A Quarter-Century of Free Trade

Colin Simkus
Free Trade Canada US

Canada US Free Trade (FTA)

The predictions were dire; the factories underpinning our branch-plant economy would close, unemployment would soar, the remaining Canadian-owned firms would be gobbled up, and Canadian small businesses would become uncompetitive. Additionally, Prime Minister Brian Mulroney’s was accused of “selling out” our economic sovereignty – indeed, our complete sovereignty. This vitriolic chorus of disapproval was unleashed a quarter-century ago today, when Canadian and American negotiators agreed on the Canada-US Free Trade Agreement. While such an treaty was a long-in-the-making, and this idea even dominated the 1891 and 1911 federal elections, this free trade agreement – building on the sector-specific 1965 AutoPact initiative – was the first concrete, broad-based agreement to liberalize cross-border trade across North America’s industrial sectors.

With 25 years of hindsight, the reality is that the economic roof has not collapsed, and we have not been crushed by our large neighbour. Instead of Canadian firms being bought or pushed out of existence, Canada is home to one of the world’s largest auto-parts manufacturers, and Ontario now leads Michigan as North America’s strongest auto-manufacturing jurisdiction. Sure, economic adjustments caused some turbulence in the manufacturing sector in 1990s, but by the end of the decade, Canada led the G8 in economic vitality. With tariffs eliminated and investor and intellectual property rights affirmed, companies like RIM can now tap more easily into the world’s largest free-market, allowing them to fund even greater levels of product innovation.

Nor are we more economically dependent on the US. Although the Ambassador Bridge between Windsor and Detroit sees more trade than America does with either the EU or Japan, the percentage of Canada’s exports that go to the US is nonetheless continuing to fall. Now, Canadian firms do not have to be American branch-plants in order to sell into the US; they can sell there, while also selling to Costa Rica, Israel, Iceland, or into any other market where Canada used this free trade agreement as used as a blueprint for subsequent free trade arrangements. Those free trade agreements also put the lie to expectation that Canadians would face less product choices diversity as American products flooded the market. The reality is that our free trade agreements have allowed Canadians to benefit from a more affordable array of products. Just as Auto Pact reduced the price of cars available to Canadians, the ability to access a broader array of tariff-free goods was a contributing factor to declining inflation in Canada over the last two decades.

The Ambassador Bridge

The Ambassador Bridge

During the 1988 federal election, Liberal leader John Turner proceeded to claim that “when the economic levers go, the political independence is sure to follow”. Turner even suggested that, through this free trade agreement, Canada would be reduced to a “colony of the United States”. However, these prognostications were false. Contrary to Turner’s campaign commercial, the border between Canada and the US has not been erased but, instead, now as border guards that are armed. Furthermore, Canada retains its own central bank, one that is currently amongst the most respected in the world. Canada also maintained its own foreign policy, opting out of the Iraq war. Canada even maintained its own economic policy, balancing its budgets through most of the last decade, and the average Canadian is now wealthier than the average American.

During the same leaders-debate, Mulroney stated that this free trade agreement, in its own modest way, was part of Canada’s ‘nation-building’. This is correct, except for the fact that the net benefits have been anything but modest. Because, by leaving the country’s enterprises with greener pastures and more inbound investment, by leaving consumers with lower prices and more choice, and by leaving the country a blueprint for its economic engagement with the ‘Global Century’, the leaders and negotiators responsible for the free trade agreement have given us a stronger foundation for a more economically dynamic future.