The Economy: World Trade: A Clash of Wills

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Flight Toward Protectionism. While the Europeans debated, the Canadians made the first overt move aimed at interfering with the effects of Nixon's program. Prime Minister Pierre Trudeau proposed to Parliament the creation of an $80 million fund that would reimburse some Canadian companies for up to two-thirds of the U.S. import surtax on their products. The measure is expected to pass easily and would have the effect of encouraging Canadian producers to absorb the surtax themselves rather than pass it along to U.S. consumers, as Nixon intended. Trudeau acted partly to fend off any increase in Canada's already high level of unemployment (6.3%) and partly because Canadian businessmen feel that the Nixon program violated a "special trading relationship" between the two nations.

The temptation to retaliate is being voiced especially in Common Market nations. Says an official of Siemens A.G., West Germany's largest electrical manufacturer: "We fear the flight of the largest industrial nation of the world toward protectionism will be the signal for others to follow suit." Adds Jacques Rueff, the French economist who was De Gaulle's prophet of the gold standard: "By setting up an import tax that breaks the previous agreements, America has shown us the way."

If the U.S. is to prevent a worldwide retreat to economic nationalism and protectionism, it must eliminate the surtax soon. Another danger of stretching out the tax is that Nixon could find himself bound to it longer than he wants. Many U.S. businessmen have pleaded for protection, and they will quickly grow attached to the surtax. Particularly in an election year, the President may find it difficult to disturb their comfort.