Canadian officials abruptly stormed out of trade talks with the United States yesterday, saying they will not resume negotiations unless the Reagan administration offers major concessions on a new way to settle trade disputes between the two nations.
The walkout, which U.S. officials characterized as "preplanned" and "clearly a tactical move," threw into doubt the effort to create a free trade zone that would eliminate barriers to the movement of goods, services and investment from the Arctic Circle to the Rio Grande.
"The negotiations will only resume when it is clear from the American side that matters of vital concern to Canada will be addressed in a satisfactory way," said Prime Minister Brian Mulroney in a statement issued from Ottawa shortly after his chief negotiator, Simon Reisman, left the bargaining table.
Reisman, who had a printed statement ready in his pocket when he broke off the talks here, immediately flew back to Ottawa, where he met with Mulroney last night and is scheduled to meet the Cabinet today.
"In the absence of any new initiative from the United States, it doesn't look to me that we have any negotiations," a Canadian source said.
With $130 billion in commerce passing between the two nations last year, the United States and Canada are the world's two largest trading partners.
The negotiations have been going on for 18 months and were nearing a congressionally set deadline of midnight Oct. 4.
The talks collapsed over one issue that Canada considers central to any free trade pact: the creation of a new bilateral method for settling disputes that would be binding on both nations and would place Canadian industries beyond U.S. laws against unfair trade practices by other countries.
"The negotiations are at an impasse because the United States has not moved on the most basic issue of all -- a way of resolving disputes satisfactorily between the two countries," Mulroney said.
The Reagan administration would face considerable opposition from Congress, which must approve any agreement, if it gave too much ground to Canada on the dispute settlement issue.
House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) said: "I fully support our negotiators' position on the contentious issue of dispute settlement. That position accurately reflects the political consensus here in Washington."
U.S. Trade Representative Clayton K. Yeutter emphasized that the United States had not broken off the talks and expressed regret over the Canadian walkout. "We are prepared to resume talks and are willing to meet around the clock if necessary to complete an agreement by the Oct. 4 deadline," he said.
The talks are a critical element of Reagan administration trade policy, and their failure would make it more difficult to achieve the U.S. aim of strengthening and expanding the 95-nation compact that regulates world trade, the General Agreement on Tariffs and Trade.
The Reagan administration is believed to have gone part way toward meeting the Canadian demands on dispute settlement methods by offering to create some form of tribunal to mediate differences. But the results of a tribunal would not be binding, one of Mulroney's stated requirements.
U.S. officials said they thought it would take a political step, perhaps a personal call between the leaders of the two nations, to get the talks moving again. They speculated that the walkout was a tactical move by the Canadian government to soften up the administration to make major concessions in the dispute settlement area.
But there also was concern here that the free trade pact, first proposed by Mulroney at the 1985 "Shamrock Summit" with Reagan in Ottawa, had run into such strong political opposition in Canada from provincial leaders and opposition parties that the government staged the walkout to blame the United States for the collapse of the talks.
"It appears that the Canadian walkout was dictated more by political problems in Ottawa," Rostenkowski said. "We've seen increasing political opposition in Canada to the idea of free trade with the United States," added Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.).
The free trade proposal ignited nationalistic Canadian concerns over being dominated economically by its more prosperous southern neighbor. In addition, some protected Canadian industries, especially in what is termed the "cultural field" of broadcasting, films and publishing, feared they would be hurt by an end to barriers in trade and investment.
U.S. trade officials said the talks were stuck on the dispute settlement issue for most of the past three days.
Negotiators broke into subgroups Tuesday to take up other issues, including ending barriers in service industries and cross-border investment; ending provincial barriers to sales of American beer, wine and liquor; reducing tariffs, which are twice as high in Canada as the United States, and revising a 20-year-old agreement allowing free trade in autos between the two countries.
U.S. officials said there was little progress in those talks, however, and yesterday afternoon at Reisman's insistence they returned to the dispute resolution issue