NAFTA and Softwood. BDO Dunwoody/Chamber Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication August 22, 2005
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1 NAFTA and Softwood BDO Dunwoody/Chamber Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication August 22, 2005 COMPAS Inc. Public Opinion and Customer Research August 16, 2005
2 1.0. Introduction In the wake of the U.S. government s refusal to remit softwood duties as decided by the NAFTA tribunal process, the CEO and business leader panel gives Prime Minister Martin the worst performance grade he has ever received a failing grade of 47% on a school report card-type scale. The panel attributes the U.S. government s position less to an honest belief that Canada s stumpage practices amount to improper subsidies than to reaction against rising anti-americanism in Ottawa and in Canada as whole. A few respondents volunteer that Washington s position on softwood duties reflects a history of hard-line positions on trade disputes. Other key findings: The panel is no more concerned about the softwood dispute in general than in the past and does not see Canadian-American relations as any worse than it did in March, but is concerned that Washington s rejection of the tribunal decision on duty remission signifies that free trade is not working and Canada is vulnerable; The panel feels strongly that Canada should definitely be committed to preserving NAFTA in the face of U.S. government doubts about its value; With an eye on improving Canada s position in the bilateral relationship, the panel expresses very strong support for heightened anti-terrorist cooperation, strong support for a greater investment in our embassy and lobbying efforts in Washington, and strong support for enhanced military defence; The panel is divided about using oil and gas as a bargaining chip a small majority advocates thinking about using it while an overwhelming majority thinks that blocking oil exports is a poor or bad idea. These are the key findings from the week s web survey of CEOs and business leaders conducted under the sponsorship of BDO Dunwoody LLP and the Canadian Chamber of Commerce. 1
3 2.0. Canada Vulnerable Now That Washington Repudiates NAFTA Tribunal Decision When not thinking specifically of Washington s repudiation of the NAFTA tribunal decision, the panel sees the softwood disagreement as no more troublesome than it did in March. Most believed in March that the softwood issue showed that the agreement was not working, but the majority has neither grown nor become more intense in its viewpoint, as shown in table 2. In a similar vein, the panel believes that Canada-U.S. relations are definitely worse than average over the last 100 years but no worse than in late winter, as shown in table 3. The panel is nonetheless concerned about Washington s refusal to carry out the NAFTA tribunal decision. This refusal truly signifies NAFTA s problems in the opinion of CEOs and opinion leaders, as shown in table 3. Washington s repudiation of the tribunal decision also signifies Canada s vulnerability, as shown in table 4. Table 1: To What Degree Does Softwood Disagreement Signify NAFTA Not Working 1 August September Table 2: Canada-U.S. Relations Better or Worse than Historically? 2 AUGUST 2005 MARCH 2005 The very worst we ve had 1 6 Among the worst Worse than average Better than average 14 6 Among the best 2 1 The very best 0 0 Don t know/refused (Q1) As you know, the U.S. has applied special duties on Canadian softwood because of a U.S. belief that the level of timber-cutting ( stumpage ) fees amount to a government subsidy. To what extent does this dispute demonstrate that free trade does not work? Please use a 7 point scale where 7 means demonstrates strongly it does not work and 1 the opposite. 2 (Q3) Thinking back over more than a century of Canada-U.S. relations, would you say that Can-Am relations this season were [ROTATE POLES]. 2
4 Table 3: To What Degree Does U.S. Government s Rejection of NAFTA Tribunal Decision Signify NAFTA Not Working Table 4: (Q5) Does the U.S. government s rejection of the NAFTA decision mean that Canada is becoming [ROTATE POLES] % Much more vulnerable on trade issues in general 30 Somewhat more vulnerable 41 No more and no less vulnerable than in the past 26 Somewhat less vulnerable 3 Much less vulnerable on trade issues in general 0 Don t know/refused NAFTA Vital for Canada Members of the panel feel strongly that Canada should be strongly committed to the preservation of the NAFTA (see table 5). As one business leader volunteered, Just imagine what this dispute would look like without NAFTA and the WTO. In my view it would be much, much worse. Table 5: How Committed Should Canada Be to NAFTA? (Q2) The NAFTA tribunal mechanism took the side of Canadian lumber companies, deciding that the U.S. government owes them mammoth compensation for tariffs that were wrongly imposed. The U.S. government refuses to pay or change its position on the special duties. To what extent does this situation demonstrate that free trade does not work? Please use a 7 point scale where 7 means demonstrates strongly it does not work and 1 the opposite. 4 (Q4) The U.S. government says that it wants to rethink NAFTA, especially its tribunals. On a 7 point scale where 7 means very committed and 1, the opposite, how committed should Canada be to preserving NAFTA and its dispute-settling mechanisms? 3
5 4.0. Explaining U.S. Government Behaviour Reaction against Canadian Anti-Americanism Few business leaders attribute Washington s position to authentic free market, conservative beliefs in the U.S. presidency, as shown in table 6. Most panellists attribute the tough position to reaction against anti-american outbursts from the Canadian government and other Canadian sources in recent years. As one respondent put it, Canadian attitudes towards the U.S. depress me. We deserve what they dish out to us. Table 6: Explanations for U.S. Government Position 5 Declining support for Canada in the U.S. as a result of perceptions that Canadian governments are increasingly anti-american Declining support for Canada in the U.S. as a result of perceptions that the Canadian media and public are increasingly anti-american Honest U.S. belief that Canadian governments subsidize the lumber industry through artificially low stumpage fees A weakened Canadian embassy in Washington after Ambassador Alan Gottlieb retired some years ago (Q6) In explaining the resistance of the U.S. government to the NAFTA tribunal s ruling, please score the importance of each of the following factors on a 7 point scale where 7 means a very important factor and 1, the opposite. [RANDOMIZE]. 4
6 A few respondents also volunteered their conviction that the hard-line U.S. position reflected a general tendency of Washington to be hard-line on trade matters. As a senior executive of a manufacturing company put it, Clearly, if an agreement with Canada or any other country does not benefit the United States, they will not respect it. Their domestic interests will override International trade agreements. A few respondents also attributed genuine conviction to the U.S. position. Some called for either privatization of forestry lands or auctioning of rights in order to protect Canada from being accused of subsidization Remedies Strengthen Anti-Terrorism and Military Efforts, Spend More on Embassy and Lobbying Presence The panel expresses very strong support for a greater investment in anti-terrorist collaboration with the U.S. along with strong support for a greater embassy/lobbying effort and stronger military defence, as shown in table 7. Support for consider[ing] touch action on oil and gas has increased in the last twelve months from 41% (scoring 5-7 on the 7 point scale) to 52% today. Meanwhile strong opposition (scoring 1-2) has declined from 37% to 23%, as shown in table 7. Yet, an overwhelming majority remains opposed to actually blocking oil exports, as shown in table 8. Table 7: (Q7) On a 7 point scale where 7 means very important to do and 1, the opposite, how important is it for the Canadian government to [RANDOMIZE] Strengthen anti-terrorist collaboration with the U.S. August Spend more on an Embassy and lobbying presence in Washington August Strengthen military defence August Consider taking tough action in oil and gas as a reprisal August September March Slap special duties on U.S. imports August Launch a pro-canada advertising and PR campaign across the United States 5
7 August Sell timber from Crown lands in a free market-style open auction as the Americans have been asking us to do August September March Support the U.S. at the U.N. more than in the past August Sell off Crown lands August September March Table 8: (Q8 ) A lumber union leader called for blocking all oil exports to the U.S. in retaliation. Is this [ROTATE POLES] % A very poor idea 43 A poor idea 34 A good idea 15 A very good idea 4 Don t know/refused Martin Earns Failing Grade for First Time As shown in table 9, the Prime Minister earns a failing grade for his performance. It is not clear to what extent his failing grade is entirely attributable to perceived nonperformance on bilateral relations or reflects other factors including fallout from controversy over the Governor-General nomination. Table 9: (Q9) On a 100 point school report card scale, what score would you give Paul Martin for his performance on Canada-American relations? MEAN DNK
8 Methodology The National Post/COMPAS web-survey of CEOs and leaders of small, medium, and large corporations and among executives of the local and national Chambers of Commerce was conducted August 17-19, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 136 are deemed accurate to within approximately 8.4 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D and Tamara Gottlieb. 7
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