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POLI 243 (70)
Chapter 22

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Political Science
POLI 243
Mark Brawley

Chapter 22: Canada and the Free Trade Agreement with the US Background  Canada & US explored freer trade on several occasions after 1911  Bilateral agreements 1935, 1938 o Need to stimulate production and employment  Canada takes the initiative and asks US for trade liberation in 1985 Fears of the new Protectionism  GATT provided benefits to countries relying on trade  Early 1980s GATT in trouble? o Principals and practices under attack o Developing countries joining and developed countries having economic difficulties o GATT rules prevented tariffs from rising btu caused an increase of non- tariff barriers o Uruguay Round dragging on, trade in agricultural goods and in services were issues o Bilateral trade agreement with US in response to possible decline of GATT and/or NTBs Canada’s attitude towards US  Views of Mitchell Sharp dominated perspective on trade with US after 1972 o Vulnerable to threats o See Nixon Shocks o Stressed multilateral trade strategies, lessen economic dependence on US  Foreign Investment Review Agency (FIRA) monitored and regulated foreign investments entering Canada  1980 National Energy Program (NEP) introduced to promote Canadian ownership of energy sector  1982-3 Trudeau admin reemphasized sector-based approach to trade policy  tariff reductions by Canada in 1980s had lead to increased trade levels and an increase in holdings by foreign investors  to this day Canada supplies raw materials and energy to the US and receives large amounts of US investments. Canada is also one of the top foreign investors in the US.  However, US dominates. Canada initiates talks  Goals: securing access to US market, open previously blocked parts of US market to Canadian exporters, establish special rules for some sectors (agriculture, wine/spirits, energy, autos)  First discussion in 1984 aimed at replicating the auto pact in other sectors  No agreement as the symmetry was hard to see. Decided that any deal would need to be much broader.  Public support already existed. US priorities  Saw Canada’s offer as opportunity for immediate financial gains and a way to establish important precedents  US had several large trading partners, so goal was to get issues such as liberalization of trade in services on the world’s agenda and open investment opportunities
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