National Post

Trade, taxes and defence: the great Bush-Chretien

Former Senior Fellow and Vice Chair, Board of Trustees

American journalists speculated profusely about the reasons Canadian Prime Minister Jean Chretien was not invited to stay overnight at Blair House, the official residence for foreign leaders, when he visited President George W. Bush in Washington this week. The official response from White House spokesman Ari Fleisher was that the invitation was for a working meeting and did not as such constitute an official visit with all the pomp and circumstance usually attached to these more formal ceremonial occasions. This is a far cry from the festive birthday celebration that former president Ronald Reagan held for former prime minister Brian Mulroney in Washington or the Mulroney-Bush weekends in Maine.

The press persisted in arguing that President Bush was less than pleased by Mr. Chretien's seeming endorsement of Al Gore during the recent presidential campaign. Some also surmised that the Bush family's solid friendship with Brian Mulroney might have shaped the President's views of Mr. Chretien. One would not expect Mr. Mulroney to have forgotten the severity of the Airbus tribulations nor to have hidden his pain from the Bush family. Mr. Chretien's less than gentlemanly behaviour in that case was not to be rewarded with a stay at Blair House.

Interestingly, British Prime Minister Tony Blair, also a Clinton favourite, is coming to Washington for a working meeting but he has been invited to spend the weekend at Camp David. Is there more than meets the eye in the initial distance that Bush set between himself and Mr. Chretien?

We may be needlessly splitting hairs and it could be that this was a straight-forward business meeting well suited to President Bush' s informal and direct style of leadership. Nevertheless, if process was less of an issue than the U.S. press suggested, there are real differences in substance that must be addressed if the Canada-U.S. relationship is to grow and develop.

The two leaders seemed to be in agreement on trade expansion, at least as far as North American free trade goes, but what about further trade liberalization beyond North America's borders? U.S. trade policy will be dominated by President Bush's personal desire to expand a free trade of the Americas zone (FTAA). Broader trade agreements under the aegis of the World Trade Organization (WTO) have not, at least until now, captured his interest as vigorously. The new U.S. trade representative Robert Zoellick promoted the idea of an FTAA when he served in the Reagan and previous Bush administrations. He has not shown any great interest in pushing a new round of multilateral trade negotiations under the WTO. Nor has Canada clarified its own positions, even though the country has traditionally espoused multilateralism.

Where might we now be headed? The two trade options are not mutually exclusive, but the Canadian government will have to outline a more sophisticated strategy toward the United States and other trading nations if it intends to play a more active WTO role even while it pursues bilateral agreements in this hemisphere. Playing the bilateral card will require some fancy footwork beyond the pious statements about consultation on U.S. energy policy. It is clear that President Bush wishes to emphasize U.S. energy independence and favours policies and programs that increase the supply of oil and gas. He seems to have only modest, if any, interest in using regulation to curtail demand. Arctic drilling, laying of new pipelines and easing of emissions standards for older power plants, etc. will be controversial, not only in the United States but also in Canada. Beyond whining, what is our policy to be? Where is compromise possible? To what end?

There appears now to be a sense of inevitability in Washington about two issues: tax cuts and national missile defence. The tax reductions--if anywhere close to what is being discussed in Congress and within the administration--will continue to create tax competition for Canada, especially in the realm of personal taxation. Should the federal government not consider this eventuality as it plans future spending and taxation policy? Should recent tax cutting measures be seen as a prelude to further adjustment to U.S. tax competition,

or will Mr. Chretien embark on his refrain about Canadian health care and other benefits?

On missile defence, President Bush tried to assuage Canadian fears of American unilateralism. However, Canada must define the role it intends to play in the NATO coalition as this issue begins to overtake alliance

discussions. Canada is allowed to express deep skepticism of the proposed missile defence initiatives, but nuisance power is not an option. Canada cannot afford to undermine the Atlantic alliance. The cohesive power engendered by the Cold War has dissipated substantially. It is not necessary to hold joint press conferences on missile defence with Russian President Vladimir Putin to further the point.

In the Clinton era of grappling with a post-Cold War foreign policy, Mr. Chretien chose more or less to follow the flow of decisions taken south of the border. With the Bush presidency, where a more concrete and ambitious foreign policy agenda seems to prevail, Canada cannot merely sit on the sidelines, whine and react. It should define its role in the world with more rigour, intelligence and vision.