary: Quebec, the Atlantic Provinces and New England," the study is edited by William Shipman, economics professor at Bowdoin College in Brunswick, Maine.

Though, as the study points out, fish and forestry products continue to dominate the north-to-south flow, energy and a variety of manufactured goods increasingly have becomeimportant. The south-to-north trade continues to reflect New England's manufacturing strengths, which today include an array of high-technology goods and services. Inter-regional investments, for their part, are undergoing far-reaching changes, with the parties concerned taking steps to protect their own best interests.

Figures shown in the study and covering the 1979-83 period indicate Quebec more closely is integrated with the United States than are the Atlantic Provinces, or than is New England with Canada.

Exports to New England from Quebec and the Atlantic Provinces climbed from C$1.8 billion in 1979 to C$3 billion in 1983. Quebec accounts for two-thirds of these exports.

Exports to Quebec to New England and the Atlantic Provinces amounted to C$1.3 billion in 1983, with Quebec alone absorbing about 90 percent of these exports.

Still in 1983, trade flowing from New England to Quebec and the Atlantic Provinces represented 40 percent of all exports of New England to Canada. And, on the Canadian side, about 17 percent of Quebec and 18 percent of Atlantic Provinces imports from the United States originated in New England.

According to the authors of the study, the increasing flow of Canadian- gener ated electricity to New England and New York is highly advantageous to both seller and buyer. But impediments exist on both sides of the border for further substantial growth in this sector.

Trade in fish products - most of it southward - has been influenced largely by gains in efficiency in the Canadian offshore fleet, by various Canadian government measures to rationalize the country's fishery, and by low U.S. tariffs on unprocessed, as compared with, processed fish. The latter has prompted Canadian interests to locate processing plants in New England where they have access to both low-cost Canadian suppliers and the big Boston market.

The prospect of a U.S.-Canadian free trade accord raises important issues involving trade dominance, investment and job migration, as well as the power of multinational firms.

"While such an agreement," the authors of the study note, "would benefit consumers in both countries, effects on producers are highly

uncertain. Some Canadian manufacturers should realize scale economies through improved access to the U.S. market and increased competition should enforce greater efficiency."

But the plant location decisions of many firms, it is stressed, will depend on their ownership structure, on the one hand, and the southward and westward shifts in the U.S. market itself, on the other.

The industry mix of Quebec is seen as not yielding the same scale economies as that of Ontario. And Atlantic Canada's ability to obtain better access to U.S. markets could depend on its giving up those governmental transfers that help lower production costs.

Without doubt, an area of special concern is that of investment flows among the three regions. Over the past two decades, neither Americans nor Canadians generally have regarded the East as the most promising place to invest.

Competition with the Sun Belt and the Canadian West for investment, however, today is not as intense as it was during the early part of this decade. The marked recovery in the New England economy and the attractiveness of eastern Canadian locations could combine, with aggressive promotion, to increase cross-boundary investments.

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