MONTREAL -- Trade Minister Pierre Pettigrew and his U.S. and Mexican counterparts yesterday rejected the idea of a customs union as the next stage in their continental economic relationship.
Mr. Pettigrew, U.S. Trade Representative Robert Zoellick and Fernando Canales, Mexico's Secretary of the Economy, said they would rather see a successful conclusion to the troubled free-trade area of the Americas (FTAA) talks instead.
"A customs union puts a barrier to the world: We've always been proud that a free-trade area doesn't necessarily raise a common barrier to the world," Mr. Zoellick said after their meeting in Montreal.
Mr. Zoellick, Mr. Pettigrew and Mr. Canales were in brief talks about the state of the North American free-trade agreement.
The 10th anniversary of NAFTA's coming into force is Jan.1, 2004.
A customs union is the next step in the economic integration of countries that have already signed a free-trade deal. Not only do union members eliminate all barriers to mutual trade, but also they, in effect, set up a common economic zone that shares the same trade policies toward the rest of the world.
But Mr. Pettigrew said that's not on.
"I fail to see how a customs union would lead to a deepening of our integration," he said. "It has more to do with [an approach to the] rest of the world."
Mr. Zoellick said the priority now is striking a successful deal to combine many of the countries of the Western Hemisphere in a free-trade zone that stretches from Alaska to the southernmost tip of South America.
"It would be incredible to have 34 democratic countries united by free trade."
But FTAA talks, which resume in November in Miami and are supposed to conclude by 2005, have hit roadblocks. Brazil is resisting Washington's attempts to include investment and competition rules in the negotiations, while the United States is refusing to consider including cuts in agricultural subsidies as part of FTAA talks.
"All of us know that the politics of trade is not easy," Mr. Zoellick said. "But one way or another, the heart of free trade that we've nurtured through NAFTA is something we want to extend through the hemisphere," he said.
Three-way trade among Canada, the United States and Mexico has more than doubled in the past decade to over $621-billion (U.S.). And direct foreign investment by NAFTA -based companies in each other's countries has also more than doubled to $299.2-billion in 2000.
While they rejected moving to a customs union, the three trade ministers talked about "deepening" their NAFTA relationship.
They agreed to "explore opportunities" to harmonize the most favoured nation treatment that the three countries award third-party nations in trade relations.
They also agreed to consider liberalizing rules-of-origin tariffs that determine whether goods are treated as made-in-NAFTA countries or not.
Canada and the United States also took steps to improve public access to cases where NAFTA-based companies sue member governments for compensation. Ottawa and Washington said they agreed to open public hearings on NAFTA Chapter 11 arbitrations "to which either is a party and will request the consent of disputing investors to open such hearings."
The spirit of harmony pervading the talks didn't stop Mr. Zoellick from taking a shot at Canada's protectionist cultural policies. "We wish we could have Americans own Canadian bookstores even if [these] sold Canadian books, but we hope over time . . . [for] openness to more ideas like that."
Trade ministers avoided any talk of progress toward a goal that Ottawa has sought in vain for decades: agreement between Canada and the United States to limit or avoid using trade remedy actions such as anti-dumping duties or countervailing levies during a trade dispute.
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