MGMT 1030 Lecture Notes - Lecture 12: Petro-Canada, Industrial Unionism, North American Free Trade Agreement

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20 Jul 2016
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade (GATT) is a treaty with one main objective: to reduce
barriers to international trade. Through the reduction of tariffs, quantitative restrictions and subsidies
on trade through a series of agreements, it was made possible. It was initially introduced to regulate
trade as part of a larger plan for economic recovery after World War II. Eventually, the functions of the
GATT were taken over by the World Trade Organization which was established during the final round of
negotiations in the early 1990s.
Conservative Economic Policy/ Brian Mulroney – Brian Mulroney took over a Canadian economy that
had failed in 1984. Unlike the previous government, led by Pierre Elliot Trudeau, Mulroney attempted
to deregulate business in order to stimulate the economy. The main ideas brought about by Mulroney
were free trade, as shown by the FTA and NAFTA, and taxes. The FTA went into effect in January of
1989, and it removed the barriers to free exchange on the majority of goods. This was the predecessor
to NAFTA, which was signed in 1994, between Canada, the United States, and Mexico. As well,
Mulroney instituted the Goods and Services Tax (GST) in 1991. This was a very unpopular move, and
resulted in the Conservatives going from a majority government to receiving two seats in the 1993
general election.
Liberal Economic Policy/ Trudeau – Pierre Elliot Trudeau, a Liberal, was in charge during the 1970’s,
which featured the Middle Eastern oil crises due to the creation of OPEC. Real GDP growth went from
7.7% in 1973 to -3.0% in 1982. This created stagflation, which is when unemployment and inflation both
increase at the same time. Unemployment moved from 6% in 1973 to 11% in 1982, while inflation
moved from 5% to 10% in the same time period. This also caused the budget deficit to rise from $3
billion to $20 billion. As a result, Trudeau attempted to increase government intervention in business.
He created an anti-inflation board that failed miserably. As well, to combat the oil crisis, he created
Petro-Canada, which was to bring in a home-grown source of petroleum. Trudeau’s attempt to
intervene failed, as he left office in the mid-80’s with Canada in terrible economic shape.
The Canadian Government and Wartime State - The Second World War inspired much change for
government policy in Canada. The wartime situation required Canada to adapt its wage, price and
labour control policies to match the increased government spending. Federal government expenditures
increased from $681 million in 1939 to 5.1 billion in 1945. Military spending increased from $126 million
to $2.9 billion. Employment in war industry increased from 121 000 in 1939 to 1.1 million in 1943. Steel
industry employment increased from 73 000 in 1939 to 213 000 in 1943 and the value of steel products
increased from $321 million in 1939 to $1.3 billion in 1943. In order to maintain stability in this fast
growing industry Canada implemented new wage, price and labour controls. In 1940 a policy was passed
that called for “fair and reasonable” wage levels. Soon after, in 1941 the National War Labour Board was
established to control wage increases. The National Selective Service created in March 1942 required
Canadian workers to register for employment and obtain permission to leave employment. This made it
impossible for workers in essential industries to change professions. Also the government instituted
compulsory transfers of workers in non-essential industries to essential industries.
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