POLI 243 Lecture Notes - Brian Mulroney, Free Trade, Free-Trade Area

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18 Mar 2013
Canada Free Trade with United States
Systemic Environment in the 1980s
Trade is a priority for Canada
Tied to the international economy; large proportion of economic activity of GDP is
related to trade one way or another
Exports, Imports
Canada is going to be concerned at the broader environment at the system level to
sustain trade
This is not particularly true for the US
US only has around 10% of its production tied up with trade
Post World War II: GATT and the Auto Pact
Lowering of tariffs in the United States
Canada gains from this without agreements of reciprocity
GATT: members were interested in lowering tariffs slowly
Liberalize tariffs on manufacture goods
Agreement between Canada US for firms with regard to inputs
The firms are interested want to integrate production
Want to move parts across the border
Lengthy negotiations in GATT in the 1970s
Uruguay Round proves just as difficult
Many countries want to pursue free trade but new members make negotiations
US pushing for Broader Coverage
Canada has a lot of stake in GATT
They need that access to the American market
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Canada: bilateralism vs multilateralism
Bilateralism gave a bargaining advantage to the United States
If it was one vs one, US holds sway
Therefore, Canada preferred multilateralism
It evens out the table
Having GATT gives a multilateral approach
Reduce leverage of the United States
Canada wants to improve trade disputes more of a legal process than a political
If you go to court, you have to make a case but procedure and rights are definitive
Political process persuasion is part of the process but it rests on power
Depends on votes
Multilateral approach is killer
Legal process: fairness and equality of states
Trade is becoming a more important issue for US
US hopes to liberalize agriculture and services
Systemic Factors at Work
Canada is prepared to approach the United States
A one on one deal makes sense
Mitchell Sharp’s advice after Nixon Shocks
1984 Election: Conservatives win but trade not an issue yet
Brian Mulroney makes trade an issue in 1988
Decision making in Canada
Macdonald Commission
Liberal government set up a Royal Commission
Wanted to talk about trade
Economic ties between different parts of the country
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