Prime Minister Brian Mulroney announced today that Canada will slap tariffs on books, magazines, computer products and other imports from the United States this week in retaliation for President Reagan's decision to impose a 35 percent tariff on cedar products from Canada.
Reflecting new strains in his formerly close relationship with Reagan, Mulroney, in a statement, called "unjustified and unacceptable" the U.S. tariff on cedar shakes and shingles.
"It flies in the face of past commitments to refrain from discretionary protectionist actions and to consult in such situations," Mulroney said. "It runs counter to current attempts to liberalize trade between our two countries."
Canada will start imposing the new tariffs Friday, the same day the U.S. duties take effect.
In Washington, White House spokesman Albert Brashear said the administration was disappointed by the Canadian move. "We will delay comment on what action, if any, the United States will take while we fully analyze the Canadian response," he said.
Finance Minister Michael Wilson revealed the Canadian countermeasures in a brief speech this afternoon in the House of Commons, where deliberations are routinely televised live. Wilson said they were designed to show the U.S. Congress and the administration that "yielding to protectionist pressure is not without cost."
While Wilson ruled out a prospect of a "trade war" and called the announcement today "a measured response," he did hold up the threat of having Canada join with European nations on another trade irritant involving U.S. copyright laws.
Wilson and Mulroney said they expected the 10 percent tariff on books and magazines will cost U.S. publishers a total of about $25 million annually.
The manufacturers of computer parts and semiconductors will have to pay about $30 million each year in duties as a result of the decision today to reimpose tariffs that had been lifted earlier this year under a trilateral agreement involving Canada, the United States and Japan.
In addition, the officials said, Canada will impose duties on cider, diesel motors, rail cars, asphalt oil, trees, oatmeal and rolled oats, and ozone generators. These are currently duty-free commodities, but are not covered by multilateral trade agreements.
Mulroney's statement said that the actions will be reviewed at the end of 30 months and that "the appropriate action to scale down or phase out the Canadian response will mirror any action on the part of the United States."
A national trauma was touched off here as a result of Reagan's decision 11 days ago to protect the ailing U.S. red-cedar shakes and shingles industry, which has steadily lost markets in recent years to its Canadian competitors.
Benefiting from a lower dollar, producers in the $180 million Canadian cedar industry, which is largely located in the west coast province of British Columbia, have captured about three-quarters of the U.S. market. Officials here said the U.S. tariff would virtually wipe out the Canadian industry, costing the jobs of about 4,000 Canadian workers.
Virtually no one here regarded it as a coincidence that Reagan's decision to impose the tariff came without warning on the same day that U.S. and Canadian representatives concluded their first round of negotiations on a trade agreement.
Appearing stunned, Mulroney said the next day, "Actions like this make it extremely difficult for anyone, including Canadians, to be friends with the Americans from time to time."
The government opposition critics, who had been either wary of, or opposed to, the trade talks, cried that the United States was trying to bring Canada to its knees just as that nation's representatives sat down at the bargaining table.
Over the past week, these critics have repeatedly demanded that Mulroney suspend the trade negotiations until he receives assurances from Washington that no more tariffs will be imposed on Canadian products while the talks are under way.
Both Mulroney and opposition leaders have indicated that they are extremely concerned that U.S. Pacific Northwest softwood-lumber interests will be successful in having tariffs imposed on those products. The Canadian softwood-lumber industry, a major product exported to the United States, employs about 100,000 workers.
But Mulroney firmly rejected the appeals to abort the negotiations, reiterating today that the best case that can be made for them is in the demonstration of the rise of protectionist sentiment in Washington.
He said Canada must move to secure its access to U.S markets.
Canadian sensitivities were further bruised by the actions of Thomas Niles, the U.S. ambassador to Canada, who privately informed senior Canadian officials that they were "overreacting" to the tariff on cedar products and were "showing a lack of sensitivity" to Reagan's "political environment."
On Friday, The Toronto Star newspaper, which has crusaded against the trade negotiations, published a message in which Niles informed U.S. Secretary of State George P. Shultz that the Canadian government, "as expected, is showing signs of panic." Niles counseled Shultz to refrain from making any public response.
Late last week, Canadian trade officials traveled to Washington and Canadian External Affairs Minister Joe Clark met with Shultz during the conference of NATO foreign ministers in Halifax, Nova Scotia, as part of a concerted Canadian effort to get the tariff on the cedar products rolled back.
Canadian officials said that they would be satisfied also if, as compensation, the United States agreed to reduce the tariffs on other Canadian exports. In both cases, U.S. officials reportedly refused the requests.
As a result, Canadian officials said they felt they had no choice but to take some kind of retaliatory action.
Opposition critics argued in the Commons this afternoon that Mulroney and Wilson had not gone far enough in countermeasures. And they noted that the imposition of the Canadian tariffs will not save the cedar industry from possible extinction.
Liberal Party critic Tom Axworthy said Wilson and Mulroney "will now be known widely throughout the land as the mouse that roared."