Canada-United States Free Trade Agreement
Encyclopedia
The Free Trade Agreement (FTA) (French: Accord du libre-échange (ALE)) was a trade agreement signed by Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 and the United States on October 4, 1988. The agreement, finalized by October 1987, removed several trade restrictions in stages over a ten year period, and resulted in a great increase in cross-border trade. With the addition of Mexico in 1994 FTA was superseded by the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...

 (NAFTA) (French: Accord du libre-échange Nord Américain (ALENA), Spanish:Tratado de Libre Comercio de América del Norte (TLCAN)).

As dictated by the agreement, the main purposes of the Canadian-United States Free Trade Agreement are as follows:
  • eliminate barriers to trade in goods and services between Canada and the United States;
  • facilitate conditions of fair competition within the free-trade area established by the Agreement;
  • significantly liberalize conditions for investment within that free-trade area;
  • establish effective procedures for the joint administration of the Agreement and the resolution of disputes;
  • lay the foundation for further bilateral and multilateral cooperation to expand and enhance the benefits of the Agreement.

History

Starting in 1855, while Canada was under British control, free trade was implemented between the colonies of British North America
British North America
British North America is a historical term. It consisted of the colonies and territories of the British Empire in continental North America after the end of the American Revolutionary War and the recognition of American independence in 1783.At the start of the Revolutionary War in 1775 the British...

 and the United States under the Reciprocity Treaty
Canadian-American Reciprocity Treaty
The Canadian American Reciprocity Treaty, also known as the Elgin-Marcy Treaty, was a trade treaty between the colonies of British North America and the United States. It covered raw materials and was in effect from 1854 to 1865...

. In 1866, a year before Canadian Confederation
Canadian Confederation
Canadian Confederation was the process by which the federal Dominion of Canada was formed on July 1, 1867. On that day, three British colonies were formed into four Canadian provinces...

, the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 voted to cancel the treaty.

Free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...

 with the U.S. has long been a controversial issue in Canada. Historically, Canadians who advocated a closer relationship with the U.S., especially closer economic ties, were portrayed by critics as encouraging political annexation
Annexation
Annexation is the de jure incorporation of some territory into another geo-political entity . Usually, it is implied that the territory and population being annexed is the smaller, more peripheral, and weaker of the two merging entities, barring physical size...

 by the Americans. Under Canada's first Prime Minister, John A. Macdonald
John A. Macdonald
Sir John Alexander Macdonald, GCB, KCMG, PC, PC , QC was the first Prime Minister of Canada. The dominant figure of Canadian Confederation, his political career spanned almost half a century...

, the protectionist National Policy
National Policy
The National Policy was a Canadian economic program introduced by John A. Macdonald's Conservative Party in 1876 and put into action in 1879. It called for high tariffs on imported manufactured items to protect the manufacturing industry...

 became a cornerstone of the new Canadian nation.

The Liberal Party of Canada
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...

 had traditionally supported free trade. In the 1911 Canadian federal election
Canadian federal election, 1911
The Canadian federal election of 1911 was held on September 21 to elect members of the Canadian House of Commons of the 12th Parliament of Canada.-Summary:...

, free trade in natural products became the central issue. The Conservative Party
Conservative Party of Canada (historical)
The Conservative Party of Canada has gone by a variety of names over the years since Canadian Confederation. Initially known as the "Liberal-Conservative Party", it dropped "Liberal" from its name in 1873, although many of its candidates continued to use this name.As a result of World War I and the...

 campaigned using fiery anti-American rhetoric, and the Liberals lost the election. Further political disputes over free trade were shelved for many decades.

From 1935-1980, a number of bilateral trade agreements greatly reduced tariffs in both nations. The most significant of these agreements was the 1960s Automotive Products Trade Agreement
Automotive Products Trade Agreement
The Canada—United States Automotive Products Agreement, commonly known as the Auto Pact or APTA, was an important trade agreement between Canada and the United States. It was signed by Prime Minister Lester B. Pearson and President Lyndon B...

 (also known as the Auto Pact).

Negotiation

By the early 1980s Canada and the US were very interested in an agreement. It got off the ground quickly. Brian Mulroney
Brian Mulroney
Martin Brian Mulroney, was the 18th Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. His tenure as Prime Minister was marked by the introduction of major economic reforms, such as the Canada-U.S...

's Progressive Conservative Party
Progressive Conservative Party of Canada
The Progressive Conservative Party of Canada was a Canadian political party with a centre-right stance on economic issues and, after the 1970s, a centrist stance on social issues....

 was elected to office in the 1984 election
Canadian federal election, 1984
The Canadian federal election of 1984 was held on September 4 of that year to elect members of the Canadian House of Commons of the 33rd Parliament of Canada...

. Free trade was not an important issue, but Mulroney and the party both announced their opposition to such a move. In 1985, a Royal Commission
Royal Commission
In Commonwealth realms and other monarchies a Royal Commission is a major ad-hoc formal public inquiry into a defined issue. They have been held in various countries such as the United Kingdom, Australia, Canada, New Zealand, and Saudi Arabia...

 on the economy issued a report to the Government of Canada recommending free trade with the U.S. This commission was chaired by former Liberal Minister of Finance Donald S. Macdonald, and had been commissioned by the Liberal government of Pierre Trudeau
Pierre Trudeau
Joseph Philippe Pierre Yves Elliott Trudeau, , usually known as Pierre Trudeau or Pierre Elliott Trudeau, was the 15th Prime Minister of Canada from April 20, 1968 to June 4, 1979, and again from March 3, 1980 to June 30, 1984.Trudeau began his political career campaigning for socialist ideals,...

. Mulroney nonetheless embraced the report's findings. U.S. President Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

 welcomed the Canadian initiative and the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 gave the President the authority to sign a free trade agreement with Canada, subject to it being presented for Congressional review by October 5, 1987. In May 1986, Canadian and American negotiators began to work out a trade deal. The Canadian team was led by former deputy Minister of Finance
Minister of Finance (Canada)
The Minister of Finance is the Minister of the Crown in the Canadian Cabinet who is responsible each year for presenting the federal government's budget...

 Simon Reisman
Simon Reisman
Sol Simon Reisman, was a Canadian civil servant, and the country's chief negotiator for the Canada-United States Free Trade Agreement....

 and the American side by Peter O. Murphy, the former deputy United States trade representative in Geneva
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...

.

The agreement between the two countries ultimately created greatly liberalized trade between them, removing most remaining tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

s. The FTA was not fundamentally about tariffs, however. Average tariffs on goods crossing the border were well below 1% by the 1980s. Instead, Canada desired unhindered access to the American economy. Americans, in turn, wished to have access to Canada's energy and cultural industries.

In the negotiations, Canada retained the right to protect its cultural industries and such sectors as education and health care. As well, some resources such as water were left out of the agreement. The Canadians did not succeed in winning free competition for American government procurement contracts.

Debate and implementation

The debate in Canada over whether to implement the negotiated agreement was very contentious. The opposition Liberal Party of Canada
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...

 under leader John Turner
John Turner
John Napier Wyndham Turner, PC, CC, QC is an English Canadian lawyer and retired politician, who served as the 17th Prime Minister of Canada from June 30 to September 17, 1984....

 vociferously opposed the agreement, saying that he would "tear it up" if he were Prime Minister. The opposition New Democratic Party
New Democratic Party
The New Democratic Party , commonly referred to as the NDP, is a federal social-democratic political party in Canada. The interim leader of the NDP is Nycole Turmel who was appointed to the position due to the illness of Jack Layton, who died on August 22, 2011. The provincial wings of the NDP in...

 under leader Ed Broadbent
Ed Broadbent
John Edward "Ed" Broadbent, is a Canadian social democratic politician and political scientist. He was leader of the federal New Democratic Party from 1975 to 1989. In the 2004 federal election, he returned to Parliament for one additional term as the Member of Parliament for Ottawa Centre.-Life...

 also strongly opposed the agreement. Both parties objected that the agreement would erode Canadian sovereignty
Sovereignty
Sovereignty is the quality of having supreme, independent authority over a geographic area, such as a territory. It can be found in a power to rule and make law that rests on a political fact for which no purely legal explanation can be provided...

, arguing that Canada would effectively become the "51st state" of the U.S. if the agreement was implemented. They also raised concerns about how Canada's social programs and other trade agreements such as the Auto Pact would be affected. The legislation to implement the agreement was delayed in the Senate, which had a Liberal Party majority. Partly in response to these delays, Mulroney called an election in 1988
Canadian federal election, 1988
The Canadian federal election of 1988 was held November 21, 1988, to elect members of the Canadian House of Commons of the 34th Parliament of Canada. It was an election largely fought on a single issue: the Canada-U.S. Free Trade Agreement ....

. Trade Agreement was by far the most prominent issue of the campaign, prompting some to call it the "Free Trade Election." It was the first Canadian election to feature large third-party campaign advertising, with pro- and anti-free trade lobbyists buying television advertisements. It was also the first Canadian election to use negative advertising; one anti-free-trade advertisement showed negotiators "removing a line" from the Free Trade Agreement, which at the end of the advertisement was revealed to be the Canada-U.S. border. Although some opinion polls showed slightly more Canadians against the Agreement than in favour of it, Mulroney's Progressive Conservatives
Progressive Conservative Party of Canada
The Progressive Conservative Party of Canada was a Canadian political party with a centre-right stance on economic issues and, after the 1970s, a centrist stance on social issues....

 benefitted from being the only party in favour of the agreement, while the Liberals and NDP split the anti-free trade vote. Mulroney won a governing majority and the agreement was passed into law, despite that a majority had voted for parties opposing free trade.

The Free Trade Agreement faced much less opposition in the U.S. Polls showed that up to 40% of Americans were unaware that the agreement had been signed. The treaty was given to the U.S. Congress for "fast-track
Fast track (trade)
The Fast track negotiating authority for trade agreements is the authority of the President of the United States to negotiate agreements that the Congress can approve or disapprove but cannot amend or filibuster. Fast-track negotiating authority is granted to the president by Congress...

" ratification by President Reagan, meaning that it could only be accepted or rejected but not amended. It passed the House and Senate on 9 September 1988 by comfortable margins.

Effects

The exact ramifications of the agreement are hard to measure. After the agreement came into effect, trade between Canada and the U.S. began to increase rapidly. While throughout the 20th century, exports fairly consistently made up about 25% of Canada's Gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 (GDP), since 1990 exports have been about 40% of GDP. After 2000, they reached nearly 50%.

Conservative economists welcomed the U.S.-Canada Free Trade Agreement, focusing on the gains from trade
Gains from trade
Gains from trade in economics refers to net benefits to agents from allowing an increase in voluntary trading with each other. In technical terms, it is the increase of consumer surplus plus producer surplus from lower tariffs or otherwise liberalizing trade...

, while liberal economists criticized the agreement as a cause of capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...

 and job insecurity due to international outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

.

Often, analyses of the free trade agreement find that its effects on the two countries depend on the difference in value between the Canadian
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...

 and U.S. dollar. In 1990-1991, the Canadian dollar rose sharply in value against the US currency, making Canadian manufactured goods much more expensive for Americans to buy, and making American manufactured goods much cheaper for Canadians, who no longer had to pay high duties on them. The phenomenon of "cross-border shopping", where Canadians would make shopping daytrips to U.S. border towns to take advantage of tariff-free goods and a high Canadian dollar, provided a mini-boom for these towns. Many Canadian jobs lost, particularly in the Ontario manufacturing sector during the recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...

 of the early 1990s, was attributed (fairly or not) to the Free Trade Agreement. In the mid-to-late 1990s, however, the Canadian dollar fell to record lows in value to against the U.S. dollar. Cheaper Canadian primary products such as lumber and oil could be bought tariff-free by Americans, while Hollywood studios sent their crews to film many movies in Canada due to the cheap Canadian dollar. The removal of protective tariffs meant that market forces, such as currency values, have a bigger effect on the economies of both countries that they otherwise would have been.

The agreement has failed to liberalize trade in some areas, most notably softwood lumber, in which Canadians have expressed frustration that Americans repeatedly violated the agreement to impose protectionist policies.

The policies still remain incredibly pro-American, as Canada's natural resources are extremely abundant when compared to the United States. Issues such as mineral, fresh water, and softwood lumber trade still remain disputed.

While the agreement remains controversial to this day, it is no longer at the forefront of Canadian politics. It was superseded by the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...

 (NAFTA) in 1994. The Liberals under Jean Chrétien
Jean Chrétien
Joseph Jacques Jean Chrétien , known commonly as Jean Chrétien is a former Canadian politician who was the 20th Prime Minister of Canada. He served in the position for over ten years, from November 4, 1993 to December 12, 2003....

 were elected to office in the 1993 election
Canadian federal election, 1993
The Canadian federal election of 1993 was held on October 25 of that year to elect members to the Canadian House of Commons of the 35th Parliament of Canada. Fourteen parties competed for the 295 seats in the House at that time...

, partly on a promise to re-negotiate key labor and environmental parts of NAFTA. An agreement was indeed struck with the Democrats
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...

 under Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...

 that created separate side deals to address both of these concerns. The Liberal Party of Canada
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...

 is largely content with the existing agreement. Today, the NDP still argues that the FTA and its successor, NAFTA, do not, amongst other concerns, provide adequate measures to protect the labor force and to prevent big business from degrading the environment. They have since taken the view that the two NAFTA side agreements negotiated by Chrétien and Clinton should be worked into the main body of the agreement so that they can be properly enforced, which is notably the same position that U.S. President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...

 has recently taken. It is unclear whether or not either of the other two major Canadian political parties would be interested in opening the agreement back up to address these concerns, but Prime Minister Stephen Harper
Stephen Harper
Stephen Joseph Harper is the 22nd and current Prime Minister of Canada and leader of the Conservative Party. Harper became prime minister when his party formed a minority government after the 2006 federal election...

has recently expressed his lack of interest in doing so.

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK