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dispute at Photo Engravers involved (1) profits remitted from Photo Engravers to Sears Canada, as a consequence of Sears Canada's equity position in Photo Engravers, and (2) expense levels for Sears Canada with respect to the publishing of the company's catalogues for 1989 and 1990. There were no fnancial effects on Sears Canada's revenues as a consequence of catalogue unavilability, because Sears Canada was able to __________

3Canadian Broadcasting Company, October 1989, radio report.

5Canadian Broadcasting Company, October 1989, radio report.

secure an alternate catalogue supplier to replace Photo Engravers.6

With respect to the profits remitted to Sears Canada by Photo Engravers, the level of remitted profits in 1989 was down from prior years.7 Profits at Photo Engravers were down because most of the company's profits are derived from the production of catalogues for Sears Canada.

With respect to expenses incurred by Sears Canada for catalogue production, the expense level was down from prior years.8 The alternate source secured by Sears Canada for its 1989 and 1990 catalogue production is located in the United States.9 Becuase of lower wage levels and lower employee benefit levels in the United States, the American company was able to undercut the Photo Engravers price the production of Sears Canada catalogues.10 Additionally, the implementation of the CanadaUnited States Free Trade Agreement (FTA) removed a previously held advantage for Photo Engravers with respect to American competitiona tariff.11

8Canadian Broadcasting Company, October 1989, radio report.

11Communication from the President, "United StatesCanada FreeTrade Agreement,." 104th Cong., 2nd Sess., 1988. H. Doc. 100216.

The FTA eliminates all tariffs, reduces many non tariff barriers, liberalizes investment requirements, and provides a new framework for trade in services between Canada and the United States over time. Canadian tarif...