U.S.-CANADA TIES SEEN WORSE WITHOUT TRADE PACT U.S.-Canadian ties could worsen if the two nations are unable to reach a free trade pact, according to a study published by two nonpartisan public policy research groups. The Cato Institute of Washington and the Fraser Institute of Vancouver said removing the remaining tariffs on cross border trade would benefit both countries. But Cato chairman William Niskanen added "the two nations' generally harmonious trade relations are probably not sustainable without a new agreement." The United States and Canada, whose cross-border trade totaled about 125 billion dlrs last year, have been holding talks since last June on a pact to end the few trade barriers remaining between their two countries. The U.S. put a deadline on the talks of October 1, but both sides have said an agreement is likely despite tough bargaining remained. Niskanen said if no pact is reached, bilateral trade ties could deteriorate because of Congressional pressure on President Reagan to implement trade laws more aggressively, and this could hit some Canadian trade practices. He noted Canada is seeking foreign investment in its auto industry, which could put strains on the considerable bilateral free trade in U.S. and Canadian autos and parts. Niskanen also said the Canadian government is vulnerable to a resurgence of economic nationalism which could restrict U.S. exports to Canada. A free trade pact, backed by President Reagan and Prime Minister Brian Mulroney, would open new markets for Canada and enable its industries to achieve economies of scale, which would also help it widen exports worldwide, he said. It would also increase the gross national products of both countries. Niskanen said the goal of a pact should be to end all tariffs within 10 years, lower subsidies on exports, set rules for trade in services and investments, end curbs on government procurement and agree ways to resolve trade disputes.