U.S. trade protectionism is a huge danger for Canada and the world economy warns BMO Nesbitt Burns chief economist, Sherry Cooper.

In a new research note Cooper says that, according to the Wall Street Journal, none of the current Democratic candidates for president supports the North American Free Trade Agreement, with the exception of Senator Joe Lieberman. As well the Bush administration is falling prey to the same political protectionism, she says.

Cooper says that Canada must take special note of this. She warns, “The clearest risk to a sustained global economic rebound in my mind is U.S. protectionism. It was the Smoot-Hawley Tariff Act in 1930 that led to the Great Depression, not the stock market crash of 1929.”

“Canadian exporters have already felt the trade effects of the nearly 20% rise in our currency, the softwood lumber dispute, the partial ban on beef exports, and the steel tariffs. A less favourable NAFTA agreement would have a meaningful deleterious effect on our economy,” she says.

“It is essential that relations between Ottawa and Washington be repaired. It is bad enough that there is no love lost between Messieurs Chretien and Bush, but now the Democrats appear to be on a Canada-bashing bandwagon as well..”

“The first order of business for Paul Martin must be to repair the damage,” Cooper insists. “Canada and the U.S. share a unique economic relationship, which is of great benefit to both countries. Moreover, in these post-9/11 days, we also share a special hemispheric interest in homeland security. Much is to be lost with a further breakdown in relations, and much is to be gained with its rebuilding.”

http://www.bmonb.com/Economics/bottomline/common/line_b.asp?issue=20030925