Power, Money and Trade
-Cobden-Chevalier Treaty: liberal trade policies in the major economies.
-Decline in economies decline in liberalism and free trade, rise of protectionism
-Tories and John A. Macdonald (winners of the election with a campaign focused on
-Compensation to the groups hurt by protectionism (grain growers)
-Agricultural tariffs but didn’t really affect farmers because they didn’t fear foreign
Infrastructure development: support for the Canadian Pacific Railway (CPR)
transcontinental line easier for farmers to ship goods to markets.
Immigration and settlement in the western regions (support as markets for
-Lasted for 20 years
-Economic downturn in many countries incentive for protectionism
-US most important trading partner to Canada so its decisions shaped Canada’s
options. MacKenzie 1878 negotiated a trade agreement, which was rejected by the
-The nature of the international arrangements governing trade: before Cobden-
Chevalier treaty, free trade via clauses in bilateral agreements but no norms or
obligations, states acted as the wanted, adopting protectionism while benefitting
from the low tariffs in other countries (short-lived)- exceptions Britain and Belgium
didn’t adopt protectionism.
-Systemic linked to domestic- transnational railroad to not depend on the US
-Disagreement among Canadians
-Canada’s factor endowment: land. Scarcity in labor and capital
(Stolper-Samuelson model- landowners (farmers) to prefer free trade while
industrial interests protection.
-Construction of the CPR long and costly high rates for transporting goods
resentment among farmers
Liberals: competition in transportation needed
-No support for immigrants (went to the US) overproduction?
-Quebec and nationalism. (UK and US) Bureaucratic Politics
-Tariffs related to revenues. Recession in 1873—options were cutting expenditures
or raise tariffs on remaining goods. So higher rates.
-Ad valorem rate: the duty paid was a % of the declared value of the imported goods.
So when prices dropped, so did the revenues so had to change rates.
Individuals and Ideas
-Macdonald: effective negotiator for protectionism why NP lasted for so long.
-Liberalism challenged after the crisis of the 1870s rise of monopolies, cartels,
protectionism and social welfare.
-Reasons why Macdonald also changed his thinking.
-Macdonald held together the interests of the eastern urban centers (despite the
difficulties facing the NP), called on patriotism and relied on patronage.
The liberals adopt the NP
-Defeated Tories in 1896.
-Made it clear that they supported free trade in the right measures (so support from
the farmers in the west and businessmen)
-No real changes, very slight change in the tariffs.
-Freer trade only came in 1911 when the US opened its markets for Laurier.
-Positive policies on railways and immigration.
-Crow’s Nest Pass agreement: with the CPR, lowering shipping rates for the prairie
provinces so less expensive + rival companies.
-Rise in the expenditures on immigration.
-Improvements in technology so more possibility for farmers to be successful.
-Despite all of that, no real changes in the tariffs. Chapter 15
-Laurier and the liberal party looking to liberalize trade with the US, confident that
this would be a very successful plan, elections in the bag.
-In 1896 the Liberals stuck with the NP (although more successfully than the
Mixed trends in tariffs
US seemed ready to negotiate liberalized trade
Canada redefining its links to Britain while Britain was rethinking its
commitment to free trade (although they stuck with it, rejecting
Chamberlain’s ideas about imperial preference)
-Economy was declining and the tariffs got higher (France, Italy, US)
-Mixed tariffs reciprocity (give lower tariffs to countries that would give their
exports favorable treatment); negotiations.
-1910, Canada’s economy peaked and global economy started stabilizing so
negotiations with the US seemed favorable. However, decline in 1911 that allowed
for the Tories’ counterattack.
-US and Britain main option for trade with Canada.
-If Chamberlain’s tariff reforms had passed, Canada would have had an advantage on
the British market, however with the liberal policies maintained, the British market
is open to an array of countries so Laurier decided to get closer to the US.
-McKinley Tariff (1890) raised US tariffs, killing Canada’s hopes to access US
-Laurier turned his back on tariff reductions with the US.
-After that, the US was willing to negotiate a trade agreement.
-William Fielding: the Liberals’ Finance Minister (announced trade agreement)
-Tories based their campaign on trade policy.
-Timing: Laurier had to go to London to attend the coronation of King George V and
the Imperial Conference so suggested to hold early elections before his trip but his
supporters convinced him to wait until he gets back, at this time the Tories were
gaining ground and the economy was declining.
-Liberals’ campaign: “Laurier and larger markets”
Stolper-Samuelson model, Canada’s endowment in land, labor and capital made
agricultural interests the base for trade liberalization
Agricultural discontent, organizations (even under NP for complaints) Canadian
Council of Agriculture.
Variations in farmers’ interest depending on the regions: Ontario & Quebec vs.
prairies. (west- grains, central provinces- capital intensive dairy products) Canadians selling dairy products found it more effective to sell their products on
domestic markets than on American so their interests in in exports were falling by
“While the Stolper-Samuelson theorem suggests that owners of the relatively
abundant asset, land, should be the strongest supporters of freer trade, landowners
were in fact divided along sector-based lines.”
Agriculture was declining as a portion in the GDP.
In the west raw materials so it would’ve been a fierce competition with the US if
the market opened up.
In Quebec and Ontario, industrial development.
Canadian Manufacturers’ Association (CMA) argued that only moderate protection
was good for Canada and that NP could halt Canada’s industrial development.
-Following the SS model, it could be said that in a country where labor is scarce,
protection would be needed.
Also, in a country where land is abundant, free trade will raise agricultural prices
(exports) so that would convince the working class that their interests as consumers
will not be met.
(Groups with concerns on free trade)
Workers and industrialists in the east feared US competition.
Labor-intensive manufacturing sectors or capita-intensive farmers were more
interested by domestic markets.
Traditional supporters of Laurier and the Liberals became less important.
Also, Clifford Sifton’s (who was a dedicated liberal in the cabinet, from the west-
opposed reciprocity, he argued that while heavy industry needed protection,
industrial interests in the west didn’t need trade liberalization) decision to side with
Henri Bourassa- mobilized support for the Quebec Nationalistes against the
Liberals. Initially, they supported a deal with US to prevent strong ties with Britain
but then second thoughts based on the opposition of businessmen and farmers in
Montreal and the province. He also opposed Laurier’s support for the construction
of a Canadian navy, arguing that it would be of value to Britain to its imperial wars.
In Ontario, Laurier and the Liberals were attacked for not supporting Britain
Bourassa’s vision: support small businesses (ideal social order in Quebec) rather
than large ones (meaning domination by English Canadians)
-Sir George Ross: liberal senator and former premier of Ontario questioning why
tariffs should be changed in the first place.
-William Lyon Mackenzie King: Laurier’s Minister of Labor in 1911: claimed that he
supported laborers and that reciprocity would bring them advantage.
Interests changed, economy declined and the Tories gained ground.
Bureaucratic Politics, Individual Leaders and Ideas
-No strong bureaucratic opponents to free trade because there was a healthy budget
so low tariffs could be pursued. -Some argue that the groups left out in Laurier’s plan caused a loss of support (pork
farmers in Quebec)
-Sifton predicted the change in interests while Laurier did not.
Also, although he was a strong believer in liberalism, he opposed reciprocity for
good reasons and on liberal grounds (free trade was only just in a perfect
competition, however the US had an advantage so no)
-Tories- nationalism (some groups that benefitted from freer trade voted for the
Tories for patriotic reasons) Patriotism= Canada’s ties to Britain. (criticism for those
who wanted closer ties to Britain but also from those in Quebec who criticized them
for bowing down to Britain.)
Quebec Nationalistes and the Tories: “the unholy alliance” because it brought
together parties with opposing principles. Chapter 19
-Institutional framework for trade liberalization
-Tariff reductions by GATT members
-Lower tariffs and expansion of trade
-Development program by South Korea in the 1960s (industrialization- share of
manufacturing went from 14% of the GDP in 1960 to 305 in 1983)
-Export earnings grew almost 4% from 1949 to 1960
-South Korea joined the OECD
Import-Substitution Industrialization (ISI)
-In the immediate post-WWII, ISI. Blocked the imports to stimulate domestic
markets and domestic manufacturers but this hurt consumers due to the lack of