Canada-United States Free Trade Agreement

Canada-United States Free Trade Agreement

The Free Trade Agreement (FTA) was a trade agreement signed by Canada and the United States on October 4th, 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. A few years later, it was superseded by the North American Free Trade Agreement, which included Mexico as well.

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;
* liberalize significantly 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.


Free trade with the United States has long been a controversial issue in Canada. Historically, Canadians who advocated a closer relationship with the United States, especially closer economic ties, were portrayed by critics as encouraging political annexation by the Americans. Under Canada's first Prime Minister, John A. Macdonald, the protectionist National Policy became a cornerstone of the new Canadian nation.

Starting in 1855, the Reciprocity Treaty created limited free trade between the colonies of British North America and the United States. In 1866, the United States Congress voted to cancel the treaty.

The Liberal Party of Canada had traditionally supported free trade. In the 1911 Canadian federal election, free trade in natural products became the central issue. The Conservative Party 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 to 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 (also known as the Auto Pact).


By the early 1980s Canada and the US were very interested in an agreement. It got off the ground quickly.
Brian Mulroney's Progressive Conservative Party was elected to office in the 1984 election. 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 on the economy issued a report to the Government of Canada recommending free trade with the United States. This commission was chaired by former Liberal Minister of Finance Donald S. Macdonald, and had been commissioned by the Liberal government of Pierre Trudeau. Mulroney nonetheless embraced the report's findings. U.S. President Ronald Reagan welcomed the Canadian initiative and the United States Congress 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 Simon Reisman and the American side by Peter O. Murphy, the former deputy United States trade representative in Geneva.

The agreement the two countries ultimately reached greatly liberalized trade between them, removing most remaining tariffs. 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.


The exact ramifications of the agreement are hard to measure. After the agreement came into effect, trade between Canada and the United States began to increase rapidly. While throughout the twentieth century, exports fairly consistently made up about 25% of Canada's Gross domestic product (GDP), since 1990 exports have been about 40% of GDP. After 2000, they reached nearly 50%. Some of this growth might be attributed to the sharp decrease in the value of the Canadian dollar during this period, and perhaps a general global pattern of increasing international trade. In 2007 the Canadian dollar rose above the US dollar which means that the benefits that Canada was gaining are now taken away by the decrease in the international value of the U.S. dollar.The agreement has failed to liberalize trade in some areas, most notably softwood lumber, where Canadians have complained that the Americans repeatedly violated the agreement to impose protectionist policies.

The fears that the agreement would undermine Canada's sovereignty have still not come to pass, and Canada's cultural industries are still healthy.

While the agreement remains controversial to this day, it is no longer at the forefront of Canadian politics. The NDP remains opposed to free trade; however when the Liberals under Jean Chrétien were elected to office in 1993 election promising to re-negotiate key parts of the agreement, they continued the deal with only minor modifications, and signed the North American Free Trade Agreement to expand the free trade area to include Mexico.


* Wilkinson, Bruce. " [ Free Trade] ." "The Canadian Encyclopedia"

External links

* [ CBC Digital Archives - Canada-U.S. Free Trade Agreement]
* [ Canada-United States Free Trade Agreement Implementation Act]
* [ Canada–United States Free Trade Agreement: Eliminating Barriers to Trade]

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