STUDY SAYS U.S., CANADA PACT WOULD SPUR ECONOMIES

  A free trade pact between the United
  States and Canada could spur the economies of both sides
  substantially, according to a study released by the Institute
  for International Economics.
      The study, by Paul Wonnacott, said a successful conclusion
  to the free trade talks now under way could raise Canada's
  gross national product by more than five pct and expand U.S.
  export's by about seven pct.
      He said the pact could resolve the knotty issue of
  government subsidies, end curbs on trade in services and
  investments and pave the way for new global talks under the 
  General Agreement on Tariffs and Trade.
      The United States and Canada - the world's two biggest
  trading partners with cross border shipments of about 150
  billion dlrs a year - opened free trade talks last June. They
  are aiming for a pact by next October.
      Wonnacott, an economics professor at the Univerity of
  Maryland, said an agreement should include:
      - Elimination of tariffs between the two countries, phased
  in over a five to 10-year period;
      - Equal access to federal government procurement in the two
  countries, replacing current "Buy America" and "Buy Canada"
  provisions with a "Buy North America" provision;
      - Fewer restrictions in trade in services, chiefly finance
  and transportation;
      - A commitment not to screen foreign investments in favor
  domestic producers;
      - A commission to resolve bilateral trade disputes.
       Wonnacott said that to resolve the subsidy problem, the
  two sides should permit export subsidies of exports of up to
  2.0 or 2.5 pct without imposing coutervailing duties.
      The limit on subsidies is now 0.5 pct.
      He proposed that any attempt to impose new duties to offset
  subsidies should go first a special disputes commission for
  resolution at an early stage.
      Wonnacott said "bilateral free trade would contribute to the
  efficiency of the North American economies and to their
  competitiveness in facing overseas producers.
      He said it would it would open U.S. markets to Canadian
  goods and enable them to benefit from the economies of mass
  production.
      Benefits to the United States would be fewer than those to
  Canada proportionately, he said, because of the already large
  U.S. gross national product.
      Wonnacott said also that a U.S.-Canada pact in such areas
  as export subsidies and the creation of a dispute commission
  could set an example for the current attempt by GATT to write
  new and more liberal global trading regulations.
  

