Saturday, April 7, 2001

Canada Prepares for Rocky Relations with Washington

OTTAWA (Reuters) - Canadian Prime Minister Jean Chretien
is worried by what he sees as a confrontational and
isolationist tone by the new U.S. administration and is getting
ready to adopt a harder line with Washington if necessary,
political sources said on Thursday.

Members of Chretien's ruling Liberal Party said the prime
minister had taken the unusual step of expressing concern
about relations with the United States -- which is by far
Canada's most important ally and trading partner -- at a
weekly meeting of legislators on Wednesday.

"They're getting tougher to deal with...and we're going to have
to examine getting tough with them," one person in the room
quoted Chretien as saying.

Canada's usually trouble-free relations with the United States
have deteriorated steadily since President Bush took power,
at least in part because Ottawa gave clear signs that it
preferred Democrat Al Gore in last November's U.S. election.

The two countries are now mired in an ugly dispute over
Canadian softwood lumber exports, which could escalate into
a crippling trade war.

Canada, under U.S. pressure to agree to a controversial
missile defense plan, is also angry that Washington
abandoned the Kyoto climate change accord last week on the
grounds it could damage the U.S. economy.

"Chretien definitely signaled a shift in attitude after a series of
increasing problems. It was not a declaration of war on the
United States but he said 'Look, things aren't going well'," said
another Liberal source.

Chretien, by far the most experienced leader in the Group of
Seven leading industrialized nations, expressed dismay at the
Bush administration's tougher approach on sensitive issues
such as Russia, China, North Korea and the Middle East
peace process.

"(Chretien said) 'Bush has got his problems, he's got
problems with China, he's got problems with I don't know who
else. They're becoming more inward-looking, protectionist',"
said one legislator.

Chretien -- who will meet Bush at an April 20-22 summit of
Western Hemisphere leaders in Quebec -- did not specify how
he might crack down on Washington.

His options would appear to be limited, especially as he ruled
out linking the lumber dispute to Canada's profitable energy
exports to the United States.

"All the signs are that this is a problematic relationship so it
may partly become a matter of Canada bunkering down," said
David Rudd, executive director of the Canadian Institute

of Strategic Studies.

"But it would not be responsible if we just sat back and took it
(the U.S. stance) on lumber, missile defense or the
environment," he told Reuters.

The prime minister's frank words could also create tensions
with new Foreign Minister John Manley, whose overriding
priority is to strengthen ties with Washington.

But sentiment within the Liberal party does appear to have
hardened, with several members of Parliament openly
admitting concern about the Bush administration.

"The Americans are becoming very arrogant. The expression
goes 'It's either my way or the highway'...that's the American
way," Liberal legislator Sarkis Assadourian told Reuters.

The legislators say Chretien is particularly vexed by the U.S.
lumber industry's hard-line approach on the softwood issue,
which he feels violates the North American Free Trade
Agreement (NAFTA).

U.S. lumber producers, who allege Canada is unfairly
subsidizing its timber industry, asked the U.S. Commerce
Department this week to impose stiff countervailing and
anti-dumping duties on Canadian lumber imports.

Stephen Clarkson, a professor of political economy at the
University of Toronto, who is currently a fellow at Washington's
Woodrow Wilson Center, said Canada's options for getting
tough with the United States are limited.

"(But) Canada can be firmer than it has been in the past and
not give into U.S. violations of NAFTA. We could take them to
the World Trade Organization (over lumber) and probably
win," he said.