TRADE TALK - LEO RYAN BEST FRIENDS, LIKE IT OR NOT: A BILATERAL SUCCESS STORY

TRADE TALK - LEO RYAN BEST FRIENDS, LIKE IT OR NOT: A BILATERAL SUCCESS STORY

Looking back at nearly 15 years of covering the world's biggest bilateral trading relationship as Canada bureau chief of The Journal of Commerce, it seems natural to recall a vivid comment by John F. Kennedy.

"Geography," he said, "has made us neighbors. History has made us friends."That observation remains as true today as it was in 1961, when President Kennedy addressed the Canadian Parliament during a state visit to Ottawa.

In addition to defending similar Western values of freedom and democracy (though with very different political institutions), Canada and the United States have generally moved in concert on global security and trade matters.

This has included the U.S.-Canada Free Trade Agreement, which took effect on Jan. 1, 1989; the North American Free Trade Agreement, encompassing Mexico, which came into force five years later; and the Uruguay Round of trade- liberalization measures.

And the two countries have been ardent in the past few years in promoting hemispheric free trade as well as closer links with the Pacific Rim.

A notable exception to this harmony has been Canada's continuation of economic relations with the Fidel Castro's communist regime in Cuba. To Ottawa's distress, the U.S. Congress is considering a proposal to widen the U.S. embargo to encompass foreign companies and countries investing in or trading with Cuba.

INTIMACY AT THE TOP

The past decade or so has been marked by a rare intimacy between U.S. presidents and Canadian prime ministers.

There appeared to be little in common between Ronald Reagan, the populist, and Pierre-Elliott Trudeau, the aloof intellectual, in the early 1980s.

Things changed dramatically between 1984 and 1993, when Brian Mulroney was prime minister at the head of a Progressive Conservative government.

One moment stands out in the Reagan-Mulroney era - the day (aptly called the Shamrock Summit) in March 1985 in Quebec City when the two leaders, arms around each other's shoulders, sang "When Irish Eyes Are Smiling."

Schmaltzy though this may have been, it pretty much set the tone for the negotiations that followed on the U.S.-Canada free-trade agreement.

Mr. Mulroney was equally chummy with George Bush - a fact that did not escape the notice of a veteran Liberal politician, Jean Chretien.

When Mr. Chretien became prime minister in late 1993, he was quick to say people would never catch him fishing or playing golf with the president of the United States.

The new Liberal government scoffed at the "camp-follower" approach of its Tory predecessor, but soon abandoned its tough talk about "renegotiating" a ''flawed" Nafta.

When Mr. Chretien played host to Bill Clinton for the first time last February, their meeting was like a reunion of old chums. Mr. Chretien opened it by quipping, "The Americans are our best friends, whether we like it or not."

A DECLINE IN IRRITANTS

The 1980s saw a number of bitter trade conflicts, on topics ranging from Canadian exports of wheat and softwood lumber to beer distribution.

These disputes spilled over into the early 1990s, despite rulings by arbitration panels that largely absolved Canada of alleged unfair trade practices.

Last year saw the apparent resolution of the softwood, beer and wheat conflicts, though various farm-trade issues remain on the front burner.

What's important to realize is that during this period, the irritants have never represented more than 1 percent of bilateral trade.

Moreover, since the U.S.-Canada free-trade accord came into force, two-way trade has soared, proving wrong especially the doomsayers among organized labor and economic nationalists in Canada.

Total bilateral trade, comprising services as well as merchandise, has surpassed C$1 billion (US$745 million) a day. American as well as Canadian exporters are clearly capitalizing on the decline of tariff and nontariff

barriers.

Last year, merchandise trade between the two countries totaled C$331 billion (US$242.7 billion) - up 22.1 percent from C$271 billion in 1993, and way up from C$187 billion in 1988, the year before the FTA took effect.

Canadian exports to the U.S. amounted to C$173 billion in 1994 vs. C$100.8 billion in 1988. U.S. exports to Canada rose from C$86 billion in 1988 to C$137.2 billion in 1994.

The trend so far in 1995 is pointing to further growth of 25 percent in bilateral trade.

Summing up, U.S.-Canada trade has attained an enviable level of maturity, and bureaucrats in Washington and Ottawa have become increasingly sophisticated in managing their relationship.