THE TRADE agreement with Israel, which goes into effect this weekend, sets an interesting precedent for American policy. Tariffs now vanish altogether on some of the goods moving between the two countries, and on others they will be gradually peeled away over the next decade. By 1995 a common market is to exist between the two countries.
Its importance will be primarily political, reaffirming the bond between them; shipments to and from Israelemonstitute less than 1 percent of the United States' foreign trade, and expansion is limited both by distance and the size of the Israeli economy. But when Congress authorized the president to negotiate this agreement, it also had in mind the possibility of extending the same principles to other and larger traders.
Like Canada. While it's hardly imminent, a North American common market is now a genuine possibility. When they met at Quebec last March, President Reagan and Prime Minister Brian Mulroney agreed to have their specialists study it. The reports to the two governments are due soon. In Canada the idea has been under intense discussion, and the minister of trade, James Kelleher, has been holding hearings around the country. There's been some vigorous opposition, but on the whole the concept seems to be picking up momentum.
If the agreement with Israel is largely symbolic in terms of the American trade pattern, any similar arrangement with Canada would be at the other end of the scale. U.S. trade with Israel, in both directions, came to $3.4 billion last year. Trade with Canada was $113 billion, substantially more than with any other country. While tariffs and other trade barriers along the border are relatively low, they are far from negligible.
But the American interest goes well beyond tariffs. As services become a larger part of American trade, the United States is increasingly anxious to establish agreements that go well beyond the present focus on goods. The likeliest partner for a model agreement is clearly Canada, with an economy and a legal structure less dissimilar from those of the United States than any other country's.
It is, of course, all slightly paradoxical: the Reagan administration is inching along toward the largest venture in free trade of the country's history, just as Congress is about to descend on this city full of protectionist fervor and hostility to imports. But Canada is one of the countries at which American protectionists (except for the lumber industry) are least angry. And of those two impulses -- to open borders, or to close them -- the expansion of trade is most durably associated in American minds with economic growth and stability.